UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                   FORM 10-KSB


                   Annual Report Under Section 13 or 15(d) of
                       the Securities Exchange Act of 1934

                  For the fiscal year ended September 30, 2002

                         Commission file number: 2-42114
                                                 -------
                           Local Telecom Systems, Inc.
                           ---------------------------
                 (Name of Small Business Issuer in Its Charter)


       State of Nevada                                  75-1310613
       ---------------                                  ----------
(State or Other Jurisdiction of             (I.R.S. Employer Identification No)
Incorporation or Organization)

             3537 West 7th Street, Suite 5, Fort Worth, Texas 76107
             ------------------------------------------------------
                    (Address of Principal Executive Offices)

          Issuer's Telephone Number including Area Code: (817) 675-4237
                                                         --------------
           Securities registered pursuant to Section 12(g) of the Act:

                         Common stock, par value $0.0167

The issuer (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months, and (2)
has been subject to such filing requirements for the past 90 days.

                Yes   X                 No
                    ----                  -----
Check if there is no disclosure of delinquent filers in response 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. [ ]

State issuer's revenues for its most recent fiscal year $ 42,652
                                                        ---------
Currently no trading market exists for the voting stock (8,701,034 shares) held
by non-affiliates of the Registrant on September 30, 2002. The number of shares
outstanding of the Registrant's common stock on September 30, 2002, was
39,330,582 shares


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                                TABLE OF CONTENTS

PART I ......................................................................  1
        Item 1.   Description of Business....................................  1
                  (a) Business Development...................................  1
                  (b) Business of Issuer.....................................  2
        Item 2.   Description of Property....................................  5
        Item 3.   Legal Proceedings..........................................  5
        Item 4.   Submission of Matters to a Vote of Security Holders........  5

PART II .....................................................................  6
        Item 5.  Market for Common Equity and Related Stockholder Matters....  6
                 (a) Market Information......................................  6
                 (b) Holders.................................................  6
                 (c) Dividends...............................................  6
        Item 6.  Plan of Operations..........................................  7
        Item 7.  Financial Statements ....................................... 10
        Item 8.  Changes in and Disagreements with Accountants on Accounting
                 and Financial Disclosure.................................... 11

PART III..................................................................... 11
        Item 9.  Directors, Executive Officers, Promoters and Control Persons 11
        Item 10. Executive Compensation ..................................... 12
        Item 11. Security Ownership of Certain Beneficial Owners and
                 Management ................................................. 12
        Item 12. Certain Relationships and Related Transactions.............. 13
        Item 13. Exhibits and Reports on Form 8-K ........................... 13

INDEX TO EXHIBITS ........................................................... 17




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                                     PART I

Item 1.   Description of Business

(a) Business Development

Local Telecom Systems, Inc. (the "Company") was organized on February 19, 1969,
as a corporation under the laws of the State of Nevada, under the name of
International Royalty & Finance Co. for the general purpose of engaging in
exploration for oil and gas, and on December 23, 1971, the name of the Company
was changed to International Royalty & Oil Co. (IROC). Again on July 10, 1996,
the Company changed its name to Signature Motorcars, Inc., in anticipation of
entry into the car rental business; however, the anticipated merger was never
consummated. In 1997, the Company began acquiring working interests, royalties,
and overriding royalties in oil and gas properties within the United States and
in foreign countries. However, with the decline of oil and gas prices in 1998,
the Company began evaluating opportunities in other industries. On February 22,
2002 the Company entered into a merger agreement with Local Telecom Systems,
Inc. and agreed to change its name to Local Telecom Systems, Inc. See Item 4
"Submission of Matters to Security Holders" for additional information.

During its fiscal year ended September 30, 2001 the Company was not involved in
any bankruptcy, receivership, or similar proceeding and underwent no material
reclassification, merger, or consolidation. The Company did during the fiscal
year ended September 30, 2002, enter into a merger agreement with Local Telecom
Systems, Inc. as well as effect a partial distribution of the Company's assets.

The Company, Local Telecom Systems, Inc. (LTSI), offers local and long distance
service on a prepaid basis. Specifically, local services include a "bare bones"
product providing unlimited local dial tone and 911 emergency access with the
option of several custom calling features, for additional fees, including Call
Waiting, Caller ID, Call Forwarding and Speed Dialing. These features may be
purchased individually or in a package at reduced rates.

LTSI purchases phone services from the incumbent local exchange carrier (ILEC)
at deep discounts (currently up to 26%) and resells the service on a prepaid
basis at a premium, allowing attractive profit margins. The markets are
households without phone service due to lack of credit history or a poor credit
history, and/or the inability to pay a deposit.

LTSI is a flat rate service provider with a customer base of approximately 800
in Texas, New Mexico and Arizona as of September 30, 2002. LTSI is not a
measured service provider, which is when service is provided on a per call or
minute basis. LTSI now has the licenses in place to expand into 42 more states
for a total of 45 states. See Item 1(b) "Business of Issuer" for additional
information.

From April 18, 2002 until August 30, 2002 the Company was working with the
principles in the preparation of the various license agreements held in 42
states and documenting the transfer of these rights in compliance with state and
federal laws.

August 30, 2002 was the effective date of this acquisition. On this date the
Company released the 27,335,854 restricted shares to the principles of this
acquisition and in return they conveyed the property, rights, privileges,
agreements, tariffs and the 42 license agreements to LTSI. The Company issued an
additional 2,719,818 restricted common shares for consulting services for the
acquisition and funding arrangements for the merger with Local Telecom Systems,
Inc. These shares were adjusted after the 4 for 5 reverse stock split to
2,175,854 restricted common shares representing a 5.6% fee for the services
rendered in connection with this acquisition. The sole consideration for these
consulting services was restricted shares of the Company's common stock.



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At the same shareholders' meeting held on February 22, 2002, the holders of a
majority of outstanding common stock approved stock dividends to the
shareholders of 100% of the outstanding common stock of the Company's four
wholly owned subsidiaries. The effective date of these stock dividends was April
15, 2002, prior to the effectiveness of the merger with LTSI. Each stock
dividend was approved on the basis of one (1) share of each subsidiary for every
three (3) shares of the Company's common stock owned. Pursuant to these stock
dividends, the ownership of the following subsidiaries was transferred from the
Company directly to the shareholders on a pro rata manner: International Royalty
& Oil Co., Signature Financial Services, Inc., Cumberland Continental Corp., and
Signature Healthcare, Inc. Each former subsidiary company now has 100,000,000
shares authorized for issuance, 5,217,179 shares of restricted common stock
issued and outstanding, par value of $0.001 per share. The record date for the
distribution of the 5,217,179 common shares in each of the four companies was
April 15, 2002 at no additional cost to the existing shareholders.

(b) Business of Issuer

LTSI is a local telephone service reseller with an acquired three-year-old
customer base in Texas, New Mexico and Arizona. LTSI has the necessary licenses
and interconnect agreements to offer, on a national basis, prepaid local
telephone service and various ancillary products such as 911, caller ID and
prepaid long distance in 45 states. The following are brief highlights of LTSI
business:

      Experience - LTSI management has been in the prepaid industry since 1997
      shortly after the passage of the Telecommunications Act of 1996 and has
      years of experience in the prepaid local telephone reseller niche,
      primarily the Hispanic market. LTSI also has consulting contracts with
      individuals that have extensive communications experience.

      Hispanic Market - The Hispanic market has a higher growth rate than other
      demographic sectors, unusual brand loyalty, and twice the national average
      propensity for prepaid telephone service.

      Economics - The prepaid telephone service reseller business has attractive
      margins, minimal capital expense and minimal bad debt. LTSI acquires
      heavily discounted telephone service from the incumbent local exchange
      carriers, such as Southwestern Bell, Bell South, Sprint, Verizon and Qwest
      and charges premium rates yielding above average profit margins.
      Additionally, customers must pay prior to receiving service, thereby
      mitigating bad debts.

      Regulatory Approvals - LTSI possesses regulatory approval to sell and
      provide local and long distance phone service in 45 states plus the
      District of Columbia. This nationwide (footprint) affords LTSI an
      advantage over many competitors, as it is a very arduous and
      time-consuming process to acquire approvals from each state's Public
      Utility Commission (PUC) and Secretary of State. The footprint allows LTSI
      flexibility in terms of market selection and service deployment. LTSI is
      not licensed in Arkansas, Missouri, Oklahoma, Alaska and Hawaii.

