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, 2005

[ ]  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_________

               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 14, 2005: 2,779,750 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, 2005 are attached to this Report,
commencing at page F-1.


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS

        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" contained in the Company's Annual Report on Form 10-KSB
for the fiscal year ended October 31, 2004 ("Fiscal 2004"),
which may cause actual results to differ materially from those
described.

BACKGROUND

            For over twenty-eight years, TASA has served the
rapidly expanding education market, primarily through the
publishing and sale of its highly regarded proprietary reading
tests.  Since 1994, management implemented a strategy to broaden
the Company's services within the educational marketplace.  As a
result, the Company completed three acquisitions since the
beginning of Fiscal 1997 in the K-12 assessment, instructional
and post secondary proprietary school markets.  In Fiscal 2002,
the Company determined that its core business was assessment.
It believed that this category provided better long-term growth
and profit potential than either the proprietary school business
or the supplemental instruction segment.  Consequently, during
the second fiscal quarter of Fiscal 2002, the Company reached a
decision to sell its proprietary school, and in the third
quarter of Fiscal 2003, the Company reached the decision to sell
its supplemental instruction materials business, Modern Learning
Press.    In early fiscal 2005, based upon the Company's
strategy to focus on assessment, the Company acquired Assessment
and Evaluation Concepts Inc.  Revenues from this business will
be reported under custom services.    See the Annual Report for
Fiscal 2004.

RESULTS OF OPERATIONS

            The following table compares the revenues for the
assessment division and the instructional division for the
fiscal quarter ended January 31, 2005 versus the fiscal quarter
ended January 31, 2004.



              RESULTS OF OPERATIONS FOR THE FIRST FISCAL QUARTER
                            ENDED ON JANUARY 31, 2005

                                  Three Months
                                Ended January 31,
                                -----------------
                                                       %
                           2005          2004        Change
                           ----          ----        ------
                              (in thousands
                               of dollars)


Proprietary products
and services              $740.2       $1020.7       (27.5)

Custom Services
Revenues                 $1912.6       $1067.1        79.2

Total Revenues from
Assessment Products
and Services             $2652.8       $2087.8        27.1



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


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

                                     2005      2004
                                     ----      ----

                                    (in percentages)

Revenues                             100%      100%

        Gross Profit                  49        48

Operating Expense:

        Selling Expense               13        13


        General & Administrative      30        30

Income from Operations                 6         5

        Other (Expense)               --        --

Income Before Income Taxes             6         5

Income Taxes                           3         2

Net Income                             3         3


            REVENUES. Net revenues for the three months ended
            --------
January 31, 2005 (the "current quarter") increased by 27.1%, or
$565,035, to $2,652,829 as compared to net revenues of
$2,087,794 in the three months ended January 31, 2004 (the
"comparable quarter").

            Revenues from assessment products and services through
the Company's proprietary unit decreased 27.5% or $280,514
during the current quarter from $1,020,714 in the comparable
quarter to $740,200 in the current quarter.  The decrease was
anticipated at the commencement of the fiscal year due to large
DRP and MACII orders last year.  In the prior fiscal year,
several large districts (Los Angeles, California and Orange
County, Florida) ordered sufficient supplies of testing
materials to carry them through the first half of this year.
Further, MACII test materials for Rhode Island and Missouri are
reusable.  Consequently, these customers have not yet reordered.

            We anticipate a more robust second half of the year
with a new product launch and increased scoring revenues.

            Revenues from the Company's custom testing unit,
increased by 79.2% or $845,520, during the current quarter, or
from $1,067,080 in the comparable quarter to $1,912,600 in the
current quarter.  This increase is attributable to multi-year
contracts acquired in prior years.  We also expect, based on
current market indicators, that BETA's custom assessment
revenues will continue to be strong throughout the current
fiscal year.  Additionally, Assessment and Evaluation Concepts,
Inc., TASA's new acquisition in the custom testing arena, has
received a 20 month evaluation assignment from the State of
Minnesota.

