UNITED STATES
                  SECURITIES AND EXCHANGE COMMISSION
                       Washington, D.C. 20549


                              FORM 10-QSB

(Mark One)

[X]  Quarterly report pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934
                  For the quarterly period ended January 31, 2006

[ ]  Transition report pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934
                  For the transition period from              to
                                                 ------------    -------------

                  Commission file number     0-20303
                                         -------------------------------------


              TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
------------------------------------------------------------------------------
   (Exact name of small business issuer as specified in its charter)


            Delaware                                 13-2846796
-----------------------------------     --------------------------------------
  (State or other jurisdiction of                 (I.R.S. Employer
  incorporation or organization)                 Identification No.)

      P.O. Box 382, 4 Hardscrabble Heights, Brewster, New York  10509
------------------------------------------------------------------------------
               (Address of principal executive offices)

                              (845) 277-8100
------------------------------------------------------------------------------
                      (Issuer's telephone number)


------------------------------------------------------------------------------
          (Former name, former address and former fiscal year,
                      if changed since last report)

        APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
           PROCEEDINGS DURING THE PRECEDING FIVE YEARS

     Check whether the registrant filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange
Act after the distribution of securities under a plan confirmed
by court.

Yes________ No_________

     Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).

Yes________ No_________

               APPLICABLE ONLY TO CORPORATE ISSUERS

     State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:  As
                                                              --
of March 15, 2006: 2,909,738 shares of Common Stock, par value
----------------------------------------------------------------
$0.0001 per share.
------------------

Transitional Small Business Disclosure Format (check one):
Yes         No    X
   --------   ----------

<PAGE>

                                PART I

                        FINANCIAL INFORMATION

ITEM 1.   FINANCIAL STATEMENTS

          The financial statements for the Company's fiscal
quarter ended January 31, 2006 are attached to this Report,
commencing at page F-1.

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

          Except for historical information, the material
contained in this Management's Discussion and Analysis or Plan
of Operation is forward-looking.  For the purposes of the safe
harbor protection for forward-looking statements provided by the
Private Securities Litigation Reform Act of 1995, readers are
urged to review the list of certain important factors set forth
in "Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of
1995" below, which may cause actual results to differ materially
from those described.

COMPANY BACKGROUND

          Touchstone Applied Science Associates, Inc. (the
"Company" or "TASA") now competes exclusively in the assessment
marketplace.  With the advent of No Child Left Behind
legislation ("NCLB"), the Company's Board of Directors and
management made the strategic decision to refocus the
organization on the fast-growing assessment segment of the K-12
education market.  During the Company's fiscal year ended
October 31, 2003 ("Fiscal 2003"), TASA sold both its post-
secondary proprietary school, Mildred Elley (originally acquired
by TASA in fiscal 1999), and Modern Learning Press, its
supplemental instructional materials subsidiary (originally
acquired by TASA in fiscal 1997).  Revenues were $11.2 million
for the fiscal year ended October 31, 2004 ("Fiscal 2004"), and
$11.7 million for the fiscal year ended October 31, 2005
("Fiscal 2005"). Over the past ten years, assessment revenues
have increased from $2.1 million to $11.7 million, representing
a compounded annual growth rate of approximately 15%.

RESULTS OF OPERATIONS

          The following table compares the revenues for the
fiscal quarter ended January 31, 2006 versus the fiscal quarter
ended January 31, 2005.



              RESULTS OF OPERATIONS FOR THE FIRST FISCAL QUARTER

                                  Three Months
                                Ended January 31,
                                -----------------
                                                       %
                           2006          2005        Change
                           ----          ----        ------
                              (in thousands
                               of dollars)


Proprietary products
and services              $943.8         $740.2        27.5

Custom Services
Revenues                $2,130.2       $1,912.6        11.4

Total Revenues
from Assessment
Products and
Services                $3,074.0       $2,652.8        15.9



            The following are selected ratios as a percentage of
revenues on the Company's financial statements:

                                      Three Months
                                    Ended January 31,
                                    -----------------

                                     2006      2005
                                     ----      ----

                                    (in percentages)

Revenues                             100%      100%

  Gross Profit                        36        49

Operating Expense:

  Selling Expense                     11        13

  General & Administrative            34        30

(Loss) Income from Operations         (9)        6

  Other Income                         1         1

(Loss) Income Before
Income Tax Provision (Benefit)        (8)        7

Income Tax Provision (Benefit)        (3)        3

Net (Loss) Income                     (5)        4



          REVENUES. Net revenues for the three months ended
          --------
January 31, 2006 (the "current quarter") increased by 15.9%, or
$421,185, to $3,074,014 as compared to net revenues of
$2,652,829 in the three months ended January 31, 2005 (the
"comparable quarter").

            Revenues from assessment products and services through
the Company's proprietary unit increased 27.5% or $203,584
during the current quarter from $740,192 in the comparable
quarter to $943,776 in the current quarter.  This increase is
primarily due to revenues generated in connection with our Idaho
ESL (English as a Second Language) contract awarded during the
third quarter of Fiscal 2005 as well as our increased DRP
contract in Connecticut due to expansion to the State Testing
Program in grades 3 through 8.

            Revenues from the Company's custom testing unit,
increased by 11.4% or $217,601, during the current quarter, or
from $1,912,637 in the comparable quarter to $2,130,238 in the
current quarter.  This increase is a result of the addition of
two new custom units in Fiscal 2005 -- Assessment and Evaluation
Concepts, Inc. ("AEC") and Achievement Data, Inc. ("ADI").

