**Securities      and Exchange Commission**

**Washington,      D.C. 20549**

**FORM      10-QSB**

| x | Quarterly                Report Pursuant To Section 13 Or 15(d) Of The Securities Exchange                Act Of 1934 |
|---|-----------------------------------------------------------------------------------------------------------------------|

| o | Transition                Report Under Section 13 Or 15(d) Of The Securities Exchange Act                Of 1934 |
|---|------------------------------------------------------------------------------------------------------------------|

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| DELAWARE(State                  or Other Jurisdiction ofIncorporation                  or Organization) | 13-2614435(I.R.S.                  EmployerIdentification                  No.) |
|---------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------|

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|                                                                                                                                                                         |                                                                 | Page   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------|--------|
| **Part                  I**                                                                                                                                                  |                                                                 |   |
|                                                                                                                                                                         |                                                                 |   |
|                                                                                                                                                                         |                                                                 |   |
| Item                  1.                                                                                                                                                     | Financial                  Statements                                |   |
|                                                                                                                                                                         |                                                                 |   |
| Balance                  Sheet as of December 31, 1996 (Unaudited)                                                                                                           | 1                                                                    |
|                                                                                                                                                                         |                                                                 |   |
| Statements                  of Operations for the three and six Months ended December 31, 1996                  and                  1995 (Unaudited)                        | 2                                                                    |
|                                                                                                                                                                         |                                                                 |   |
| Statements                  of Stockholders Equity for the year ended June 30, 1996 and the                  six months                  ended December 31, 1996 (Unaudited) | 3                                                                    |
|                                                                                                                                                                         |                                                                 |   |
| Statements                  of Cash Flows for the six months ended December 31, 1996 and 1995                  (Unaudited)                                                   | 4                                                                    |
|                                                                                                                                                                         |                                                                 |   |
| Notes                  To Financial Statements (Unaudited)                                                                                                                   | 5                                                                    |
|                                                                                                                                                                         |                                                                 |   |
| Item                  2.                                                                                                                                                     | Management's                  Discussion and Analysis                | 7      |
|                                                                                                                                                                         |                                                                 |   |
| Item                  3.                                                                                                                                                     | Controls                  and Procedures                             | 8      |
|                                                                                                                                                                         |                                                                 |   |
|                                                                                                                                                                         |                                                                 |   |
| **Part                  II - Other Information**                                                                                                                             |
|                                                                                                                                                                         |                                                                 |   |
| Item                  1.                                                                                                                                                     | Legal                  Proceedings                                   | 8      |
|                                                                                                                                                                         |                                                                 |   |
| Item                  2.                                                                                                                                                     | Change                  in Securities                                | 8      |
|                                                                                                                                                                         |                                                                 |   |
| Item                  3.                                                                                                                                                     | Defaults                  Upon Senior Notes                          | 8      |
|                                                                                                                                                                         |                                                                 |   |
| Item                  4.                                                                                                                                                     | Submission                  of Matters to a Vote of Security Holders | 8      |
|                                                                                                                                                                         |                                                                 |   |
| Item                  5.                                                                                                                                                     | Other                  Information                                   | 8      |
|                                                                                                                                                                         |                                                                 |   |
| Item                  6.                                                                                                                                                     | Exhibits                  and Reports on Form 8-K                    | 8      |
|                                                                                                                                                                         |                                                                 |   |
| Signatures                                                                                                                                                                   | 8                                                                    |

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**ITEM      1. FINANCIAL STATEMENTS**