            COST OF GOODS SOLD.  Cost of goods sold for the
            ------------------
current quarter increased by 23.7%, or $258,629, from $1,089,043
in the comparable quarter to $1,347,672 in the current quarter.
Because of our product and service mix, cost of goods was 51% of
revenues in the current quarter versus 52% in the comparable
quarter.

            GROSS PROFIT.  Gross profit from continuing operations
            ------------
increased to $1,305,157 in the current quarter, from $998,751 in
the comparable quarter, or by $306,406 or 30.7%.  The gross
profit margin is now 49% in the current quarter versus 48% in
the comparable quarter.

            SELLING EXPENSE.  Selling expense for the current
            ---------------
quarter increased by 24.1% or $66,320 or from $275,104 in the
comparable quarter to $341,424 in the current quarter.  Last
year, we withheld spending as we conducted market research to
refocus and reposition our proprietary brands.  This year, we
are spending closer to our historical levels.  Selling expenses
were 13% of revenues in both quarters.

            GENERAL AND ADMINISTRATIVE EXPENSES.  General and
            -----------------------------------
administrative expenses for the current quarter were $805,951
versus $616,263 for the comparable quarter.  This is an increase
of $189,688 or 30.8%.  Approximately one-third of the increase
is attributable to Sarbanes-Oxley 404 requirements.  The balance
is primarily associated with increased labor costs.  General and
administrative expenses were 30% of revenues in both quarters.

            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 income from continuing operations to EBITDA:

                              EBITDA from Continuing Operations

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

                                     2005            2004
                                     ----            ----
                                         (in dollars)


Net Income From Operations        $157,782         $107,384


Depreciation & Amortization        159,453          139,003


EBITDA                             317,235          246,387


            OTHER INCOME (EXPENSE).  For the current quarter, the
            ----------------------
Company had net interest income of $2,579 versus a net interest
expense of ($549) for the comparable quarter.  For the past
seven quarters, the Company has been cash flow positive.
Consequently, we are now generating cash in excess of operating
requirements which is invested in an interest-bearing account.

            NET INCOME AND INCOME PER SHARE.  For the current
            -------------------------------
quarter, the Company's net income increased by $30,723 or from
$62,122 in the comparable quarter to $92,845 in the current
quarter.  For the current quarter, the Company earned $0.03 per
diluted share versus $0.02 in the comparable quarter.

LIQUIDITY AND CAPITAL RESOURCES

            WORKING CAPITAL.  Working capital increased by
            ---------------
$106,481 during the current quarter from $3,107,390 at October
31, 2004 to $3,213,871 at January 31, 2005.  This increase
resulted primarily from the increase in accounts receivable.
The ratio of current assets to current liabilities was
approximately 3.07 to 1.0 at October 31, 2004 versus 3.30 to 1.0
at January 31, 2005.

            CASH FLOW FROM OPERATING ACTIVITIES.  During the
            -----------------------------------
current quarter, the Company had net cash provided by operating
activities of $38,451, as compared to $325,078 used by operating
activities in the comparable quarter.  The increase in cash
provided by operating activities resulted primarily from
increased net operating income and a smaller increase in
accounts receivable.

            CASH FLOW FROM INVESTING ACTIVITIES.  During the
            -----------------------------------
current quarter, the Company had net cash used in investing
activities of $369,889, as compared to $252,978 in the
comparable quarter.  The increase in cash used in investing
activities resulted primarily from the cash expended in the
acquisition of Assessment & Evaluation Concepts Inc.

            CASH FLOW FROM FINANCING ACTIVITIES.  The Company had
            -----------------------------------
net cash provided by financing activities of $152,607 for the
current quarter as compared to $1,900 used in financing
activities for the comparable quarter. The cash provided by
financing activities in the current quarter resulted primarily
from the proceeds from the exercise of warrants and employee
stock options.  The cash used in financing activities in the
comparable quarter resulted primarily from the repayment of
long-term debt.

