<PAGE>

                 U. S. 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 SEPTEMBER 30, 1996

                                        or

    [ ]   Transition report pursuant to Section 13 or 15(d) of the Securities
          Exchange Act of 1934
                  For the transition period from __________ to __________


                          Commission File Number 33-11875-A

                             MEGALITH CORPORATION
       -----------------------------------------------------------------
       (Exact name of small business issuer as specified in its charter)


            Colorado                                         22-2701047
     (State or other jurisdiction                          (IRS Employer 
   of incorporation or organization)                      Identification No.)

Address of principal executive offices: 4720 Esco Drive, Fort Worth, Texas 76140

       Issuer's telephone number:                      (817) 478-4299

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

Securities registered under Section 12(b) of the Exchange Act: 
                           Title of each class:  COMMON STOCK, $.005

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      No  X
                                                                ---     ---

Check if there is no disclosure of delinquent filers pursuant to item 405 of
Regulation  S-B 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.
                               ---

The issuer's revenues for its most recent fiscal year were $2,530,056.

The aggregate market value of the shares of Common Stock held by non-affiliates
of the Registrant, as of March 17, 1997 (based upon the last sales price of
$2.06, as reported by the NASD Bulletin Board) was $22,572,000.

The number of shares outstanding of the Company's common stock as of March 17,
1997 is 16,838,433 shares. 

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PART  I


ITEM 1.  DESCRIPTION OF BUSINESS.

ORGANIZATION AND BUSINESS

     Megalith Corporation ("Megalith" or the "Company") was incorporated on 
November 3, 1995 in the State of Colorado.  Pursuant to Articles of Merger 
filed on January 4, 1996, Megalith was merged with Overline Corporation, a 
Delaware corporation formed in 1986 ("Overline"), and Megalith was the 
surviving entity of the merger.  In connection with the merger, all 
outstanding shares of Overline were exchanged for an equal number of shares 
of Megalith.  For approximately five years prior to the merger on  November 
27, 1995, Overline had been essentially inactive, other than for its efforts 
in seeking business opportunities.

     Effective as of November 27, 1995, the Company, through its newly-formed 
subsidiary (Esco Elevator Corporation), acquired substantially all of the 
assets of Esco Elevators Inc. and Esco Properties, Inc. (the "Esco Assets").  
Upon the acquisition of the Esco Assets on November 27, 1995, the Company's 
principal business is the manufacture and sale of custom passenger and 
freight elevators. Esco Elevators Inc. had manufactured, sold and serviced 
elevators since 1932.

     The Esco Assets were acquired by the Company pursuant to a Plan of 
Reorganization of Esco Elevators Inc. and Esco Properties Inc. which was 
approved by the U.S. Bankruptcy Court on October 12, 1995.  Esco Elevators 
Inc. and Esco Properties Inc. (collectively, "Old Esco"), based in Fort 
Worth, Texas, had filed for relief under Chapter 11 of the U.S. Bankruptcy 
Code on December 14, 1994.  A Bankruptcy Trustee was appointed by the Court 
on January 10, 1995, and the Trustee soon thereafter entered into a 
management agreement with Epsitek, Inc., a Delaware corporation, for the 
operation of Old Esco from January through November, 1995.  In June 1995, the 
Trustee and Epsitek, Inc. jointly filed the Plan of Reorganization of Old 
Esco, whereby Epsitek, Inc. would purchase substantially all of the assets 
from the Bankruptcy Estate. Effective November 27, 1995, Epsitek, Inc. 
assigned to Esco Elevator Corporation, the wholly-owned subsidiary of the 
Company, all of its rights and equity in Old Esco, including the right to 
acquire the Esco Assets pursuant to the Plan of Reorganization and the 
accounts receivable generated during the time of the management agreement, 
subject to expenses required to be paid during the same period.  

     The Esco Assets were acquired in exchange for $808,000 cash paid to the 
Bankruptcy Estate of Old Esco, assumption by the Company of certain 
installment debt and other obligations of Old Esco aggregating $4,273,642, 
and the issuance to Epsitek, Inc. of 4,268,000 shares of the common stock of 
the Company.  In addition, the Company assumed indebtedness totaling 
$1,425,066 and received certain assets from Epsitek, Inc. in connection with 
the purchase of the Esco Assets.  $800,000 of the cash consideration at 
closing was borrowed from certain shareholders or related parties of the 
Company on short term notes bearing interest of eight percent, of which 
$200,000 of principal on the notes was canceled in exchange for shares of 
common stock of the Company upon the exercise of a stock option agreement by 
the chief executive officer of the Company on December 4, 1995.  An 
additional $325,000 of that debt has also been canceled upon the issue of 
shares of the Company's Common Stock to the noteholders.  Of the debt assumed 
by the Company, $3,407,177 was due to an individual who holds first lien 
rights to the substantial portion of the Esco Assets, including the land, 
buildings and all equipment not encumbered by other priority liens.  The 
remaining debt assumed by the Company is owed to various financing 
institutions and vendors for certain items of equipment or improvements which 
are included in the assets acquired by the Company.  With one exception, all 
of the notes have installment payment provisions of varying terms that are 
specified by the Plan of Reorganization.



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<PAGE>

     On July 9, 1996, the Company acquired 100% of the outstanding shares of 
Dalcom Elevator Corporation ("Dalcom"), a private company located in Garland, 
Texas which manufactures and markets elevator cabs and entrances.  In 
connection with that purchase, the Company received certain equipment, 
accounts receivables, the customer list and the backlog of customer orders.  
In exchange, the Company assumed certain indebtedness of Dalcom and issued 
944,520 shares of the Company's restricted Common Stock.  Immediately after 
the closing, the indebtedness was reduced by a cash payment of $250,000.  The 
Company is presently in negotiation with the previous owner of Dalcom to 
cancel a portion of the indebtedness assumed by the Company and receive back 
all of the shares issued in the transaction to the treasury of the Company.

OPERATIONS

     Operations of the Company are conducted principally through its 
subsidiary, Esco Elevator Corporation.  As used hereinafter, "ESCO" may refer 
to the Company or its products after the purchase on November 27, 1995, as 
well as to activities of the predecessor, Esco Elevator, Inc., prior to 
November 28, 1995. ESCO is a manufacturer of custom hydraulic elevators and 
related products. Having been in the elevator business since 1932, ESCO is 
considered a leader in custom-designed hydraulic elevators.  ESCO's products 
are sold primarily in the U.S. through approximately 100 nonexclusive 
distributors and independent elevator sales and installation companies.  Its 
products have also been regularly sold to the major elevator companies, such 
as Otis, Dover and Schindler, whose customers require the ESCO hydraulic 
elevator or components. Over the years, ESCO elevators have been installed in 
facilities of many well known corporations and public buildings across the 
U.S.  Historically, ESCO has also provided installation and construction 
services for its elevators and, to a lesser extent, service and repair of 
existing elevator installations primarily from various service centers in 
the Southwestern U.S.  The Company's service and installation business is 
presently limited and all operations are presently conducted from its main 
facility in Fort Worth, Texas. ESCO's main facility, constructed in 1981, is 
located at 4720 Esco Drive, Fort Worth, Texas and consists of approximately 
195,000 sq. ft. of manufacturing, warehouse and office facilities on 19 acres 
of prime industrial land in Southeast Fort Worth.

     Management believes that the Americans with Disabilities Act (ADA), 
requiring elevator access for all multi-story buildings of public 
accommodation and in commercial facilities, will be instrumental in 
substantially increasing the sales of ESCO elevators.  ESCO has historically 
sold its products only in the U.S.  Current management, however, brings 
international sales, marketing and manufacturing experience and intends to 
aggressively pursue elevator sales in the Pacific Rim, South America, Middle 
East and Europe.

     Demand for the ESCO elevators is expected to grow as the result of the 
Americans with Disabilities Act adopted in 1992 by Congress, which 
essentially requires all new and existing multi-story buildings to provide 
elevator access in all buildings of public accommodation and commercial 
facilities. ESCO's major expertise is in constructing smooth riding hydraulic 
elevators and low cost holeless elevators. This patented ESCO technology is 
specifically useful in retrofitting existing buildings with elevators at 
minimum installation costs.
       
     As of the end of February, 1997, ESCO had a backlog of orders of 
approximately $3,500,000 from various customers, primarily from independent 
elevator installation companies.  Based upon limited production capabilities 
and working capital in the year following the emergence from bankruptcy, 
ESCO's sales were $2,530,056 for the 10 month period ended September 30, 
1996, as compared to approximately $2.8 Million for the calendar year 1995 
while operating in bankruptcy.  Esco Elevators Inc. had sales in excess of 
$14,000,000 in calendar 1994, prior to the Chapter 11 bankruptcy filing in 
December, 1994.  With a concentrated marketing effort and appropriate 
financing, management anticipates the sales of the ESCO


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elevator products can be increased to the pre-bankruptcy levels and, with 
adequate cost controls (aided in part by the prior bankruptcy action), 
management believes the business can quickly return to profitability. 

JOINT VENTURE AGREEMENT - CHINA

     On January 16, 1997 Shaanxi Elevator Corp. in the Province of Shaanxi in 
China and Esco Elevator Corporation entered into a Joint Venture Agreement to 
manufacture and market a full line of hydraulic and traction elevators and 
related products.  Under the terms of the agreement, the provincial 
government will provide a large plant capable of producing $100 million in 
products a year. Esco will equip and manage the plant and China Shaanxi 
Elevator Corp. will market the Joint Venture's elevators through its 36 
offices in China.  Esco will have the right to market the products of the 
Joint Venture throughout North, Central and South America, as well as to 
continue to manufacture and market elevators from its existing facilities in 
Fort Worth, Texas.

     Simultaneous with the execution of the Joint Venture Agreement, Esco 
received an order from China Shaanxi Elevator Corp. for a minimum of 250, and 
up to 400, hydraulic elevators valued at $19 million to $30 million.  Esco is 
to commence the production of this order immediately so as to open the China 
market as soon as possible for the benefit of the Joint Venture.  The Company 
believes this order will be a "perpetual order" since the joint venture 
plant, when operating at full capacity, is expected to supply only a small 
portion of China's total needs.

HISTORICAL BACKGROUND OF ESCO

     In 1932, Robert F. Loughridge founded the Elevator Service Company, 
which pioneered the development and improvement of hydraulic passenger, 
freight and special purpose elevators.  In the mid-1930s, Elevator Service 
Company designed and built the first push-button operated, plunger-type, 
hydraulic elevator. As demand for this smooth-riding, cost-effective system 
increased, the company grew accordingly.  In 1956, Elevator Service Company 
became Esco Elevators Inc.

     By the early-1980's, ESCO became the nation's largest supplier of 
individual hydraulic elevator components and the second largest supplier of 
complete hydraulic elevator systems.  ESCO manufactured systems and 
components for companies throughout the United States, including every major 
elevator company and more than 400 independent distributors and developers.  
Some of the best known corporations in the U.S. have installed ESCO 
elevators.  ESCO has installed over 35,000 elevators throughout the U.S., 
most with the unique ESCO patented designs.  Hydraulic elevators, which is 
the ESCO mainstay, are used primarily on shorter travel distances and slower 
speed applications.  By comparison, "traction" elevators, which are not 
produced by ESCO, are used in applications requiring greater speed and travel 
distances.

     ESCO has an impeccable reputation for quality and designs of its 
products.  ESCO has built various sizes of custom designed elevators 
including some of the largest freight and specialty elevators.  Most of the 
major elevator companies, such as Otis, Dover and Schindler have been, and 
continue to be, customers of ESCO and purchase custom built elevators from 
ESCO as their subcontract manufacturer.