Risk Factors

Termination of License/Certificate - Failure to pay Utility Tax, Line Charge or
license fees in the states in which we operate would result in a termination of
LTSI's license and/or certificate within the state. Unauthorized change in
service provider, known as "Slamming", would also terminate a license or
certificate to do business as a reseller of local phone service. Although the
Company does not intend on allowing any of these events to occur, if any do
occur, the Company would be prohibited from engaging in the local telephone
service market, which would have a material adverse effect on the Company.

Dependence on Third Parties - The Company depends on many consultants, vendors
and suppliers to conduct business. For example, the Company uses a billing
service to mail the monthly invoices to our customers and the Company also uses
a telemarketing company for subscribing new customers during an advertising
campaign. LTSI is not equipped with the necessary personnel or equipment to
handle either of these services and is therefore dependent to outsource these

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types of services. A loss of any one of these third parties would significantly
disrupt our operations.

Dependence Upon Management - The operations and financial success of the Company
are significantly dependent on the managerial personnel of the Company, Tracey
Norris and William Miertschin. In the event that the management of the Company
becomes unable or unwilling to continue to direct its operations, the Company
could be adversely affected.

Incumbent Local Exchange Carrier (ILEC) - The Company purchases phone lines from
the ILECs at a discount and resells the lines on a prepaid basis; however, the
ILEC companies could offer those same lines to the Company's customers. For the
most part the ILECs are not interested in this market and have set their pricing
and restrictions to exclude most of our target market. However, ILEC's may
compete directly with the Company, which would drastically increase competition
and likely impair our business.

Incumbent Based Operation- The Company is a resale based operation and not a
facility based operation and therefore any Acts of God, Terrorist acts or Union
Strikes that cause phone service to be interrupted will result in the Company's
total dependence on the ILEC provider to restore operations in a timely fashion.
Poor service provided by our ILEC could result in the loss of customers to our
Company.

The Financial Difficulties of Other Competitive Communications Providers Could
Adversely Affect our Financial Results - Many competitive local exchange
carriers and other emerging communications providers have experienced
substantial financial difficulties over the past year, in some cases leading to
bankruptcies and liquidations. The financial difficulties of these companies
could reflect poorly on the Company's financial stability, may diminish its
ability to obtain further working capital and may adversely affect the
willingness of potential customers to move their communications services to a
competitive local carrier like Local Telecom Systems, Inc.

Competition and Markets

The telecommunications industry is highly competitive. The Company believes that
the principal competitive factors affecting its business are pricing levels and
clear pricing policies, customer service, accurate billing and, to a lessor
extent, variety of services. The Company's ability to compete effectively
depends upon its continued ability to maintain high quality, market-driven
services at prices generally equal to or below those charged by our competitors.
To maintain its competitive posture, the Company believes it must be in a
position to reduce its prices in order to meet reductions in rates, if any, by
others. Any such reductions could materially adversely affect the Company. Many
of the Company's current and potential competitors have financial, personnel and
other resources, including brand name recognition, substantially greater than we
do or expect to have in the near term.

Telephone service providers like LTSI are subject to competition from other
providers including those incumbent local exchange carriers from which LTSI
purchases phone lines. As a result of the Telecommunications Act of 1996,
telephone companies are no longer afforded exclusive franchise service areas.
Under that Act, competitors can offer telephone services to LTSI subscribers.
The Act contemplates that various regulations will be promulgated by the Federal
Communications Commission (FCC) and state regulatory agencies to implement
various parts of the Act, such as regulations setting out the procedures and
methodologies for implementing and promoting competition in the telephone
industry. The regulations could have a material adverse effect, and the Act does
open the opportunity for others to be competitive for the same markets.

LTSI is initially targeting Hispanic households in the United States that
currently do not have telephone service. This sector presents opportunity, as
Hispanics: are growing at a rate faster than the national average; tend to be
brand loyal; have a higher than average number of residents in the home creating
a need for service; have favorable feature and long distance use; and are easier
to target market than other segments, as they tend to watch specific television
programming formats and networks during less expensive time periods,

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allowing for reduced advertising costs. Other local exchange carriers that
target this same sector include, but are not limited to, Smoke Signal, 4Aphone
and ComSouth.

The Act of 1996 has significantly increased the level of competition in our
local exchange markets. One of the purposes of the 1996 Act was to ensure, and
accelerate, the emergence of competition in local exchange markets. Toward this
end, the 1996 Act requires most existing local exchange carriers (incumbent
local exchange carriers, or ILECS's), to permit competitive local exchange
carriers, or CLEC's, including our Company, to purchase service from the ILEC
for resale to CLEC customers and interconnect the CLEC's network with the ILEC's
network. As a result, competition in the local exchange markets is expected to
continue to increase.

Governmental and Other Regulations

LTSI is subject to regulation by the Public Utility Commission, FCC and each of
the Utilities Boards in each state in which LTSI holds a license/certificate.
LTSI operates our telephone businesses pursuant to license/certificates and
various rules and regulations promulgated by these agencies. Although not
anticipated to occur, these agencies have the authority to terminate LTSI's
right to provide services if they fail to comply with those rules and
regulations.

Agencies, like the FCC, require us to file periodic reports, pay various fees
and assessments, and comply with rules governing quality of service, consumer
protection, and similar issues. Although the specific requirements vary from
state to state, they tend to be more detailed than the FCC's regulation because
of the strong public interest in the quality of basic local exchange service. We
intend to comply with all applicable state regulations, and as a general matter
do not expect that these requirements of industry-wide applicability will have a
material effect on our business. However, no assurance can be given that the
imposition of new regulatory burdens in a particular state will not affect the
profitability of our services in that state.

Under the Telecommunications Act, any entity, including cable television
companies, electric and gas utilities, may enter any telecommunications market,
subject to reasonable state regulation of safety, quality and consumer
protection. Because of the implementation of the Telecommunications Act, LTSI is
subject to numerous federal and state policy rulemaking proceedings and judicial
review. There is still uncertainty as to what impact such legislation will have
on us.

The Telecommunications Act is intended to increase competition. This Act was
designed to open the local services market by requiring incumbent local carriers
to permit interconnection to their networks and establishing incumbent local
carriers' obligations with respect to:

      Reciprocal Compensation. Requires all local exchange carriers to complete
      calls originated by competitive local exchange carriers under reciprocal
      arrangements at prices based on tariffs or negotiated prices.

      Resale. Requires all incumbent local carriers and competitive local
      carriers to permit resale of their telecommunications services without
      unreasonable restrictions or conditions. In addition, incumbent local
      carriers are required to offer wholesale versions of all retail services
      to other telecommunications carriers for resale at discounted rates, based
      on the costs avoided by the incumbent local carrier in the wholesale
      offering.

      Interconnection. Requires all incumbent local carriers and competitive
      local carriers to permit their competitors to interconnect with their
      facilities. Requires all incumbent local carriers to permit
      interconnection at any technically feasible point within their networks,
      on nondiscriminatory terms, at prices based on cost, which may include a
      reasonable profit. At the option of the carrier seeking interconnection,
      co-location of the requesting carrier's equipment in the incumbent local
      carriers' premises must be offered, except where an incumbent local
      carrier can demonstrate space limitations or other technical impediments
      to co-location.

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      Number Portability. Requires all incumbent local carriers and competitive
      local carriers to permit users of telecommunications services to retain
      existing telephone numbers without impairment of quality, reliability or
      convenience when switching from one telecommunications carrier to another.

      Dialing Party. Requires all incumbent local carriers and competitive local
      carriers to provide (1+) equal access to competing providers of telephone
      exchange service and toll service, and to provide nondiscriminatory access
      to telephone numbers, operator services, directory listing, with no
      unreasonable dialing delays.

      Access to Rights-of-Way. Requires all incumbent local carriers and
      competitive local carriers to permit competing carriers access to poles,
      ducts, conduits and rights-of-way at regulated prices.

Incumbent local carriers are required to negotiate in good faith with carriers
requesting any or all of the above arrangements. If the negotiating carriers
cannot reach agreement within a prescribed time, either carrier may request
binding arbitration of the disputed issues by the state regulatory commission.
Where an agreement has not been reached, incumbent local carriers remain subject
to interconnection obligations established by the FCC and state
telecommunications regulatory commissions.

Personnel

As of September 30, 2002, the Company had nine (9) full time employees plus both
full and part time consultants.

Item 2. Description of Property

LTSI corporate offices are located at 3537 West 7th Street, Suite 5, Fort Worth,
Texas. These offices are leased by LTSI from Llewellyn Realty. The monthly
rental payable by LTSI is $3,100. LTSI also pays the utilities and insurance.
The office lease is a month-to-month lease.