          COST OF GOODS SOLD.  Cost of goods sold for the
          ------------------
current quarter increased by 45.7%, or $615,807, from $1,347,672
in the comparable quarter to $1,963,479 in the current quarter.
Cost of goods is now 64% of revenues in the current quarter
versus 51% in the comparable quarter.  The increase is a
function of two events.  The Company as a whole is bidding on
larger administration contracts that traditionally have lower
margins, and as we undertake such large contracts, we have
encountered higher start-up costs than we have traditionally
seen.  We anticipate costs of goods sold should decrease as a
percent of sales as the number of contracts we administer
increases and as our operations gain in efficiency.

          GROSS PROFIT. Gross profit from continuing operations
          ------------
decreased to $1,110,535 in the current quarter, from $1,305,157
in the comparable quarter, or by $194,622 or (14.9%).  The gross
profit margin is now 36% in the current quarter versus 49% in
the comparable quarter resulting from the factors contributing
to increased cost of goods sold.

          SELLING EXPENSE.  Selling expense for the current
          ---------------
quarter increased by 2.4% or $8,293, or from $341,424 in the
comparable quarter to $349,717 in the current quarter.  Selling
expenses have decreased from 13% of revenues in the comparable
quarter to 11% of revenues in the current quarter.  Since the
first quarter of last year, the Company has added three seasoned
sales executives and a marketing director.  The net result is
that the Company has shifted, with little incremental expense,
from an outside independent sales organization to an in-house
staff.  We believe this shift bodes well for the future.

          GENERAL AND ADMINISTRATIVE EXPENSES.  General and
          -----------------------------------
administrative expenses for the current quarter were $1,028,819
versus $805,951 for the comparable quarter.  This is an increase
of $222,868, or 27.7%.  The increase is primarily due to G&A
expenses associated with the addition of AEC in January 2005 and
ADI in July 2005.

          OTHER INCOME (EXPENSE).  For the current quarter, the
          ----------------------
Company had net other income of $11,156 versus net other income
of $33,939 for the comparable quarter.  Other income includes
recognition of deferred gain from the sale/leaseback of the
Company's headquarters building in July 2003, of $31,360 for
each of the current quarter and the comparable quarter.  The
difference between net other income from the comparable quarter
to the current quarter is interest expense associated with debt
incurred in July 2005 in connection with the ADI acquisition.

          NET (LOSS) INCOME AND (LOSS) EARNINGS PER SHARE.  For
          -----------------------------------------------
the current quarter, the Company had a loss of ($159,975) versus
net income of $111,347 in the comparable quarter.  For the
current quarter, the Company lost ($0.05) per diluted share
versus income of $0.04 per diluted share in the comparable
quarter.

          EBITDA.  EBITDA is a non-GAAP financial measure and
          ------
should not be used as a substitute for directly comparable GAAP
financial measures.  In order to facilitate an understanding of
the components of EBITDA and their effect on the results of
operations, the following table is provided as a reconciliation
of reported (loss) income from continuing operations to EBITDA:


                                   EBITDA from Operations

                                         Three Months
                                      Ended January 31,
                                      -----------------

                                     2006            2005
                                     ----            ----
                                         (in dollars)


Net (Loss) Income From
Operations                        ($268,001)       $157,782

Depreciation &
amortization                        183,816         159,453
                                  ---------        --------

EBITDA                             ($84,185)       $317,235
                                  =========        ========


LIQUIDITY AND CAPITAL RESOURCES

          WORKING CAPITAL.  Working capital decreased by
          ---------------
$590,717 during the current quarter from $3,106,382 at October
31, 2005 to $2,515,665 at January 31, 2006.  This decrease
resulted primarily from an increase in operating expenses during
the current quarter.  However, the ratio of current assets to
current liabilities was essentially unchanged at the end of the
current quarter compared to the end of Fiscal 2005: 2.23 to 1.0
at October 31, 2005 versus 2.22 to 1.0 at January 31, 2006.

          CASH FLOW FROM OPERATING ACTIVITIES.  During the
          -----------------------------------
current quarter, the Company had net cash used in operating
activities of $118,193, as compared to net cash of $18,527
provided by operating activities in the comparable quarter.  The
decrease in cash provided by operating activities resulted
primarily from decreased net income, accounts payable and
accrued expenses and other liabilities partially offset by a
decrease in accounts receivable.

          CASH FLOW FROM INVESTING ACTIVITIES.  During the
          -----------------------------------
current quarter, the Company had net cash used in investing
activities of $408,006, as compared to $350,885 in the
comparable quarter.  The cash used in both periods results
primarily from the acquisition of fixed assets and test
development costs.  In addition, the Company incurred $83,000 in
fees related to the acquisition of AEC in the comparable quarter.

          CASH FLOW FROM FINANCING ACTIVITIES.  The Company had
          -----------------------------------
net cash used in financing activities of $36,819 for the current
quarter as compared to net cash provided by financing activities
of $153,527 for the comparable quarter.  The cash used in the
current quarter relates to the repayment of long-term debt.  The
cash provided during the comparable quarter relates primarily
from the exercise of warrants.