| **CST                  ENTERTAINMENT, INC.**                                                         |
|------------------------------------------------------------------------------------------------------|
| BALANCE                  SHEETS (Unaudited)                                                          |
| As                  of December 31, 1996                                                             |
|                                                                                                 |
| ASSETS                                                                                               |   |   |   |
| Current                  assets:                                                                     |   |   |   |
| Cash                                                                                                 |   | $ | 18,706 |   |
| Accounts                  receivable, net                                                       |   |   | 221,430 |   |
| Work-in-process                                                                                 |   |   | 340,908 |   |
| Prepaid                  expense                                                                |   |   | 112,889 |   |
| Receivable                  from related parties                                                |   |   | 15,000 |   |
| Total                  current assets                                                                |   |   | 708,933 |   |
|                                                                                                 |   |   |   |   |
| Property                  and equipment:                                                             |   |   |   |   |
| Color                  conversion equipment                                                     |   |   | 3,896,789 |   |
| Leasehold                  improvements and other equipment                                     |   |   | 1,615,020 |   |
| Capitalized                  software                                                           |   |   | 1,460,571 |   |
|                                                                                                 |   |   | 6,972,380 |   |
| Less                  accumulated depreciation                                                  |   |   | 6,090,005 |   |
|                                                                                                 |   |   | 882,376 |   |
| Other                  assets:                                                                       |   |   |   |   |
| Film                  library, net of amortization of $5,180,900                                |   |   | 1,245,292 |   |
| Other                  assets                                                                   |   |   | 16,633 |   |
| Notes                  receivable from directors and officers                                   |   |   | 100,000 |   |
|                                                                                                 |   |   | 1,361,925 |   |
|                                                                                                 |   | $ | 2,953,233 |   |
|                                                                                                 |   |   |   |   |
| LIABILITIES                  AND STOCKHOLDERS' DEFICIT                                               |   |   |   |   |
|                                                                                                 |   |   |   |   |
| Current                  liabilities:                                                                |   |   |   |   |
| Line                  of credit                                                                 |   | $ | 56,747 |   |
| Current                  portion of long term debt                                              |   |   | 250,200 |   |
| Notes                  payable                                                                  |   |   | 734,884 |   |
| Accounts                  payable                                                               |   |   | 419,855 |   |
| Accrued                  expenses                                                               |   |   | 1,177,163 |   |
| Total                  current liabilities                                                           |   |   | 2,638,849 |   |
|                                                                                                 |   |   |   |   |
| Non                  current portion of long term debt                                               |   |   | 577,875 |   |
|                                                                                                 |   |   |   |   |
| Stockholders'                  Deficit:                                                              |   |   |   |   |
| Common                  stock, par value $0.15; 40,000,000 authorized;                  issued  |   |   |   |   |
| and                  outstanding 27,278,340 at December 31, 1996                                |   |   | 4,091,752 |   |
| Additional                  paid in capital                                                     |   |   | 56,115,740 |   |
| Accumulated                  deficit                                                            |   |   | (60,470,983 | ) |
| Total                  stockholders' deficit                                                         |   |   | (263,491 | ) |
| Total                  liabilities and stockholders' deficit                                         |   | $ | 2,953,233 |   |