LTSI believes that its leased real estate, buildings, and other improvements are
adequate to conduct their businesses as conducted or proposed to be conducted on
the date of this filing. LTSI also believes that its leased buildings and
improvements have been maintained in good repair and condition, ordinary wear
and tear with depreciation excepted. LTSI also believes the leased buildings and
improvements are adequately insured. LTSI is not a hardware (facility) based
telecommunications company. Equipment consists mainly of office furniture and
equipment such as computers, telephone systems and fixtures. Value of said
equipment is not material.

Item 3.  Legal Proceedings

As of September 30, 2002, there were no legal proceedings to which the Company
was a party, and no litigation is known to be pending against the Company.

Item 4.  Submission of Matters to a Vote of Security Holders

Holders of a majority (7,829,179 shares of 15,000,000 outstanding shares) of the
Company's outstanding shares of common stock met at a special meeting of
stockholders on February 22, 2002, and voted to approve the merger acquisition
of Local Telecom Systems, Inc. (LTSI) and restructure the Company for that
purpose with a four (4) shares for five (5) shares reverse stock split and the
issuance of new shares for the acquisition of LTSI and related assets. At the
same meeting it was also approved to distribute stock in each of the four wholly
owned subsidiaries to the existing stockholders on a one (1) share for three (3)
shares basis with no additional cost. All 7,829,179 shares voted for each matter
and no shares voted against any matter and no shares abstained from voting on
any matters.


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                                     PART II

Item 5.  Market for Common Equity and Related Stockholder Matters

(a) Market Information

Currently no trading market exists for the Company's shares, and no trading
market existed for the voting stock (8,701,034 shares) held by non-affiliates of
the Registrant on September 30, 2002. However, the Company's stock was trading
on the over-the-counter market of the Electronic Bulletin Board until 1996.

During the fiscal year, 650,000 warrants were exercised at 20 cents per share.
On September 30, 2002 the Company had 200,000 warrants outstanding to purchase
200,000 shares of the Company's common stock at an exercise price of 20 cents
per share. The 200,000 warrants were still outstanding as of January 8, 2003,
with an exercise price of 20 cents that expire on January 20, 2003.

On September 30, 2002, end of the fiscal year, the Company had 39,330,582 shares
issued and outstanding of which the Company believes it has 4,611,163 shares
that can be sold pursuant to Rule 144 under the Securities Act of which
4,021,163 shares are held by officers and directors. The Company also believes
it has approximately 33,000,000 shares that are not eligible for Rule 144 of the
Securities Act on September 30, 2002 and all other shares are freely tradable.

(b) Holders

The approximate number of security holders of record of the Company's common
stock on January 8, 2003 was 1,502. Additional stockholders hold stock in street
name; the number of holders in street name is not available to the Company.

(c) Dividends

The Company has not declared a cash dividend or paid dividends in the past.
However, in April 2002, the Company did affect a stock distribution of 5,217,179
restricted common shares of each of its subsidiary companies (International
Royalty & Oil Co., Signature Healthcare, Inc., Signature Financial Services, Inc
and Cumberland Continental Corp.) on a one (1) share for three (3) shares pro
rata basis to all of the Company's stockholders as of April 15, 2002. See Item 4
"Submission of Matters to a Vote of Security Holders".

(d) Securities Authorized of Issuance Under Equity Compensation Plans

The Company currently does not have any securities authorized for issuance under
any Equity Compensation Plans.

Issuance of Unregistered Shares

During the year ended September 30, 2002, the Company issued securities in the
transactions below without registering the securities under the Securities Act
of 1933. No underwriter, sales or placement agent was involved in any of the
transactions.

On October 25, 2001 the Company issued the following restricted shares of common
stock to the following persons in exchange for their services: Karen Lee (10,000
shares), Robert Anderson (25,000 shares), Amber Smith (15,000 shares), J.V.
Rhyne (10,000 shares), Benjamin Botello (45,000 shares), Barbara Williams (1,000
shares), Susie Hare (1,000 shares) and Melissa Eason (1,000 shares). The Company
also sold to Dale Houlette, an existing shareholder, 25,000 restricted common
shares for $5,000. All of these restricted shares were issued in reliance on the
exemption from registration including, but not limited to, Sections 3(b) and/or
4(2) of the Securities Act of 1933.

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On December 7, 2001 the Company issued 228,000 restricted common shares as
compensation to its officers and directors (William R. Miertschin, Victoria
Lucas and Howard Siegel). These restricted shares were issued in reliance on the
exemption from registration including, but not limited to, Sections 3(b) and/or
4(2) of the Securities Act of 1933.

On March 19, 2002 the Company issued 350,000 restricted common shares when
Stephen Grosberg, an existing shareholder, exercised 350,000 warrants. These
warrants were issued in conjunction with the private placement of stock made on
December 20, 1999. The exercise price was $0.20 per share and resulted in cash
to the Company of $70,000. These restricted shares were issued in reliance on
the exemption from registration including, but not limited to, Sections 3(b)
and/or 4(2) of the Securities Act of 1933.

On April 1, 2002 the Company issued 300,000 restricted common shares when
Herbert Wolas, an existing shareholder, exercised 300,000 warrants. These
warrants were issued in conjunction with the private placement of stock made on
December 20, 1999. The exercise price was $0.20 per share and resulted in cash
to the Company of $60,000. These restricted shares were issued in reliance on
the exemption from registration including, but not limited to, Sections 3(b)
and/or 4(2) of the Securities Act of 1933.

On February 15, 2002 the Company issued 2,719,818 restricted common shares for
consulting services to Graford Communications Group and Copano Bay Associates,
Texas general partnerships partially owned by Richard M. Hewitt, a director, and
two accredited investors, for the acquisition and for providing funding
arrangements for the merger with Local Telecom Services, Inc. These consulting
services received only restricted shares for compensation. These restricted
shares were issued in reliance on the exemption from registration including, but
not limited to, Sections 3(b) and/or 4(2) of the Securities Act of 1933.

On April 18, 2002 the Company made effective the 4-for-5 reverse stock split and
allocated 27,335,584 restricted common shares for the acquisition of all
property, rights, privileges, leases of LTSI which became effective on August
30, 2002 and allocated 11,374,416 restricted common shares for funding the
merged entity. These restricted shares were issued in reliance on the exemption
from registration provided by Section 4(2) of the Securities Act of 1933.

The facts relied on to make the exemption from registration provided by Section
4(2) of the Securities Act of 1933 available for the sale of securities
discussed in paragraphs 2 through 7 above were: (1) the limited number of
purchasers; (2) the sophistication or accreditation of the purchasers; (3) their
relationship with the Company and/or access to material information about the
Company; (4) the information furnished to them by the Company; (5) the absence
of any general solicitation or advertising; and (6) restrictions on transfer of
the securities issued to them as indicated by a legend on the certificates
representing such securities.

Item 6.  Plan of Operations

Disclosure Regarding Forward-Looking Statements

This Form 10-KSB includes "forward-looking" statements within the meaning of
Section 27A of the Securities Act, and the Company desires to take advantage of
the "safe harbor" provisions thereof. Therefore, the Company is including this
statement for the express purpose of availing itself of the protections of such
safe harbor provisions with respect to all of such forward-looking statements.
The forward-looking statements in this Form 10-KSB reflect the Company's current
views with respect to future events and financial performance. These
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ from those anticipated. In the Form 10-KSB,
the words "anticipates," "believes, "expects," "intends," "future" and similar
expressions identify forward-looking statements. The Company undertakes no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that may arise after the date hereof. All subsequent written
and oral forward- looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by this section.


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General Discussion

During the fiscal year two events occurred which management considers to be
positive steps toward building tangible value for the Company's shareholders.
Firstly the Company made a distribution of certain assets to its former
subsidiaries and subsequently distributed all of its ownership in the
subsidiaries to its shareholders in the form of common stock. - See Item 4
"Submission of Matter to a Vote of Security Holders". On April 15, 2002, the
Company made unregistered distributions in the form of stock dividends to the
existing common shareholders of the Company of common stock of Signature
Healthcare, Inc., Signature Financial Services, Inc., Cumberland Continental
Corporation and International Royalty and Oil Co., Inc., each of which were
originally wholly owned subsidiaries. In each instance, 5,217,179 shares of
stock were issued to the existing shareholders of the Company at no additional
cost. The Company has been advised that these unregistered distributions may be
exempt from registration and that the Company may have some contingent liability
for the distributions as a result. The Company received no funds as a result of
the distributions.