		Long-term debt, operating leases and other long-term
obligations as of January 31, 2006 mature as follows:

<TABLE>
<CAPTION>

                                                           Payments due
                                                           ------------
                           -------------------------------------------------------------------------
Obligations                       Total       Less than                                    More Than
-----------                                    1 year        1-3 years      4-5 years       5 years
                           -------------------------------------------------------------------------
<S>                         <C>           <C>           <C>             <C>           <C>

Long-term debt                 $1,526,143    $  221,300    $  635,286      $ 554,664      $  114,893

Operating leases                2,961,726       442,572       796,724        752,960         969,470

Other long-term
obligations (1)                 3,295,719     1,616,642     1,647,151         31,926              --
                               ----------    ----------    ----------      ---------      ----------

TOTAL OBLIGATIONS              $7,783,588    $2,280,514    $3,079,161      $1,339,550     $1,084,363
                               ==========    ==========    ==========      ==========     ==========

<FN>
(1) Relate to employment contracts in effect at the end of the current quarter.
</FN>
</TABLE>


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

          The preparation of financial statements and related
disclosures in conformity with generally accepted accounting
principles in the United States of America requires management
to make estimates and assumptions that affect the amounts
reported in the Consolidated Financial Statements and
accompanying notes. Estimates are used for, but not limited to,
the accounting for the allowance for doubtful accounts,
inventories, capitalized labor for long-lived assets, income
taxes and loss contingencies. Management bases its estimates on
historical experience and on various other assumptions that are
believed to be reasonable under the circumstances. Actual
results could differ from these estimates under different
assumptions or conditions.

          The Company believes the following critical accounting
policies, among others, may be impacted significantly by
judgment, assumptions and estimates used in the preparation of
the Consolidated Financial Statements:

          *  Revenues from the Company's sales of its
     proprietary tests, including sales of the related ancillary
     materials, are recognized when the Company ships the
     physical product from its warehouse.  The Company's
     revenues from performance of assessment, consulting and
     psychometric services under long-term contracts are
     recognized on the percentage-of-completion basis pursuant
     to the provisions of Statement of Position No. 81-1,
     "Accounting for Performance of Construction-Type and
     Certain Production-Type Contracts" and Accounting Research
     Bulletin No. 45, "Long-Term Construction-Type Contracts".
     For each contract, the Company compares the costs incurred
     in the course of performing such contract during a fiscal
     period to the total estimated costs of full performance of
     the contract, and recognizes a proportionate amount of
     total revenue for the fiscal period based on the percentage
     of costs incurred to total estimated costs.

          *  In July 2003, the Company sold its headquarters
     building to 26 Palmer LLC for $2,875,000.  The building and
     related improvements had a net book value of $1,458,481.
     The Company reported a gain on the sale totaling
     $1,254,383, net of closing costs totaling $162,136.  The
     building was then leased by the Company under a ten year
     lease agreement.  As a result of the sale-leaseback of the
     building, the gain has been deferred and is being
     recognized as other income over the ten-year term of the
     lease at $125,439 per year.

          *  Deferred tax assets are recorded based on the
     Company's projected future taxable income and the resulting
     utilization of the deferred tax assets.  The Company
     believes it is more likely than not that this net deferred
     tax asset will be realized in future periods and,
     accordingly, no valuation allowance has been recorded.  To
     the extent that the Company would not be able to realize
     all or part of its deferred tax assets in the future, an
     adjustment to the deferred tax assets would be necessary
     with a corresponding charge to income.

          *  The process of writing and calibrating a test
     passage takes approximately two years, and all costs
     associated with the process are capitalized during this
     period. Amortization of these costs begins once the
     development period has elapsed, which in most cases,
     represents the point in time at which the new test passage is
     placed into the test passage bank and becomes available to be
     utilized within the Company's existing tests, or the point in
     time at which a newly developed test becomes available for
     sale.  Costs capitalized in connection with the development
     of passages used in the Company's DRP Test have been
     estimated to have a useful life of eleven years and,
     accordingly, are being amortized over an eleven-year period.
     Such amortization costs are included in the costs of goods
     sold in that period.  Costs capitalized in connection with
     the development of passages used in all other of the
     Company's tests have been estimated to have a useful life of
     seven years and, accordingly, are being amortized over a
     seven-year period.  If these estimates of the useful lives of
     test passages prove to be shorter periods, the Company would
     be required to accelerate the amortization of these passages,
     resulting in a reduction in income.

ITEM 3.   CONTROLS AND PROCEDURES

          (a) EVALUATION OF THE COMPANY'S DISCLOSURE CONTROLS
AND PROCEDURES.  As of the end of the most recent fiscal year
covered by this Quarterly Report on Form 10-QSB, the Company
evaluated the effectiveness of the design and operation of its
"disclosure controls and procedures" ("Disclosure Controls"),
and its "internal controls and procedures for financial
reporting" ("Internal Controls").  This evaluation (the
"Evaluation") was done under the supervision and with the
participation of management, including Mr. Andrew Simon, the
Company's Chief Executive Officer ("CEO") and Chief Financial
Officer ("CFO").  Rules adopted by the SEC require that in each
periodic report filed pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Company present the
conclusion about the effectiveness of the Company's Disclosure
Controls and Internal Controls based on and as of the date of
the Evaluation.