     Although Mr. Loughridge had built the new facilities in 1981 and 
installed equipment that could produce sales of an estimated $75 million 
annually at full capacity, he intentionally maintained a sales volume not to 
exceed $25 million annually.  Furthermore, ESCO has never pursued the 
overseas markets.

     In 1988, Mr. Loughridge became seriously ill and was unable to attend to 
the business.  This event would have a very negative impact on his company.  
Thereafter, his widow (now Mrs. McMillan) managed the business and, in 1990, 
sold ESCO to an individual.  This former owner, on November 30, 1994, while 
facing



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cash flow problems at ESCO, entered into an agreement for the sale of ESCO to 
Overline Corporation in a transaction that included the assumption of 
existing indebtedness by Overline.  Overline Corporation quickly realized 
that in order to bring ESCO back to a profitable stage, a significant capital 
infusion would be necessary.  In addition, ESCO was behind in payments to its 
secured and unsecured creditors for several months.  Furthermore, at the time 
of the sale,  the payroll checks to the employees for the period immediately 
preceding the sale had bounced due to insufficient bank funds.  Realizing the 
gravity of the situation, the new owners of ESCO placed ESCO under the 
protection of Chapter 11 of the  U.S. Bankruptcy Code on December 14, 1994.  
The filing of the bankruptcy petition resulted in the shutdown of operations 
for a period of about two weeks.  At the time of the shutdown, ESCO had a 
backlog of orders of over $6 million, secured debt of approximately $4 
million and unsecured claims of approximately $2.5 million.  On January 10, 
1995 the Bankruptcy Court appointed a Trustee to manage the assets and 
operations of ESCO.  As described more fully above, Epsitek, Inc. obtained a 
management agreement with the Bankruptcy Trustee for the management of ESCO 
and subsequently acquired substantially all of the assets of ESCO.  
Significant for the Company is that the majority of the current employees of 
ESCO have many years of experience in the elevator industry, and in 
particular with ESCO, in the manufacture, sales and servicing of its 
elevators.
        
        ELEVATOR PRODUCTS

     In the elevator industry, there are two basic types of elevators, 
hydraulic and traction.  In a hydraulic elevator, the movement of the car 
upward is by hydraulic fluid under pressure from a pump to a jack unit.  To 
lower the car, a valve opens and gravity lowers the car.  The starting and 
stopping of the elevator is controlled by a valve.  The weight of the 
elevator is supported by a hydraulic jack.  The building does not have to be 
designed to support the elevator. This results in less building costs and 
greater flexibility as to where the elevator can be located in the building.  
The hydraulic elevators are primarily used on shorter travel distances and 
slower speed applications.  By comparison, traction elevators are used in 
applications requiring greater speed and longer travel distances.  Hydraulic 
elevators are much more economical to install and maintain than traction 
elevator equipment.

     By comparison, in a traction elevator, the movement of the car is by a 
cable attached to the car and a counterweight that moves over sheaves that 
turn, causing the cable to move, which in turn causes the car to move.  The 
"traction" designation comes from the traction between the cable and the 
sheaves.  The building has to be designed to support the complete elevator 
and the driving machine.

     ESCO manufactures a complete line of hydraulic elevators, that is, the 
complete system which consist of the jack unit, sling platform, cab, 
entrances, pump unit, and controller.

     The standard hydraulic elevator has travel limitations due to the column 
strength of the plunger and the cost of drilling the hole for the jack unit.  
ESCO's patented CA-CY elevator overcomes these restrictions.  ESCO also 
manufactures the holeless elevator which normally has a jack unit on each 
side of the hoistway.  This type of elevator also has travel limitations due 
to the design and hoistway construction.  ESCO also designs and manufactures 
all components of the elevators including the entrances which are UL listed 
and sells them as separate items.  ESCO designs and manufactures a complete 
line of cabs for both passenger and freight use.  ESCO designs and 
manufactures a complete line of jack units, including the polishing of 
plungers and fabrication of the cylinders.  ESCO also designs and 
manufactures a complete line of controllers and a line of pump units.  ESCO 
manufactures and designs a complete line of freight elevators, of which the 
largest has been a unit that with a 60,000 pound capacity and a sling 
platform and cab large enough to handle a complete tractor and trailer.  ESCO 
also manufactures several items that are used by the industry in general, 
such as, silencers and guide shoes.  ESCO also has significant sales of parts 
for maintaining elevators that were manufactured and shipped in previous 
years.

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          STANDARD HYDRAULIC ELEVATORS

     As indicated above, ESCO manufactures a complete line of hydraulic 
elevators.  ESCO designs and manufactures a standard hydraulic elevator, 
which has a plunger located under the car.  Normally, the cylinder for a 
standard hydraulic elevator is buried in the ground.  The primary benefits of 
hydraulic elevators are (i) lower cost for the elevator unit, (ii) lower 
building construction costs, and (iii) installation can be made even after 
the construction of the building is complete, thereby making these the ideal 
products for retrofitting existing buildings.  Hydraulic elevators are very 
reliable and cost less to maintain than traction elevators. The cost of 
construction of the building is lower with a hydraulic elevator because the 
structure does not have to support the weight of the elevator and does not 
require a penthouse for the elevator equipment as required by the traction 
type elevators.
          
          886 HOLELESS ELEVATORS

     The ESCO "886" elevator is an economical elevator system for fast 
delivery and easy installation.  The dual jack design provides a quiet, 
smooth, solid feel and allows for an optional center-opening door arrangement 
in addition to the standard single-slide door.  A hospital model is also 
available.  The 886 is a holeless elevator which consists of two jack units 
above ground and is usually located on each side of the hoistway, thereby 
eliminating the need for drilling a hole in the ground to bury the jack unit.

     In the 886, the power unit contains all the electric and hydraulic 
equipment and is located in the machine room.  The motor, pump and valve are 
easily accessible, and the two jacks are self-aligning.
      
          CA-CY  ELEVATORS

     ESCO manufactures its patented product called a cable cylinder elevator 
which is referred to as a CA-CY.  This combines the benefits of hydraulic 
with cable technologies.  In this elevator the plunger, or the driving force, 
consists of a piston attached to a cable which is nylon coated.  The cable 
attaches to an elevator, up over the sheaves in the overhead, with the other 
end attaching to a piston in the cylinder on each side of the hoistway.  This 
design has all of the advantages of a traction elevator in that there is no 
limit to the travel.  However, ESCO has limited the speed of this type of 
elevator to 200 feet per minute, primarily to achieve lower cost.

          OTHER PRODUCTS

     ESCO's DUMBWAITER is a revolutionary application of hydraulics to 
vertical materials handling. The hydraulic cylinder forms part of the 
supporting structure which is made in sections for high rise installations.  
These sections bolt together requiring no special tools for field alignment.  
The dumbwaiter is virtually unlimited in its travel and number of openings 
served and is equally suitable for handling mail, package goods, merchandise, 
food and other materials in low and high rise buildings.

     ESCO has not made significant efforts to market this product since the 
mid-1970s.  However, management believes the unit can be marketed 
successfully through existing elevator distribution channels.  Although there 
are existing companies manufacturing and selling dumbwaiters, there exist a 
sufficient demand to warrant reentry into the market for the ESCO hydraulic 
dumbwaiter.
      
     ESCO patented a product to assist in getting in and out of the swimming 
pools for young, old and the handicapped, which is called a "MERMAID LIFT."  
The unit looks like a ladder and operates like an elevator.  This product 
operates on water pressure from the household garden hose.  When a person 
needs to get out of the

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pool, he/she steps onto the unit.  The weight on the step trips the valve 
causing water to flow into a power piston and the step, along with the 
handrails, rises and automatically stops at the pool deck level. The Lift 
remains at the top position as long as weight remains on step.  When weight 
is removed, the step and the rails automatically descend and is ready for the 
next upward trip.

     ESCO apparently made no efforts to market this product after designing 
and field testing the unit.  Management believes that with the passage of the 
Americans with Disabilities Act discussed previously, the time is right to 
aggressively market this product to public places with access to swimming 
pools, such as hotels and health and fitness facilities.  The product is 
inexpensive to manufacture and could be sold at high margins.

MARKETING AND DISTRIBUTION

     Historically, ESCO has not been aggressive in marketing its products.  
Most of the sales have been generated by word of mouth and by elevator 
products distributors, contractors and other elevator companies such as Otis, 
Dover, Montgomery and Schindler.  These customers typically call for quotes 
and place orders at some later date.  The Company is pursuing plans to 
improve upon the marketing of its products, including a public relations 
efforts.

     The most significant efforts at increasing markets for the Company's 
products has been in connection with overseas markets. As discussed above 
under "JOINT VENTURE AGREEMENT - CHINA", the Company has taken clear and 
present action at expanding its overseas markets.  Historically, the founder 
of ESCO was not interested in pursuing business outside the U.S.  Contrary to 
that, the management of Megalith, with its experience in international sales, 
believes that the elevator business in the developing nations is growing at a 
much faster pace than in the U.S. The market in the U.S. for elevators has 
been mature for a long time and, with the exception of the impact of the 
Americans with Disabilities Act for retrofitting existing buildings, the 
market growth is stabilized.  The major elevator companies attribute much of 
their revenues to the business in developing countries.  Even in the U.S., 
the Americans with Disabilities Act should make ESCO a major benefactor, 
since its elevators provide the ideal and inexpensive solutions to retrofit 
existing buildings. 

     In the domestic market, ESCO will continue to obtain orders for its 
elevators, components and spare parts directly from contractors and 
developers.  Historically, ESCO obtained a significant amount of sales volume 
from the major elevator companies. Future sales to those customers will 
depend upon ESCO's ability to re-establish production capabilities following 
the negative events of the bankruptcy proceedings discussed previously.  ESCO 
will continue to obtain the majority of its sales of elevators through the 
distributors and independent elevator sales and installation companies as it 
has done in the past.  

     The Company is not dependent upon one or a few major customers for its 
sales at present.

COMPETITION

     The elevator industry is dominated by a few large companies, including 
Dover, Otis and Schindler.  In addition, numerous smaller companies, which 
generally have only a regional focus, are competitors of ESCO.  Although 
there are about 20 elevator manufacturing companies in the U.S., ESCO is a 
very well known company, having delivered over 35,000 elevators around the 
U.S. during the last 62 years.  Although the major companies (Dover, Otis and 
Schindler) may be seen as competitor's of ESCO, they are also customers of 
ESCO.  Increases in their sales may also result in increased sales for ESCO 
since many of the ESCO custom elevators are placed by the 'majors' in 
locations around the U.S.  ESCO will continue to obtain orders for its 
elevators, components and spare parts directly from contractors and 
developers and not necessarily through the major manufacturers indicated 
above.  In addition, ESCO will continue the majority of its sales of 
elevators through the distributors and independent elevator sales and 
installation companies as it has done in the past.  


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     The smaller 2nd-tier manufacturing companies, which are more-or-less 
ESCO's direct competition, include Cemcolift Corporation, Minnesota Elevator, 
EECO, Canton Elevator, Amlift International, American Crescent Elevator, and 
U.S. Elevator.  A profile is provided below on each of these companies. 

          1) Cemcolift Corporation: Located in Plumsteadville, PA.  Family 
owned and operated for over 30 years.  Supplies complete hydraulic elevator 
packages to the elevator industry.  Even though this company is a complete 
supplier of package product, they do not produce all components in house.  
Company has annual sales of  $20 million.  Company has a focus on the eastern 
United States market, and does not have an overall U.S. market 
distributorship set-up.  Cemco has tried to venture into the Pacific Rim 
market with not much success.  Maintains a profile of U.S. The quality of 
products does not match with that of Esco.