            During the current quarter, options to purchase 2,000
shares of the Company's Common Stock were exercised resulting in
proceeds totaling $4,200.  In addition, warrants for the
purchase of 138,047 shares of the Company's Common Stock were
exercised in the current quarter resulting in proceeds totaling
$155,303.

            During the current quarter, options to purchase 56,000
shares of the Company's Common Stock were granted to employees of
the Company pursuant to the 2000 Stock Option Plan at an exercise
price of $3.15 per share.

            In January 2005, the Company acquired all of the
outstanding stock of Assessment and Evaluation Concepts Inc.
("AEC") in exchange for $83,000 and 12,000 shares of the
Company's common stock.  In addition, the Company entered into
two-year employment agreements with the two officers of AEC.
Pursuant to the agreements, the officers of AEC are entitled to
a base salary and bonuses determined by the attainment of
certain performance goals.  Options to purchase 50,000 shares of
the Company's common stock were granted pursuant to the 2000
Plan on the date of the closing exercisable at $3.06 per share,
the fair market value on that date.  The options are exercisable
commencing one year from the closing, through January 2015.
Goodwill totaling $118,074 was recorded as a result of the
acquisition.

            The Company has a $1,000,000 line of credit which
matures on April 1, 2005.  At this time, there is no outstanding
balance.

		Long-term debt, operating leases and other long-term
obligations as of January 31, 2005 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                 $  142,001    $   28,923     $   61,870       $ 51,208      $       --

Operating Leases                3,190,251       361,341        719,257        705,425       1,404,228

Other long-term
obligations (1)                 2,081,395       880,904      1,169,326         31,165              --

TOTAL OBLIGATIONS              $5,413,647    $1,271,168     $1,950,453       $787,798      $1,404,228

(1) Relate to employment contracts in effect at the end of the current quarter.


</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, 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 and other assessment-related products are recognized
when product is shipped from the Company's warehouse.
Assessment consulting revenues are recognized when the
consulting services are rendered.

      *  Deferred tax assets are recorded based on the
Company's projected future taxable income and the resulting
utilization of the deferred tax assets. 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 and charged 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.  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

        The Certifications required by Item 307 of Regulation
S-B are set forth after the signatures to this Report.

        (a)  EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES.
             ------------------------------------------------
The Company's principal executive officer and principal
financial officer, after evaluating the effectiveness of the
Company's disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14(c) and 15d-14(c)) on January 23, 2005,
has concluded that, as of such date, the Company's disclosure
controls and procedures were adequate and effective to ensure
that material information relating to the Company and its
consolidated subsidiaries would be made known to him by others
within those entities.

        (b)  CHANGES IN INTERNAL CONTROLS.  There were no
             ----------------------------
significant changes in the Company's internal controls or in
other factors that could significantly affect the Company's
disclosure controls and procedures subsequent to the date of the
evaluation, nor were there any significant deficiencies or
material weaknesses in the Company's internal controls. As a
result, no corrective actions were required or undertaken.

<PAGE>

                               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 AND REPORTS ON FORM 8-K

        (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

        (b)     Reports on Form 8-K

                Current Report on Form 8-K, filed on January 18, 2005

                Current Report on Form 8-K, filed on January 27, 2005


<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.


           INDEX TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                FOR THE FISCAL QUARTER ENDED JANUARY 31, 2005


  Index                                              F-1

  Consolidated Balance Sheets                        F-2

  Consolidated Statements of Operations              F-4

  Consolidated Statements of Cash Flows              F-6

  Notes to Consolidated Financial Statements         F-8












                                F - 1



<PAGE>



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

<TABLE>
<CAPTION>
                         CONSOLIDATED BALANCE SHEETS


                                                        January 31,           October 31,
                                                          2 0 0 5               2 0 0 4
                                                          -------               -------
                                                        (Unaudited)
<S>                                               <C>                   <C>

ASSETS
------

Current assets:
  Cash and temporary investments                        $1,572,656            $1,751,487
  Accounts receivable, net of allowance
   for doubtful accounts of
   $14,232 and $4,417, respectively                      1,765,557             1,526,559
Inventories                                                426,196               431,196
Prepaid expenses and other current assets                  290,380               338,354
Restricted cash                                             22,924                21,954
Deferred income taxes                                      536,440               536,440
                                                        ----------            ----------

