10QSB

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

For The Quarterly Period Ended December 31, 1996.

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

For The Transition Period From ______________To_________________

Commission File Number 333-31238

LEGACY HOLDINGS, INC. FKA CST ENTERTAINMENT, INC.

(FORMERLY CST ENTERTAINMENT IMAGING, INC.)

(Exact Name Of Registrant As Specified In Its Charter)

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

4160 TECHNOLOGY DRIVE, SUITE B

FREMONT, CA 94538

(510) 651-2312

(Address, Including Zip Code, And Telephone Number, Including

Area Code, Of Registrant's executive offices)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes o No x

The Registrant has 27,278,340 shares of common stock, par value $0.15 per share, issued and outstanding as of December 31, 1996.

TABLE OF CONTENTS

		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

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

1

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

2

 

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

3

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

4

CST ENTERTAINMENT, INC.

Notes to Consolidated Financial Statements (Unaudited)

For The Three and Six Months Ended December 31, 1996 and 1995

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

To the best of Company's management knowledge, the accompanying unaudited financial statements contain all adjustments, consisting of only normal recurring accruals, necessary to present fairly the Company's financial position at December 31, 1996, the results of operations for the quarter ended December 31, 1996 and 1995 and the cash flows for the quarter ended December 31, 1996 and 1995. Although management of the Company believes that the disclosures in the financial statements are adequate to make the information presented not misleading, certain information and footnote disclosures normally included in financial statements that have been prepared in accordance with generally accepted accounting principles have been condensed or omitted. For further information, refer to the financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the years ended June 30, 1996 and December 31, 2007.

The results of operations for the quarter ended December 31, 1996 are not necessarily indicative of the results of operations to be expected for the full year ending June 30, 1997.

Summary of Significant Accounting Principles

Work-in-process

Work-in-process is stated at the lower of cost or market, not to exceed net realizable value. Work-in process includes internally generated costs of production and colorization, along with relevant external costs.

Property and Equipment and Depreciation

Property and equipment relating to the Company's digital coloring system, including capitalized software and other equipment, is carried at cost and is depreciated by the straight-line method over the estimated useful life of three years. Leasehold improvements and video equipment are being depreciated by the straight-line method over the estimated useful life of five years.

Patent

Costs incurred in acquiring the patent are being amortized on a straight-line basis over the remaining life of the patent.

Film Library

The Company's film library is carried at the lower of cost or estimated net realizable value. The film library costs primarily include the cost to acquire the film and internally generated costs of production and colorization.

Revenue Recognition

Revenues are recognized when color converted projects are completed and shipped. Deferred income arises as a result of prepayments on contracts in progress. Revenues and related expenses from television and video licensing agreements are generally recognized on the date the film is available for broadcasting by the licensee. Revenues from royalties are recognized upon receipt.

Net Loss Per Share

Net loss per share is based on the weighted average number of shares of common stock outstanding during each year, exclusive of common share equivalents which, for the years presented, would be anti-dilutive.

5

CST ENTERTAINMENT, INC.

Notes to Consolidated Financial Statements (Unaudited)

For The Three and Six Months Ended December 31, 1996 and 1995

NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value of Notes Payable and Long-Term Debt

The fair value of the Company's notes payable and long-term debt is estimated based on the quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same remaining maturities. Accordingly, the current value is the same as the carrying value.

NOTE B - GOING CONCERN UNCERTAINTY

The Company has consistently incurred substantial losses exclusive of extraordinary items. The Company has restructured substantial amounts of its debt which relieved considerable amounts of its debt service requirement; reduced overhead significantly; raised working capital; and converted its video/analog colorizing system into a state-of-the-art digital system. At December 31, 1996, the Company had stockholders' deficit of $263,491 and a negative working capital of $1,929,916. It has experienced significant negative cash flow from operations for two of the past three years. The Company has also been slow and is delinquent in paying its accounts payable and other obligations. Accordingly, there is substantial doubt as to its ability to continue as a growing concern.

NOTE C - INTERACTIVE TECH, INC.

In October, 1996, the Company settled its lawsuit with Interactive Tech, Inc. ("Interactive Tech"), the Company involved with CST in the European joint venture. Under the settlement, CST will issue Interactive Tech 400,000 shares of common stock, in exchange for which Interactive Tech will forego all rights related to the joint venture with CST.

NOTE D - AMERICAN STOCK EXCHANGE

In October 1996, the Company was informed by the American Stock Exchange ("AMEX") of its intent to remove the listing of CST's common stock. CST is appealing the decision and has asked the Amex to resume trading pending the appeal. AMEX has advised CST that the trading halt in its common stock will not be lifted during the appeal process. Trading in CST's common stock was halted by the AMEX on October 16, 1996.

NOTE E - SUBSEQUENT EVENT

On July 11, 2007, Legacy Systems, Inc. signed a definitive agreement to be merged into CST Entertainment, Inc, (CST). The CST stockholders acquired all of the issued and outstanding common stock of Legacy Systems, Inc. The transaction was accounted for as a capital transaction and recapitalization by the accounting acquirer and as a re-organization by the accounting acquiree wherein CST Entertainment, Inc. is the acquiree and, Legacy Systems, Inc. is the acquirer. CST Entertainment, Inc. changed its name to Legacy Holdings at the date of merger July 11, 2007. Furthermore, to conform with the fiscal year of its acquirer, Legacy Systems, Inc. the Company changed its fiscal year end from June 30^th to December 31^st effective December 31, 2005.