          2) Minnesota Elevator- Located in Mankato, Minn. Family owned and 
operated with annual sales of  approximately $18 million.  Supplies complete 
elevator package units but does not produce all components in house.  Company 
has a service concentration in the Minnesota State area.  Currently does not 
have a national distributorship chain set up.  Has not ventured into the 
international market except few limited projects.  Has no desire to venture 
into the Pacific Rim arena because limited resources.

          3) EECO- Located in Los Angles, CA.- Privately owned and operated 
with products limited to supplying complete package units.  This company is 
known for its hydraulic valves and various components to the industry.  Over 
the last five years it has started to supply elevator package units.  It does 
not produce all components in house and depends on outside supplier for most 
of them. It has annual sales of approximately $20 million.

          4) Canton Elevator- Located in Canton, Ohio, Privately owned and 
operated for over 30 years.  Supplies a complete package unit to a limited 
customer base.  Does not solicit nationally nor internationally. Approx. 
yearly sales $12 million.

          5) Amlift International- Located in Rosoreta, MX.  This company is 
new into the market and manufactures all products in Mexico.  With the 
products produced outside the U.S. it cannot be used on most government 
projects.  This company will have  limited access to the U.S.

          6) American Crescent Elevator- Located in Mississippi, limited to 
local market share of approx. $4 million per year.

          7) U.S. Elevator- Plant located in Mexico with limited customer 
base in the U.S.  Company does not have much customer following.

EMPLOYEES

     The Company and its subsidiaries currently employ approximately 63 full 
time employees, all of which are in its elevator manufacturing operation.  
This employment level is expected to grow as the Company obtains expected 
increase in sales.

ITEM 2.  DESCRIPTION OF PROPERTY.

     The primary assets of the Company are the improved real estate and 
equipment owned by Esco Elevator Corporation which is located at 4720 Esco 
Drive, Fort Worth, Texas.  The manufacturing facility, constructed in 1981, 
is in excellent condition and consists of buildings of approximately 195,000 
square feet (including 40,000

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square feet of office space) and 19 acres of prime industrial land. The 
present manufacturing and office facilities are in excess of that required 
for the current level of operations, which provides ample space and capacity 
for growth. 

ITEM 3.  LEGAL PROCEEDINGS.
     
     NORDIC V. MEGALITH, Case # 9612396-B, is pending in the 44th Judicial 
District Court Dallas County and a trial date is currently set for June 16, 
1997.  The suit is on a promissory note, with an original purchase price of 
$1,800,000.00, consisting of $150,000.00 cash and $1,650,000.00 promissory 
note.  Discovery is pending in this action.  Total liability by the Company 
in this action is currently believed to be approximately $25,000.00, as 
payment demand's have been made by Plaintiff in this action for that amount.

     In MEGALITH V. PETER DEWAN, File #97-00022, 298th Judicial District 
Court Dallas County, a suit on Tortuous Interference with contact, was filed 
by Megalith and is pending.  However, no trial date is currently set, and no 
motions are pending.  There is no potential for liability, because as of 
November 19, 1996, no counter claim had been filed.  Management is proceeding 
vigorously with this action to prohibit Mr. Dewan from continued contact with 
any vendors or customers of Megalith.

     In RICHARD M. BUFERD, II., V. DALCOM MANUFACTURING, INC., AND MEGALITH 
CORPORATION, File # 96-11299-H, 160th Judicial District Court, Dallas County 
Plaintiff's have a Motion for Summary Judgment set on February 24, 1997. This 
is a Suit on Lease of real property located at 210 E. Buckingham, Garland 
Texas.  This is for a lease entered into by Dalcom Mfg. Inc., and not 
Megalith.  It is very unlikely that any judgment shall be taken against 
Megalith on this action.  Management has taken the position that no liability 
is owned, and this action is being fully litigated.

     HENRY C. SEALS, TRUSTEE, ET AL, V.  DICK ELLIS DAVIS, ET AL, V. OVERLINE 
CORPORATION ET AL (MEGALITH), Civil Action # 4:95-CV-839-Y, U.S. District 
Court for the Northern District of Texas, Fort Worth Division.  There are no 
trial or motion settings at this time, and no scheduling order that Megalith 
is aware of. It is currently unknown what the basis of this action involves, 
as Megalith was made a party solely due to the overlapping directors and 
officers it shared with Cassco Capital Co.  There has been no affirmative 
evidence that Megalith is a proper party, and is unlikely that Megalith has 
any liability.  Management is awaiting Mr. Davis' amended pleadings to 
determine the basis of this action, and will make a determination as to how 
to proceed based upon that information.  The Company does not believe that it 
has any responsibility nor liability in this action. 

     PACIFIC PLUS INTERNATIONAL INC., V MEGALITH CORPORATION AND ESCO 
ELEVATORS, INC. #97-00283-D, Dallas County Court at Law #4. This is a suit 
based upon a credit account set up by Dalcom with Pacific Plus in the 
approximate amount of $15,000.00.  This is for a line of credit entered into 
by Dalcom Mfg. Inc., and not Megalith.  It is very unlikely that any judgment 
shall be taken against Megalith on this action.  Management has taken the 
position that no liability is owned, and this action is being fully defended.

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

     No matters were submitted to a vote of security holders during the 
fourth quarter of the fiscal year ended September 30, 1996. However, on 
December 18, 1996, a special meeting of shareholders was held.  At this 
meeting, Dr. Arthur H. Malcolm submitted his resignation as Director.  

     The following actions were adopted at this special meeting:

                                      9

<PAGE>

          (1)  Syed G. Zaidi, James W. Landrum, Mohammed Sharabash, Bashir G. 
Ahmed and Arthur Steber were elected to serve as members of the Board of 
Directors.

          (2)  An Amendment to the Articles of Incorporation was adopted to 
(i) divide the Company's authorized Preferred Stock into series of preferred 
shares and to fix and determine the relative rights, limitations, and 
preferences of the shares of the Company's Series A, B, and C Preferred 
Stock, and (ii) to grant the authority to the Board of Directors of the 
Company to fix and determine the relative rights, limitations, and 
preferences of the remaining series of the Company's Preferred Stock.

PART II

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

     As indicated above, the Company's Common Stock became publicly-traded on 
June 6, 1987,  However, from 1989 until 1995, the Company was essentially 
inactive and elected to become a non-reporting company for SEC purposes.  In 
November 1994, the Company again became a reporting company and applied for a 
listing on NASDAQ OTC/BB and, on November 14, 1994, the Company started 
trading under the symbol "OVRL".   In connection with the Merger of Megalith 
and Overline described above, the Company received the new trading symbol 
"MEGH".

The following table sets forth, for the periods shown, the range of the high 
and low bid quotations for the Company's common stock in the over-the-counter 
market as reported by NASDAQ.  Quotations are inter-dealer quotations, 
without retail markups, markdowns or commissions, and do not necessarily 
represent actual transactions.

                                               Bid Price
                                               ---------
                                            High        Low 
                                            ----        ---
    Fiscal 1995:         1st quarter        n/a         n/a 
                         2nd quarter        n/a         n/a 
                         3rd quarter        n/a         n/a 
                         4th quarter        n/a         n/a 
 
    Fiscal 1996:         1st quarter        1.25        0.25 
                         2nd quarter        1.13        0.13 
                         3rd quarter        1.00        0.31 
                         4th quarter        1.00        0.56 
 
On December 31, 1996, the Company had approximately 342 stockholders of 
record of its common stock.  The Company has not paid cash or stock dividends 
on its common stock in either of its two most recent fiscal years and does 
not anticipate or contemplate paying dividends in the foreseeable future.  It 
is the present intention of management to utilize all available funds for the 
development of the Company's business.  Several of the Company's current 
shareholders are broker/dealers which hold title to the Company's shares for 
their customers.

                                       10
<PAGE>

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

DESCRIPTION OF CURRENT OPERATIONS

     As discussed more fully in Item 1, Part I above, the Company, through 
its wholly-owned subsidiary, Esco Elevator Corporation, acquired 
substantially all of the assets (the "Esco Assets") of Esco Elevators Inc. 
and Esco Properties, Inc. effective as of November 27, 1995.  The Esco Assets 
were acquired by the Company pursuant to a Plan of Reorganization of Esco 
Elevators Inc. and Esco Properties Inc. (collectively, "Old Esco"), two 
affiliated companies that had filed for relief under Chapter 11 of the U.S. 
Bankruptcy Code on December 14, 1994.  During the period of January through 
November, 1995, Old Esco was operated by a private company, Epsitek, Inc., 
under a management agreement with the Bankruptcy Trustee.  Upon the 
acquisition of the Esco Assets, the Company began the operation of its 
principal business in the manufacture and sale of custom passenger and 
freight elevators.  For approximately the five years prior to November 27, 
1995, the Company had been essentially inactive, other than for its efforts 
in seeking business opportunities.

RESULTS OF OPERATIONS

     Revenues of the Company are derived from the sale of passenger and 
freight elevators, components, and replacement parts.  To a lesser extent, 
the Company obtains revenues from the installation and servicing of elevators 
generally within the State of Texas, and relies upon sub-contractors to 
perform the majority of such services.  The revenues and expenses reflected 
in the financials of the Company for the year ended September 30, 1996 
include only the period from the purchase of the Esco Assets on November 27, 
1995 to the end of the year, or a period of about ten months.  Also, the 
Company did not have active operations in the preceding year, and the only 
expenses incurred were in the maintenance of the corporate entity and in 
seeking other business opportunities.  Therefore, the presence of active 
operations for a period of only ten months and the lack of comparative data 
in the same period in the preceding year, provides only limited operating 
information for the purposes of comparative analysis.  

     For the period of approximately ten months from the purchase of the Esco 
Assets, the revenues from the sales of elevators, components, replacement 
parts, and service was $2,530,056, with a gross profit of $205,397 (or 8.1% 
of sales).  The Company had no operating revenues in the prior year.  The 
operating loss for the current year was $1,805,613, as compared to an 
operating loss of $80,704 for the previous year.  After interest and other 
non-operating expenses, the Company had a net loss of $2,127,239 for the 
current year, as compared to a net loss of $80,704 for the prior year.  

     All revenues in the current year were generated in operations of the 
elevator manufacturing subsidiary.  Of the operating expenses, the majority 
were incurred in connection with elevator manufacturing; however, 
approximately $330,000 of G&A costs were incurred in connection with 
corporate and executive costs for the development and execution of the 
Company's growth and financing efforts.  The interest expense was incurred 
primarily in connection with the installment debt related to the Esco Asset 
purchase.  The Company's efforts are currently directed at increasing sales 
and operating profits at its elevator manufacturing subsidiary, following a 
period of severe sales decline as a result of the bankruptcy of Old Esco.  
The gross revenues are expected to remain at an average of approximately 
$300,000 per month until such time as the Company has completed satisfactory 
financing arrangements that will ultimately permit a steady growth in sales 
provided by a sustained marketing effort, both domestically and in the 
foreign markets.  However, more rapid growth could potentially be obtained by 
commencing deliveries on the China Joint Venture.  However, that venture is 
also dependent upon adequate financing.  Upon the completion of financing, 
the Company intends to commit funding to its marketing for the remainder of 
the year, which will tend to increase S,G&A costs over present levels.  
Conversely, such refinancing is also expected to reduce the interest expense 
burden of the Company.  The manufacturing plant is operating at far less than 
its design capacity and, with the present low volumes, results in cost 
inefficiencies.  The present headcount of 63 employees compares with a total 
headcount of approximately 150 in the predecessor company during periods 
immediately prior to the bankruptcy.   