          Disclosure Controls are procedures that are designed
with the objective of ensuring that information required to be
disclosed in our reports filed under the Exchange Act, such as
this Quarterly Report, is recorded, processed, summarized and
reported within the time periods specified in the rule and
forms.  Disclosure Controls are also designed with the objective
of ensuring that such information is accumulated and
communicated to the Company's management, including Mr. Simon as
CEO and CFO, as appropriate to allow for timely decisions
regarding required disclosure.  Internal Controls are procedures
which are designed with the objective of providing reasonable
assurance that (1) the Company's transactions are properly
authorized; (2) the Company's assets are safeguarded against
unauthorized or improper use; and (3) the Company's transactions
are properly recorded and reported, all to permit the
preparation of our financial statements in conformity with
generally accepted accounting principles.

          The Company's management does not expect that the
Company's Disclosure Controls or Internal Controls will
prevent all errors and all fraud. Any control system, no matter
how well conceived and operated, can provide only reasonable,
not absolute, assurance that the objectives of the control
system are met.  Further, the design of a control system must
reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs.
Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within the
Company have been detected.  These inherent limitations include
the realities that judgments in decision-making can be faulty
and that breakdowns can occur because of simple error or
mistake.  Additionally, controls can be circumvented by the
individual acts of some persons, by collusion of two or more
people, or by management override of the control.  The design of
any system of controls also is based in part upon certain
assumptions about the likelihood of future events, and there can
be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions; over time,
control may become inadequate because of changes in conditions,
or the degree of compliance with the policies or procedure may
deteriorate.  Because of the inherent limitations in a cost-
effective control system, misstatements due to error or fraud
may occur and not be detected.

          The Evaluation included a review of the controls'
objectives and design, the controls' implementation by the
Company and the effect of the controls on the information
generated for use in this Quarterly Report.  In the course of
the Evaluation, we sought to identify data errors, controls
problems or acts of fraud and to confirm that appropriate
corrective action, including process improvements, were being
undertaken.  This type of evaluation will continue to be done on
a quarterly basis so that the conclusions concerning controls
effectiveness can be reported in each Quarterly Report on Form
10-QSB and the Annual Report on Form 10-KSB.  The Company's
Internal Controls are also evaluated on an ongoing basis by the
Company's finance personnel and by the Company's independent
auditors in connection with their audit and review activities.
The overall goals of these various evaluation activities are to
monitor the Company's Disclosure Controls and Internal Controls
and to make modifications as necessary; it is the Company's
intent in this regard that the Disclosure Controls and the
Internal Controls will be maintained as dynamic systems change
(including improvements and corrections) as conditions warrant.

          Among other matters, the Company sought in the
Evaluation to determine whether there were any "significant
deficiencies" or "material weaknesses" in the Company's Internal
Controls, or whether the Company had identified any acts of
fraud involving personnel who have a significant role in the
Company's Internal Controls.  This information was important
both for the Evaluation generally and because items 4, 5 and 6
in the Section 302 Certification require that the CEO and CFO
disclose that information to the Board's Audit Committee and to
the Company's independent auditors and to report on related
matters in this section of the Quarterly Report.  In the
professional auditing literature, "significant deficiencies" are
referred to as "reportable conditions"; these are control issues
that could have a significant adverse effect on the ability to
record, process, summarize and report financial data in the
financial statements.  A "material weakness" is defined in the
auditing literature as a particularly serious reportable
condition where the internal control does not reduce to a
relatively low level the risk that misstatements caused by error
or fraud may occur in amounts that would be material in relation
to the financial statements and not be detected within a timely
period by employees in the normal course of performing their
assigned functions.  The Company also sought to deal with other
controls matters in the Evaluation, and in case a problem was
identified, we considered what revision, improvement and/or
correction to make in accordance with on-going procedures.

          An Evaluation was carried out under the supervision
and with the participation of the Company's management,
including Mr. Simon as CEO and CFO, of the effectiveness of the
design and operation of our disclosure controls and procedures
(as defined in Rule 13a-15(e) or 15d-15(e) under the Exchange
Act) as of the end of the fiscal quarter covered by this
Quarterly Report.  Based upon that Evaluation, the Company's
management, including Mr. Simon as CEO and CFO, had concluded at
that time that the design and operation of these Disclosure
Controls and Internal Controls were effective as of the end of
the fiscal quarter covered by this Quarterly Report.

          However, based on a prior evaluation in Fiscal 2005
the Company believes that it did not have adequate personnel and
technical resources with respect to accounting for the sale-
leaseback of the Company's headquarters in July 2003.  As a
result, the gain from the sale-leaseback was originally
recognized in its entirety in the third fiscal quarter of 2003,
during which the sale-leaseback occurred.  After consulting with
the Company's independent registered public accountants during
Fiscal 2005, management concluded that such gain should have
been recognized over the ten-year term of the lease.  On May 24,
2005, the Company concluded that the Company should restate its
audited consolidated financial statements for the fiscal years
ended October 31, 2003 and 2004, and its quarterly unaudited
consolidated financial statements for the quarters ended July
31, 2003, January 31, 2004, April 30, 2004, July 31, 2004, and
January 31, 2005.  Such restatements do not affect the Company's
revenues from operations for any of these periods.  These
restatements reflect the correction in the Company's accounting
for the sale-leaseback transaction.  As of the end of Fiscal
2004, the Company's management, including Mr. Simon as CEO and
CFO, concluded that, because the Company had not separated the
CEO and CFO functions, the Company's Disclosure Controls were
not effective at the end of such fiscal year to ensure that
information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods
specified in SEC rules and forms.  While the Company has been
actively searching for a CFO, the Company has not yet been
successful in hiring a new CFO.  The Company and the Audit
Committee have implemented interim measures with respect to
Disclosure Controls in order to ensure that the Disclosure
Controls are as effective as possible in the circumstances.  The
Audit Committee has directed management to devote additional
resources to Disclosure Controls, and management is currently in
the process of implementing such directive.