The following is a brief description of the distribution of the assets to the
four former subsidiaries:

      International Royalty & Oil Co. has the patented enhanced oil recovery
      process, Canadian oil and gas royalty interests, Texas oil and gas royalty
      interests, stock held in two small resource companies.

      Signature Financial Services, Inc. has two Promissory Note Receivables:
      1) Broadband Wireless International Corporation $50,000 promissory note,
      and 2) a $151,000 Note bearing 10% simple interest secured with oil and
      gas lease interests located in Upton County, Texas.

      Signature Heathcare, Inc. has rights to an agreement with National
      Healthcare, Inc. of New York. National Healthcare has a facility for
      packaging healthcare "single ready to use package" for the ophthalmology
      health field.

      Cumberland Continental Corp. has a note receivable of $150,000 from Telkin
      Sheetmetal, Inc. secured by contract retainage and bearing 9% simple
      interest.

Secondly the Company entered into a merger agreement where the Company would be
the surviving corporation with a name change to Local Telecom Systems, Inc. and
on August 30, 2002 this merger/acquisition became effective. The
merger/acquisition of LTSI increased the cash requirements of the Company's
operations that include the expansion of its prepaid phone services into 42
additional states and District of Columbia. Marketing the Company's prepaid
local service will require the Company to utilize national advertising to
maximize the Company's exposure as it plans to increase its customer base to
over 9,000 within the next twelve months. A funding campaign to raise
approximately $2,000,000 in working capital is planned for this year through
debt and/or equity financing. The Company's cash flow projections indicate an
initial funding of $2,000,000 in working capital would be sufficient to carry
the Company forward without additional funding other than returning profits back
into expanding the business.

During the second year of operations following the funding of $2,000,000 in
working capital, it is projected that the customer base could exceed 20,000.

Liquidity and Capital Resources

The Company on September 30, 2001 did not have any liabilities and had current
assets of $161,389. Prior to the acquisition of Local Telecom Systems, Inc. the
Company had sufficient cash and or revenues to carry on the Company's limited
operations. On September 30, 2002 the Company had current assets of $20,515 and
current liabilities of $309,744 or a ratio of current assets to current
liabilities of .07 to 1. As a result of the acquisition of Local Telecom
Systems, Inc., the Company plans to raise additional working capital from equity
and/or debt financing. These funds will be used to promote the Company's prepaid
telephone services in the new 42 licensed states plus District of Columbia.


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Assets and Liabilities

The Company's current assets as of September 30, 2000, 2001 and 2002, were
$177,056, $161,389 and $20,515 respectively. This dramatic change in the
decrease in current assets is directly related to the distribution of a $150,000
note receivable to a former subsidiary, Cumberland Continental Corporation.
These funds were initially raised through the private placement of the Company's
common stock in the fiscal year ended September 30, 2000 and the Company's other
investments.

The Company has Other Assets totaling $240,275 for the fiscal year ended
September 30, 2001 consisting of a Seismic Library ($64,275) and Notes
Receivable ($176,000). The Seismic Library consists of a large data- base of
seismic lines covering parts of South Louisiana and Southeast Texas and Notes
Receivable consisting of oil and gas leases in Upton County, Texas, and a
$50,000 note from BroadBand Wireless International Corporation.

Total Assets of the Company have also increased dramatically from $411,929 on
September 30, 2001, to $1,306,888 on September 30, 2002. This large increase in
total assets as reported in this section is directly related the
acquisition/merger with Local Telecom Systems. This acquisition/merger accounts
for all of the total assets of the Company ($1,306,888). During the fiscal year
ended September 30, 2002 the Company distributed all the assets to its four
former subsidiaries reflected on September 30, 2001. See General Discussion
above for additional information.

The Company's liabilities on September 30, 2002, were $309,744 for accounts
payable and accrued liabilities. Of this amount the most significant amount is
$118,000 in payables for excise taxes. On September 30, 2001, the Company did
not have any liabilities.

Income

The Company only had one income producing property for the fiscal year ended
September 30, 2001, a small Canadian override that generated $489 for 200. The
Company reported all of its oil and gas operations as discontinued operations
during the fiscal year ended September 30, 1999. During the fiscal year ended
September 30, 2002 the Company transferred all oil and gas related activities to
a wholly owned subsidiary, International Royalty & Oil Co. See above General
Discussion for more detail.

The Company did report interest income from its loans to Telkin Sheetmetal and
to an individual for oil leases reporting $20,105 for the fiscal year ended
September 30, 2001. During the fiscal year ended September 30, 2002 the Company
transferred these note receivables to its subsidiaries Signature Financial
Services, Inc. and Cumberland Continental Corp. See above General Discussion for
more detail. The revenues reported for the fiscal year end September 30, 2002
were $42,652 which are basically the revenues received from the ownership of
Local Telecom Systems since August 30, 2002.

Expenditures

During the fiscal year ended September 30, 2001, the Company incurred legal and
professional services ($8,857) to position the Company for a merger/acquisition
compared to $5,272 for the year ended September 30, 2002. During fiscal year
2001, in order to conserve working capital, the Company issued 793,000 common
restricted shares in lieu of cash for services. These shares were issued to
directors, officers and consultants based at a value of $157,165. See Financial
Statements and Consolidated Statement of Changes in Stockholders' Equity.

Salaries, Wages, and Transfer Fees decreased from $39,916 to $31,859 when
comparing September 30, 2001 to September 30, 2002. The principle reason for the
decline in this category is related to the restructuring of salaries in February
2002. Other General and Administrative expense did not change substantially when
comparing the current fiscal year to the previous year.


                                        9

<PAGE>



The Company had an operating loss of $23,682 compared to an operating loss of
$223,161 for the previous year which ended September 30, 2001. The majority of
this difference is the amount of consulting services incurred which totaled
$157,165 in the previous year.

Income Taxes

The Company anticipates that it will not generate taxable income sufficient to
utilize its carried forward tax losses at this time, based on historical
performance. See Note 4 to Financial Statements for additional disclosure.

Net Income (Loss)

The Company incurred a Net Loss of $202,297 for the year ended September 30,
2001, and a Net Loss of $514,863 for the year ended 2002. These losses incurred
in 2001 are attributable to the amount of expenditures incurred seeking and
preparing the Company for a merger and/or acquisition partner and the losses
reflected in 2002 are directly related to a $477,843 distribution of assets
through a Subsidiary Stock Dividend. See Note 1 to the Financial Statements.

Per share data the Company lost $0.04 per common share for the year ended
September 30, 2002 compared to $0.02 for the previous year.


Item 7.  Financial Statements

The financial statement information for LTSI is set forth immediately following
the signature page of this Form 10KSB. See the Financial Statements attached
hereto beginning on page F-1.


                                       10

<PAGE>




CLYDE BAILEY P.C.
--------------------------------------------------------------------------------
                                                    Certified Public Accountants
                                                        10924 Vance Jackson #404
                                                        San Antonio, Texas 78230
                                                            (210) 699-1287(ofc.)
                                           (888) 699-1287   (210) 691-2911 (fax)

                                                                         Member:
                                                     American Institute of CPA's
                                                          Texas Society of CPA's

                REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
                -------------------------------------------------
To the Board of Directors and Shareholders
Local Telecom Systems Inc.

We have audited the accompanying balance sheet of Local Telecom Systems Inc.
(formerly Signature Motorcars Inc.) ("Company") as of September 31, 2002 and the
related statement of operations, changes in stockholders' equity, and statement
of cash flows for the years ended September 30, 2002 and 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on the financial statements based on our
audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company and
subsidiaries as of September 30, 2002 and 2001, and the consolidated results of
their operations and their cash flows for the years ended September 30, 2002 and
2001 in conformity with accounting principles generally accepted in the United
States.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. The Company has limited operations
currently and suffered recurring losses from operations that raise substantial
doubt about its ability to continue as a going concern. This is further
explained in the notes to financial statements.