                                      11
<PAGE>

LIQUIDITY AND SOURCES OF CAPITAL

     The Company had a working capital deficit of $2,689,086 as of September 
30, 1996.  A primary element of this deficit was the short term debt assumed 
in connection with the acquisition of the Esco Assets. The capital resources 
to fund operations and complete the acquisition of the Esco Assets was 
provided primarily by short term loans to the Company.  Until such time as 
revenues have increased substantially over the current level, or the current 
debt burden is refinanced, or both, the Company can be expected to utilize 
additional working capital in its operations.  For the liquidity needs of the 
Company in the following twelve months, the Company is dependent upon the 
operating cash flows generated from the elevator business and on proceeds 
from loans and the sale of company stock.  However, the Company does not 
presently have available lines of credit to provide the necessary working 
capital for expansion expected to occur in the coming year.  Therefore, the 
Company is currently seeking to refinance a substantial portion of its 
existing short and long term debt with a combination of long term debt and 
equity, while simultaneously providing additional working capital.  In the 
interim period, however, the Company intends to factor its accounts 
receivable to provide an immediate source of working capital.  Also, 
subsequently to September 30, 1996, the Company has sold shares of its 
capital stock in private placements for cash, and may also do so in the 
future in order to raise capital. 

SUBSEQUENT EVENT - JOINT VENTURE AGREEMENT WITH CHINA PROVINCE

     On January 16, 1997 Shaanxi Elevator Corp in the Province of Shaanxi in 
China and Esco Elevator Corporation entered into a Joint Venture Agreement to 
manufacture and market a full line of hydraulic and traction elevators and 
related products.  Under the terms of the agreement, the provincial 
government will provide a large plant capable of producing $100 million in 
products a year. Esco will equip and manage the plant and China Shaanxi 
Elevator Corp will market the Joint Venture's elevators through its 36 
offices in China.  Esco will have the right to market the products of the 
Joint Venture throughout North, Central and South America, as well as to 
continue to manufacture and market elevators from its existing facilities in 
Fort Worth, Texas.

     Simultaneous with the execution of the Joint Venture Agreement, Esco 
received an order from China Shaanxi Elevator Corp for a minimum of 250, and 
up to 400, hydraulic elevators valued at $19 million to $30 million.  Esco is 
to commence the production of this order immediately so as to open the China 
market as soon as possible for the benefit of the Joint Venture.  The Company 
believes this order will be a "perpetual order" since the joint venture 
plant, when operating at full capacity, is expected to supply only a small 
portion of China's total needs.  The financial impact this venture may have 
on the Company has not been fully evaluated.

                                       12

<PAGE>

ITEM 7. FINANCIAL STATEMENTS

MEGALITH CORPORATION

INDEX TO FINANCIAL STATEMENTS

                                                                            PAGE

Independent Auditor's Report . . . . . . . . . . . . . . . . . . . . . . . . 14

Balance Sheets, September 30, 1996 and 1995. . . . . . . . . . . . . . . . . 15

Statements of Operations for Years Ended September 30, 1996 and 1995 . . . . 16

Statement of Changes in Stockholders' Equity for the 
  Year Ended September 30, 1996. . . . . . . . . . . . . . . . . . . . . . . 17

Statements of Cash Flows for the Years Ended September 30, 1996 and 1995 . . 18

Notes to Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 20










                                      13

<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS



Board of Directors and Stockholders
Megalith Corporation

We have audited the accompanying consolidated balance sheets of Megalith 
Corporation (a Colorado corporation) and Subsidiaries as of September 30, 
1996 and 1995, and the related consolidated statements of operations, changes 
in stockholders' equity and cash flows for the years ended September 30, 1996 
and 1995.  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 generally accepted auditing 
standards.  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 consolidated financial position of Megalith 
Corporation and Subsidiaries as of September 30, 1996 and 1995, and the 
consolidated results of their operations and their consolidated cash flows 
for the years ended September 30, 1996 and 1995, in conformity with generally 
accepted accounting principles.

The accompanying financial statements have been prepared assuming that the 
Company will continue as a going concern.  As discussed in Note C to the 
financial statements, the Company incurred a significant net loss for the 
year ended September 30, 1996 and needs capital to maintain adequate levels 
of working capital and develop the markets for its products and, in 
particular, the Joint Venture in China. These factors, among others, raise 
substantial doubt about the Company's ability to continue as a going concern. 
Management's plans in regard to these matters are also described in Note C.  
The financial statements do not include any adjustments that might result 
from the outcome of this uncertainty.



Boamah Boachie, CPA

Dallas, Texas
March 13 , 1997



                                      14
<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS.

                       MEGALITH CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
                                                          September 30,    September 30,
                                                              1996             1995
                                                          -------------    -------------
               ASSETS                                
<S>                                                        <C>             <C>
Current Assets:                                      
 Cash                                                      $  131,438      $    489
 Trade accounts receivable, net                               195,343           -
 Other receivables                                             75,000           -
 Inventory                                                    616,126           -
                                                           ----------      --------
   Total Current Assets                                     1,017,907           489
                                                           ----------      --------
                                                     
Plant, Property and Equipment                               9,102,366        29,000
 Less:  Accumulated depreciation                            (525,630)        (4,143)
                                                           ----------      --------
   Net Plant, Property & Equipment                          8,576,736        24,857
                                                           ----------      --------
                                                     
Goodwill                                                      655,930           -
Other Assets, net of amortization                               2,180           -
                                                           ----------      --------
   Total Assets                                            10,252,753        25,346
                                                           ----------      --------
                                                           ----------      --------
                                                     
     LIABILITIES AND STOCKHOLDERS' EQUITY            
                                                     
Current Liabilities:                                 
 Accounts payable, trade                                      594,767           -
 Customer prepayments                                          74,760           -
 Accrued expenses                                             333,037           -
 Property and payroll taxes payable                           556,044           -
 Accrued interest related to Esco asset 
  acquisition                                                 187,489           -
 Obligation on Dalcom Acquisition                             166,000           -
 Short term notes payables to related parties                 918,896        76,562
 Current portion of long term debt                            876,000           -
                                                           ----------      --------
   Total Current Liabilities                                3,706,993        76,562
                                                           ----------      --------
Long term notes payables, net of current portion            3,181,176           -  

Stockholders' Equity:
 Convertible preferred stock, Series A,  $10 par value;
  5,000,000 shares authorized; 8,807 shares
  outstanding at September 30, 1996                            88,070           -
 Common stock, $.005 par value; 50,000,000 shares           
  authorized; 14,597,862 and 1,554,346 shares                
  issued and outstanding at September 30, 1996               
  and September 30, 1995, respectively                         72,989         7,772
 Additional paid-in capital                                 5,395,809       105,907
 Stock subscriptions received                                  99,850           -
 Accumulated deficit                                       (2,292,134)     (164,895)
                                                           ----------      --------
   Total Stockholders' Equity                               3,364,584       (51,216)
                                                           ----------      --------
   Total Liabilities and Stockholders' Equity            $ 10,252,753     $  25,346
                                                           ----------      --------
                                                           ----------      --------
</TABLE>
                               SEE ACCOMPANYING NOTES.

                                       Page 15
<PAGE>

                        MEGALITH CORPORATION AND SUBSIDIARIES

                        CONSOLIDATED STATEMENTS OF OPERATIONS

                              YEARS ENDED SEPTEMBER 30,

                                                          1996          1995
                                                     ------------    ----------
Revenues                                             $  2,530,056    $    -

Cost of Goods Sold                                      2,324,659         -
                                                     ------------    ----------

   Gross profit                                           205,397         -

Expenses:
 Property taxes                                           321,412         -
 Liability and casualty insurance                         179,516         -
 Selling, general & administrative expenses               921,334        76,562
 Provision for doubtful accounts                           63,118         -
 Depreciation and amortization                            525,630         4,142
                                                     ------------    ----------
                                                        2,011,010        80,704
                                                     ------------    ----------

   Operating loss                                      (1,805,613)      (80,704)

Other Income (expense):
 Interest expense                                        (259,126)        -
 Other expenses                                           (62,500)        -
                                                     ------------    ----------

   Net loss                                          $ (2,127,239)   $  (80,704)
                                                     ------------    ----------
                                                     ------------    ----------

Net loss per common and common equivalent shares     $      (0.23)   $    (0.05)
                                                     ------------    ----------
                                                     ------------    ----------

Weighted average number of common and common
    equivalent shares outstanding                       9,256,917     1,554,346
                                                     ------------    ----------
                                                     ------------    ----------

                             SEE ACCOMPANYING NOTES.

                                     Page 16
<PAGE>

                    MEGALITH CORPORATION AND SUBSIDIARIES
          CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                        YEAR ENDED SEPTEMBER 30, 1996

<TABLE>
<CAPTION>                                  SERIES A                              
                                        PREFERRED STOCK         COMMON STOCK     
                                            ISSUED                 ISSUED        
                                      -------------------   --------------------- ADDITIONAL   COMMON      RETAINED      TOTAL
                                                AMOUNT                  AMOUNT      PAID IN     STOCK       EARNINGS  STOCKHOLDERS'
                                      SHARES (AT $10 PAR)   SHARES  (AT $.005 PAR)  CAPITAL   SUBSCRIBED   (DEFICIT)     EQUITY
                                      ------ ------------   ------  --------------  -------   ----------   ---------     ------
<S>                                    <C>    <C>          <C>       <C>            <C>        <C>       <C>           <C>        
BALANCE SEPTEMBER 30, 1995                 0   $   -      1,554,346    $ 7,772     $  105,907            $  (164,895)  $  (51,216)

Shares issued in connection with the 
   purchase of the assets of Esco 
   Elevator Inc.                           -       -      4,268,000     21,340      3,356,610                           3,377,950

Proceeds from sale of shares in a                                                                                    
   private placement                     300      3,000   1,994,334      9,972        429,100                             442,072

Exercise of option by a director/
   officer for purchase of shares 
   through a reduction of notes 
   payable                                 -       -      2,000,000     10,000        190,000                             200,000

Shares issued to an officer and 
   directors in reduction of notes 
   payable                             2,500     25,000   1,300,000      6,500        358,500                             390,000

Shares issued to various persons in                                                                                  
   cancellation of notes payables      8,311     83,110   1,831,160      9,156        802,519                             894,785

Shares issued in connection with the                                                                                 
   acquisition of Vertical Lift 
   Management                              -       -        166,668        833         61,667                              62,500

Shares issued in connection with the                                                                                 
   acquisition of Dalcom Elevator 
   Corporation                             -       -        944,520      4,723         (4,723)                               -

Stock issued for services and interest 
   on notes                              196      1,960     272,167      1,361         72,561                              75,882

Preferred stock converted to common 
   stock                              (2,500)   (25,000)    266,667      1,333         23,667                                -

Stock subscriptions received               -       -           -             -              -   99,850                     99,850

Current year earnings (loss)                                                                              (2,127,239)  (2,127,239)
                                   -----------------------------------------------------------------------------------------------
BALANCE SEPTEMBER 30, 1996             8,807   $ 88,070  14,597,862    $72,990     $5,395,808  $99,850   $(2,292,134) $ 3,364,584
                                   -----------------------------------------------------------------------------------------------
                                   -----------------------------------------------------------------------------------------------
</TABLE>

                           See accompanying notes.

