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


                              FORM 10-QSB/A

(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

                          EXPLANATORY NOTE
                          ----------------

        This Amendment No. 2 on Form 10-QSB/A includes
restated unaudited consolidated financial statements for the
three months ended January 31, 2005 and 2004, which supersede
the Company's previously issued unaudited consolidated financial
statements for those interim periods.  This Amendment No. 2 also
includes related changes to the disclosures in "Management's
Discussion and Analysis or Plan of Operation."  See Note 5 to
the accompanying financial statements.  Except as otherwise
specifically noted, all information contained herein is
as of January 31, 2005 and does not reflect any events or
changes that have occurred subsequent to that date.  For the
convenience of readers, this Amendment No. 2 restates in its
entirety the Company's Report on Form 10-QSB for the quarter
ended January 31, 2005.

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 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" contained in the Company's Annual Report on Form 10-KSB/A
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.  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 Income                   1         1

Income Before Income Taxes             7         7

Income Taxes                           3         3

Net Income                             4         4



        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.

        OTHER INCOME (EXPENSE).  For the current quarter, the
        ---------------------
Company had net other income of $33,939 versus net other income
of $30,811.  Other income includes recognition of deferred gain
from the sale/leaseback of the Company's headquarters building
in July 2003, of $31,360 and $31,360, respectively, for the
current quarter and 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 EARNINGS PER SHARE.  For the current
        ---------------------------------
quarter, the Company's net income increased by $30,722 or from
$80,625 in the comparable quarter to $111,347 in the current
quarter.  For the current quarter, the Company earned $0.04 per
diluted share versus $0.03 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 income from continuing operations to EBITDA:


                              EBITDA from 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
                                   ========        ========


LIQUIDITY AND CAPITAL RESOURCES

        WORKING CAPITAL.  Working capital increased by
        ---------------
$106,481 during the current quarter from $2,981,951 at October
31, 2004 to $3,088,432 at January 31, 2005.  This increase
resulted primarily from the increase in accounts receivable.
The ratio of current assets to current liabilities was
approximately 2.83 to 1.0 at October 31, 2004 versus 3.02 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 in 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

<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, 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 revenue for
such period.

        *  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 will be recognized
over the ten-year term of the lease as other income during
the relevant period.

        *  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.  The amortization costs
for a period are included in the cost of goods sold for such
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.
Our disclosure controls and procedures are designed to ensure
that information required to be disclosed by us in the reports
that are filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission's rules and
forms.  These disclosure controls and procedures include
controls and procedures designed to ensure that information
required to be disclosed under the Securities Exchange Act of
1934 is accumulated and communicated to our management on a
timely basis to allow decisions regarding required disclosure.

        An evaluation was carried out under the supervision
and with the participation of the Company's management,
including the Chief Executive Officer and Chief Financial
Officer, 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 period
covered by this Quarterly Report.  Based upon that evaluation,
the Company's management, including the Chief Executive Officer
and Chief Financial Officer, had concluded that as of the end of
the period covered by this Quarterly Report that the design and
operation of these disclosure controls and procedures were
effective as of the end of the period covered by this Report.
However, based on a subsequent evaluation in Fiscal 2005, the
Company now 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 for the quarter during which the
sale-leaseback occurred.  After consulting with the Company's
independent registered public accountants during Fiscal 2005,
management has concluded that such gain should have been
deferred and recognized over the ten-year term of the lease.  On
May 24, 2005, management concluded that the Company should
restate its audited financial statements for the fiscal years
ended October 31, 2003 and 2004, and its quarterly unaudited
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.  The Company's management, including
the Chief Executive Officer and Chief Financial Officer, have
concluded that, as of the end of the period covered by this
Quarterly Report, the Company's disclosure controls and
procedures were not effective at the end of the period covered
by this Quarterly Report 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.  The Audit Committee has directed management to devote
additional resources to disclosure controls and management is in
the process of implementing such directive.

        (b)  Changes in internal controls.  Other than changes to our
accounting for the sale-leaseback transactions noted above, there was
no change in the Company's internal controls over financial reporting
occurring in the Company's fiscal quarter covered by this Quarterly
Report that has materially affected, or is reasonably likely to
materially affect, the Company's internal controls over financial
reporting.

