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, 2004

[ ]  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 9, 2004: 2,603,453 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, 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 3 to
the accompanying unaudited financial statements.  Except as
otherwise specifically noted, all information contained herein
is as of January 31, 2004 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 Quarterly Report on Form 10-QSB for the
quarter ended January 31, 2004.

ITEM 1. FINANCIAL STATEMENTS

        The financial statements for the Company's fiscal
quarter ended January 31, 2004 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
for the fiscal year ended October 31, 2003 ("Fiscal 2003"),
which may cause actual results to differ materially from those
described.

BACKGROUND

        For over twenty-seven 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.
Accordingly, both of these segments were reported as
discontinued operations.  See the Annual Report for Fiscal 2003.

RESULTS OF OPERATIONS

        The following table compares the revenues for the
assessment division and the instructional division for the
fiscal quarter ended January 31, 2004 versus the fiscal quarter
ended January 31, 2003.

        RESULTS OF OPERATIONS FOR THE FIRST FISCAL QUARTER
                    ENDED ON JANUARY 31, 2004

                                  Three Months
                                Ended January 31,
                                -----------------
                                                       %
                           2004          2003        Change
                           ----          ----        ------
                              (in thousands
                               of dollars)


Proprietary products
and services              $1020.7       $794.6        28.5



Custom Services
Revenues                  $1067.0       $972.3         9.7



Total Revenues
from Assessment
Products and
Services                  $2087.8      $1766.9        18.2


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

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

                                     2004      2003
                                     ----      ----

                                    (in percentages)

Revenues                             100%      100%

        Gross Profit                  48        44

Operating Expense:

        Selling Expense               13        22

        General & Administrative      30        27

Income (loss) from Operations          5        (5)

        Other Income (Expense)         1        (8)

Income (loss) from Continuing
 Operations                            4        (8)


Loss from Discontinued
Operations, net of taxes              --        (9)


Net Income (loss)                      4       (17)



        REVENUES. Net revenues from continuing operations for
        --------
the three-months ended January 31, 2004 (the "current quarter")
increased by 18.2%, or $320,899, to $2,087,794 as compared to
net revenues of $1,766,895 in the three months ended January 31,
2003 (the "comparable quarter").

        Revenues from assessment products and services through
the Company's proprietary tests unit increased 28.5% or $226,145
during the current quarter, or from $794,569 in the comparable
quarter to $1,020,714 in the current quarter. This increase was
primarily due to the shipment of test materials to Rhode Island
and Missouri to comply with Title [1] funding under the
Educational Reauthorization Act of 2001 or the "No Child Left
Behind (NCLB)" Act.   We currently anticipate significant
increases in revenues through the first half of Fiscal 2004 due
to the continuing positive business impact of NCLB and due to
increases in our scoring business, both for our own products as
well as for products from third party entities.

        Revenues from BETA, the Company's custom testing unit,
increased by 9.7% or $94,754, during the current quarter, or
from $972,326 in the comparable quarter to $1,067,080 in the
current quarter.  We also expect, based on current market
indicators, that BETA's revenues will continue to be strong
throughout the current fiscal year.  In January, the Company
received a contract extension from the State of Michigan on its
contract to perform services to students with special needs.
This notice extended the contract from February 2005 to
September 2007 and increased the aggregate value of the contract
from $4,500,000 to $13,900,000.

       COST OF GOODS SOLD.  Cost of goods sold for the
       ------------------
current quarter increased by 10.9%, or $106,685, from $982,358
in the comparable quarter to $1,089,043 in the current quarter.
Because of our product and service mix, cost of goods was 52% of
revenues in the current quarter versus 56% in the comparable
quarter.

        GROSS PROFIT.  Gross profit from continuing operations
        ------------
increased to $998,751 in the current quarter, from $784,537 in
the comparable quarter, or by $214,214 or 27.3%.  The gross
profit margin is now 48% in the current quarter versus 44% in
the comparable quarter.

        SELLING EXPENSE.  Selling expense for the current
        ---------------
quarter decreased by 28.8%, or $110,951, or from $386,055 in the
comparable quarter to $275,104 in the current quarter. Selling
expenses decreased because in 2003 the Company made the
decision, as a result of NCLB, to accelerate marketing spending
in the first quarter of its fiscal year to drive business
throughout the year. In the current fiscal year, in an effort to
better focus our sales effort, the Company has embarked on
market research and decided not to spend funds until results of
this research became available and are analyzed.  Selling
expenses were 13% of revenues in the current quarter versus 22%
in the comparable quarter.