                                  Clyde Bailey
                           Certified Public Accountant


January 6, 2003
San Antonio, Texas









                                       F-1
<PAGE>


                           Local Telecom Systems, Inc.
                      (formerly Signature Motorcars, Inc.)
                           Consolidated Balance Sheets
                            As of September 30, 2002

                                   A S S E T S
                                 -----------
<TABLE>
<CAPTION>
          <S>                                                                <C>                            <C>


     Current Assets

          Cash                                                            $          277
          Accounts  Receivable                                                    20,238
                                                                       ----------------

             Total Current Assets                                                                           20,515

     Investments, at Market Value                                                                                -
     Fixed Assets
          Equipment, net of accumulated depreciation                               40,257
                                                                       ------------------

            Total Fixed Assets                                                                              40,257

     Other Assets:
     -------------
          Intangible Assets, net of amortization                                  721,116
          Licenses                                                                525,000
                                                                       -------------------
          Total Other Assets                                                                             1,246,116

                Total Assets                                                                 $           1,306,888
                                                                                               ===================


                              L I A B I L I T I E S
                              ---------------------
     Current Liabilities
          Accounts Payable and accrued expenses                                   309,744
                                                                       ------------------
                Total Current Liabilities                                         309,744
                Total Liabilities                                                                          309,744

          Commitments and Contingencies                                                                          0
                                       F-2
    The accompanying notes are an integral part of the financial statements.
</TABLE>


<PAGE>
<TABLE>
<CAPTION>
                           <S>                                                  <C>                     <C>


                      S T O C K H O L D E R S ' E Q U I T Y

     Preferred Stock, par value $.10 per share                                          -
          authorized shares 1,000,000 shares, no shares outstanding
    Common Stock                                                                  656,821
          100,000,000 authorized shares, par value $.0167
          39,330,585 share issued and outstanding
    Additional Paid-in-Capital                                                  8,780,662
    Accumulated Deficit                                                       (8,440,338)
                                                                         -----------------
                Total Stockholders' Equity (Deficit)                                                     997,144
                                                                                             -------------------

                Total Liabilities and Stockholders'Equity                                   $          1,306,888
                                                                                             ===================

</TABLE>

                                       F-3
   The accompanying notes are an intergral part of the finanical statements.
<PAGE>





                           Local Telecom Systems, Inc.
                      (formerly Signature Motorcars, Inc.)
                            Statements of Operations


<TABLE>
<CAPTION>

                   <S>                                                   <C>                       <C>


                                                                            For the Twelve Months Ended
                                                                    -----------------------------------------
                                                                        September 30             September 30
                                                                    --------------------     ----------------
     Revenues:                                                             2002                   2001
                                                                    --------------------     ----------------
           Revenues                                                  $            42,652  $               -
                                                                    --------------------     ----------------
                Total Revenues                                                    42,652                  -

     Cost of Revenues
                                                                                             $
           Telephone Services                                        $           22,717                    -
                                                                    --------------------     ----------------
      Gross Profit                                                   $           19,935                    -

     Expenses:

           Legal and Professional Services                                        5,272                8,857

           Advertising                                                            9,000                   -

           Depreciation                                                           2,104                2,103

           Consulting                                                               -                157,165

           Salaries, Wages, and Transfer Agent Fees                              31,859               39,916
           Other Selling, general & administrative expenses                      18,099               15,120
                                                                    --------------------     ----------------


           Total Expenses                                                        66,334              223,161

                Operating Income                                                (23,682)            (223,161)

     Other Income (Expenses)


           Interest Income                                                           -                20,105
           Effect of Subsidiary's Stock Dividend                             (477,843)
           Other Income(expenses)                                             (13,338)                   270
                                                                    --------------------     ----------------
                Loss from Continuing Operations                      $       (514,863)          $   (202,786)


     Discontinued Operations:                                                   -                        489
                                                                    --------------------     ----------------

                Net Loss                                                   $  (514,863)          $ (202,297)

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


     Basic and Diluted Earnings Per Common Share                                 (0.04)               (0.02)
                                                                    --------------------     ----------------

     Weighted Average number of Common Shares                               12,520,582           11,679,682
        used in per share calculations                              ====================     ================
</TABLE>
                                       F-4
    The accompanying notes are an integral part of the finanical statements.
<PAGE>




                           Local Telecom Systems Inc.
                       (formerly Signature Motorcars Inc.)
           Consolidated Statement of Changes in Stockholders' Equity

<TABLE>
<CAPTION>
               <S>                          <C>            <C>             <C>            <C>             <C>            <C>

                                                                                      Accumulated
                                                                        Additional        other                            Total
                                             Common Stock               Paid-In      Comprehensive    Accumulated     Stockholders'
                                         Shares         Amount          Capital         Income          Deficit          Equity
                                    --------------- --------------  -------------- ------------- ------------------ ----------------



     Balance September 30, 1999           7,449,835        124,867        7,367,772           -         (7,505,012)         (1,233)


      Stock Issued for Cash               3,098,347         51,742          532,242                             -          583,984


      Stock issued for Assets               100,000          1,670           18,330                             -           20,000


      Stock Issued for Services             478,000          7,983           87,617                                         95,600


      Comprehensive (Loss):                                                              (1,590)                            (1,590)

      Net Loss                                   -              -                -             -         (218,166)        (218,166)
                                      -------------- --------------  -------------- -------------------------------- ---------------


Balance September 30, 2000               11,126,182        186,262        8,005,961      (1,590)       (7,723,178)         478,595

      Stock Issued for Services             793,000         13,243         143,922                                         157,165


      Comprehensive (Loss):                                                             (10,344)                           (10,344)

      Net Loss                              -               -               -                            (202,297)        (202,297)
                                    --------------- --------------  -------------- -------------------------------- ----------------


Balance September 30, 2001              11,919,182      $  199,505       $8,149,883     (11,934)      $(7,925,475)       $  411,979
                                    ==============   ==============   ============== ================================ ==============


      Stock Issued for Cash                25,000            418             4,583                                           5,000


      Effect of Reverse Stock Split    (3,129,415)       (52,261)           52,261                                              (0)


      Shares Issued for Warrants          650,000         10,855           119,145                                         130,000


       Stock Issued for Services          336,000          5,611            61,589                                          67,200

       Stock Issued for Acquisition    29,529,818        492,693           393,202                                         885,895


      Comprehensive (Loss):                                                            11,934                               11,934

      Net Loss                                 -               -               -                        (514,863)         (514,863)
                                     ------------ --------------    -------------- -------------------------------- ----------------
Balance September 30, 2002            39,330,585        656,821         8,780,662          -         (8,440,338)          997,144
                                   =============== ==============    ============== ================================ ===============
</TABLE>

                                       F-5
          See accompanying nots to Consolitdated Financial Statements.

<PAGE>



                           Local Telecom Systems, Inc.
                      (formerly Signature Motorcars, Inc.)
                      Consolidated Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
             <S>                                                         <C>                    <C>



                                                                                Twelve Months Ended
                                                                     September 30                September
                                                                   ----------------        -----------------
                                                                         2002                      2001
                                                                   ----------------        -----------------
Cash Flows from Operating Activities:

   Net Income (Loss)                                        $            (514,863)            $    (202,297)

   Adjustments to reconcile net income (loss) to net cash provided(used) to
     operating activities:
          Depreciation                                                      2,104                     2,103
          Stock Issued to Consultants                                      67,200                   157,165
          Effect of Subsidiary's Stock Dividend                           477,843                         -
          Accrued Interest Receivable                                           -                    (7,087)
          Accounts Payable                                                 20,933                         -
                                                                  -----------------         -----------------
          Total Adjustments                                               568,080                   152,181
                                                                  -----------------         -----------------
  Net Cash provided (used) in Operating Activities         $               53,217           $       (50,116)


  Cash Flows from Investing Activities:

          Notes Receivable:
          Advances                                                        (95,000)                   25,000
          Collections                                                       5,120                         -
          Acquisition                                                    (100,000)                        -
                                                                  ----------------          -----------------
  Net Cash provided (used) in Investing Activities         $             (189,880)          $        25,000
                                                                  ----------------          -----------------

  Cash Flows from Financing Activities:

          Common Stock                                                    135,000                         -
          Note Payable                                                          -                         -
                                                                 -----------------          -----------------
  Net Cash provided (used) by Financing Activities         $              135,000                         -
                                                                 -----------------          -----------------
  Net Increase (Decrease) in Cash                          $               (1,663)          $       (25,116)

  Cash Balance,  Beginning of Period                                        1,940                    27,056
                                                                 -----------------          -----------------
  Cash Balance,  End  of Period                            $                  277           $         1,940
                                                                 =================          =================

  Supplemental cashflow information
                   Cash Paid for interest                  $                    -           $             -
                   Cash Paid for income taxes              $                    -           $             -


  Non-Cash Transactions:
                   Shares Issued for Services              $               67,200           $        157,165
                   Shares Issued for Assets                $                    -           $              -

</TABLE>

                                       F-6

<PAGE>



                            LOCALTELECOM SYSTEMS, INC.
                        (FORMERLY SIGNATURE MOTORCARS INC)
                        NOTES TO FINANCIAL STATEMENTS INC)
                        SEPTEMBER 30, 2002 STATEMENTS INC)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

                             Description of Business
                             -----------------------

Local Telecom Systems Inc. (formerly Signature Motorcars, Inc.) (the "Company")
was incorporated in Nevada on February 19, 1969, as International Royalty &
Finance Co. Prior to the Company's public offering in 1972, the Company changed
its name to International Royalty & Oil Co. In April1996, the Company's
controlling interest was acquired by ExotiCar Rentals ,Inc .and the name was
changed to Signature Motorcars, Inc. On March 27,2002, the Articles of Merger
was signed with Local Telecom Systems Inc., a Nevada company, and the Company.
As part of the merger agreement, the Company agreed to the name change to Local
Telecom Systems, Inc. The effective date of the agreement was August30, 2002.