<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)
                                                       (As Restated)         (As Restated)
<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                                   748,269                807,672
  Other assets                                            303,434                326,289
                                                       ----------             ----------


        Total assets                                   $8,864,385             $8,690,506
                                                       ==========             ==========





</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)
                                                       (As Restated)         (As Restated)
<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
  Deferred gain on sale of building-
    current portion                                      125,439                125,439
                                                      ----------             ----------


        Total current liabilities                      1,525,721              1,624,039



Long-term debt, net of current portion                   113,078                120,291
Deferred gain on sale of building, net
  of current portion                                     930,332                961,692
                                                      ----------             ----------

        Total liabilities                              2,569,131              2,706,022
                                                      ----------             ----------


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                                      487,008                375,661
                                                      ----------             ----------

        Total stockholders' equity                     6,295,254              5,984,484
                                                      ----------             ----------


Total liabilities and stockholders' equity            $8,864,385             $8,690,506
                                                      ==========             ==========

</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 5          2 0 0 4
                                            -------          -------
                                          (Unaudited)      (Unaudited)
                                         (As Restated)    (As Restated)

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):
Gain on sale/leaseback of building            31,360           31,360
Interest income (expense), net                 2,579             (549)
                                          ----------       ----------

Income before income taxes                   191,721          138,195

Income taxes                                  80,374           57,570
                                          ----------       ----------

Net income                                $  111,347       $   80,625
                                          ==========       ==========

Weighted average shares outstanding:
Basic                                      2,715,490        2,603,453
Diluted                                    2,974,518        2,797,209

Earnings per share:
Basic                                     $      .04       $      .03
Diluted                                   $      .04       $      .03













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)
                                          (As Restated)    (As Restated)


OPERATING ACTIVITIES
Net income                                  $  111,347       $   80,625
Adjustments to reconcile net
  income to net
Cash provided by operating activities:
  Depreciation and amortization                159,453          139,003
  Deferred income taxes                         59,403           48,627
  (Gain) on sale/leaseback of building         (31,360)         (81,360)


Changes in operating assets
  and liabilities:
    Restricted cash                               (970)              --
    Accounts receivable                       (238,998)        (515,863)
    Inventories                                  5,000          (11,291)
    Prepaid expenses                            47,974         (122,744)
    Other assets                                 1,388               --
    Accounts payable and accrued expenses      (94,710)          87,925
                                              --------         --------


NET CASH FLOWS FROM OPERATING ACTIVITIES        18,527         (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      (350,885)        (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)
                                          (As Restated)    (As Restated)

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                  (6,896)          (1,900)
                                           ----------         --------


NET CASH FLOWS FROM FINANCING ACTIVITIES      153,527           (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.

Subsequent to the issuance of the Company's unaudited
consolidated financial statements in its Form 10-QSB for the
fiscal quarter ended January 31, 2005, the Company concluded
that the treatment of the gain from the sale-leaseback
transaction was not consistent with generally accepted
accounting principles (See Note 5.)  As a result, on May 24,
2005, the Company filed a Current Report on form 8-K with the
SEC announcing its decision to restate the previously-issued
consolidated audited financial status for the fiscal years
ended October 31, 2004 and October 31, 2003, and its unaudited
consolidated financial statements for the interim fiscal
quarters ended July 31, 2003, January 31, 2004, April 30, 2004,
July 31, 2004 and January 31, 2005.  The foregoing unaudited
financial statements for the fiscal quarter ended January 31,
2005 supersede the Company's previously issued unaudited
consolidated financial statements for such period.

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 (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              $111,347               $80,625
Effect of stock options,
  net of tax                          35,988                 3,556
                                    --------               -------

Proforma net income                  $75,359               $77,069
                                    ========               =======


Historic basic earnings
  per share                         $    .04               $   .03
Historic diluted earnings
  per share                         $    .04               $   .03
Proforma basic earnings
  per share                         $    .03               $   .03
Proforma diluted earnings
  per share                         $    .03               $   .03



                                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.

NOTE 5 - SALE-LEASEBACK OF BUILDING
-----------------------------------

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 back to
the Company under a  ten-year lease agreement.  As a result of
the sale leaseback of the building, the gain has been deferred
and will be recognized over the ten-year term of the lease as
other income.

Subsequent to the issuance of Company's unaudited financial
statements in its Form 10-QSB for the fiscal quarter ended
January 31, 2005, the Company concluded that its treatment of
the gain from the sale-leaseback transaction was not consistent
with generally accepted accounting principles.  The Company
concluded that it was necessary to restate such financial
statements.  The restatement does not affect previously-
reported revenues for the restated period or future periods.

                                F - 11

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


NOTE 5 - SALE-LEASEBACK OF BUILDING (Continued)
-----------------------------------------------

A summary of the significant effects of the restatement is as
follows:


                                           As Previously Reported   As Restated



As of January 31, 2005:
-----------------------

Deferred income taxes (non-current)              $  315,403         $  748,269
Deferred gain on sale of building
  (current)                                              --            125,439
Deferred gain on sale of
  building  (net of current)                             --            930,332
Retained earnings                                 1,109,913            487,008



For the three months ended January 31, 2005:
--------------------------------------------

(Gain) on sale of building                       $       --         $  (31,360)
Income before income taxes                          160,361            191,721
Income taxes                                         67,516             80,374
Net income                                           92,845            111,347
Earnings per common share
   Basic and diluted                             $     0.03         $     0.04


                                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: August 8, 2005