                                   Page 17
<PAGE>

                    MEGALITH CORPORATION AND SUBSIDIARY 
                   CONSOLIDATED STATEMENTS OF CASH FLOWS                      

                         YEARS ENDED SEPTEMBER 30,                            
                                                          1996           1995 
                                                          ----           ----
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss):                                   $(2,127,239)    $ (80,704)
 Adjustments to reconcile net income (loss) to net
 cash used in operating activities:
  Depreciation and amortization                           525,630         4,142
  Common and preferred stock issued for services           75,882          -
  Loss on disposition of service business                  62,500
  Change in operating assets and liabilities:
   Accounts receivables, trade                             48,513          -
   Other receivables                                       62,681          -
   Accounts payable, trade                                282,358          -
   Customer prepayments                                   (41,076)         -
   Accrued expenses                                       333,037          -
   Property and payroll taxes payable                     556,044
                                                      -----------     ----------
  Net cash provided (used) by operating activities       (221,670)      (76,562)
                                                      -----------     ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of assets from Esco Elevators Inc.             (808,000)         -
 Proceeds from sale of subsidiary                               -       194,591
 Purchase of equipment                                     (2,876)
 Purchase of service business (VLM)                       (75,000)
 Acquisition of Dalcom Elevator Corp.                    (280,000)
                                                      -----------     ----------
  Net cash provided (used) in investing activities     (1,165,876)      194,591
                                                      -----------     ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
 Proceeds from loans from related parties               1,225,519        76,562
 Proceeds from sale of stock                              442,072          -
 Proceeds from stock subscriptions received                99,850
 Principal payments on installment notes                 (224,841)         -
 Repayment on notes to related parties                    (24,500)     (194,591)
 Other                                                        395
                                                      -----------     ----------
  Net cash provided by (used in) financing activities   1,518,495      (118,029)
                                                      -----------     ----------
Net increase (decrease) in cash                           130,949          -
Cash, beginning of year                                       489           489
                                                      -----------     ----------
Cash, end of period                                    $  131,438     $     489
                                                      -----------     ----------
                                                      -----------     ----------

                           See accompanying notes.

                                   Page 18

<PAGE>

                      MEGALITH CORPORATION AND SUBSIDIARY        
               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED) 

                    YEARS ENDED SEPTEMBER 30, 1996 AND 1995      

NON-CASH INVESTING AND FINANCING ACTIVITIES:

In connection with the acquisition of substantially all of the assets of Esco 
Elevators Inc. from the Bankruptcy Estate effective as of November 27, 1995, 
through its newly formed subsidiary, (Esco Elevator Corporation), the Company 
assumed various obligations and issued 4,268,000 shares of its common stock.  
The fair value of the assets received and the liabilities assumed are 
summarized below:

      Accounts receivables, trade                          $  243,856
      Other receivables                                        62,681
      Inventory                                               616,126
      Plant, property and equipment                         8,959,420
      Other assets                                              2,575
                                                           ----------
       Total assets                                         9,884,658
                                                           ----------
      Accounts payables                                        53,469
      Customer prepayments                                    115,836
      Current property taxes payable                          130,644
      Accrued interest to McMillian assumed                          
        for periods prior to the acquisition                  187,489
      Installment notes assumed                             5,211,270
                                                           ----------
       Total liabilities assumed                            5,698,708
                                                           ----------
       Net assets acquired                                  4,185,950
                                                                     
      Less:  Cash paid at closing                            (808,000)
                                                           ----------
       Net increase in equity                            $  3,377,950
                                                           ----------
                                                           ----------

The Company converted various notes payables and obligations to common and 
preferred stock during the year, which in the aggregate, totaled.  
$1,484,785.  In connection with acquisitions of Vertical Management Left, 
Inc. and Dalcom Elevator Corporation, the Company issued 1,111,188 shares of 
its common stock and assumed liabilities of $166,000 and owner financing of 
$350,000.

                           See accompanying notes.

                                   Page 19
<PAGE>

                    MEGALITH CORPORATION AND SUBSIDIARIES

                        NOTES TO FINANCIAL STATEMENTS

                              SEPTEMBER 30, 1996


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BUSINESS

     As described more fully at Note B, Megalith Corporation ("Megalith" or 
the "Company") was incorporated on November 3, 1995 in the State of Colorado. 
Pursuant to Articles of Merger filed on January 4, 1996, Megalith was merged 
with Overline Corporation, a Delaware corporation formed in 1986 
("Overline"), and Megalith was the surviving entity of the merger.  In 
connection with the merger, all outstanding shares of Overline were exchanged 
for an equal number of shares of Megalith.  

     Effective as of November 27, 1995, the Company, through its newly-formed 
subsidiary (Esco Elevator Corporation), acquired substantially all of the 
assets of Esco Elevators Inc. and Esco Properties, Inc. (the "Esco Assets").  
Upon the acquisition of the Esco Assets on November 27, 1995, the Company's 
principal business is the manufacture and sale of custom passenger and 
freight elevators. 

BASIS OF PRESENTATION

     The consolidated financial statements include the accounts of Megalith 
and its subsidiaries.  All significant intercompany accounts and transactions 
have been eliminated in consolidation.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted 
accounting principles requires management to make estimates and assumptions 
that affect reported amounts of certain assets, liabilities, revenues, and 
expenses. Actual results may differ from such estimates.

BUSINESS COMBINATIONS

In business combinations accounted for as purchases, the results of 
operations of the acquired companies are included from the respective dates 
of acquisition. Net assets of the companies acquired are recorded at their 
fair value at the date of acquisition.  Related purchase premiums and 
discounts, if any, are amortized over the remaining lives of the respective 
assets or liabilities. For accounting purposes, the acquisition of the Esco 
Assets was treated as a purchase of the assets by Megalith, and the assets 
and liabilities assumed were recorded at their fair values.  The acquisition 
of Dalcom Elevator Corporation was also accounted for by the purchase method, 
and the purchase price was allocated to specific assets acquired and 
liabilities assumed.  The excess of the purchase price over the amount 
allocated has been recorded as goodwill. This goodwill is attributed 
primarily to the customer list and customer order backlog obtained in the 
acquisition.  This intangible asset will be amortized over five years.

                                       20

<PAGE>

ACCOUNTS RECEIVABLE; INVENTORY

     Accounts receivables are reflected net of amounts received by the 
Company through factoring arrangements.

     Inventories are carried at the lower of cost or market.

     The allowances for accounts receivable and inventory are the amounts 
which, in the opinion of management, are necessary to absorb potential losses 
related to the collectibility of receivables and obsolescence of inventory.  
The adequacy of the allowance is based on the growth and composition of the 
accounts, their related risk characteristics, and continual review by 
management of the quality of their respective balances. 

PROPERTY AND EQUIPMENT  

     Property is recorded at cost.  Expenditures for major additions and 
improvements are capitalized, while minor replacements, maintenance and 
repairs are charged to expense as incurred.  When property is retired or 
otherwise disposed of, the cost and accumulated depreciation and depletion 
are removed from the accounts and any resulting gain or loss is reflected in 
current operations.  Depreciation is computed on the straight line method 
based upon the estimated useful lives of the assets.

          Office furniture and equipment                3 to 7 years
          Vehicles                                           5 years
          Factory equipment                                 12 years
          Buildings                                         30 years

Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for 
the Impairment of Long-Lived Assets and for Long-lived Assets to be Disposed 
Of", which is effective for fiscal years beginning after December 15, 1995, 
requires that long-lived assets and certain identifiable intangibles to be 
held and used by an entity be reviewed for impairment whenever events or 
changes in circumstances indicate that the carrying value of an asset may not 
be recoverable.  SFAS No. 121 also requires that long-lived assets and 
certain identifiable intangibles to be disposed of be reported at the lower 
of carrying amount or fair value less cost to sell.  The Company will adopt 
SFAS No. 121 effective October 1, 1996, and the impact of such adoption is 
expected to be insignificant to its financial condition and results of 
operations. 

INCOME TAXES

Deferred income taxes are provided, when applicable, on temporary differences 
between the recognition of income and expense for tax and for financial 
accounting purposes in accordance with Statement of Financial Accounting 
Standards No. 109.  Deferred income taxes are provided, when applicable, for 
all significant temporary differences by the liability method, whereby 
deferred tax assets and liabilities are determined by the tax laws and 
statutory rates in effect at the balance sheet date.

NOTE B - RECAPITALIZATION AND PURCHASE OF ESCO ASSETS

     Megalith Corporation ("Megalith" or the "Company") was incorporated on 
November 3, 1995 in the State of Colorado.  Pursuant to Articles of Merger 
filed on January 4, 1996, Megalith was merged with Overline Corporation, a 
Delaware corporation formed in 1986 ("Overline"), and Megalith was the 
surviving entity of the merger.  In connection with the merger, all 
outstanding shares of Overline were exchanged for an equal number of shares 
of Megalith.  For approximately five years prior to the merger on  November 27,
1995, Overline had been essentially inactive, other than for its efforts in 
seeking business opportunities.

                                       21
<PAGE>

     Effective as of November 27, 1995, the Company, through its newly-formed 
subsidiary (Esco Elevator Corporation), acquired substantially all of the 
assets of Esco Elevators Inc. and Esco Properties, Inc. (the "Esco Assets").  
Upon the acquisition of the Esco Assets on November 27, 1995, the Company's 
principal business is the manufacture and sale of custom passenger and 
freight elevators. Esco Elevators Inc. had manufactured, sold and serviced 
elevators since 1932.

     The Esco Assets were acquired by the Company pursuant to a Plan of 
Reorganization of Esco Elevators Inc. and Esco Properties Inc. which was 
approved by the U.S. Bankruptcy Court on October 12, 1995.  Esco Elevators 
Inc. and Esco Properties Inc. (collectively, "Old Esco"), based in Fort 
Worth, Texas, had filed for relief under Chapter 11 of the U.S. Bankruptcy 
Code on December 14, 1994.  A Bankruptcy Trustee was appointed by the Court 
on January 10, 1995, and the Trustee soon thereafter entered into a 
management agreement with Epsitek, Inc., a Delaware corporation, for the 
operation of Old Esco from January through November, 1995.  In June 1995, the 
Trustee and Epsitek, Inc. jointly filed the Plan of Reorganization of Old 
Esco, whereby Epsitek, Inc. would purchase substantially all of the assets 
from the Bankruptcy Estate. Effective November 27, 1995, Epsitek, Inc. 
assigned to Esco Elevator Corporation, the wholly-owned subsidiary of the 
Company, all of its rights and equity in Old Esco, including the right to 
acquire the Esco Assets pursuant to the Plan of Reorganization and the 
accounts receivable generated during the time of the management agreement, 
subject to expenses required to be paid during the same period.  

     The Esco Assets were acquired in exchange for $808,000 cash paid to the 
Bankruptcy Estate of Old Esco, assumption by the Company of certain 
installment debt and other obligations of Old Esco aggregating $4,273,642 and 
the issuance to Epsitek, Inc. of 4,268,000 shares of the common stock of the 
Company. In addition, the Company assumed indebtedness totaling $1,425,066 
and received certain assets from Epsitek, Inc. in connection with the 
purchase of the Esco Assets.  $800,000 of the cash consideration was borrowed 
from certain shareholders or related parties of the Company on short term 
notes bearing interest of eight percent, of which $200,000 of principal on 
the notes was canceled in exchange for shares of common stock of the Company 
upon the exercise of a stock option agreement by the chief executive officer 
of the Company on December 4, 1995.  Also, another $325,000 of notes was 
cancelled with the issuance of Common stock of the Company.  Of the debt 
assumed by the Company, $3,407,177 was due to an individual who holds first 
lien rights to the substantial portion of the Esco Assets, including the 
land, buildings and all equipment not encumbered by other priority liens.  
The remaining debt assumed by the Company is owed to various financing 
institutions and vendors for certain items of equipment or improvements which 
are included in the assets acquired by the Company.  With one exception, all 
of the notes have installment payment provisions of varying terms that are 
specified by the Plan of Reorganization.   