        GENERAL AND ADMINISTRATIVE EXPENSES.  General and
        -----------------------------------
administrative expenses for the current quarter were $616,263
versus $478,267 for the comparable quarter.  This is an increase
of $137,996 or 28.9%. Approximately two-thirds of the increase in
G&A is due to the Company's decision, in Fiscal 2003, to enter
into a sale/leaseback of its building.  This transaction was
completed in July 2003.  Consequently, approximately $90,000 in
rental expense incurred during the first quarter of Fiscal 2004
did not appear in the results of operations for the first
quarter of Fiscal 2003.  As a result of the sale/leaseback,
general and administrative expense is 30% of revenues in the
current quarter versus 27% in the comparable quarter.

        OTHER INCOME (EXPENSE).  For the current quarter the
        ----------------------
Company had net other income of $30,811 versus a net other
expense of $134,780 for the comparable quarter.  Interest
expense declined due to the early repayment of debt.  The
Company did not utilize its line of credit in the current
quarter. Further, other income (expense) includes recognition of
deferred gain on the sale/leaseback of the Company's
headquarters building in July 2003, of $31,360 in the current
quarter.

        INCOME (LOSS) FROM CONTINUING OPERATIONS.  For the
        ----------------------------------------
current quarter, the Company had income from continuing
operations of $80,625 versus a loss of $(139,468) in the
comparable quarter.

        EBITDA FROM OPERATIONS.  Earnings (loss) before interest,
        ----------------------
taxes, depreciation and amortization on the Company's operations were
$246,387 for the current quarter versus $108,488 for the comparable
quarter.  EBITDA increased by 127.1% as a result of increased sales
and a favorable gross profit margin.

        EBITDA is a non-GAAP financial measure and should not
be used as a substitute for the directly comparable GAAP
financial measure.  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 (loss) from continuing operations to EBITDA
from operations.

                        EBITDA From Operations

                                 Three Months Ended
                                     January 31,
                                  2004         2003
                                  ----         ----

Income (loss) from operations   $107,384    $ (79,785)

Depreciation & amortization      139,003      188,273
                                --------    ---------

EBITDA from continuing
operations                      $246,387    $ 108,488
                                ========    =========


        DISCONTINUED OPERATIONS.  In evaluating TASA's
        ------------------------
strategic alternatives, the Company made the decision to focus
or concentrate on its core business, namely assessment, in the
K-12 marketplace.  Accordingly, in June 2003, the Company
completed the sale of Mildred Elley, its post-secondary school
division, and in July, 2003, the Company completed the sale of
its supplemental instructional unit, Modern Learning Press.
During the first quarter of 2003, the Company took a non-cash
after tax charge of ($156,982) with respect to discontinued
operations.

        NET INCOME (LOSS) AND EARNINGS (LOSS) PER SHARE.  For the
        -----------------------------------------------
current quarter, the Company had net income of $80,625 versus a
loss of ($296,450) in the comparable quarter.  For the current
quarter, the Company earned $0.03 per share versus a loss of
($0.05) from continuing operations in the comparable quarter on a
fully diluted basis. Including the loss from discontinued operations,
the Company had a net (loss) of ($0.11) in the  comparable quarter.

LIQUIDITY AND CAPITAL RESOURCES

        WORKING CAPITAL.  Working capital increased by
        ----------------
$223,199 during the current quarter from $1,670,790 at October
31, 2003, to $1,893,989, at January 31, 2004.  This increase
resulted primarily from increases in accounts receivable and
prepaid expenses and decreases in accrued expenses, as partially
offset by an increase in accounts payable and a decrease in
cash.  The ratio of current assets to current liabilities was
approximately 2.34 to 1 at the end of the current quarter.

        CASH FLOW FROM OPERATING ACTIVITIES.  During the
        ------------------------------------
current quarter, the Company had net cash used in operating
activities of $325,078, as compared to net cash provided by
operating activities of $70,772 in the comparable quarter.  The
increase in cash used in operating activities resulted primarily
from increases in accounts receivable and prepaid expenses.

        CASH FLOW FROM INVESTING ACTIVITIES.  During the
        ------------------------------------
current quarter, the Company had net cash used by investing
activities of $252,978, as compared to $140,679 in the
comparable quarter.  The increase in the cash used in the
current quarter is primarily from increased expenditures in test
development and the acquisition of fixed assets.