        Total current assets                             4,614,153             4,605,990


Property, plant and equipment - net of
 accumulated depreciation of $322,788 and
 $284,567, respectively                                    587,657               525,319


Other assets:
  Test passage bank and test development,
   net of accumulated amortization of
   $3,274,629 and $3,174,865, respectively               2,294,639             2,227,077
Goodwill                                                   316,233               198,159
Deferred income taxes                                      315,403               361,948
Other assets                                               303,434               326,289
                                                        ----------            ----------



         Total assets                                   $8,431,519            $8,244,782
                                                       ===========            ==========

</TABLE>









See notes to consolidated financial statements.






                                F - 2



<PAGE>


<TABLE>
<CAPTION>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

                   CONSOLIDATED BALANCE SHEETS (Continued)


                                                        January 31,           October 31,
                                                          2 0 0 5               2 0 0 4
                                                          -------               -------
                                                        (Unaudited)
<S>                                               <C>                   <C>

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

Current liabilities:
  Lines of credit                                       $       --            $       --
  Current maturities of long-term debt                      28,923                28,606
  Accounts payable                                         366,473               119,448
  Accrued expenses                                       1,004,886             1,350,546
                                                        ----------            ----------



        Total current liabilities                        1,400,282             1,498,600



Long-term debt:
  Long-term debt, net of current portion                   113,078               120,291
                                                        ----------            ----------



        Total liabilities                                1,513,360             1,618,891
                                                        ----------            ----------


Commitments and contingencies


Stockholders' equity:
  Preferred stock, $.0001 par value,
   5,000,000 shares
   authorized, 0 shares-issued and
   outstanding, respectively                                    --                    --
  Common stock, $.0001 par value,
   20,000,000 shares authorized,
   2,779,750 and 2,627,703 shares
   issued and outstanding,
   respectively                                                278                   263
  Additional paid-in capital                             5,807,968             5,609,480
  Subscriptions receivable                                      --                  (920)
  Retained earnings                                      1,109,913             1,017,068
                                                        ----------            ----------


        Total stockholders' equity                       6,918,159             6,625,891
                                                        ----------            ----------


Total liabilities and stockholders' equity              $8,431,519            $8,244,782
                                                        ==========            ==========

</TABLE>

See notes to consolidated financial statements.





                                F - 3



<PAGE>



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF INCOME


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

                                            2 0 0 5          2 0 0 4
                                            -------          -------
                                          (Unaudited)      (Unaudited)

Net revenue                               $2,652,829       $2,087,794

Cost of goods sold                         1,347,672        1,089,043
                                          ----------       ----------

Gross profit                               1,305,157          998,751
                                          ----------       ----------

Operating expenses:

  Selling expenses                           341,424          275,104

  General and administrative expenses        805,951          616,263
                                          ----------       ----------

Total operating expenses                   1,147,375          891,367
                                          ----------       ----------

Income from operations                       157,782          107,384

Other income (expense):

Interest income (expense), net                 2,579             (549)
                                          ----------       ----------

Income before income taxes                   160,361          106,835

Income taxes                                  67,516           44,713
                                          ----------       ----------

Net income                                $   92,845       $   62,122
                                          ==========       ==========


Weighted average shares outstanding:

  Basic                                    2,715,490        2,603,453

  Diluted                                  2,974,518        2,797,209


Earnings per share:

  Basic                                   $      .03       $      .02

  Diluted                                 $      .03       $      .02












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 5          2 0 0 4
                                             -------          -------
                                           (Unaudited)      (Unaudited)


OPERATING ACTIVITIES

Net income                                 $    92,845      $    62,122
Adjustments to reconcile net
 income to net cash provided
 by operating activities:

   Depreciation and amortization               159,453          139,003

   Deferred income taxes                        46,545           35,770


Changes in operating assets
 and liabilities:

   Restricted cash                                (970)              --

   Accounts receivable                        (216,068)        (515,863)

   Inventories                                   5,000          (11,291)

   Prepaid expenses                             47,974         (122,744)

   Other assets                                  1,388               --

Accounts payable and accrued expenses          (97,716)          87,925
                                            ----------       ----------

NET CASH FLOWS FROM OPERATING ACTIVITIES        38,451         (325,078)
                                            ----------       ----------


INVESTING ACTIVITIES

Test passage bank and test development        (167,326)        (131,572)

Acquisition of fixed assets                   (100,559)         (60,926)

Software development costs                          --          (13,970)

Prepublication costs                                --          (46,510)

Cash and fees paid to acquire
 stock of Assessment &
 Evaluation Concepts Inc. ("AEC")              (83,000)              --
                                            ----------       ----------

NET CASH FLOWS FROM INVESTING ACTIVITIES      (369,889)        (252,978)
                                            ----------       ----------









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 5          2 0 0 4
                                             -------          -------

                                           (Unaudited)      (Unaudited)

FINANCING ACTIVITIES

Proceeds from the exercise of
 warrants                                      155,303               --

Proceeds from the exercise of
 employee stock options                          4,200               --

Repayment of long-term debt                     (6,896)          (1,900)
                                            ----------       ----------


NET CASH FLOWS FROM FINANCING
ACTIVITIES                                     152,607           (1,900)
                                            ----------       ----------

NET CHANGE IN CASH AND
TEMPORARY INVESTMENTS                         (178,831)        (579,956)


CASH AND TEMPORARY INVESTMENTS
AT BEGINNING OF PERIOD                       1,751,487          984,891
                                            ----------       ----------

CASH AND TEMPORARY INVESTMENTS
AT END OF PERIOD                            $1,572,656      $   404,935
                                            ==========      ===========

SUPPLEMENTAL CASH FLOW
INFORMATION:

  Cash paid during the quarter for:

  Interest                                  $    6,556      $       549
                                            ==========      ===========
  Income taxes                              $    2,354      $    31,382
                                            ==========      ===========

Noncash investing and financing
activities:

  Stock issued in acquisition of AEC        $   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 SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------------

In the opinion of management, the accompanying
consolidated financial statements of Touchstone Applied
Science Associates, Inc. ("TASA") and its subsidiaries
contain all adjustments necessary to present fairly the
Company's consolidated financial position as of January
31, 2005 and October 31, 2004, and the consolidated
statements of income and cash flows for the three months
ended January 31, 2005 and 2004.

The consolidated results of operations for the three
months ended January 31, 2005 and 2004 are not
necessarily indicative of the results to be expected for
the full year.

The accounting policies followed by the Company are set
forth in Note 1 to the Company's consolidated financial
statements included in its Annual Report on Form 10-KSB
for the fiscal year ended October 31, 2004.


Stock Based Compensation
------------------------

In October 1995, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation". The Company currently accounts for its
stock-based compensation plans using the accounting
prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees". As the Company
is not yet required to adopt the fair value based
recognition provisions prescribed under SFAS No. 123(R),
as amended, it has elected only to comply with the
disclosure requirements set forth in the statement which
includes disclosing pro forma net income and earnings per
share as if the fair value based method of accounting had
been applied.







                                F - 7



<PAGE>


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
---------------------------------------------------------

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 and 2004, respectively: expected
volatility of 121% and 109%, respectively; risk free interest
rate of 4.23% and 3.00%, respectively; and expected lives of 10
years.

The effects of applying SFAS No. 123, as amended, in the above
pro forma disclosures are not indicative of future amounts as
they do not include the effects of awards granted prior to
Fiscal 1996.  Additionally, future amounts are likely to be
affected by the number of grants awarded since additional
awards are generally expected to be made at varying amounts.

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 (see also Note 2).

