**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                                       |   | 13-2614435                         |
|------------------------------------------------|--------|------------------------------------|
| (State                or Other Jurisdiction of |   | (I.R.S.                Employer    |
| Incorporation                or Organization)  |   | Identification                No.) |

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|                                                                                                                                                                                                        |                                                               |   | Page   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------|--------|--------|
|                                                                                                                                                                                                        |                                                               |   |   |
| **Part                I**                                                                                                                                                                                   |                                                               |   |   |
|                                                                                                                                                                                                        |                                                               |   |   |
| Item                1.                                                                                                                                                                                      | Financial                Statements                                |   |   |
|                                                                                                                                                                                                        |                                                               |   |   |
| Balance                Sheet as of March 31, 1998 (Unaudited)                                                                                                                                               |                                                               | 1      |
|                                                                                                                                                                                                        |                                                               |   |
| Statements                      of Operations for the three and nine Months ended March 31,                      1998 and                      1997(Unaudited)                                              |                                                               | 2      |
|                                                                                                                                                                                                        |                                                               |   |
| Statements                      of Stockholders Equity for the year Ended June 30, 1997 and                      the nine                      months ended March 31, 1998                      (Unaudited) |                                                               | 3      |
|                                                                                                                                                                                                        |                                                               |   |   |
| Statements                      of Cash Flows for the nine months ended March 31, 1998 and                      1997                      (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      |

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**ITEM      1. FINANCIAL STATEMENTS**

**CST      ENTERTAINMENT, INC.**

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| 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                                                                                                            |   |   | -           |   |
| Total                property and equipment                                                                                                    |   |   | -           |   |
| Less                accumulated depreciation                                                                                                   |   |   |        |   |
| Net                property and equipment                                                                                                      |   |   | -           |   |
| Other                assets:                                                                                                                   |   |   |             |   |
| Film                library, net                                                                                                               |   |   | -           |   |
| Other                assets                                                                                                                    |   |   | -           |   |
| Notes                receivable from directors and officers                                                                                    |   |   | -           |   |
|                                                                                                                                           |   |   | -           |   |
|                                                                                                                                           |   | $      | -           |   |
|                                                                                                                                           |   |   |             |   |
| LIABILITIES                AND STOCKHOLDERS' DEFICIT                                                                                           |   |   |             |   |
|                                                                                                                                           |   |   |             |   |
| Current                liabilities:                                                                                                            |   |   |             |   |
| Line                of credit                                                                                                                  |   | $      | -           |   |
| Current                portion of long term debt                                                                                               |   |   | -           |   |
| Notes                payable                                                                                                                   |   |   | -           |   |
| Accounts                payable                                                                                                                |   |   | -           |   |
| Accrued                expenses                                                                                                                |   |   | -           |   |
| Deferred                income                                                                                                                 |   |   | -           |   |
| Loans                payable to related party                                                                                                  |   |   | -           |   |
| 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 March 31, 1998 |   |   | 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** |
|----------------------------------------------------------------------------------|

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| **CST                ENTERTAINMENT, INC.**                                 |
|----------------------------------------------------------------------------|
| STATEMENTS                OF OPERATIONS (Unaudited)                        |
| For                the Three and Nine Months Ended March 31, 1998 and 1997 |

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|                                                                                                    |   | For the Three Months Ended |       | For the Nine Months Ended |   |
|---------------------------------------------------------------------------------------------------------|--------|------------------------------------------------|------------|-----------------------------------------------|--------|
|                                                                                                    |   | March 31,                                 |       | March 31,                                |   |
|                                                                                                    |   | 1998                                           |       | 1997                                          |   | 1998 |   | 1997 |   |
| Revenue:                                                                                                |   |                                           |       |                                          |   |   |   |   |   |   |   |   |   |
| Coloring                income                                                                          |   | $                                              | -          |                                          | $      | - |   | $ | - |   | $ | 1,293,050 |   |
| License                royalty income                                                                   |   |                                           | -          |                                          |   | - |   |   | - |   |   | 175,000 |   |
| Library                sales income                                                                     |   |                                           | -          |                                          |   | - |   |   | - |   |   | 500,000 |   |
|                                                                                                    |   |                                           | -          |                                          |   | - |   |   | - |   |   | 1,968,050 |   |
| Operating                expenses:                                                                      |   |                                           |       |                                          |   |   |   |   |   |   |   |   |   |
| Production                                                                                              |   |                                           | -          |                                          |   | - |   |   | - |   |   | 996,437 |   |
| Cost                of library rights sold                                                              |   |                                           | -          |                                          |   | - |   |   | - |   |   | 500,000 |   |
| Research                and development                                                                 |   |                                           | -          |                                          |   | - |   |   | - |   |   | 5,694 |   |
| Depreciation                and amortization                                                            |   |                                           | -          |                                          |   | - |   |   | - |   |   | 302,523 |   |
| Film                library amortization                                                                |   |                                           | -          |                                          |   | - |   |   | - |   |   | 398,125 |   |
| General                and administrative                                                               |   |                                           | -          |                                          |   | - |   |   | - |   |   | 510,657 |   |
| Interest                expense                                                                         |   |                                           | -          |                                          |   | - |   |   | - |   |   | 45,401 |   |
| Total                operating expenses                                                                 |   |                                           | -          |                                          |   | - |   |   | - |   |   | 2,758,836 |   |
|                                                                                                    |   |                                           |       |                                          |   |   |   |   |   |   |   |   |   |
| Discharge                of debt in bankruptcy                                                          |   |                                           | -          |                                          |   | - |   |   | - |   |   | 3,216,724 |   |
| Loss                at termination of bankruptcy                                                        |   |                                           | -          |                                          |   | - |   |   | - |   |   | (2,953,233 | ) |
| Total                bankruptcy                                                                         |   |                                           | -          |                                          |   | - |   |   | - |   |   | 263,491 |   |
|                                                                                                    |   |                                           |       |                                          |   |   |   |   |   |   |   |   |   |
| Net                loss                                                                                 |   | $                                              | -          |                                          | $      | - |   | $ | - |   | $ | (527,295 | ) |
|                                                                                                    |   |                                           |       |                                          |   |   |   |   |   |   |   |   |   |
| Weighted                average common shares outstanding   Basic and fully                diluted |   |                                           | 27,278,340 |                                          |   | 27,278,340 |   |   | 27,278,340 |   |   | 27,278,340 |   |
|                                                                                                    |   |                                           |       |                                          |   |   |   |   |   |   |   |   |   |
| Net                income (loss) per share common                                                       |   | $                                              | -          |                                          | $      | - |   | $ | - |   | $ | (0.02 | ) |