        CASH FLOW FROM FINANCING ACTIVITIES.  During the
        ------------------------------------
current quarter, the Company had net cash used in financing
activities of $1,900 as compared to $12,746 during the
comparable quarter.  The cash used in financing activities for
both quarters resulted from the repayment of long-term debt.
The repayments made during the comparable quarter relate
primarily to the monthly repayment of the mortgage on the
Company's headquarters, which was sold in a sale-leaseback
transaction in July 2003.

        Long-term debt, operating leases and other long-term
obligations as of January 31, 2004 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                 $   36,100    $    7,600    $   22,800      $    5,700    $       --
Operating leases                3,402,618       312,233       993,395         712,288     1,384,702
Other long-term
obligations                            --            --            --              --            --


Total obligations              $3,438,718    $  319,833    $1,016,195      $  717,988    $1,384,702

</TABLE>


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

        The preparation of financial statements and related
disclosures in conformity with accounting principles generally
accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in
the unaudited 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 unaudited 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 for
each 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.  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.  Such amortization costs are included in the
costs of goods sold in each of the respective periods. 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.

        In January 2004, the Company granted options to
purchase 73,000 shares of the Company's common stock at an
exercise price of $2.10 per share.  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 required to adopt the
fair value based recognition provisions prescribed under SFAS No.
123, it has elected only to comply with the disclosure
requirements set forth in the statement which includes disclosing
pro forma net income (loss) and earnings (loss) per share as if
the fair value based method of accounting had been applied.  The
fair value of each option grant was estimated on the date of the
grant using the Black-Scholes option-pricing model.

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

                None.

<PAGE>

                TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.

          INDEX TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
               FOR THE FISCAL QUARTER ENDED JANUARY 31, 2004



       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


<PAGE>


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES


<TABLE>
<CAPTION>

                        CONSOLIDATED BALANCE SHEETS

                                                     January 31, 2004      October 31, 2003
                                                     ----------------      ----------------
                                                        (Unaudited)
                                                       (As Restated)         (As Restated)
<S>                                               <C>                   <C>

ASSETS
------

Current assets:

Cash and temporary investments                         $  404,935              $  984,891

Accounts receivable, net of
 allowance for doubtful
 accounts of $7,000 and $7,000,
 respectively                                           1,475,850                 959,987

Inventories                                               522,701                 511,410

Prepaid expenses and other
 current assets                                           408,588                 285,844

Deferred income taxes                                     497,200                 256,017
                                                       ----------              ----------


        Total current assets                            3,309,274               2,998,149

Property, plant and equipment -
 net of accumulated
 depreciation of $275,111 and
 $395,327, respectively                                   376,483                 195,341


Other assets:


Test passage bank and test
 development, net of
 accumulated amortization of
 $2,869,476 and $2,767,504,
 respectively                                           2,183,575               2,153,975

Goodwill                                                  198,159                 198,159

Deferred income taxes                                   1,315,201               1,605,011

Other assets                                              299,475                 396,241
                                                       ----------              ----------



        Total assets                                   $7,682,167              $7,546,876
                                                       ==========              ==========

</TABLE>

See notes to consolidated financial statements.


                              F - 2

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES


<TABLE>
<CAPTION>

                        CONSOLIDATED BALANCE SHEETS

                                                      January 31, 2004     October 31, 2003
                                                      ----------------     ----------------
                                                        (Unaudited)
                                                       (As Restated)         (As Restated)

<S>                                               <C>                   <C>

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


Current liabilities:


  Lines of credit                                       $       --            $       --

  Current maturities of long-term debt                        7,600                7,600

  Accounts payable                                          629,260              131,667

  Accrued expenses                                          652,986            1,062,653

  Deferred gain on sale of
   building - current portion                               125,439              125,439
                                                        -----------           ----------


        Total current liabilities                         1,415,285            1,327,359


Long-term debt, net of
 current portion                                             28,500               30,400

Deferred gain on sale of
 building, net of current portion                         1,055,771            1,087,131
                                                        -----------           ----------


        Total liabilities                                 2,499,556            2,444,890
                                                        -----------           ----------



Commitments and contingencies


Stockholders' equity:

  Preferred stock, $.0001 par
   value, 5,000,000 authorized, 0
   shares issued and outstanding                                 --                   --

  Common stock, $.0001 par value,
   20,000,000 shares authorized,
   2,603,453 shares issued and
   outstanding                                                  260                  260

  Additional paid-in capital                              5,548,668            5,548,668

  Retained (deficit)                                       (366,317)            (446,942)
                                                        -----------           ----------

        Total stockholders' equity                        5,182,611            5,101,986
                                                        -----------           ----------

        Total liabilities and stockholders' equity       $7,682,167           $7,546,876
                                                        ===========           ==========

</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 4          2 0 0 3
                                            -------          -------

                                          (Unaudited)      (Unaudited)
                                         (As Restated)     (As Restated)


Net revenue                               $2,087,794       $1,766,895

Cost of goods sold                         1,089,043          982,358
                                          ----------       ----------

Gross profit                                 998,751          784,537
                                          ----------       ----------


Operating expenses:

  Selling expenses                           275,104          386,055

  General and administrative expenses        616,263          478,267
                                          ----------       ----------


Total operating expenses                     891,367          864,322
                                          ----------       ----------


Income (loss) from operations                107,384          (79,785)


Other income (expense):

  Gain on sale leaseback of building          31,360               --

  Interest expense, net                         (549)        (134,780)
                                          ----------       ----------

Income (loss) before income taxes            138,195         (214,565)

Income taxes (benefit)                        57,570          (75,097)
                                          ----------       ----------

Income (loss) from continuing operations      80,625         (139,468)
                                          ----------       ----------

Income (loss) from discontinued
  operations:

  Loss from operations net of income
   tax (benefit) of $(167,468)                    --         (304,813)
                                          ----------       ----------

  Gain on disposal, net of income
   tax of $98,554                                 --          147,831
                                          ----------       ----------

  Loss from discontinued operations               --         (156,982)
                                          ----------       ----------

Net income (loss)                         $   80,625       $ (296,450)
                                          ==========       ==========




See notes to consolidated financial statements.


                              F - 4

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES


                    CONSOLIDATED STATEMENTS OF OPERATIONS


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

                                            2 0 0 4          2 0 0 3
                                            -------          -------

                                          (Unaudited)      (Unaudited)
                                         (As Restated)     (As Restated)


Weighted average shares outstanding:

  Basic                                    2,603,453        2,594,453

  Diluted                                  2,797,209        2,594,453


Basic earnings (loss) per share

  Continuing operations                   $      .03       $     (.05)

  Discontinued operations                         --       $     (.06)
                                          ----------       ----------

                                          $      .03       $     (.11)
                                          ==========       ==========


Diluted earnings (loss) per share

  Continuing operations                   $      .03       $     (.05)

Discontinued operations                           --             (.06)
                                          ----------       ----------

                                          $      .03       $     (.11)
                                          ==========       ==========



See notes to consolidated financial statements.

                              F - 5

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES



                    CONSOLIDATED STATEMENTS OF CASH FLOWS


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

                                             2 0 0 4          2 0 0 3
                                             -------          -------

                                           (Unaudited)      (Unaudited)
                                          (As Restated)    (As Restated)


OPERATING ACTIVITIES


Net income (loss)                          $   80,625       $ (296,450)

Adjustments to reconcile net
 income (loss) to net cash
 from operating activities:


 Depreciation and amortization                139,003          188,273

 Deferred interest                                 --           29,645

 Deferred income taxes                         48,627         (176,429)

 (Gain) on sale/leaseback of building         (31,360)              --

Changes in operating assets
 and liabilities:

 Accounts receivable                         (515,863)         328,532

 Inventories                                  (11,291)         (41,826)

 Prepaid expenses                            (122,744)        (167,669)

 Net assets from discontinued
  operations                                       --           26,581

 Accounts payable and accrued
  expenses                                     87,925          180,115
                                            ---------        ---------


 NET CASH FLOWS FROM OPERATING
 ACTIVITIES                                  (325,078)          70,772
                                            ---------        ---------


INVESTING ACTIVITIES

 Test passage bank and test
  development                                (131,572)         (81,853)

 Software development costs                   (13,970)            (136)

 Prepublication costs                         (46,510)         (36,724)

 Acquisition of fixed assets                  (60,926)         (21,966)
                                            ---------        ---------



 NET CASH FLOWS FROM INVESTING
 ACTIVITIES                                  (252,978)        (140,679)
                                            ---------        ---------


FINANCING ACTIVITIES

Repayment of long-term debt                    (1,900)         (12,746)
                                            ---------        ---------



See notes to consolidated financial statements.