          (b) CHANGES IN INTERNAL CONTROLS.  There were no
changes in the Company's Internal Controls in the Company's
fiscal quarter covered by this Quarterly Report that materially
affected, or are reasonably likely to materially affect, the
Company's Internal Controls.

                             PART II

                       OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

          None.

ITEM 2.   CHANGES 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

          (a)     Exhibits

                  Exhibit 31 -- Certification pursuant to 18 USC
                                Section 1350, as adopted by Section
                                302 of the Sarbanes-Oxley Act of 2002

                  Exhibit 32 -- Certification pursuant to 18 USC
                                Section 1350, as adopted by Section
                                906 of the Sarbanes-Oxley Act of 2002

<PAGE>


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.

                 Index to Consolidated Financial Statements

      Index                                                    F-1

      Consolidated Balance Sheets as of January 31, 2006
      (Unaudited) and October 31, 2005                         F-2

      Consolidated Statements of Operations for the three
      months ended January 31, 2006 and 2005 (Unaudited)       F-4

      Consolidated Statements of Cash Flows for the three
      months ended January 31, 2006 and 2005 (Unaudited)       F-5

      Notes to Consolidated Financial Statements (Unaudited)   F-7



                                F - 1



<PAGE>



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

                         CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>


                                                        January 31,         October 31,
                                                          2 0 0 6             2 0 0 5
                                                          -------             -------
                                                        (Unaudited)
<S>                                               <C>                   <C>

ASSETS
------

Current assets:
  Cash and temporary investments                     $   726,612           $ 1,289,630
  Accounts receivable, net of allowance for
   doubtful accounts of $2,683                         2,435,429             2,886,915
  Inventories                                            498,921               467,762
  Prepaid expenses and other current assets              325,619               397,420
  Restricted cash                                         21,296                20,347
  Deferred income taxes                                  571,417               571,417
                                                     -----------           -----------

       Total current assets                            4,579,294             5,633,491

Property, plant and equipment - net of
 accumulated depreciation of $549,139 and
  $488,863, respectively                                 891,594               675,999

Other assets:
  Test passage bank and test development, net
   of accumulated amortization of $3,684,929
    and $3,579,751, respectively                       2,749,166             2,750,239
  Goodwill                                             1,969,542             1,969,542
  Deferred income taxes                                  598,877               492,677
  Other assets                                           261,042               252,931
                                                     -----------           -----------

       Total assets                                  $11,049,515           $11,774,879
                                                     ===========           ===========



</TABLE>






See notes to consolidated financial statements.



                                F - 2



<PAGE>



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

                   CONSOLIDATED BALANCE SHEETS (Continued)


<TABLE>
<CAPTION>

                                                        January 31,         October 31,
                                                          2 0 0 6             2 0 0 5
                                                          -------             -------
                                                        (Unaudited)
<S>                                               <C>                   <C>

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

Current liabilities:
  Lines of credit                                    $        --           $        --
  Current maturities of long-term debt                   221,300               166,750
  Accounts payable                                       578,793               489,428
  Accrued expenses                                       930,103             1,427,963
  Other liabilities                                      207,994               317,529
  Deferred gain on sale of building-
   current portion                                       125,439               125,439
                                                     -----------           -----------

       Total current liabilities                       2,063,629             2,527,109

Long-term debt:
  Long-term debt, net of current portion               1,304,843             1,396,212
  Deferred gain on sale of building, net
   of current portion                                    804,896               836,255
                                                     -----------           -----------

       Total liabilities                               4,173,368             4,759,576
                                                     -----------           -----------

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $.0001 par value,
   5,000,000 shares authorized,
   0 shares-issued and outstanding                            --                    --
  Common stock, $.0001 par value,
   20,000,000 shares authorized,
   2,909,738 shares issued and
   outstanding                                               291                   291
  Additional paid-in capital                           6,185,207             6,164,387
  Retained earnings                                      690,649               850,625
                                                     -----------           -----------

       Total stockholders' equity                      6,876,147             7,015,303
                                                     -----------           -----------

Total liabilities and stockholders' equity           $11,049,515           $11,774,879
                                                     ===========           ===========
</TABLE>


See notes to consolidated financial statements.

                                F - 3



<PAGE>



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS


                                         Three Months Ended January 31,
                                         ------------------------------

                                            2 0 0 6          2 0 0 5
                                            -------          -------
                                          (Unaudited)      (Unaudited)


Net revenue                               $3,074,014       $2,652,829

Cost of goods sold                         1,963,479        1,347,672
                                          ----------       ----------

Gross profit                               1,110,535        1,305,157
                                          ----------       ----------

Operating expenses:
  Selling expenses                           349,717          341,424
  General and administrative
   expenses                                1,028,819          805,951
                                          ----------       ----------

Total operating expenses                   1,378,536        1,147,375
                                          ----------       ----------

(Loss) income from operations               (268,001)         157,782

Other income (expense):
Gain on sale/leaseback of building            31,360           31,360
Interest (expense) income, net               (20,204)           2,579
                                          ----------       ----------

(Loss) income before (benefit from)
 provision for income taxes                 (256,845)         191,721

(Benefit from) provision for income
 taxes                                       (96,870)          80,374
                                          ----------       ----------

Net (loss) income                         $ (159,975)      $  111,347
                                          ==========       ==========

Weighted average shares outstanding:
Basic                                      2,909,738        2,715,490
Diluted                                    2,909,738        2,974,518

(Loss) earnings per share:
Basic                                     $     (.05)      $      .04
Diluted                                   $     (.05)      $      .04












See notes to consolidated financial statements.