| **SEE                ACCOMPANYING NOTES TO FINANCIAL                STATEMENTS** |
|----------------------------------------------------------------------------------|

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**CST      ENTERTAINMENT, INC.**

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|                                    |   |              |             |    |   | 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,                March 31, 1998 |   |              | 27,278,340       |    | $      | 4,091,752  |   | $             | 56,115,740 |   | $      | (60,207,492 | ) | $ | - |   |

| **SEE                ACCOMPANYING NOTES TO FINANCIAL                STATEMENTS** |
|----------------------------------------------------------------------------------|

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**CST      ENTERTAINMENT, INC.**

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|                                                                                                                                                 |   | For the Nine Months Ended |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|--------|
|                                                                                                                                                 |   | March 31,                                |   |
|                                                                                                                                                 |   | 1998                                          |   | 1997 |   |
|                                                                                                                                                 |   |                                          |        |   |   |  |   |
| Cash                flows from operating activities:                                                                                                 |   |                                          |        |   |   |  |   |
| Net                income (loss)                                                                                                                     |   | $                                             | -      |   | $ | (527,295 | ) |
| Adjustments                to reconcile increase in net assets to net cash provided by (used                in)                operating activities: |   |                                          |        |   |   |  |   |
| Bankruptcy,                net                                                                                                                       |   |                                          | -      |   |   | (282,197 | ) |
| Depreciation                and amortization                                                                                                         |   |                                          | -      |   |   | 297,398 |   |
| Film                library write-down                                                                                                               |   |                                          | -      |   |   | 898,125 |   |
| Decrease                (increase) in:                                                                                                               |   |                                          |        |   |   |  |   |
| Accounts                receivable                                                                                                                   |   |                                          | -      |   |   | 674,619 |   |
| Work                in process                                                                                                                       |   |                                          | -      |   |   | 428,391 |   |
| Prepaid                expenses                                                                                                                      |   |                                          | -      |   |   | (14,632 | ) |
| Receivable                from related party                                                                                                         |   |                                          | -      |   |   | 25,000 |   |
| Other                                                                                                                                                |   |                                          | -      |   |   | 18,000 |   |
| Increase                (decrease) in:                                                                                                               |   |                                          |        |   |   |  |   |
| Accounts                payable                                                                                                                      |   |                                          | -      |   |   | (68,780 | ) |
| Accrued                expenses                                                                                                                      |   |                                          | -      |   |   | (50,042 | ) |
| Deferred                income                                                                                                                       |   |                                          | -      |   |   | (825,300 | ) |
| Loan                payable related party                                                                                                            |   |                                          | -      |   |   | (85,000 | ) |
| Net                cash provided (used in) operating activities                                                                                      |   |                                          | -      |   |   | 488,287 |   |
|                                                                                                                                                 |   |                                          |        |   |   |  |   |
| Cash                flows from investing activities:                                                                                                 |   |                                          |        |   |   |  |   |
| Additions                of capitalized software                                                                                                     |   |                                          | -      |   |   | (28,194 | ) |
| Net                cash provided by (used in) investing activities                                                                                   |   |                                          | -      |   |   | (28,194 | ) |
|                                                                                                                                                 |   |                                          |        |   |   |  |   |
| Cash                flows from financing activities:                                                                                                 |   |                                          |        |   |   |  |   |
| Payment                on note payable                                                                                                               |   |                                          | -      |   |   | (63,318 | ) |
| Line                of credit                                                                                                                        |   |                                          | -      |   |   | (451,079 | ) |
| Net                cash provided by (used in) financing activities                                                                                   |   |                                          | -      |   |   | (514,397 | ) |
| Net                increase (decrease) in cash                                                                                                       |   |                                          | -      |   |   | (54,304 | ) |
| Cash                at beginning of year                                                                                                             |   |                                          | -      |   |   | 54,304 |   |
| Cash                at end of year                                                                                                                   |   | $                                             | -      |   | $ | - |   |
| Supplementary                Information:                                                                                                            |   |                                          |        |   |   |  |   |
| Cash                paid for interest                                                                                                                |   | $                                             | -      |   | $ | - |   |
| Cash                paid for income taxes                                                                                                            |   | $                                             | -      |   | $ | - |   |

| **SEE                ACCOMPANYING NOTES TO FINANCIAL                STATEMENTS** |
|----------------------------------------------------------------------------------|

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**NOTE      A **

**–**

**      ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING      POLICIES**

*Net      Loss Per Share*

*Accounting      Estimates*

**NOTE      B **

**–**

**      BANKRUPTCY**

**NOTE      C - SUBSEQUENT EVENT**

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

**Results      of Operations**

**Liquidity      and Capital Resources**

**ITEM      3. CONTROLS AND PROCEDURES**

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**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                Matthews                                                         |
| Chief                Executive Officer and Principle Accounting                Officer |

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