**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 |
|---|------------------------------------------------------------------------------------------------------------------|

----

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

----

----

|                                                                                                                                                       |                                                               | Page   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------|--------|
| **Part                I**                                                                                                                                  |                                                               |   |
|                                                                                                                                                       |                                                               |   |
| Item                1.                                                                                                                                     | Financial                Statements                                |   |
|                                                                                                                                                       |                                                               |   |
| Balance                Sheet as of September 30, 1997 (Unaudited)                                                                                          | 1                                                                  |
|                                                                                                                                                       |                                                               |   |
| Statements                of Operations for the three months ended September 30, 1997 and 1996                (Unaudited)                                  | 2                                                                  |
|                                                                                                                                                       |                                                               |   |
| Statements                of Stockholders Equity for the year ended June 30, 1997 and the three                months ended September 30, 1997 (unaudited) | 3                                                                  |
|                                                                                                                                                       |                                                               |   |
| Statements                of Cash Flows for the three months ended September 30, 1997 and 1996                (Unaudited)                                  | 4                                                                  |
|                                                                                                                                                       |                                                               |   |
| Notes                To Financial Statements (Unaudited)                                                                                                   | 5                                                                  |
|                                                                                                                                                       |                                                               |   |
| Item                2.                                                                                                                                     | Management's                Discussion and Analysis                | 6      |
|                                                                                                                                                       |                                                               |   |
| Item                3.                                                                                                                                     | Controls                and Procedures                             | 6      |
|                                                                                                                                                       |                                                               |   |
|                                                                                                                                                       |                                                               |   |
| **Part                II - Other Information**                                                                                                             |
|                                                                                                                                                       |                                                               |   |
| Item                1.                                                                                                                                     | Legal                Proceedings                                   | 7      |
|                                                                                                                                                       |                                                               |   |
| Item                2.                                                                                                                                     | Change                in Securities                                | 7      |
|                                                                                                                                                       |                                                               |   |
| Item                3.                                                                                                                                     | Defaults                Upon Senior Notes                          | 7      |
|                                                                                                                                                       |                                                               |   |
| Item                4.                                                                                                                                     | Submission                of Matters to a Vote of Security Holders | 7      |
|                                                                                                                                                       |                                                               |   |
| Item                5.                                                                                                                                     | Other                Information                                   | 7      |
|                                                                                                                                                       |                                                               |   |
| Item                6.                                                                                                                                     | Exhibits                and Reports on Form 8-K                    | 7      |
|                                                                                                                                                       |                                                               |   |
| Signatures                                                                                                                                                 | 7                                                                  |

----

**ITEM      1. FINANCIAL STATEMENTS**

| **CST                  ENTERTAINMENT, INC.**                                                         |   |   |        |
|------------------------------------------------------------------------------------------------------|--------|--------|-------------|
| BALANCE                  SHEET (Unaudited)                                                           |   |   |        |
| As                  of September 30, 1997                                                            |
|                                                                                                 |   |   |        |
| ASSETS                                                                                               |   |   |        |
| Current                  assets:                                                                     |   |   |        |   |
| Cash                                                                                            |   | $      | -           |   |
| Accounts                  receivable, net                                                       |   |   | -           |   |
| Work-in-process                                                                                 |   |   | -           |   |
| Prepaid                  expense                                                                |   |   | -           |   |
| Receivable                  from related parties                                                |   |   | -           |   |
| Total                  current assets                                                                |   |   | -           |   |
|                                                                                                 |   |   |        |   |
| Property                  and equipment:                                                             |   |   |        |   |
| Color                  conversion equipment                                                     |   |   | -           |   |
| Leasehold                  improvements and other equipment                                     |   |   | -           |   |
| Capitalized                  software                                                           |   |   | -           |   |
|                                                                                                 |   |   | -           |   |
| Less                  accumulated depreciation                                                  |   |   | -           |   |
|                                                                                                      |   |   | -           |   |
| Other                  assets:                                                                       |   |   |        |   |
| Film                  library, net                                                              |   |   | -           |   |
| Other                  assets                                                                   |   |   | -           |   |
| Notes                  receivable from directors and officers                                   |   |   | -           |   |
|                                                                                                 |   |   | -           |   |
|                                                                                                 |   | $      | -           |   |
|                                                                                                 |   |   |        |   |
| LIABILITIES                  AND STOCKHOLDERS' DEFICIT                                               |   |   |        |   |
|                                                                                                 |   |   |        |   |
| Current                  liabilities:                                                                |   |   |        |   |
| Related                  party loan                                                             |   | $      | -           |   |
| Current                  portion of long term debt                                              |   |   | -           |   |
| Notes                  payable                                                                  |   |   | -           |   |
| Accounts                  payable                                                               |   |   | -           |   |
| Accrued                  expenses                                                               |   |   | -           |   |
| Total                  current liabilities                                                           |   |   | -           |   |
|                                                                                                 |   |   |        |   |
| Non                  current portion of long term debt                                               |   |   | -           |   |
|                                                                                                 |   |   |        |   |
| Stockholders'                  Deficit:                                                              |   |   |        |   |
| Common                  stock, par value $0.15; 40,000,000 authorized;                  issued  |   |   |        |   |
| and                  outstanding 27,278,340 at September 30, 1997                               |   |   | 4,091,752   |   |
| Additional                  paid in capital                                                     |   |   | 56,115,740  |   |
| Accumulated                  deficit                                                            |   |   | (60,207,492 | ) |
| Total                  stockholders' deficit                                                         |   |   | -           |   |
| Total                  liabilities and stockholders' deficit                                         |   | $      | -           |   |