The pro forma net income and income per share consists of the
following:

                                    Three Months Ended January 31,

                                    2 0 0 5                2 0 0 4
                                    -------                -------
                                  (Unaudited)            (Unaudited)


Net income as reported              $92,845                $62,122
Effect of stock
options, net of tax                  35,988                  3,556
                                    -------                -------


Proforma net income                 $56,857                $58,566
                                    =======                =======


Historic basic
earnings per share                  $   .03                $   .02

Historic diluted
earnings per share                  $   .03                $   .02

Proforma basic
earnings per share                  $   .02                $   .02

Proforma diluted
earnings per share                  $   .02                $   .02





                                F - 8



<PAGE>



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
---------------------------------------------------------

Earnings per Share
------------------

Earnings per share for each of the three months ended January
31, 2005 and 2004 was computed by dividing net 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 531,484 and 519,639 in the three months ended January
31, 2005 and 2004, respectively.  The reconciliation between
basic and diluted average shares outstanding is as follows:

                                    Three Months Ended January 31,

                                    2 0 0 5                2 0 0 4
                                    -------                -------
                                  (Unaudited)            (Unaudited)


Basic weighted average shares
  Outstanding                      2,715,490              2,603,453
Dilutive effect of stock
  options                            257,485                126,301
Dilutive effect of
  warrants                             1,543                 67,455
                                   ---------              ---------

Diluted weighted average shares
  Outstanding                      2,974,518              2,797,209
                                   =========              =========

Accrued Expenses
----------------

Accrued expenses consist of
 the following:

                                  January 31,            October 31,
                                    2 0 0 5                2 0 0 4
                                    -------                -------
                                  (Unaudited)

Retirement plans                  $   74,378             $  238,107
Commissions                           11,140                 14,651
Salary                               207,625                256,510
Professional fees                    119,981                100,565
Royalties                              8,687                 25,054
Outside Service                       64,909                127,939
Other                                518,166                587,720
                                  ----------             ----------

                                  $1,004,886             $1,350,546
                                  ==========             ==========





                                F - 9



<PAGE>



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)




NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)
---------------------------------------------------------

Recently Issued Accounting Pronouncements
-----------------------------------------

In December 2004, the FASB issued a revision of SFAS No. 123
"Share-Based Payment".  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 periods beginning after December 15, 2005.







                                F - 10



<PAGE>


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)





NOTE 2 - ACQUISITION OF ASSESSMENT AND EVALUATION CONCEPTS INC.
---------------------------------------------------------------

In January 2005, the Company acquired all of the outstanding
stock of Assessment and Evaluation Concepts Inc. ("AEC") in
exchange for $83,000 and 12,000 shares of the Company's common
stock.  In addition, the Company entered into two-year
employment agreements with the two officers of AEC.  Pursuant to
the agreements, the officers of AEC are entitled to a base
salary and bonuses determined by the attainment of certain
performance goals.  In addition, options to purchase 50,000
shares of the Company's Common Stock were granted pursuant to
the 2000 Stock Option Plan on the date of the closing
exercisable at $3.06 per share, the fair market value on that
date.  The options are exercisable commencing one year from the
closing, through January 2015.  Goodwill totaling $118,074 was
recorded as a result of the acquisition.

AEC reported revenues of $24,512 and $33,166 for the period
November 1, 2004 to the date of purchase and the three months
ended January 31, 2004, respectively.  Information with regards
to net income for these periods is not currently available but
the Company believes it would not be material to the financial
statements.

NOTE 3 - EXERCISE OF STOCK OPTIONS AND WARRANTS
-----------------------------------------------

In December 2004, warrants for the exercise of 138,047 shares of
the Company's Common Stock were exercised.  In January 2005,
options for the exercise of 2,000 shares of the Company's Common
Stock were exercised.  Proceeds from the exercise totaled $155,303
and $4,200, respectively.

NOTE 4 - SUBSEQUENT EVENTS
--------------------------

Effective February 28, 2005, the Company entered into an
employment agreement with its new Chief Operating officer for
its proprietary business.  Provisions of the one-year renewable
agreement call for a base salary and bonuses determined by the
attainment of certain performance goals.  In addition, 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.





                                F - 11



<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 15, 2005