                              Basis of Presentation

The Company's financial statements have been presented on the basis that it is a
going concern, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.


                           Principles of Consolidation

At the shareholders' meeting held on February 22, 2002, the shareholders
approved stock dividends to the shareholders of 100% of the outstanding common
stock of four wholly owned subsidiaries. The effective date of these stock
dividends was to be prior to the effectiveness of the merger with LTSI. Each
stock dividend was approved on a one (1) share for three (3) shares basis. The
stock dividends apply to International Royalty & Oil, Inc., Signature Financial
Services, Inc., Cumberland Continental Corp., and Signature Healthcare, Inc. The
capitalization for each company is 100,000,000 shares authorized with 5,000,000
shares outstanding with a par value of $0.001 per share. The record date for the
distribution of the 5,217,179 common shares was each of the four companies is
April 15, 2002.

The following is a division of the assets of Signature Motorcars, Inc. to the
subsidiaries:

        International Royalty & Oil Co.
                IROC patent process, Canadian Overrides, Texas Overrides and
                stock held in resource companies.
        Signature Healthcare, Inc.
                Receivables from National Healthcare for working capital
                advanced and assume agreement with National Healthcare, Inc. as
                well as other opportunities in the health care industry.

        Signature Financial, Inc.
                Telkin Sheetmetal, Inc. note receivable, Broadband Wireless
                International Corporation note receivable, Upton County note
                receivable Coastal Seismic Library Database of South Louisiana
                and Southeast Texas.






                                       F-7
<PAGE>


                           LOCALTELECOM SYSTEMS, INC.
                       (FORMERLY SIGNATURE MOTORCARS INC)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2002


        Cumberland Continental
                At the time of this report no assets have been dedicated to this
                entity, however, this entity was created in anticipation of a
                potential merger that has not been consummated as of the date of
                this report.


                        Use of Estimates and Assumptions

      Preparation of the Company's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.

                            Net Loss Per Common Share

      In March 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share ("SFAS 128"). SFAS
128 provides a different method of calculating earnings per share than was
formerly used in APB Opinion 15. SFAS 128 provides for the calculation of basic
and diluted earnings per share. Basic earnings per share includes no dilution
and is computed by dividing income available to common stockholders by the
weighted average number of common shares outstanding for the period. Dilutive
earnings per share reflects the potential dilution of securities that could
share in the earnings of the Company. Because the Company has no potential
dilutive securities, the accompanying presentation is only of basic loss per
share.

                             Statement of Cash Flows

      For statement of cash flow purposes, the Company considers short-term
investments with original maturities of three months or less to be cash
equivalents.

                                  Income Taxes

      The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). SFAS 109 utilizes the asset and liability method of computing deferred
income taxes. The objective of the asset and liability method is to establish
deferred tax assets and liabilities for the temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities at enacted tax rates expected to be in effect when such amounts are
realized or settled. Under SFAS 109, the effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that
includes the enactment date.










                                       F-8

<PAGE>



                           LOCALTELECOM SYSTEMS, INC.
                       (FORMERLY SIGNATURE MOTORCARS INC)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2002

                             Property and Equipment

      Property and equipment is stated at cost. Depreciation is expensed using
straight-line and accelerated methods over the estimated useful lives of the
assets. The estimated useful lives are: building-30 to 40 years; equipment and
tools-5 to 7 years; software-5 years; furniture and fixtures-5 to 7 years.
Depreciation expense in the amount of $2,103 has been recognized for the years
ended September 30, 2002 and 2001 respectively.


                         Impairment of Long-Lived Assets

      The Company follows SFAS No. 121, "Accounting for Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of". The Statement requires that
long-lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events of changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.

                        Recent Accounting Pronouncements

      Segments of an Enterprise and Related Information
      -------------------------------------------------

      Statement of Financial Accounting Standards (SFAS) No. 131, Disclosures
about Segments of an Enterprise and Related Information, supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise." SFAS 131
establishes standards for the way that public companies report information about
operating segments in annual financial statements and requires reporting of
selected information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosures regarding
products and services, geographic areas and major customers. SFAS 131 defines
operating segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. The Company has evaluated this SFAS and does not believe it is
applicable at this time.

      Goodwill and Other Intangible Assets
      ------------------------------------

      In July 2001, the Financial Accounting Standards Board issued Statements
of Financial Standards ("SFAS") No. 141, "Business Combinations" and No. 142,
"Goodwill and Other Intangible Assets". SFAS No. 141 established accounting and
reporting standards for business combinations and eliminates the
pooling-of-interests method of accounting for those combinations initiated after
July 1, 2001. SFAS No, 141 also includes new criteria to recognize intangible
assets separately from goodwill. SFAS No. 142 establishes the accounting and
reporting standards from goodwill and intangible lives. Goodwill and intangibles
with indefinite lives will no longer be amortized, but, alternatively will be
reviewed periodically for indicators of impairment. Separate intangible assets
that are not deemed to have an indefinite life will continue to be amortized
over their useful lives. The Company does not anticipate that the adoption of
SFAS No. 141 and SFAS No. 142 will have a significant effect on its results of
operations or financial position.







                                       F-9

<PAGE>



                           LOCALTELECOM SYSTEMS, INC.
                       (FORMERLY SIGNATURE MOTORCARS INC)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2002

      Impairment or Disposal of Long-Lived  Assets
      --------------------------------------------

      In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS No. 144 addresses financial
accounting and reporting for the impairment or disposal of long-lived assets. It
supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets To Be Disposed Of", and the accounting and reporting
provisions of Accounting Principles Board Statement ("APB") 30, "Reporting the
Results of Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions", for the disposal of a segment of a business. The Company is
required to adopt SFAS No. 144 on October 1, 2002. The Company does not expect
that the adoption of SFAS No. 144 will have a material effect on its financial
position, results of operations or cash flows.

      Accounting  for Costs Associated  with Exit or Disposal  Activities
      -------------------------------------------------------------------

       In July 2002, the FASB issued SFAS No. 146 , "Accounting for Costs
Associated with Exit or Disposal Activities". SFAS No. 146 replaces "Emerging
Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity (including Certain
Costs Incurred in a Restructuring)". SFAS No. 146 requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of a commitment to an exit or disposal plan.
Examples of costs covered by the standard include lease termination costs and
certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity. SFAS
No. 146 is to be applied prospectively to exit or disposal activities initiated
after December 31, 2002. The Company does not expect the adoption of SFAS No.
146 to have a material effect on its financial position, results of operations
or cash flows.

      2. COMMON STOCK

      The Company has 100,000,000 common shares authorized with a par value of
$0.0167 of which 39,330,585 are issued and outstanding as of September 30, 2002.
The Company also has 1,000,000 preferred shares authorized with a par value of
$0.10 of which no shares are issued and outstanding.

      As of September 30, 2002 the Company had 200,000 warrants outstanding to
purchase 200,000 restricted common shares at an exercise price of $0.20 per
share. In March 2002, 650,000 warrants were exercised causing the issuance of
650,000 restricted common shares. The remaining 200,000 warrants have an
expiration date of January 20, 2003.

      During the year ended September 30, 2001, the Company issued securities in
the transactions below without registering the securities under the Securities
Act of 1933. No underwriter, sales or placement agent was involved in any of the
transactions.

      On April 2, 2001 the Company issued 165,000 restricted common shares for
consideration to extend a note for the Troell oil and gas lease located in south
Texas. Of the 165,000 shares issued for this extension 15,000 were issued for
professional fees to prepare the legal documentation for the extension.






                                      F-10

<PAGE>



                           LOCALTELECOM SYSTEMS, INC.
                       (FORMERLY SIGNATURE MOTORCARS INC)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2002


      During the year ended September 30, 2002, the Company issued securities in
the transactions below without registering the securities under the Securities
Act of 1933. No underwriter, sales or placement agent was involved in any of the
transactions.