                              F - 6

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES


                    CONSOLIDATED STATEMENTS OF CASH FLOWS


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

                                             2 0 0 4          2 0 0 3
                                             -------          -------

                                           (Unaudited)      (Unaudited)
                                          (As Restated)    (As Restated)



NET CHANGE IN CASH AND
 TEMPORARY INVESTMENTS                       (579,956)         (82,653)

CASH AND TEMPORARY INVESTMENTS
 AT BEGINNING OF PERIOD                       984,891          182,788
                                            ---------        ---------

CASH AND TEMPORARY INVESTMENTS
 AT END OF PERIOD                            $404,935         $100,135
                                            =========        =========

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

    Interest                                $     549        $ 152,748
                                            =========        =========

    Income taxes                            $  31,382        $  14,935
                                            ---------        =========





See notes to consolidated financial statements.

                              F - 7


<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES


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, 2004 and October 31, 2003, and its consolidated statements of
operations and cash flows for the three months ended January 31, 2004
and 2003.

The consolidated results of operations for the three months ended
January 31, 2004 and 2003 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/A for the fiscal year ended October 31,
2003.

Subsequent to the issuance of the Company's unaudited
consolidated financial statements in its Form 10-QSB for the
fiscal quarter ended January 31, 2004, the Company concluded
that the treatment of the gain from the sale-leaseback
transaction was not consistent with generally accepted
accounting principles (note 3.)  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,
2004 supersede the Company's previously issued unaudited
consolidated financial statements for such period


NOTE 2 -  STOCK OPTIONS
-----------------------

In January 2004, the Company granted options to purchase 73,000
shares of the Company's common stock at an exercise price of $2.10
per share.





                              F - 8


<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES


NOTE 2 -  STOCK OPTIONS (Continued)
-----------------------------------

The Company measures compensation cost in connection with employee
stock option plans using the intrinsic value based method and
accordingly, does not recognize compensation expense for the issuance
of options with an exercise price equal to or greater than the market
price on the date of the grant.  Had the fair value based method been
adopted by the Company, the effect on the net income (loss) and
earnings (loss) per share for the quarters ended January 31, 2004 and
2003 would have been as follows:


                                    For the Quarters ended January 31,

                                          2004                 2003
                                          ----                 ----

Net income (loss) - as reported      $   80,625           $ (296,450)
Less: Total share-
based employee
compensation awards
determined under the
fair-value based
method net of tax(1)                      3,556               14,492
                                     ----------           ----------

Net income (loss) - proforma         $   77,069           $ (310,942)
                                     ==========           ==========

Net income (loss) per share
Basic - as reported                  $      .03           $     (.11)
Basic - proforma                            .03                 (.12)
Diluted - as reported                       .03                 (.11)
Diluted - proforma                          .03                 (.12)


<FN>
       (1) 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: Expected volatility of 109%,
risk free interest rate of 3.00%, and expected lives of 10 years for
the quarter ended January 31, 2004;  expected volatility of 114%,
risk free interest rate of 3.63%, and expected lives of 10 years for
the quarter ended January 31, 2003.
</FN>


NOTE 3 - RESTATEMENT
--------------------

Subsequent to the issuance of Company's unaudited financial
statements in its Form 10-QSB for the fiscal quarter ended
January 31, 2004, 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 - 9

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES


NOTE 3 - RESTATEMENT (Continued)
--------------------------------

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


                                        As Previously Reported    As Restated
As of January 31, 2004:

Deferred income taxes (non-current)          $  830,904            $1,315,201
Deferred gain on sale of
 building  (current)                                 --               125,439
Deferred gain on sale of
 building  (net of current)                          --             1,055,771
Retained earnings (deficit)                     330,596              (366,317)



For the three months ended
 January 31, 2004:

Gain on sale/leaseback of
 building                                    $       --            $   31,360
Income before income taxes                      106,835               138,195
Income taxes                                     44,713                57,570
Income from continuing
operations                                       62,122                80,625
Net income                                       62,122                80,625
Earnings per common share
        Basic                                     $0.02                 $0.03
        Diluted                                   $0.02                 $0.03


                              F - 10


<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