**SEE        ACCOMPANYING NOTES TO FINANCIAL STATEMENTS**

----

| **CST                  ENTERTAINMENT, INC.**                            |   |                                        |       |   |   |
|-------------------------------------------------------------------------|--------|---------------------------------------------|------------|--------|--------|
| STATEMENTS                  OF OPERATIONS (Unaudited)                   |   |                                        |       |   |   |
| For                  the Three Months Ended September 30, 1997 and 1996 |
|                                                                    |   |                                        |       |   |   |
|                                                                    |   | For                  the Three Months Ended |       |
|                                                                    |   | September                  30,              |       |
|                                                                    |   | 1997                                        |       | 1996   |   |
| Revenue:                                                                |   |                                        |       |   |   |
| Coloring                  income                                   |   | $                                           | -          |   | $      | 931,750 |   |
| License                  royalty income                            |   |                                        | -          |   |   | 175,000 |   |
| Library                  sales income                              |   |                                        | -          |   |   | 500,000 |   |
|                                                                    |   |                                        | -          |   |   | 1,606,750 |   |
| Operating                  expenses:                                    |   |                                        |       |   |   |   |   |
| Production                                                         |   |                                        | -          |   |   | 845,171 |   |
| Cost                  of library rights sold                       |   |                                        | -          |   |   | 500,000 |   |
| Research                  and development                          |   |                                        | -          |   |   | 5,694 |   |
| Depreciation                  and amortization                     |   |                                        | -          |   |   | 172,870 |   |
| Film                  library amortization                         |   |                                        | -          |   |   | 227,500 |   |
| General                  and administrative                        |   |                                        | -          |   |   | 510,657 |   |
| Interest                  expense                                  |   |                                        | -          |   |   | 45,401 |   |
| Total                  operating expenses                               |   |                                        | -          |   |   | 2,307,293 |   |
|                                                                    |   |                                        |       |   |   |   |   |
| Net                  loss                                               |   | $                                           | -          |   | $      | (700,543 | ) |
|                                                                    |   |                                        |       |   |   |   |   |
| Weighted                  average common shares outstanding             |   |                                        |       |   |   |   |   |
| Basic                  and fully diluted                           |   |                                        | 27,278,340 |   |   | 27,278,340 |   |
|                                                                    |   |                                        |       |   |   |   |   |
| Net                  income (loss) per share common                     |   | $                                           | -          |   | $      | (0.03 | ) |

**SEE        ACCOMPANYING NOTES TO FINANCIAL        STATEMENTS**

----

| **CST                  ENTERTAINMENT, INC.**                                                                                      |   |                          |       |    |   |       |   |          |       |   |   |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|------------|---------|--------|------------|--------|---------------|------------|--------|--------|
| CONSOLIDATED                  STATEMENT OF STOCKHOLDERS' EQUITY (Unaudited)                                                       |
| For                  the Year Ended June 30, 1997 and the Three Months Ended September                  30,                  1997 |
|                                                                                                                              |   |                          |       |    |   |       |   |          |       |   |   |
|                                                                                                                              |   |                          |       |    |   | Additional |   |          |       | Total  |   |
|                                                                                                                              |   | Common                  Stock |       | Paid-In |   | Deficit    |   | Stockholders' |       |
|                                                                                                                              |   | Shares                        |       | Amount  |   | Capital    |   | Accumulated   |       | Equity |   |
| 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                                                                                                         |   |                          |       |    |   |       |   |          |       |   |   | (527,295 | ) |   | (527,295 | ) |
| Balances,                  June 30, 1997                                                                                          |   |                          | 27,278,340 |    | $      | 4,091,752  |   | $             | 56,115,740 |   | $      | (60,207,492 | ) | $ | - |   |
|                                                                                                                              |   |                          |       |    |   |       |   |          |       |   |   |   |   |   |   |   |
| Net                  loss                                                                                                         |   |                          |       |    |   |       |   |          |       |   |   | - |   |   | - |   |
| Balances,                  September 30, 1997                                                                                     |   |                          | 27,278,340 |    | $      | 4,091,752  |   | $             | 56,115,740 |   | $      | (60,207,492 | ) | $ | - |   |