                                F - 4



<PAGE>




                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS



                                         Three Months Ended January 31,
                                         ------------------------------

                                             2 0 0 6          2 0 0 5
                                             -------          -------
                                           (Unaudited)      (Unaudited)


OPERATING ACTIVITIES
Net (loss) income                         $  (159,975)     $   111,347
Adjustments to reconcile net (loss)
  income to net cash (used in)
  provided by operating activities:
  Depreciation and amortization               183,816          159,453
  Deferred income taxes                      (106,200)          59,403
  (Gain) on sale/leaseback of building        (31,360)         (31,360)
Changes in operating assets and
 liabilities:
  Restricted cash                                (949)            (970)
  Accounts receivable                         451,486         (238,998)
  Inventories                                 (31,159)           5,000
  Prepaid expenses and other assets            94,178           49,362
  Other liabilities                          (109,535)               0
  Accounts payable and accrued expenses      (408,495)         (94,710)
                                          -----------      -----------

NET CASH FLOWS (USED IN) PROVIDED
BY OPERATING ACTIVITIES                      (118,193)          18,527
                                          -----------      -----------

INVESTING ACTIVITIES
  Test passage bank and test development     (104,105)        (167,326)
  Acquisition of fixed assets                (275,871)        (100,559)
  Software development costs                  (28,030)              --
  Cash and fees paid to acquire
   stock of subsidiary                             --          (83,000)
                                          -----------      -----------

NET CASH FLOWS USED IN INVESTING
ACTIVITIES                                   (408,006)        (350,885)
                                          -----------      -----------









See notes to consolidated financial statements.


                                F - 5



<PAGE>



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)



                                          Three Months Ended January 31,
                                          ------------------------------

                                             2 0 0 6          2 0 0 5
                                             -------          -------

                                           (Unaudited)      (Unaudited)

FINANCING ACTIVITIES
  Proceeds from the exercise of
   warrants                                        --          155,303
  Proceeds from the exercise of
   employee stock options                          --            4,200
  Stock subscriptions received                     --              920
  Repayment of long-term debt                 (36,819)          (6,896)
                                          -----------      -----------


NET CASH FLOWS (USED IN) PROVIDED
BY FINANCING ACTIVITIES                       (36,819)         153,527

NET CHANGE IN CASH AND TEMPORARY
INVESTMENTS                                  (563,018)        (178,831)

CASH AND TEMPORARY INVESTMENTS
AT BEGINNING OF PERIOD                      1,289,630        1,751,487
                                          -----------      -----------

CASH AND TEMPORARY INVESTMENTS
AT END OF PERIOD                          $   726,612       $1,572,656
                                          ===========       ==========


SUPPLEMENTAL CASH FLOW INFORMATION:
  Cash paid during the quarter for:

  Interest                                $    26,336       $    6,556
                                          ===========       ==========
  Income taxes                            $    51,218       $    2,354
                                          ===========       ==========

Noncash investing and financing
activities:
  Stock issued in acquisition of
   subsidiary                             $        --       $   39,000
                                          ===========       ==========












See notes to consolidated financial statements.



                                F - 6



<PAGE>



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)




NOTE 1 - ORGANIZATION AND BUSINESS
----------------------------------

Touchstone Applied Science Associates, Inc. (the "Company")
develops, publishes and distributes a proprietary line of tests
specifically to meet clients' measurement specifications to
elementary and secondary schools, colleges and universities
throughout the United States.  The remainder of the Company's
continuing operations is comprised of Beck Evaluation & Testing
Associates, Inc. ("BETA"), Assessment & Evaluation Concepts,
Inc. ("AEC") (acquired in January 2005) and Achievement Data,
Inc. ("ADI") (acquired in July 2005), companies which design,
develop and evaluate assessment needs for schools, school
districts and test and textbook publishers throughout the
United States.

The Company operates through different subsidiaries, but
management believes that all such subsidiaries constitute a
single operating segment since the subsidiaries have similar
economic characteristics.

The interim condensed consolidated financial statements
include the accounts of the Company and its wholly-owned
subsidiaries, BETA, AEC, and ADI.  All material intercompany
balances and transactions have been eliminated in the
consolidated financial statements.

The accompanying interim condensed consolidated financial
statements have been prepared, without audit, in accordance
with the instructions to Form 10-QSB for interim financial
reporting pursuant to the rules and regulations of the
Securities and Exchange Commission.  While these statements
reflect all normal recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of
the results of the interim period, they do not include all of
the information and footnotes required by U.S. generally
accepted accounting principles for complete financial
statements.  Therefore, the interim condensed consolidated
financial statements should be read in conjunction with the
consolidated financial statements and notes included in the
Company's annual report filed on Form 10-KSB for the fiscal
year ended October 31, 2005.

The results and trends on these interim consolidated financial
statements for the three months ended January 31, 2006 and
2005 may not be representative of those for the full fiscal
year or any future periods.