For accounting purposes, the acquisition of the Esco Assets was treated as a 
purchase of the assets by Megalith, and the assets and liabilities assumed 
were recorded at their fair values.

NOTE C - GOING CONCERN CONSIDERATIONS

The consolidated financial statements have been presented in conformity with 
generally accepted accounting principles, which contemplate continuation of 
the Company as a going concern.  However, the Company has sustained 
substantial losses from operations in the  year just ended, and such losses 
have continued subsequent to year end.  In addition, the Company has used, 
rather than provided, cash in its operations.  Operations of the Company have 
been financed primarily from revenues generated from the sale of elevators 
and components, borrowings and contributions from its principal stockholder, 
and by proceeds from the sale of its common stock.  To implement its business 
plan, which is to develop the markets for its products, including expansion 
into the China market through the joint venture in China (see "Note N - 
Subsequent Events" below) and 

                                        22
<PAGE>

complete an adequate refinancing of its subsidiary (Esco Elevator 
Corporation) the Company must raise additional capital.

In view of the matters described in the preceding paragraph, recoverability 
of a major portion of the recorded asset amounts shown in the accompanying 
balance sheet is dependent upon continued operations of the Company, which in 
turn is dependent upon the Company's ability to raise capital to (i) obtain 
adequate levels of working capital, (ii) expand and develop the markets for 
its products, and in particular, develop the Joint Venture in China, and 
(iii) to achieve successful operations.  The financial statements do not 
include any adjustments relating to the recoverability and classification of 
recorded asset amounts or amounts and classification of liabilities that 
might be necessary should the Company be unable to continue in existence.

The Company is presently undertaking a private placement offering for the 
sale of its common stock for which the Company expects to raise up to 
$3,000,000 for the purposes of developing additional markets for its 
products, expansion of its operations overseas, and for working capital.  
Simultaneous with this effort for the sale of common stock, the Company is 
pursuing refinancing of its existing long and short term indebtedness.  In 
addition, the Company has commenced a program to expand the market 
penetration for its products and services through the implementation of 
marketing efforts into other  geographic areas not previously exploited by 
the Company.  Management believes the above steps will enable the Company to 
meet its obligations and sustain operations until profitable operations have 
been attained.

NOTE  D - ACCOUNTS RECEIVABLE

As of September 30, 1996 the balance of trade accounts receivable was as 
follows: 

     Gross trade receivables                       $ 682,284
     Less:  Advances on factored receivables        (423,823)
            Allowance for doubtful accounts          (63,118)
                                                   ---------
               Net trade receivables               $ 195,343


     Other receivables reflect amounts aggregating $75,000 due in less than 
one year for the sale of Vertical Lift Management, Inc. (VLM), an elevator 
service and installation company acquired by Megalith during 1996.  Megalith 
sold its interest in VLM, which transaction was closed on October 4, 1996, 
and the Company has recorded a charge of $62,500 against income in the 
current year for the disposition.

NOTE E - INVENTORIES

     Inventories consisted of the following at September 30, 1996 and 1995:

                                                      1996        1995 
                                                   ---------     -----
           Raw materials and work-in-progress      $ 820,259     $ -0- 
           Less:  Allowance for obsolesence         (204,133)      -0- 
                                                   -------------------
                       Net inventories             $ 616,126     $ -0- 
                        
 
During the fourth quarter the Company recorded a provision of $52,133 to 
reduce the carrying value of its inventory.  An additional reserve amount of 
$152,000, included in the total reserve of $204,133 above, was recorded in 
connection with the acquisition of the Esco Assets at November 27, 1995.

                                      23
<PAGE>

NOTE F - PROPERTY AND EQUIPMENT

     The Company's property and equipment consist of the following at 
September 30, 1996 and 1995:

                                                 1996            1995 
                                              ----------       -------
          Land and buildings                  $5,600,000       $   -0- 
          Furniture and office equipment         314,460        29,000 
          Computer software                       35,000           -0- 
          Factory equipment                    3,101,956           -0- 
          Automobiles                             50,950           -0- 
                                              ----------       -------
               Totals                         $9,102,366       $29,000 
                                              ----------       -------
                                              ----------       -------


NOTE G - DALCOM ACQUISITION

     On July 9, 1996, the Company acquired 100% of the outstanding shares of 
Dalcom Elevator Corporation ("Dalcom"), a private company located in Garland, 
Texas which manufactures and markets elevator cabs and entrances.  In 
connecrtion with that purchase, the Company received certain equipment, 
accounts receivables, the customer list and the backlog of customer orders.  
In exchange, the Company assumed certain indebtedness of Dalcom and issued 
944,520 shares of the Company's restricted Common Stock.  Immediately after 
the closing, the indebtedness was reduced by a cash payment of $250,000.  The 
Company is presently in negotiation with the previous owner of Dalcom to 
cancel a portion of the indebtedness assumed by the Company and receive back 
all of the shares issued in the transaction to the treasury of the Company.


NOTE H - ACCRUED LIABILITIES

     Accrued expenses consist of the following at September 30, 1996 and 1995:

                                                1996             1995 
                                              --------         -------
          Officer compensation                $152,599         $   -0- 
          Accrued travel expenses               25,000             -0- 
          Accrued legal expenses                25,000             -0- 
          Other accrued expenses               130,438             -0- 
                                              --------         -------
               Totals                         $333,037         $   -0- 
                                              --------         -------
                                              --------         -------


NOTE I - LONG TERM NOTES PAYABLE

     Long term notes payable consists of the following:

                                               Sep. 30,         Sep. 30,
                                                 1996             1995 
                                              ----------        --------
          Promissory note to McMillan, 
            secured by first lien deed 
            of trust on substantially all
            equipment and real estate, 
            assumed effective as of 
            November 27, 1995 as part 
            of the Esco Asset acquisition,
            principal and interest of 
            6.5% due in monthly installments
            of $45,425, payable in full 
            July 10, 2002                     $3,269,820             -0- 



                                      24

<PAGE>

          Various installment notes payable,
          assumed effective as of 
            November 27, 1995 as part of 
            the Esco Asset acquisition, 
            with terms ranging from 3 
            months to 10 years at interest 
            rates ranging from 3% to 9.9%, 
            secured by certain equipment 
            and property                         787,356             -0- 
                                              ----------        --------
                                              $4,057,176             -0- 
               Less short term portion 
               of long term debt                 876,000             -0- 
                                              ----------        --------
                    Net long term debt        $3,181,176             -0- 


NOTE J - SHORT TERM NOTES PAYABLES TO RELATED PARTIES

     Notes and accounts due to related parties consists of the following::

                                               Sep. 30,         Sep 30, 
                                                 1996             1995  
                                               --------         --------
   Short term note payable to Epsitek,
     Inc., unsecured, payable on 
     demand, with interest at 8%; 
     issued in exchange for receivables 
     (net of liabilities) transferred 
     from Epsitek, Inc. in connection
     with the acquisition of the 
     Esco Assets                               $152,355          $   -0- 

   Short term notes payable to four
     stockholders, unsecured, with 
     interest at 8% paid monthly, and 
     due on demand;  loan incurred 
     in connection with Esco Asset 
     acquisition                                386,432              -0- 

   Short term note payable to a
     shareholder/officer/director,
     unsecured, with interest at 8%,
     principal and interest due 
     on demand; loan incurred in 
     connection with Esco Asset 
     acquisition                                180,109              -0- 

   90-day note payable payable to 
     a former officer/director,
     non-interest bearing; note 
     given for cash advance to the 
     Company in connection with 
     the Dalcom Acquisition                     200,000              -0- 

   Demand note payable to a former
     officer/director, non-interest 
     bearing; the note was given in 
     exchange for operating expenses 
     advanced to the Company                        -0-           76,562 
                                               --------          -------
          Total                                $918,896          $76,562


     The demand note due to the former officer/director was reduced during 
the current quarter by $24,857 for the net book value of furniture and 
equipment distributed to the noteholder upon the merger of Megalith and 
Overline; the balance of 51,705 was cancelled upon the issuance of shares of 
the Company's Common Stock.



                                      25

<PAGE>

NOTE K - STOCKHOLDERS' EQUITY

CAPITAL STOCK

     The authorized capital stock of the Company as of September 30, 1996 
consists of 50,000,000 shares of common stock, par value $.005 per share 
("Common Stock") and 5,000,000 shares of preferred stock, par value $10.00 
per share ("Preferred Stock").  At a special meeting of shareholders on 
December 18, 1996, an amendment to the Company's Certificate of Incorporation 
was adopted to (i) divide the Company's authorized Preferred Stock into 
series of Preferred shares and to fix and determine the relative rights, 
limitations, and preferences of the shares of the Company's Series A, B, and 
C Preferred Stock, and (ii) to grant the authority to the Board of Directors 
of the Company to fix and determine the relative rights, limitations, and 
preferences of the remaining series of the Company's Preferred Stock.


PREFERRED STOCK

     During the fiscal year ended September 30, 1996, the Company issued 
11,307 shares of its Preferred Stock primarily in exchange for the 
cancellation of obligations to various individuals in connection with loans 
to the Company, or its predecessor, for the initial financing of the Company. 
 Certain of the shares issued during the period were sold for cash pursuant 
to a private placement offering or as compensation for financial consulting 
services provided to the Company.  Pursuant to the amendments to the Articles 
of Incorporation adopted by the shareholders at the special meeting on 
December 18, 1996, each of the 11,307 issued shares were designated as Series 
A Preferred Stock.  Of the 11,307 shares of Preferred Stock issued, 2,500 
shares had been exchanged for shares of Common Stock as of September 30, 
1996, as provided for such conversion by the designation of the Series A 
Preferred Stock.  Subsequent to September 30, 1996, additional shares of the 
Preferred Stock were exchanged for Common Stock 

     Three million shares of the five million authorized Preferred shares are 
divided into three series and designated as Series A, Series B, and Series C 
Preferred Stock, and the corporation is authorized to issue one million 
shares each for Series A, B and C.  The Board of Directors is authorized to 
divide the two million remaining shares of Preferred Stock into series, to 
designate each series, to fix and determine separately for each series the 
relative rights, limitations, and preference of such series, and to issue 
shares of any series of Preferred Stock then or previously designated, fixed, 
or determined.  Although the Board of Directors has designated the term for 
Series A, Series B and Series C of its Preferred Stock, only the Series A 
shares have been issued.  Each share of each series of Preferred Stock will 
have rights identical to each other share of that series of Preferred Stock.  
No dividend on any share of Series A, B or C Preferred Stock will accumulate.

     Each share of Series A Preferred Stock has a stated value of $40.00, and 
is convertible, at the option of the holder of such share, into Common Stock. 
 The conversion rate into Common is determined by dividing the $40 per share 
stated value of the Preferred by 50% of the closing bid price of the Common 
Stock.  The term "Closing Bid Price" means, if the corporation stock is 
actively traded, the published closing bid price of the Common on the trading 
day immediately preceding the date of conversion.  Series A shares may be 
converted into Common Stock after the Preferred Stock has been issued and 
outstanding for at least six months.