**SEE      ACCOMPANYING NOTES TO FINANCIAL      STATEMENTS**

----

| **CST                  ENTERTAINMENT, INC.**                               |   |                                         |   |   |   |
|----------------------------------------------------------------------------|--------|----------------------------------------------|--------|--------|--------|
| STATEMENTS                  OF CASH FLOWS (Unaudited)                      |   |                                         |   |   |   |
| For                  the Three Months Ended September 30, 1997 and 1996    |
|                                                                       |   |                                         |   |   |   |
|                                                                       |   | Three                  Months Ended June 30, |   |
|                                                                       |   | 1997                                         |   | 1996   |   |
|                                                                       |   |                                         |   |   |   |
| Cash                  flows from operating activities:                     |   |                                         |   |   |   |
| Net                  income (loss)                                         |   | $                                            | -      |   | $      | (700,543 | ) |
| Adjustments                  to reconcile increase in net assets to net    |   |                                         |   |   |   |   |   |
| cash                  provided by (used in) operating activities:          |   |                                         |   |   |   |   |   |
| Depreciation                  and amortization                        |   |                                         | -      |   |   | 400,370 |   |
| Non                  cash payment of expenses                         |   |                                         | -      |   |   | 54,145 |   |
| Decrease                  (increase) in:                              |   |                                         |   |   |   |   |   |
| Accounts                  receivable                                       |   |                                         | -      |   |   | 674,619 |   |
| Work                  in process                                           |   |                                         | -      |   |   | 314,755 |   |
| Prepaid                  expenses                                          |   |                                         | -      |   |   | (57,386 | ) |
| Receivable                  from related party                             |   |                                         | -      |   |   | 25,000 |   |
| Accounts                  receivable - long-term                           |   |                                         | -      |   |   | - |   |
| Increase                  (decrease) in:                              |   |                                         |   |   |   |   |   |
| Accounts                  payable                                          |   |                                         | -      |   |   | (68,780 | ) |
| Accrued                  expenses                                          |   |                                         | -      |   |   | (50,042 | ) |
| Deferred                  income                                           |   |                                         | -      |   |   | (464,000 | ) |
| Net                  cash provided (used in) operating activities          |   |                                         | -      |   |   | 128,138 |   |
|                                                                       |   |                                         |   |   |   |   |   |
| Cash                  flows from investing activities:                     |   |                                         |   |   |   |   |   |
| Additions                  of capitalized software                         |   |                                         | -      |   |   | (28,194 | ) |
| Sales                  of film library rights                              |   |                                         | -      |   |   | 500,000 |   |
| Net                  cash provided by (used in) investing activities  |   |                                         | -      |   |   | 471,806 |   |
|                                                                       |   |                                         |   |   |   |   |   |
| Cash                  flows from financing activities:                     |   |                                         |   |   |   |   |   |
| Payment                  on note payable                                   |   |                                         | -      |   |   | (768 | ) |
| Payments                  on term loan                                     |   |                                         | -      |   |   | (62,550 | ) |
| Line                  of credit                                            |   |                                         | -      |   |   | 1,347,053 |   |
| Pay-down                  on line of credit                                |   |                                         | -      |   |   | (1,834,277 | ) |
| Loans                  payable to related party                            |   |                                         | -      |   |   | (85,000 | ) |
| Net                  cash provided by (used in) financing activities  |   |                                         | -      |   |   | (635,542 | ) |
|                                                                       |   |                                         |   |   |   |   |   |
| Net                  increase (decrease) in cash                      |   |                                         | -      |   |   | (35,598 | ) |
|                                                                       |   |                                         |   |   |   |   |   |
| Cash                  at beginning of year                                 |   |                                         | -      |   |   | 54,304 |   |
|                                                                       |   |                                         |   |   |   |   |   |
| Cash                  at end of year                                       |   | $                                            | -      |   | $      | 18,706 |   |
|                                                                       |   |                                         |   |   |   |   |   |
| Supplementary                  Information:                                |   |                                         |   |   |   |   |   |
| Cash                  paid for interest                                    |   | $                                            | -      |   | $      | - |   |
| Cash                  paid for income taxes                                |   | $                                            | -      |   | $      | - |   |

**SEE      ACCOMPANYING NOTES TO FINANCIAL      STATEMENTS**

----

----

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

*Net      Loss Per Share*

*Accounting      Estimates*

**NOTE      B - BANKRUPTCY**

**NOTE      C - SUBSEQUENT EVENT**

----

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

**Results      of Operations**

**Liquidity      and Capital Resources**

**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 Principal 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 |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----