      On October 25, 2001 the Company issued the following restricted shares of
common stock to the following persons in exchange for their services: Karen Lee
(10,000 shares), Robert Anderson (25,000 shares), Amber Smith (15,000 shares),
J.V. Rhyne (10,000 shares), Benjamin Botello (45,000 shares), Barbara Williams
(1,000 shares), Susie Hare (1,000 shares) and Melissa Eason (1,000 shares). The
Company also sold to Dale Houlette, an existing shareholder, 25,000 restricted
common shares for $5,000.

      On December 7, 2001 the Company issued 228,000 restricted common shares as
compensation to its officers and directors (William R. Miertschin, Victoria
Lucas and Howard Siegel).
      On March 19, 2002 the Company issued 350,000 restricted common shares when
Stephen Grosberg, an existing shareholder, exercised 350,000 warrants. These
warrants were issued in conjunction with the private placement of stock made on
December 20, 1999. The exercise price was $0.20 per share and resulted in cash
to the Company of $70,000.

      On April 1, 2002 the Company issued 300,000 restricted common shares when
Herbert Wolas, an existing shareholder, exercised 300,000 warrants. These
warrants were issued in conjunction with the private placement of stock made on
December 20, 1999. The exercise price was $0.20 per share and resulted in cash
to the Company of $60,000.

      On February 15, 2002 the Company issued 2,719,818 restricted common shares
for consulting services to Graford Communications Group and Copano Bay
Associates, Texas general partnerships partially owned by Richard M. Hewitt, a
director, and two accredited investors, for the acquisition and for providing
funding arrangements for the merger with Local Telecom Services, Inc. These
consulting services received only restricted shares for compensation.

      On April 18, 2002 the Company made effective the 4-for-5 reverse stock
split and allocated 27,335,584 restricted common shares for the acquisition of
all property, rights, privileges, leases of LTSI which became effective on
August 30, 2002 and allocated 11,374,416 restricted common shares for funding
the merged entity.


      3. RELATED PARTY TRANSACTIONS

      The Company has significant relations with the President and principal
shareholder, William R. Miertschin in the form of salary and expenses.

      4. INCOME TAXES

      At September 30, 2002, the Company had net operating loss carryforwards
totaling approximately $8,100,000 available to reduce future taxable income
through the year 2021. Due to changes in control of the Company, these
carryforwards are limited on an annual basis.





                                      F-11

<PAGE>



                           LOCALTELECOM SYSTEMS, INC.
                       (FORMERLY SIGNATURE MOTORCARS INC)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2002


      5. ACQUISITION

      Local Telecom Systems, Inc. (LTSI) is a local telephone service reseller
with a three year old customer base in Texas, New Mexico and Arizona. LTSI
recently acquired the necessary licenses and interconnect agreements to offer,
on a national basis, prepaid local telephone service and various ancillary
products such as 911, caller ID and prepaid long distance in 45 states.

      The transaction is being accounted for as a "purchase" following the
procedures of SFAS 142, "Accounting for Business Combinations.


      The following table summarizes the estimated fair value of the assets of
the assets acquired and liabilities assumed at the date of acquisition:

                             Current Assets      $      20,582
                             Fixed Assets               35,000
                             Goodwill                  721,116
                             Licenses                  525,000
                             Debt Assumed        (     415,803)

                             Net Assets Acquired $     885,895
                                                 =============
      Pro Forma Summary Data (Unaudited)

      The following proforma summary data for the twelve months ended September,
2002 and 2001 presents the consolidated results of operations as if the
acquisition of LTSI made on August 30, 2002 had occurred on October 1, 2000.
These pro forma results have been prepared for comparative purposes only and do
not purport to be indicative of what would have occurred had the acquisition
been made as of October 1, 2000 or of results that may occur in the future.

                        Twelve Months Ended September 30
                              2002                   2001

Proforma Revenue          $   665,745        $    732,203
Proforma Net Loss            (137,155)            (87,925)

Proforma net loss per share   ( $ .04)            ( $ .02)


6. COMMITMENTS AND CONTINGENCIES

                          Concentration of Credit Risk

The Company invests its cash and certificates of deposit primarily in deposits
with major banks. The Company has not incurred losses related to its cash.





                                      F-12

<PAGE>



                           LOCALTELECOM SYSTEMS, INC.
                       (FORMERLY SIGNATURE MOTORCARS INC)
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2002


                       Fair Value of Financial Instruments

The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, Disclosures about Fair
Value of Financial Instruments. The estimated fair value amounts have been
determined by the Company, using available market information and appropriate
valuation methodologies.

The fair value of financial instruments classified as current assets or
liabilities including cash and cash equivalents and accounts payable approximate
carrying value due to the short-term maturity of the instruments.


7. GOING CONCERN

The Company's financial statements are prepared using generally accepted
accounting principles applicable to a going concern, which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. However, the Company does not have significant cash or other material
assets, The issues related to unpaid telephone excise tax and a potential debt
that was not assumed raises substantial doubt about its ability to continue as a
going concern. The stockholders/officers and or directors have committed to
advancing operating costs of the Company interest free to continue operations
for the next twelve months, but they are not legally obligated to do so.

8. SUBSEQUENT EVENTS

There were no other subsequent events that have occurred after the balance sheet
date that warrants disclosure.
























                                      F-13

<PAGE>



Item 8.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure

There are no disagreements between the Company and its auditor, Clyde Bailey,
P.C., San Antonio, Texas, regarding accounting and/or financial disclosure.

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons

The following are the officers and directors of the Company as of January 8,
2003:

                                   Date First
Name                        Age   Elected           Term        Position
-------------------------------------------------------------------------
William R. Miertschin       55    1997             1 year      President, CEO &
                                                                        Director

Tracey Norris               32    2002             1 year      Secretary &
                                                                        Director

Amber G. Smith              38    2002             1 year      Treasurer

Richard M. Hewitt           65    2002             1 year      Director

William R. Miertschin, President, Chief Executive Officer, and Chairman of the
Board of Directors, is an oil and gas consultant with offices in Dallas, Texas.
A 1972 graduate of the University of Texas at Austin, with a BA in Mathematics,
he completed additional courses in petroleum engineering at the University of
Texas of the Permian Basin in 1978. Beginning his oil and gas career in 1975,
Miertschin served as an Engineer with the Baroid Division of NL Industries in
Odessa, Texas. From 1977 to 1979, Mr. Miertschin was Drilling Supervisor for
Gulf Oil Exploration and Production, being the first trainee to complete Gulf
Oil's drilling and production engineering training program. Thereafter, he was
employed with Mesa Petroleum (1979-1985) as Corporate Supervisor of Regulatory
and Safety in Amarillo, Texas, and as Drilling Supervisor and Senior Drilling
Engineer in Midland and Amarillo, Texas, managing Mesa's corporate drilling and
completion operations for all of the Permian Basin Division, Texas Panhandle and
Kansas. In 1986 he graduated from the Leadership Amarillo Program of the
Amarillo Chamber of Commerce. A former member of the Society of Petroleum
Engineers, Mr. Miertschin has served as an expert witness before the Kansas
Corporation Commission (KCC) and the New Mexico Oil Conservation Commission
(NMOCC) on regulatory affairs, drilling and completion, and analysis of
potential production purchases. He also served on the Oil and Gas Advisory
Committee to KCC to revise statewide rules in Kansas. Mr. Miertschin has been
active in the oil and gas industry as an investor and operator, and has been in
private practice as a consultant in the Dallas-Fort Worth area for the last
fourteen (14) years. Since 1997, Mr. Miertschin has served as President, Chief
Executive Officer and Chairman of the Board of Directors of the Company and its
subsidiaries. During this period he maintained, funded and expanded the
operations of the Company. He has agreed to continue with Local Telecom Systems,
Inc. in those same capacities. Mr. Mierstchin is also currently serving as the
President of each of the former subsidiaries of the Company. See Item 13
"Certain Relationships and Related Transactions." Also, he is currently a
Vice-President of the Dallas Safari Club.

Tracey Norris, Secretary, Director of Operations, and a Director of the Company
since February 2002, previously served as Office Manager and Director of
Operations of Local Telecom Service, LLC (a prepaid telephone resale company)
since 1998. Before joining Local Telecom Service, LLC, Ms. Norris worked for
Southwestern Bell in the Department of Resale Specialization. Between 1996 and
1998 Ms. Norris was trained in local resale telephone service including, but not
limited to, order processing, order completion, and billing. Prior to 1996 Ms.
Norris was Manager of Accounting for Twenty-First Century Connection and

                                       11

<PAGE>




Research and Processing Department at Vought Heritage Federal Credit Union,
Grand Prairie. Ms. Norris attended University of Texas at Arlington, majoring in
accounting.