**SEE          ACCOMPANYING NOTES TO FINANCIAL STATEMENTS**

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| **CST                    ENTERTAINMENT, INC.**                                                      |   |                                          |       |                                        |   |       |   |   |       |
|-----------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|------------|---------------------------------------------|--------|------------|--------|--------|------------|
| STATEMENTS                    OF OPERATIONS (Unaudited)                                             |   |                                          |       |                                        |   |       |   |   |       |
| For                    the three and Six Months Ended December 31, 1996 and                    1995 |
|                                                                                                |   |                                          |       |                                        |   |
|                                                                                                |   | For                    the Three Months Ended |       | For                    the Six Months Ended |   |
|                                                                                                |   | December                    31,               |       | December                    31,             |   |
|                                                                                                |   | 1996                                          |       | 1995                                        |   | 1996       |   | 1995   |       |
| Revenue:                                                                                            |   |                                          |       |                                        |   |       |   |   |       |   |   |   |   |
| Coloring                    income                                                             |   | $                                             | 361,300    |                                        | $      | 613,320    |   | $      | 1,293,050  |   | $ | 1,292,100 |   |
| License                    royalty income                                                      |   |                                          | -          |                                        |   | 1,485,066  |   |   | 175,000    |   |   | 1,885,066 |   |
| Library                    sales income                                                        |   |                                          | -          |                                        |   | -          |   |   | 500,000    |   |   | - |   |
|                                                                                                |   |                                          | 361,300    |                                        |   | 2,098,386  |   |   | 1,968,050  |   |   | 3,177,166 |   |
|                                                                                                |   |                                          |       |                                        |   |       |   |   |       |   |   |   |   |
| Operating                    expenses:                                                              |   |                                          |       |                                        |   |       |   |   |       |   |   |   |   |
| Production                                                                                     |   |                                          | 151,266    |                                        |   | 226,921    |   |   | 996,437    |   |   | 753,656 |   |
| Cost                    of library rights sold                                                 |   |                                          | -          |                                        |   | -          |   |   | 500,000    |   |   | - |   |
| Research                    and development                                                    |   |                                          | -          |                                        |   | 26,031     |   |   | 5,694      |   |   | 62,813 |   |
| Depreciation                    and amortization                                               |   |                                          | 129,653    |                                        |   | 125,682    |   |   | 302,523    |   |   | 262,753 |   |
| Film                    library amortization                                                   |   |                                          | 170,625    |                                        |   | 986,500    |   |   | 398,125    |   |   | 1,208,500 |   |
| Participation                    and licensing                                                 |   |                                          | -          |                                        |   | 160,000    |   |   | -          |   |   | 440,000 |   |
| General                    and administrative                                                  |   |                                          | -          |                                        |   | 519,054    |   |   | 510,657    |   |   | 870,415 |   |
| Interest                    expense                                                            |   |                                          | -          |                                        |   | 33,551     |   |   | 45,401     |   |   | 48,159 |   |
| Total                    operating expenses                                                         |   |                                          | 451,543    |                                        |   | 2,077,739  |   |   | 2,758,836  |   |   | 3,646,296 |   |
|                                                                                                |   |                                          |       |                                        |   |       |   |   |       |   |   |   |   |
|  Net                    loss                                                                   |   | $                                             | (90,243    | )                                           | $      | 20,647     |   | $      | (790,786   | ) | $ | (469,130 | ) |
|                                                                                                |   |                                          |       |                                        |   |       |   |   |       |   |   |   |   |
| Weighted                    average common shares outstanding                                       |   |                                          |       |                                        |   |       |   |   |       |   |   |   |   |
| Basic                    and fully diluted                                                     |   |                                          | 27,278,340 |                                        |   | 26,811,115 |   |   | 27,278,340 |   |   | 25,506,081 |   |
|                                                                                                |   |                                          |       |                                        |   |       |   |   |       |   |   |   |   |
| Net                    income (loss) per share common                                               |   | $                                             | (0.00      | )                                           | $      | 0.00       |   | $      | (0.03      | ) | $ | (0.02 | ) |