                                F - 7



<PAGE>



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------

Revenue Recognition
-------------------

Revenues from the Company's sales of its proprietary tests,
including sales of their related ancillary materials and
performance of scoring services are recognized when the
Company ships the physical product from its warehouse or when
the revenues have been realized or become realizable and have
been earned pursuant to Staff Accounting Bulletin No. 104,
"Revenue Recognition".  Shipping charges are included in
revenue in the accompanying interim condensed consolidated
statements of operations.  The Company's revenue from the
performance of assessment, consulting and psychometric
services under long-term contracts are recognized on the
percentage of completion basis pursuant to the provisions of
Statement of Position No. 81-1, "Accounting for Performance of
Construction-type and Certain Production-type Contracts" and
Accounting Research Bulletin ("ARB") No. 45, "Long-term
Construction-type Contracts".  For each contract, the Company
compares the costs incurred in the course of performing such
contract during a reporting period to the total estimated costs
of full performance of the contract and recognizes a proportionate
amount of total revenue for such period based on the percentage of
costs incurred to total estimated costs.  In addition, the Company
records revenue from software pursuant to the provisions of Statement
of Position No. 97-2, "Software Revenue Recognition", and in the
Statement of Position No. 98-9, "Modification of SOP 97-2,
Software Revenue Recognition With Respect to Certain
Transactions".


(Loss) earnings per share
-------------------------

(Loss) earnings per share for each of the three months ended
January 31, 2006 and 2005 was computed by dividing net (loss)
income by the weighted average number of common and common
equivalent shares outstanding and also was adjusted for the
assumed conversion of shares issuable upon the exercise of
options and warrants in accordance with SFAS No. 128, "Earnings
Per Share". The total potential dilutive common shares excluded
from this computation, as a result of the stock price exceeding
the exercise price, totaled 804,213 and 531,484 in the three
months ended January 31, 2006 and 2005, respectively.  The
reconciliation between basic and diluted average shares
outstanding is as follows:


                                 Three Months Ended January 31,
                                 ------------------------------
                                 2 0 0 6                2 0 0 5
                                 -------                -------
                               (Unaudited)            (Unaudited)


Basic weighted average
shares
  Outstanding                   2,909,738              2,715,490
Dilutive effect of
 stock options                         --                257,485
Dilutive effect of
 warrants                              --                  1,543
                                ---------              ---------
Diluted weighted
 average shares
  Outstanding                   2,909,738              2,974,518
                                =========              =========

The dilutive effect of stock options and warrants were not
considered for the three months ended January 31, 2006 due to
the loss incurred for the period, resulting in an anti-dilutive
effect.


                                F - 8



<PAGE>



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)
----------------------------------------------------

Recently Issued Accounting Standards Affecting the Company
----------------------------------------------------------

In December 2004, the FASB issued a revision of SFAS No. 123
"Share-Based Payment" ("SFAS No. 123(R)").  The statement
establishes standards for the accounting for transactions in
which an entity exchanges its equity investments for goods and
services. It also addresses transactions in which an entity
incurs liabilities in exchange for goods or services that are
based on the fair value of the entity's equity instruments or
that may be settled by the issuance of those equity
instruments.  The statement does not change the accounting
guidance for share-based payments with parties other than
employees.

The statement requires a public entity to measure the cost of
employee service received in exchange for an award of equity
instruments based on the grant-date fair value of the award
(with limited exception).  That cost will be recognized over
the period during which an employee is required to provide
service in exchange for the award (usually the vesting period).
A public entity will initially measure the cost of employee
services received in exchange for an award of a liability
instrument based on its current fair value; the fair value of
that award will be remeasured subsequently at each reporting
date through the settlement date.  Changes in fair value during
the requisite service period will be recognized as compensation
over that period.

The grant-date for fair value of employee share options and
similar instruments will be estimated using option-pricing
models adjusted for the unique characteristics of these
instruments.  The Company will be required to comply with this
pronouncement with the first three month interim period beginning
after December 15, 2005.  Consequently, the Company will be
adopting SFAS No. 123(R) for the three month period ending
April 30, 2006.  The adoption of this pronouncement is expected
to affect the Company's interim condensed consolidated
statements of operations in future periods.  The amount of the
effect cannot be measured at this time.  The Company is
currently evaluating the impact of SFAS No. 123(R) on its
consolidated financial statements.  As the Company currently
accounts for share-based compensation using the intrinsic value
method as allowed by APB Opinion No. 25, the adoption of the
fair value method under SFAS No. 123(R) will have an impact on
the Company's results of operations in future periods.

NOTE 3 - ACQUISITIONS
---------------------

The following unaudited pro-forma income statement data presents
the revenue of the Company had the acquisitions of AEC and ADI
occurred at the beginning of the earliest period presented:


                                           Three Months Ended
                                           January 31, 2 0 0 5
                                           -------------------
                                               (Unaudited)


Reported net revenue                          $  2,652,829
AEC (for the period November 1, 2004
  to the date of purchase)                          24,512
ADI (for the three months ended
  January 31, 2005)                                340,994
                                              ------------

                                              $  3,018,335
                                              ============



                                F - 9



<PAGE>



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


NOTE 3 - ACQUISITIONS (continued)
---------------------------------

Information in regard to net income (loss) for this period for
ADI and AEC is not available but the Company believes it would
not be material to the interim condensed consolidated financial
statements.  The above pro-forma information does not purport to
be indicative of what would have occurred had the acquisitions
been made as of such date or the results which may occur in the
future.