COMMON STOCK 

     During the fiscal year ended September 30, 1996, the Company issued 
4,268,000 shares of its Common Stock in connection with the acquisition of 
the Esco Assets and 5,131,160 shares in exchange for the cancellation of 
obligations to various individuals (including officers and directors) in 
connection with loans to the Company, or its predecessor, for the initial 
financing of the Company.  Certain additional shares were 



                                      26

<PAGE>

issued during the period pursuant to a private placement offering for cash or 
as compensation for financial consulting services provided to the Company

     Holders of Common Stock are entitled to one vote for each share held of 
record on all matters voted on by stockholders.  The shares of the Common 
Stock do not have cumulative voting rights, which means that the holders of 
more than 50% of the shares of the common Stock voting for the election of 
the directors can elect all of the directors to be elected by holders of the 
Common Stock, in which event the holders of the remaining shares of Common 
Stock will not be able to elect any director.  Upon any liquidation, 
dissolution, or winding-up of the affairs of the Company, holders of the 
Common Stock would be entitled to receive, pro rata, all of the assets of the 
Company available for distribution to stockholders, after payment of any 
liquidation preference of any Preferred Stock that may be issued and 
outstanding at the time.  Holders of the Common Stock have no subscription, 
redemption, sinking fund, or preemptive rights.  

     Common Stock is stated at the lower of par value or consideration 
received, as permitted by state law.  Common stock subscribed reflects 
amounts received in September, 1996 for shares of the Company's Common Stock 
for which the shares were not issued until October, 1996.


STOCK OPTIONS

     On April 1, 1996, the Company granted to an individual options to 
acquire up to 200,000 shares of restricted common stock of the Company in 
conjunction with an agreement to provide services to the Company.  The option 
agreement expires 24 months from the date of the agreement.

     On May 29, 1996, the Company granted to Stacy Investments Partnership 
Ltd. the option to purchase 50,000 shares of restricted common stock at a 
price of $.60 per share.  The option expires in 24 months from the date of 
the agreement.

     On September 5, 1996, the Company acknowledged to Dr. Arthur Malcolm, a 
former Director of the Company, that the Company has granted to him the 
option to purchase 100,000 shares of restricted common stock at $.37 per 
share and 100,000 shares at $1.00 per share, both expiring March 5, 1998.

     On May 1, 1996, the Company accepted certain subscriptions for 105,000 
shares of the Company's common stock from five individuals which could 
require the Company to buy the shares back at a price of $1.20, only upon the 
election of the holder and in the event that within 12 months the bid price 
of the Company's Common Stock falls below $1.20 for any consecutive 60 day 
period.  The Company has not been requested to buy back any of the shares 
under the agreements and, based upon the current level of the trading price 
of the Common Stock which is in excess of the price required for an election 
of the put option, management does not anticipate that the Company will be 
required to buy back any shares prior to the expiration date of April 30, 
1997.  Accordingly, no provision has been made in the financial for any 
obligation that might arise in connection with any put option. 



                                      27
<PAGE>

NOTE L - COMMITMENTS AND CONTINGENCIES

     Effective November 27, 1995, the Company entered into a three-year
employment contract with a director, who is the chief executive officer of the
Company's subsidiary, Esco Elevator Corporation.  The contract provides for a
base annual salary of $120,000, expense reimbursements and other provisions.

NOTE M - INCOME TAXES

     The Company has net operating loss carryforwards of $1,915,000 available 
to offset future taxable income expiring in tax years ended 2010 through 
2011.  Tax laws limit the utilization of the net operating loss carryforwards 
available for use in any given tax year in the event of a significant change 
in ownership interests.  Due to changes in majority ownership occurring at 
November 27, 1995 and again during 1996, the utilization of net operating 
losses of the Company will be limited to approximately $250,000 per year.  
Furthermore, realization of future deductions for available net operating 
losses is dependent on generating sufficient taxable income prior to 
expiration of the loss carryforwards. Management believes that it is more 
likely than not that any deferred tax asset arising from the net operating 
losses carryforwards may not be realized; therefore, a valuation allowance in 
the full amount of the deferred tax asset has been provided to reduce the 
total deferred tax asset to zero.  

NOTE N - SUBSEQUENT EVENT

     On January 16, 1997, the Company's subsidiary, Esco Elevator 
Corporation, entered into a Joint Venture Agreement with Shaanxi Elevator 
Corp. in Province of Shaanxi in China to manufacture and market a full line 
of hydraulic and traction elevators and related products.  Under the terms of 
the agreement, the provincial government will provide a large plant capable 
of producing $100 million in products a year, Esco will equip and manage the 
plant and China Shaanxi Elevator Corp. will market the Joint Venture's 
elevators through its 36 offices in China.  Esco will have the right to 
market the products of the Joint Venture throughout North, Central and South 
America, as well as to continue to manufacture and market elevators from its 
existing facilities in Fort Worth, Texas.  Simultaneous with the execution of 
the Joint Venture Agreement, Esco received an order from China Shaanxi 
Elevator Corp. for a minimum of 250, and up to 400, hydraulic elevators 
valued at $19 million to $30 million.  Esco is to commence the production of 
this order immediately so as to open the China market as soon as possible for 
the benefit of the Joint Venture.

                                     28
<PAGE>

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

     None.


PART  III

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

     The following table lists the names, ages and present position with the
Company for all of the Company's directors and executive officers:

Syed G. Zaidi          51         Chief Executive Officer and
                                  Chairman of the Board of Directors 
Bashir G. Ahmed        52         Director 
James W. Landrum       47         Director and President of Esco
                                  Elevators, Inc. 
Mohammed Sharabash     48         Director 
Arthur Steber          38         Director 

The executive officers of the Company are elected annually at the first 
meeting of the Company's Board of Directors held after each annual meeting of 
stockholders.  Each executive officer will hold office until the first 
meeting of the Board after annual meeting of stockholders next succeeding his 
election and until his successor is duly elected and qualified, or until his 
death or resignation or until he shall have been removed in the manner 
provided in the Company's Bylaws.

BIOGRAPHICAL INFORMATION.  Set forth below is certain information concerning 
the Directors and Executive officers of the Company.
          
     SYED G. ZAIDI serves as the President, Chief Executive Officer, and 
Chairman of the Board.  He has been affiliated with the Company since 
November, 1995.  Since April, 1994, Mr. Zaidi has been the President and 
Chief Executive Officer of Epsitek, Inc., a major shareholder of the Company. 
Prior to his association with Megalith, he also served as President and 
Chief Executive Officer of Alphasoft, Inc., and Baby's Dream Furniture, Inc.  
In 1990, Mr. Zaidi, as President of Crib to College, Inc., developed a 
distribution program for the company's manufactured products by opening 20 
retail stores.  From 1985 to 1990, Mr. Zaidi served as Managing Director and 
CEO of Intech International in Karachi, Pakistan and a related company, 
Fujatech Industries, Ltd in Fujairah, UAE.  In 1980, Mr. Zaidi founded 
Alphacom, Inc., a company engaged in the business of design, manufacture and 
marketing of computer printer products for OEM and consumers, including the 
establishment of distribution and manufacturing in Europe and the Far East.  
Mr. Zaidi holds a bachelors degree in electrical engineering from Oklahoma 
State University.

     BASHIR G. AHMED has been a director of the Company since April, 1996.  
Mr. Ahmed has served as the President and Chief Executive Officer of Samad 
Group, Inc., a venture capital organization, since 1986.  Mr. Ahmed holds two 
masters degrees from the University of Illinois-Champaign Urbana.

     JAMES W. LANDRUM has been affiliated with the Company since November, 
1995. Mr. Landrum is presently a director of the Company and also serves as 
the President and Chief Executive Officer of Esco Elevator Corporation.  
Prior to becoming affiliated with the Company, Mr. Landrum was a Vice 
President of 

                                     29
<PAGE>

Epsitek, Inc.  Prior to that, Mr. Landrum was President of Lanco 
Environmental and Lanco Energy, companies founded and owned by him.  Mr. 
Landrum holds a degree in Business Administration from the University of 
Texas at Arlington.

     MOHAMMED SHARABASH has been a director of the Company since April, 1996. 
Mr. Sharabash is President of Micro System International and CU Online, Inc. 
Mr. Sharabash holds a masters and a doctoral degree from the University of
Illinois.

     ARTHUR W. STEBER has served as a director of the Company since December,
1996.  Mr. Steber is Managing Director of Bagby Elevator Company, Inc., where he
has been employed for over 20 years.  Bagby is the largest independent elevator
contractor in the Southeastern U.S., and for 70-years, has sold, installed and
serviced elevators.  Mr. Steber has a degree in business administration from the
University of Alabama.

SECTION 16 REPORTING

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and Directors, and persons who own more than 10% of a registered class
of the Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC") and the
National Association of Securities Dealers, Inc.  Officers, Directors, and
greater than 10% stockholders are also required by SEC regulations to furnish
the company with copies of all Section 16(a) forms they file.  

     Based upon a review of the Company's files, the Company has apparently not
received copies of the required forms.   Therefore, the Company cannot ascertain
whether the reporting requirements of Section 16(a) has been met by the persons
required to report. 

ITEM 10.  EXECUTIVE COMPENSATION.

The following table sets forth the compensation of the Company's Chief Executive
Officer for the fiscal years ended September 30, 1996, 1995, and 1994.

<TABLE>
                    ------Annual Compensation------                ------Long Term Compensation-----

                                                        Awards     Payouts 
         (a)          (b)    (c)    (d)       (e)        (f)         (g)       (h)         (i) 
                                             Other    Restricted                                
     Name and                                Annual     Stock      Options/   LTIP      All Other
     Principal              Salary  Bonus   Compen-     Awards       SARs    Payouts   Compensation 
     Position        Year      $      $     sation $      $           #         $           $     
---------------------------------------------------------------------------------------------------
<S>                  <C>      <C>    <C>     <C>        <C>         <C>      <C>          <C>
Syed G. Zaidi,       1996     (1)    --       --         (1)         (1)       --          --     
CEO and              1995      --    --       --         --          --        --          --
Chmn of BOD          1994      --    --       --         --          --        --          --
 
James W. Landrum     1996     (2)    --       --         --          --        --          --
Pres. & CEO,         1995      --    --       --         --          --        --          --
Esco Elevator Corp.  1994      --    --       --         --          --        --          --
</TABLE>

          (1)  Mr. Zaidi began his duties as CEO and Chairman of the Board
     effective in November, 1995 and has received no cash compensation for the
     fiscal year ended September 30, 1996.  Mr. Zaidi has been authorized by the
     Board of Directors to receive an annual salary of $120,000 per year, of

                                       30
<PAGE>

     which $100,000 was accrued as compensation and $25,000 as travel expense
     and obligations of the Company as of September 30, 1996.  Mr. Zaidi
     received an option for the purchase of 2,000,000 shares of the Company's
     Common Stock at a price of $0.10 per share in November, 1995 and on
     November 28, 1995, he exercised his option and received those shares.  The
     exercise price of $200,000 was paid by the cancellation of $200,000 of
     indebtedness due to Mr. Zaidi in connection with monies advanced for the
     acquisition of the Esco Assets.  Also, in February and June, 1996, Mr. 
     Zaidi was issued a total of 1,100,000 shares of Common Stock of the 
     Company, and the attributed value of $275,000 for those shares was 
     used to reduce the indebtedness due to Mr. Zaidi referred to previously.  
          (2)  Mr. Landrum began his duties as President and CEO of Esco
     Elevator Corporation effective November 27, 1995 and has an employment
     contract for a period of three years with the Company which provides for an
     annual salary of $120,000 per year.  During the period from  November 27,
     1995 to the fiscal year ended September 30, 1996, Mr. Landrum was due basic
     compensation under the employment contract of approximately $100,000, and
     was actually paid $47,401 during the period.  The amount under the contract
     of $52,599 not paid has been accrued as an expense and an obligation of the
     Company as of September 30, 1996.  