**SEE          ACCOMPANYING NOTES TO FINANCIAL STATEMENTS**

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| **CST                    ENTERTAINMENT, INC.**                                                                                       |
|--------------------------------------------------------------------------------------------------------------------------------------|
| CONSOLIDATED                    STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)                                                        |
| For                    the Year Ended June 30, 1996 and the Six Months Ended December                    31,                    1996 |
|                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                 |   |   |   |   |   | Additional |   |   |   | Total |   |
|                                                                                                                                 |   | Common                    Stock |   | Paid-In |   | Deficit |   | Stockholders' |   |
|                                                                                                                                 |   | Shares |   | Amount |   | Capital |   | Accumulated |   | Equity |   |
| Balances,                    June 30, 1995                                                                                           |   |   | 26,199,624 |   | $ | 3,929,944 |   | $ | 55,667,022 |   | $ | (56,210,711 | ) | $ | 3,386,255 |   |
|                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Common                    stock, restricted, issued as payment                                                                       |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| for                    services rendered                                                                                             |   |   | 274,450 |   |   | 41,168 |   |   | 123,558 |   |   |   |   |   | 164,726 |   |
| Common                    stock issued in connection with                                                                            |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| exercise                    of stock options                                                                                         |   |   | 4,266 |   |   | 640 |   |   | 3,160 |   |   |   |   |   | 3,800 |   |
| Common                    stock, restricted, issued in connection                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| with                    debt restructuring                                                                                           |   |   | 500,000 |   |   | 75,000 |   |   | 175,000 |   |   |   |   |   | 250,000 |   |
| Common                    stock, restricted, issued in connection                                                                    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| with                    animation rights repurchase                                                                                  |   |   | 300,000 |   |   | 45,000 |   |   | 105,000 |   |   |   |   |   | 150,000 |   |
| Warrants                    issued as payment for services rendered                                                                  |   |   |   |   |   |   |   |   | 24,000 |   |   |   |   |   | 24,000 |   |
| Net                    loss                                                                                                          |   |   |   |   |   |   |   |   |   |   |   | (3,469,486 | ) |   | (3,469,486 | ) |
| Balances,                    June 30, 1996                                                                                           |   |   | 27,278,340 |   | $ | 4,091,752 |   | $ | 56,097,740 |   | $ | (59,680,197 | ) | $ | 509,295 |   |
|                                                                                                                                 |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Warrants                    issued                                                                                                   |   |   |   |   |   |   |   |   | 18,000 |   |   |   |   |   | 18,000 |   |
| Net                    loss                                                                                                          |   |   |   |   |   |   |   |   |   |   |   | (790,786 | ) |   | (790,786 | ) |
| Balances,                    December 31, 1996                                                                                       |   |   | 27,278,340 |   | $ | 4,091,752 |   | $ | 56,115,740 |   | $ | (60,470,983 | ) | $ | (263,491 | ) |

**SEE        ACCOMPANYING NOTES TO FINANCIAL        STATEMENTS**

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| **CST                    ENTERTAINMENT, INC.**                               |
|------------------------------------------------------------------------------|
| STATEMENTS                    OF CASH FLOWS (Unaudited)                      |
| For                    the Six Months Ended December 31, 1996 and 1995       |
|                                                                         |   |   |   |
|                                                                         |   | For                    the Six Months Ended |   |
|                                                                         |   | December                    31, |   |
|                                                                         |   | 1996 |   | 1995 |   |
| Cash                    flows from operating activities:                     |   |   |   |   |   |   |   |
| Net                    income (loss)                                         |   | $ | (790,786 | ) | $ | (469,130 | ) |
| Adjustments                    to reconcile increase in net assets to net    |   |   |   |   |   |   |   |
| cash                    provided by (used in) operating activities:          |   |   |   |   |   |   |   |
| Depreciation                    and amortization                        |   |   | 297,398 |   |   | 1,471,253 |   |
| Non-cash                    revenue from commitments payable            |   |   |   |   |   | (174,258 | ) |
| Film                    library amortization                            |   |   | 898,125 |   |   | - |   |
| Non                    cash payment of expenses                         |   |   | - |   |   | 82,500 |   |
| Decrease                    (increase) in:                              |   |   |   |   |   |   |   |
| Accounts                    receivable                                       |   |   | 674,619 |   |   | (337,346 | ) |
| Work                    in process                                           |   |   | 428,391 |   |   | (103,347 | ) |
| Prepaid                    expenses                                          |   |   | (14,632 | ) |   | (108,217 | ) |
| Receivable                    from related party                             |   |   | 25,000 |   |   | 200,000 |   |
| Other                                                                        |   |   | 18,000 |   |   | (2,300 | ) |
| Increase                    (decrease) in:                              |   |   |   |   |   |   |   |
| Accounts                    payable                                          |   |   | (68,780 | ) |   | 166,748 |   |
| Accrued                    expense                                           |   |   | (50,042 | ) |   | 25,161 |   |
| Deferred                    income                                           |   |   | (825,300 | ) |   | (149,987 | ) |
| Loan                    payable related party                                |   |   | (85,000 | ) |   | 50,000 |   |
| Net                    cash provided (used in) operating activities          |   |   | 506,993 |   |   | 651,077 |   |
|                                                                         |   |   |   |   |   |   |   |
| Cash                    flows from investing activities:                     |   |   |   |   |   |   |   |
| Additions                    to property and equipment                       |   |   | - |   |   | (22,185 | ) |
| Additions                    of capitalized software                         |   |   | (28,194 | ) |   | (183,985 | ) |
| Additions                    to film library                                 |   |   | - |   |   | (1,688,196 | ) |
| Net                    cash provided by (used in) investing activities  |   |   | (28,194 | ) |   | (1,894,366 | ) |
|                                                                         |   |   |   |   |   |   |   |
| Cash                    flows from financing activities:                     |   |   |   |   |   |   |   |
| Proceeds                    from exercise of stock options                   |   |   | - |   |   | 3,800 |   |
| Proceeds                    from notes payable                               |   |   | - |   |   | 1,250,000 |   |
| Payment                    on note payable                                   |   |   | (63,318 | ) |   | (4,127 | ) |
| Line                    of credit                                            |   |   | (451,079 | ) |   | - |   |
| Net                    cash provided by (used in) financing activities  |   |   | (514,397 | ) |   | 1,249,673 |   |
|                                                                         |   |   |   |   |   |   |   |
| Net                    increase (decrease) in cash                      |   |   | (35,598 | ) |   | 6,384 |   |
|                                                                         |   |   |   |   |   |   |   |
| Cash                    at beginning of year                                 |   |   | 54,304 |   |   | 24,694 |   |
|                                                                         |   |   |   |   |   |   |   |
| Cash                    at end of year                                       |   | $ | 18,706 |   | $ | 31,078 |   |
|                                                                         |   |   |   |   |   |   |   |
| Supplementary                    Information:                                |   |   |   |   |   |   |   |
| Cash                    paid for interest                                    |   | $ | - |   | $ | 7,899 |   |
| Cash                    paid for income taxes                                |   | $ | - |   | $ | - |   |