NOTE 4 - ACCOUNTS RECEIVABLE
----------------------------

Accounts receivable consist of the following:
                                                     January 31,     October 31,
                                                        2006             2005
                                                        ----             ----
                                                     (unaudited)

       Billed, net of allowance                      $2,104,879      $2,559,630
       Unbilled (costs in excess of billing)            330,550         327,285
                                                     ----------      ----------
                                                     $2,435,429      $2,886,915
                                                     ==========      ==========

Management expects that the unbilled accounts receivable will
be collected; therefore, no allowance for doubtful accounts has
been recorded on this balance.  Allowances for doubtful
accounts at January 31, 2006 and October 31, 2005 are based on
prior collection experience and pertain to billed accounts
receivable.


NOTE 5 - OTHER LIABILITIES
--------------------------

Other liabilities consist of the following:
                                                     January 31,     October 31,
                                                        2006             2005
                                                        ----             ----
                                                     (unaudited)

       Billings in excess of costs                   $   37,476      $  22,921
       Customer advance                                 170,518        294,608
                                                     ----------      ---------
                                                     $  207,994      $ 317,529
                                                     ==========      =========


                                F - 10



<PAGE>



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


NOTE  6 - ACCRUED EXPENSES
--------------------------

Accrued expenses consist of the following:


                                                     January 31,     October 31,
                                                       2 0 0 6         2 0 0 5
                                                       -------         -------
                                                     (Unaudited)

Retirement plans                                     $  144,625      $  262,723
Salary                                                  113,048         174,590
Professional fees                                       184,273         208,828
Royalties                                                 6,128          12,571
Outside Service                                         118,169         212,024
Rent                                                     99,372          93,084
Purchases                                                69,438          93,405
Consulting                                               99,853         128,573
Other                                                    95,197         242,165
                                                     ----------       ---------

                                                     $  930,103      $1,427,963
                                                     ==========      ==========


NOTE 7 -STOCK-BASED COMPENSATION
--------------------------------

The Company has a 2000 Stock Option Plan which is described more
fully in Note 11 to the Company's Annual Report on Form 10-KSB for
the year ended October 31, 2005.  The Company currently accounts
for this plan using the intrinsic method prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees", and related interpretations. No stock-based employee
compensation cost is included in net (loss) income, as all options
granted under this plan had an exercise price equal to the market
value of the underlying common stock on the date of the grant.
The following table illustrates the effect on net (loss) income
and (loss) earnings per share if the Company had applied the fair
value recognition provisions of SFAS 123 "Accounting for Stock-
Based Compensation".  In December 2004, the Financial Accounting
Standards Board issued SFAS 123 (revised 2004), "Share-Based
Payment" which replaced SFAS 123 and supersedes APB Opinion No.
25.  Refer to Note 2 to the interim condensed consolidated
financial statements for additional information.


                                                  Three Months Ended January 31,
                                                  ------------------------------
                                                     2 0 0 6         2 0 0 5
                                                     -------         -------
                                                   (Unaudited)     (Unaudited)

Net (loss) income as reported                      $ (159,975)     $  111,347
Effect of stock options, net of tax                    95,798          35,988
                                                   ----------      ----------

Proforma net (loss) income                         $ (255,773)     $   75,359
                                                   ==========      ==========

Historic basic (loss) earnings per share           $     (.05)     $      .04
Historic diluted (loss) earnings per share         $     (.05)     $      .04
Proforma basic (loss) earnings per share           $     (.09)     $      .03
Proforma diluted (loss) earnings per share         $     (.09)     $      .03

                                F - 11



<PAGE>



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



<PAGE>



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



NOTE 7 -STOCK-BASED COMPENSATION (continued)
--------------------------------------------

The fair value of each option grant was estimated on the date of
the grant using the Black-Scholes option pricing model with the
following weighted average assumptions for the three months ended
January 31, 2005: expected volatility of 121%; risk free interest
rate of 4.23%; and expected lives of 10 years.  There were no
options granted during the quarter ended January 31, 2006.

In January 2005, the Company granted options to purchase 56,000
shares of the Company's Common Stock pursuant to the 2000 Stock
Option Plan at an exercise price of $3.15 per share.  Also in
January 2005, the Company granted options to purchase an
aggregate of 50,000 shares of the Company's Common Stock pursuant
to the 2000 Stock Option Plan to the two officers of AEC pursuant
to employment agreements.  In February 2005, options to purchase
40,000 shares of the Company's Common Stock were granted pursuant
to the 2000 Stock Option Plan on the date of the closing
exercisable at $3.10 per share, the fair market value on that
date.  In June 2005, the Company granted options to purchase
10,000 shares of the Company's common stock at an exercise price
of $3.79 per share.  In July 2005, the Company granted options to
purchase an aggregate of 60,000 shares of the Company's common
stock at an exercise price of $3.75 to two of the officers of ADI
pursuant to employment agreements.

                                F - 12


<PAGE>

                               SIGNATURE

            In accordance with the requirements 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.

                             TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.



                             By: /s/ ANDREW L. SIMON
                                 -------------------------------------
                                 Andrew L. Simon
                                 President and Chief Executive Officer
                                 and Principal Financial Officer

Date: March 17, 2006