     No other officer or person received compensation of an amount in excess of
$100,000 during the fiscal year ended September 30, 1996.

     The Company does not compensate its non-employee Board members for
participation in board meetings.  During the fiscal year ended September 30,
1996, the Directors were not paid any compensation in connection with their
services.

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

     The following table sets forth the total number of shares of the Company's
Common Stock and Preferred Stock beneficially owned by (a) each person who, to
the knowledge of the Company, is the beneficial owner of 5% or more of the
outstanding shares of a class of the Company's Capital Stock, (b) each of the
Company's present Directors and officers and certain other parties, and (c) the
directors and officers of the company as a group, all as reported by each such
person, and as of February 28, 1997.  Except as otherwise indicated, ownership
of shares by the persons named below includes sole voting and investment power
held by such persons. 
                                         Amount and
                                          Nature of         (1)
                                          Beneficial      Percent
Name and Address of Beneficial Owner      Ownership      of Class
------------------------------------      ---------      --------

                               COMMON STOCK 

Frances H. Alexander
172 Empinado Way
Hot Springs Village, AR  71909             944,520          5.6% 

Epsitek, Inc.                            3,025,862 (2)     18.0% 
3102 Coronado St.
Irving, TX  75062

Syed G. Zaidi                            4,989,122 (3)     29.6% 
4720 Esco Drive
Fort Worth, TX  76140

                                       31
<PAGE>

Bashir Ahmed                               209,622 (4)      1.2% 
c/o Samad Group, Inc.
2801 Far Hills Avenue, Suite 205
Dayton, OH  45419

James W. Landrum                         1,008,620 (5)      6.0% 
4720 Esco Drive
Fort Worth, TX  76140

Mohammed Sharabash                         775,643 (6)      4.6% 
2907 River Oak Drive
Champaign, IL  61821

Arthur W. Steber                           116,245           .7% 
c/o Bagby Elevator Company, Inc.
4240 First Avenue South
Birmingham, AL  35232-0919

All Directors and Officers as a          5,892,543 (7)     35.0% 
 group (5 people) 

                          SERIES A PREFERRED STOCK 
 
Bashir Ahmed                                   297 (4)      5.3% 
c/o Samad Group, Inc.
2801 Far Hills Avenue, Suite 205
Dayton, OH  45419

All Directors and Officers as a                297          5.3% 
group (5 people) 
 
  (1)  Percent of class is based upon the 16,838,433 shares of Common and
       5,574 shares of Preferred issued and outstanding as of February 28,
       1997; and for each person or group, pursuant to Item 403 of Regulation
       S-B, the percentages are calculated on the basis of the amount of
       outstanding securities of the particular class plus any securities that
       such person or group has the right to acquire within 60 days pursuant
       to options, warrants, conversion privileges or other rights.
  (2)  Shares owned by Epsitek, Inc. are voted by Syed G. Zaidi, in his
       capacity as President and Chief Executive officer of Epsitek, Inc.  Mr.
       Zaidi has an indirect ownership of 1,008,620 of the Epsitek, Inc.
       shares, determined by his proportionate ownership of Epsitek, Inc.
  (3)  Mr. Zaidi's shares beneficially owned includes 1,963,260 shares held
       directly by Mr. Zaidi and 3,025,862 shares held by Epsitek, Inc., of
       which Mr. Zaidi votes as President and Chief Executive Officer of
       Epsitek, Inc.
  (4)  Mr. Ahmed's shares are held by Samad Group, Inc., of which Mr. Ahmed
       is the principal shareholder and entitled to vote the shares.  Mr.
       Ahmed's shares also include shares of Common which Samad Group, Inc. is
       entitled to receive under a conversion of Preferred shares, calculated
       based upon an assumed conversion rate of 38.83 shares of Common for
       each share of Preferred ($40 per share stated value of Preferred
       divided by 50% of the closing bid price of $2.06 on March 17, 1997), in
       accordance with the terms of the Preferred.
  (5)  Mr. Landrum's shares reflect a portion of the Epsitek, Inc. shares,
       determined by Mr. Landrum's proportionate ownership of Epsitek, Inc.  
  (6)  Mr. Sharabash's shares include 357,143 shares of Common which were
       converted from 2,500 Preferred shares on December 31, 1996, in
       accordance with the terms of the Preferred Series A.
  
                                       32
<PAGE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     In the transaction involving the purchase of the Esco Assets described 
in Item 1. above, the Company issued to Epsitek, Inc. 4,268,000 shares of its 
Common Stock and assumed certain indebtedness of Epsitek, Inc. totaling 
$1,425,066, and received certain assets from Epsitek, Inc.  The obligations 
assumed from Epsitek, Inc. were incurred primarily in connection Epsitek's 
operations of Esco Elevators, Inc. during the period of the Chapter 11 
Bankruptcy under the supervision of the Bankruptcy Trustee and for working 
capital for Epsitek, Inc.  Mr. Zaidi, Chief Executive Officer and Chairman of 
the Board of Megalith, Inc. is the President, Chief Executive Officer, 
Director and the major shareholder of Epsitek, Inc.  Mr. Landrum, a Director 
of Megalith is also a director and major shareholder of Epsitek, Inc. and 
serves as its Vice President.  In connection with the acquisition of the Esco 
Assets from the Bankruptcy Estate for a cash purchase price of $800,000 plus 
other expenses, Mr. Zaidi loaned the Company cash of $600,000.  In addition, 
Mr. Zaidi loaned the Company $79,608 for working capital during the year.  On 
November 28, 1995, Mr. Zaidi exercised an option granted to him by the 
Company for the purchase of 2,000,000 shares of Common Stock, and the 
exercise price of $200,000 was paid by the reduction of the note due to him.  
Mr. Zaidi also received a total of 1,100,000 shares of the Company's common 
stock in the months of February and May, 1996, in exchange for cancellation 
of $275,000 of the promissory note due to him.  In addition, Mr. Zaidi was 
repaid cash in the amount of $24,500 on the note.  The balance of all notes 
due to Mr. Zaidi was $180,108 at September 30, 1996.  

     On April 7, 1996, Mohammed Sharabash, a Director of the Company was 
issued 200,000 shares of Common Stock and 2,500 shares of Preferred Stock of 
the Company in cancellation of $115,000 of indebtedness due to him for loans 
made to the Company.  

     In a transaction recorded in the year ended September 30, 1996 and 
closed on October 4, 1996, the Company sold 100% of the stock in Vertical 
Lift Management, Inc. (VLM) to Arthur P. Bagby in a transaction for cash and 
notes receivable aggregating $75,000.  Arthur P. Bagby is the majority 
shareholder of Bagby Elevator, Inc., a private company headquartered in 
Birmingham, Alabama. Arthur W. Steber, a Director of Megalith, is the 
Managing Director and shareholder of Bagby Elevator, Inc.  Mr. Steber was not 
elected to the Board of Megalith until December 18, 1996, which occurred 
after the acquisition of VLM by Arthur P. Bagby.  VLM is a private company 
involved in the installation and servicing of elevators in the North Texas 
area.  The stock of VLM, a Texas corporation, had been acquired by Megalith 
in a purchase agreement dated April 23, 1996.  In connection with the 
agreement for the sale of VLM to Mr. Bagby the Company granted to Mr. Bagby 
or any of his affiliates ("Bagby"), credits totaling $41,126 in the form of 
credits on existing purchase orders due and payable by Bagby to subsidiaries 
of Megalith or purchase discounts on future orders for parts and supplies 
sold to Bagby within 6 months from the date of the agreement.  In addition, 
Bagby was granted a preferred customer status as a customer of Esco whereby 
Bagby will receive price discounts on purchases from the Company of 
approximately 5% for a period of 10 years. 

     During the year, Samad Group, Inc. was compensated by the issuance of 
shares of Common and Preferred shares of the Company in connection with 
financial consulting services provided to the Company.  The value attributed 
to these shares issued during the year was $28,382.  Mr. Ahmed, a Director of 
the Company, is the President, Chief Executive Officer and principal owner of 
Samad Group, Inc.

                                       33
<PAGE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(A)  FURNISH THE EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-B.

  Exhibit No.                   Exhibit Description
  -----------                   -------------------
     2.1 *     Amended Asset Purchase Agreement dated November 27, 1995 by and
               among Epsitek, Inc. and Overline Corporation

     2.2 *     Plan and Agreement of Purchase dated May 22, 1996 by and amongst
               Megalith Corporation, Frances H. Alexander, and Dalcom Elevator
               Corporation

     3.1       Articles of Incorporation of Megalith Corporation (a Colorado
               Corporation)
     
     3.2       Articles of Merger of Megalith Corporation (acquiror) and 
               Overline Corporation (acquired) dated as of November 7, 1995

     3.3       Bylaws of Megalith Corporation     

     10.1      Bill of Sale and Assignment dated as of November 27, 1995 between
               Esco Trust, Esco Elevator Corporation and Epsitek

     10.2      Assignment dated as of November 27, 1995 between Epsitek, Inc. 
               and Esco Elevator Corporation

     10.3      Assumption, Extension, Modification and Renewal Agreement (to the
               Promissory Note and Deed of Trust, Security Agreement and 
               Financing Statement) dated as of November 7, 1995 between 
               Esco Elevator Corporation, Epsitek, Inc. and Anna Loughridge 
               McMillan

     17 *      Letter on director resignation

     21 *      Subsidiaries of registrant

     23 *      Consent of Independent Auditor

     27 *      Financial Data Schedule

----------------
* Indicates documents filed herewith.

(B)  REPORTS ON FORM 8-K.

     No reports on Form 8-K were filed during the fourth quarter of the 
fiscal year ended September 30, 1996.

                                       34
<PAGE>

                                    SIGNATURES

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

MEGALITH CORPORATION:

                                                         Date
                                                         ----
By:  /s/  Syed G. Zaidi                              March 18, 1997
------------------------------------------
Syed G. Zaidi, Chief Executive Officer and                  
Chairman of the Board of Directors 



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.

/s/  Bashir G. Ahmed                                March 18, 1997
------------------------------------------
Bashir G. Ahmed                    
Director


/s/  Mohammed Sharabash                             March 18, 1997
------------------------------------------
Mohammed Sharabash
Director


/s/  James W. Landrum                               March 18, 1997
------------------------------------------
James W. Landrum
Director


/s/  Arthur Steber                                    March 18, 1997
------------------------------------------
Arthur Steber
Director

                                         35
<PAGE>
                                       
                             Megalith Corporation

                       Exhibits attached to Form 10-K

                     Fiscal Year Ended September 30, 1996



      2.1  Amended Asset Purchase Agreement dated November 27, 1995 by and 
           among Epsitek, Inc. and Overline Corporation

      2.2  Plan and Agreement of Purchase dated May 22, 1996 by and amongst
           Megalith Corporation, Frances H. Alexander, and Dalcom Elevator
           Corporation

     17   Letter on director resignation

     21   Subsidiaries of registrant

     23   Consent of Independent Auditor

     27   Financial Data Schedule