**SEE      ACCOMPANYING NOTES TO FINANCIAL      STATEMENTS**

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**NOTE      A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING      POLICIES**

*Work-in-process*

*Property      and Equipment and Depreciation*

*Patent*

*Film      Library*

*Revenue      Recognition*

*Net      Loss Per Share*

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**NOTE      A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING      POLICIES**

*Accounting      Estimates*

*Fair      Value of Notes Payable and Long-Term Debt*

**NOTE      B - GOING CONCERN UNCERTAINTY**

**NOTE      C - INTERACTIVE TECH, INC.**

**NOTE      D - AMERICAN STOCK EXCHANGE**

**NOTE      E - SUBSEQUENT EVENT**

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**ITEM      2. MANAGEMENT'S DISCUSSION AND ANALYSIS**

**Results      of Operations**

**Liquidity      and Capital Resources**

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**ITEM      3. CONTROLS AND PROCEDURES**

**PART      II - OTHER INFORMATION**

| Item                  1. | Legal                  Proceedings. None.                                   |
|--------------------------|-----------------------------------------------------------------------------|
|                     |                                                                        |
| Item                  2. | Change                  in Securities. None.                                |
|                     |                                                                        |
| Item                  3. | Defaults                  Upon Senior Securities. None.                     |
|                     |                                                                        |
| Item                  4. | Submission                  of Matters to a Vote of Security Holders. None. |
|                     |                                                                        |
| Item                  5. | Other                  Information. None.                                   |
|                     |                                                                        |
| Item                  6  | Exhibits                                                                    |

| Exhibit                    Number |   | Title                    of Document                                                                                                                                                                                                                                              |
|-----------------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                              |   |                                                                                                                                                                                                                                                                              |
| 31.1                              |   | Certification                    of Principal Executive Officer and Principal Accounting Officer                    Pursuant                    to Rule 13a-14                                                                                                                    |
| 32.1                              |   | Certification                    of Chief Executive Officer and Principle Accounting Officer Pursuant                    to 18                    U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the                    Sarbanes-Oxley Act of                    2002 |

**SIGNATURES**

|   | LEGACY                HOLDINGS, INC. /S/                Robert Matthews  Robert                MatthewsChief                Executive Officer and Principle Accounting Officer |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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