Legacy Holdings, Inc, (formerly CST Entertainment, Inc.) is filing Forms 10QSB and 10KSB for all interim and annual periods beginning with the quarter ended December 31, 1996 through December 31, 2005.

6

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

Results of Operations

Coloring revenue for the quarter ended December 31, 1996 was $361,300 compared to $613,320 during the same quarter of 1995 representing a decrease of $252,020 or 41%. Coloring revenue for the six months ended December 31, 1996 was $1,293,050 compared to $1,292,100 during the same period in 1995 representing an increase of $950 or 0.1%. In the first quarter ended September, 1996, the Company delivered two significant colorized projects. The Company also delivered numerous color FX projects. However, during the second quarter ended December, 1996, the Company experienced a significant fall-off in sales as anticipated sales never materialized.

License royalty income for the quarter ended December 31, 1996 was $0 compared to $1,485,066 during the same quarter of 1995 representing a decrease of $1,485,066 or 100%. License royalty income for the six months ended December 31, 1996 was $175,000 compared to $1,885,066 during the same period in 1995 representing a decrease of $1,710,066 or 91%. The decrease in Licensing/royalty income in 1996 is due primarily to the results of the Featurizations division. The Company did not complete any projects for its Featurizations division during the three or six months ended December 31, 1996. However, the Company did sell certain rights in a previously produced project during the six months ended December 31, 1995. In August 1996, the Company entered in to an agreement with Allied Communications, Inc. whereby the Company sold certain rights in its Wyatt Earp - Return to Tombstone project. In exchange, the Company received $175,000.

The increase in library sales income is due to the sale of all rights to the MGM films previously produced. In September 1996, the Company entered into an agreement with MGM/UA whereby the Company sold its rights in the first four films produced under its minimum seven picture agreement. In exchange, the Company received $500,000. There was no such sale for the three or six months ended December 31, 1995.

Operating expenses for the quarter ended December 31, 1996 was $451,543 compared to $2,077,739 during the same quarter of 1995 representing a decrease of $1,626,196 or 78%. Operating expenses for the six months ended December 31, 1996 was $2,758,836 compared to $3,646,296 during the same quarter of 1995 representing a decrease of $887,460 or 24%. Operating expenses for the three months ended December 31, 1996 were comprised primarily of depreciation and amortization ($300,278) and production ($151,266) costs. The decrease in operating expenses was due primarily to a significant decrease in operations as a result of management’s realization that the company cannot continue as a going concern. The six month decrease in operating expenses was primarily the result of significantly reduced second quarter operations offset by higher than normal operating expenses incurred during the first quarter ended September 30, 1996.

Liquidity and Capital Resources

The Company's working capital position as of December 31, 1996 was a negative $1,929,917 as compared to a positive $125,348 as of December 31, 1995. The Company has experienced significant reductions in working capital and the Company's independent certified public accountants included an explanatory paragraph in their last fiscal year-end report with respect to the Company's ability to continue as a going concern.

Following the date of this report on January 13, 1997, the Company filed for bankruptsy protection under chapter 7 and all Company assets and liabilities were put into the bankruptcy estate, a trustee was appointed and Company operations ceased.

7

ITEM 3. CONTROLS AND PROCEDURES

(a)Evaluation of disclosure controls and procedures

As required by Rule 13a-15(b) under the Exchange Act, we conducted an evaluation, under the supervision and participation of our management, including the Company’s President and Chief Financial Officer (who is the principal accounting officer). No weaknesses were noted and both the President and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of the most recent fiscal quarter covered by this Form 10-QSB.

(b) Changes in internal controls

In accordance with Item 308 (c) of Regulation S-B, there were no changes in the Company’s internal control reporting in connection with the Company’s evaluation of its internal controls that occurred during the most recent fiscal quarter covered by this Form 10-QSB.

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

Pursuant to the requirement of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

LEGACY HOLDINGS, INC.

/S/ Robert Matthews

Robert Matthews

Chief Executive Officer and Principle Accounting Officer

8

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Robert Matthews, the Chief Executive Officer and Principle Accounting Officer of Legacy Holdings, Inc. FKA CST Entertainment, Inc. (the “Company” or the “small business issuer”), certify that:

1. I have reviewed this quarterly report on Form 10QSB of the Company for the fiscal quarter ended December 31, 1996;

2. To the best of my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. To the best of my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report;

4. As the small business issuer’s certifying officer I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the small business issuer’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(c) Disclosed in this report any change in the small business issuer’s internal control over financial reporting that occurred during the small business issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer’s internal control over financial reporting; and

5. The small business issuer’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer’s auditors and the audit committee of the small business issuer’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer’s internal control over financial reporting.

/S/ Robert Matthews

Name: Robert Matthews

Title: Chief Executive Officer and Principle Accounting Officer

Dated August 21, 2008

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly Report of Legacy Holdings, Inc. FKA CST Entertainment, Inc. (the ”Company”) on Form 10QSB for the period ending December 31, 1996, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert Matthews, Chief Executive Officer and Principle Accounting Officer of the Company, certify, to the best of my knowledge, pursuant to Exchange Act Rule 15d-14(b) and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002, that:

(i) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(ii) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

Dated: August 21, 2008

/S/ Robert Matthews

Name: Robert Matthews

Title: Chief Executive Officer and Principle Accounting Officer