Amber G. Smith, Treasurer of the Company since February 2002, a native of
Friona, Texas, Ms. Smith is a 1986 graduate of West Texas State University,
Canyon, Texas. Ms. Smith worked as Telecommunications Manager of Span
Instruments, Inc., Plano, Texas from 1991 until 1996.  Since 1996 she has been
active in managing her personal investment portfolio and performing consulting
services for both public and private companies. In 1989 and 1990 she was
Communications Manager of H.D. Vest Financial Services, Inc., Irving, Texas, a
securities broker dealer. Ms. Smith also currently serves as Secretary of
Cumberland Continental Corp. and Signature Financial Services, Inc. both of
which are former subsidiaries of the Company.

Richard M. Hewitt, Director of the Company since February 2002, is a sole
practitioner attorney specializing in securities law. A 1958 graduate of
Grinnell College, Grinnell, Iowa, with an AB degree, Mr. Hewitt holds an LLB
degree from Southern Methodist University, College of Law in Dallas, Texas
(1963). He has been in private practice in the Dallas-Fort Worth area for the
last 20 years. Mr. Hewitt is currently Vice President and a Director of Gas
Transmission Organization, Inc., Dallas, Texas, a Secretary/Treasurer and
Director of Signature Healthcare, Inc. and a Director of Golden Chief Resources,
Inc., Dallas, Texas, a publicly owned independent oil and gas producer.

Section 16(a) Beneficial Ownership Reporting Compliance

Based solely on a review of reports filed with the Company, several persons
(William Miertschin, Amber Smith, Tracey Norris and Richard M. Hewitt) did not
file all reports on time regarding transactions in the Company's securities
required to be filed for 2002 by Section 16(a) under the Securities Exchange Act
of 1934. Though the required reports were not filed timely, they were
subsequently filed after the year end.

Item 10.  Executive Compensation

The Company's total remuneration for annual salary and bonuses does not exceed
$100,000 per officer. The Company currently does not have a compensation
committee, however, since the merger with Local Telecom Systems, Inc. an
independent compensation committee will be formed to evaluate the annual
remuneration for each of its officers.

      Name                    Position                      Annual Compensation
 -------------------------------------------------------------------------------
      William Miertschin      President & CEO               $30,000
      Tracey Norris           Secretary                     $40,000
      Amber Smith             Treasurer                     $ 6,000

The Directors of the Company, William Miertschin, Richard M. Hewitt and Tracey
Norris each receive 36,000 shares of restricted common stock per year as
compensation for their services as director s plus reimbursement of any approved
out of pocket expenses incurred on behalf of the Company.

Item 11.  Security Ownership of Certain Beneficial Owners and Management

The following is certain information concerning the officer and directors and
persons or firms who are known by the Company to own beneficially more than 5%
of the Company's common stock (39,330,582 shares) and voting shares on January
8, 2003:


                                       12
<PAGE>

                      Name and Address        Number of         Percent
Title of Class        of Beneficial Owner     Shares Owned      of Class
--------------------------------------------------------------------------
Common Stock          Connect Holding Corp.   12,580,000        31.985
$0.0167 Par Value     1133 Empire Drive
                      Dallas, Texas 75247
Common Stock          Sammy Dog, Ltd.         12,580,000        31.985
$0.0167 Par Value     400 North Bailey Ave.
                      Fort Worth, Texas 76107

---------------------------------------------------------------------------
Executive Officers and Directors
---------------------------------------------------------------------------
Common Stock          William R. Miertschin         4,049,163         10.295
$0.0167 Par Value     7738 Forest Lane #102
                      Dallas, Texas 75230
Common Stock          Tracey Norris                    50,000          0.127
$0.0167 Par Value     2034 Misty Glen, #1910
                      Arlington, Texas 76011
Common Stock          Amber G. Smith                   52,800          0.134
$0.0167 Par Value     6867 Anglebluff Circle
                      Dallas, Texas 75248
Common Stock          Richard M. Hewitt             1,317,585          3.351
$0.0167 Par Value     202 Fresh Meadow Drive
                      Trophy Club, Texas 76262
All Directors and Officers as a group (4 persons)   5,469,548         13.907



On April 18, 2002 the Company implemented a 4 for 5 reverse stock split. The
above share numbers are share positions as of January 8, 2003 and do reflect the
reduction in the number of shares caused by the reverse stock split.

Changes in Control of Issuer

On August 30, 2002 a merger/acquisition with Local Telecom Systems, Inc. and
related transactions thereto resulted in a change of control and change of name
of the Company. See Item 4 "Submission of Matters to a Vote of Security Holders"

Item 12. Certain Relationships and Related Transactions

William R. Miertschin, President of the Company, is also President and Director
of the four former subsidiaries of the Company that were distributed to the
Companies shareholders in April 2002. These four former subsidiaries are
International Royalty & Oil Co., formed in July 1999, Signature Financial
Services, Inc., formed in July 2000, Cumberland Continental Corporation, formed
in June 2001 and Signature Financial Services, Inc. formed in September 2001.
However, the Company does not anticipate any conflicts of interest with him
holding these corporate positions in these companies mentioned in this section.

Item 13.  Exhibits and Reports on Form 8-K
(a)     On June 6, 2002 the Company filed a Form 8-K notifying the change of
        accountants from Jackson & Rhodes, P.C.of Dallas, Texas to Clyde Bailey,
        P.C. of San Antonio, Texas.



                                       13
<PAGE>


(b)     The Index to Exhibits is found on page 16.

Item 14.  Controls and Procedures
(a)   The Company plans to expand the Board of Directors within the fiscal year
      ending September 30, 2003 to provide an independent board which will then
      create two committees independent of management 1) audit committee and 2)
      compensation committee.

(b)   No significant changes occurred in the internal controls of the Company
      during the fiscal year ended September 30, 2002.

(c)   Not Applicable











































                                       14
<PAGE>



                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, Local Telecom Systems, Inc. has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                                          LOCAL TELECOM SYSTEMS, INC.
Date: January 17, 2003                    /s/ William R. Miertschin
                                          ----------------------------
                                          By: William R. Miertschin, President,
                                              Chief Executive Officer, Principal
                                              Accounting Officer, Principal
                                              Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:

Signature                         Title                         Date

/s/ Tracey Norris                 Secretary & Director          January 17, 2003
--------------------------
Tracey Norris

/s/ William R. Miertschin         President, CEO & Director     January 17, 2003
--------------------------
William R. Miertschin

/s/ Richard M. Hewitt             Director                      January 17, 2003
-------------------------
Richard M. Hewitt




                                       15
<PAGE>
                                  CERTIFICATION



I, William R. Miertschin, certify that:
1.. I have reviewed this annual report on Form 10-KSB of Local Telecom Systems,
     Inc
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report; 3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report. 4. The
registrant's other certifying officers and I are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules L3a-14 and 15d-14) for the registrant and have:
        a) designed such disclosure controls and procedures to ensure that
           material information relating to the registrant, including its
           consolidated subsidiaries, is made known to us by others within those
           entities, particularly during the period in which this annual report
           is being prepared;
        b) evaluated the effectiveness of the registrant's disclosure controls
           and procedures as of a date within 90 days prior to the filing date
           of this annual report (the "Evaluation Date"); and
        c) presented in this annual report our conclusions about the
           effectiveness of the disclosure controls and procedures based on our
           evaluation as of the Evaluation Date:
5. The registrant's other certifying officers and I have disclosed, base on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent
functions):
        a) all significant deficiencies in the design or operation of internal
           controls which could adversely affect the registrant's ability to
           record, process, summarize and report financial data and have
           identified for the registrant's auditors any material weaknesses in
           internal controls; and
        b) any fraud, whether or not material, that involves management or other
           employees who have a significant role in the registrant's internal
           controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

     Date January 17, 2003
     ----------------------

     /s/William R. Miertschin
     ------------------------
     William R. Miertschin, President, Chief Executive Officer
     And Chief Financial Officer of Local Telecom Systems, Inc.


                                       16
<PAGE>

                                INDEX TO EXHIBITS


Exhibit No.       Page No.          Description
-----------       --------          ------------
   3(i)              *             Articles of Incorporation of the Company

   3(ii)             *             Bylaws of the Company


* Previously filed as indicated and incorporated herein by reference from the
filings previously made by the Company.










































                                       17