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


                              FORM 10-QSB

(Mark One)

[X]  Quarterly report pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934
                  For the quarterly period ended January 31, 2007

[ ]  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)


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

Yes___X___	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 12, 2007: 3,021,561 shares of Common Stock, par value
$0.0001 per share.


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

<PAGE>

                                PART I


ITEM 1.   FINANCIAL STATEMENTS

          The financial statements for the Company's fiscal quarter
ended January 31, 2007 are attached to this Report, commencing at
F-1.

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

          Except for historical information, the material
contained in this Management's Discussion and Analysis or Plan of
Operations is forward-looking.  For 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, 2006 ("Fiscal 2006") which may cause actual
results to differ materially from those described.

COMPANY BACKGROUND

          Touchstone Applied Science Associates, Inc. (the "Company" or
"TASA") competes exclusively in the assessment marketplace.  With
the advent of No Child Left Behind legislation ("NCLB"), the
Company's Board of Directors and management made the strategic
decision to focus the organization on the fast-growing assessment
segment of the K-12 education market. The Company competes in both
the custom and proprietary product lines of the assessment
marketplace.  Over the past decade, this market has been moving
towards custom testing as a result of NCLB legislation requiring
that student success be measured against specific standards
established by each individual state.  The Company has recognized
this trend and has aligned its long term and short term strategic
initiatives and resources to take advantage of these changes in the
market.  During the fiscal year ended October 31, 2006 ("Fiscal
2006"), the Company decided to minimize its efforts in growing its
proprietary products business, and to devote significant resources
to expanding its custom testing services. The Company implemented
this strategy by acquiring all the outstanding stock of Questar
Educational Systems, Inc. ("Questar") in May 2006.  Questar
provides test delivery, scoring, and score analysis capabilities
for state testing programs.  In addition to the Questar
acquisition, the Company had previously acquired all the
outstanding stock of both Assessment and Evaluation Concepts, Inc.
("AEC") and Achievement Data, Inc. ("ADI") in January 2005 and July
2005, respectively.

          As a result of the Company's recent acquisitions and change in
strategic initiatives, and because of the industry shift from
proprietary to custom work, the Company believes that the
descriptions of its revenues as either custom or proprietary are no
longer representative of the Company's business. Consequently, the
Company is combining categories in the reporting of its assessment
revenues. In order to report clearly the growth of our business for
prior versus current periods, we will be reporting revenues with
Questar and without Questar since that acquisition has a
significant impact on the overall revenues of the Company during
the current reporting period.

          Revenues were $3,074,014 for the fiscal quarter ended January
31, 2006 ("Prior Quarter") and $9,592,013 for January 31, 2007
("Current Quarter").  Current quarter revenues without Questar were
$3,694,973.

          TASA's corporate headquarters are located at 4 Hardscrabble
Heights, P.O. Box 382, Brewster, New York 10509.  The Company's
telephone number is (845) 277-8100 and its facsimile number is
(845) 277-3548.  The Company maintains a website at www.tasa.com.
Information contained on the Company's website is not, and should
not be deemed to be, incorporated into this Report.  As used in
this Report, the terms "Company" and "TASA" refer to Touchstone
Applied Science Associates, Inc. and its subsidiaries, unless the
context otherwise indicates.

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

SUMMARY OF RECENT ACQUISITIONS

          In May 2006 the Company acquired all of the outstanding shares
of Questar. Questar provides test delivery, scoring and score
analysis capabilities to state testing programs and also provides
test material development. Total consideration paid by the Company
was $20,000,000 consisting of $15,000,000 in cash, the issuance of
222,222 shares of Series A-2 Preferred Stock of the Company valued
at $1,000,000, and a $4,000,000 promissory note. Goodwill totaling
$11,677,544 was recorded as a result of the acquisition. The
Company also has valued and recorded $4,860,000 in other intangible
assets identified during the acquisition. The Company has also
agreed to pay additional consideration in 2010 if Questar achieves
certain revenue goals during the three years ending October 31,
2007, 2008, and 2009. The maximum contingent earn out payment is
$12,500,000, of which up to $10,000,000 shall be paid half in cash
and half in Series A-2 Preferred Stock and $2,500,000 shall be
paid, if earned, at the election of the Company, in cash or
additional shares of Series A-2 Preferred Stock, or any combination
thereof, valued at fair market value at the time of issuance. The
Company financed the acquisition through senior debt and a private
equity investment.  The Company entered into a loan agreement (the
"Loan Agreement") with TD Banknorth, N.A. ("Banknorth"), pursuant
to which the Company borrowed a term loan in an aggregate principal
amount of $9,600,000, obtained a revolving line of credit in the
amount of $4,000,000 and had issued on its behalf a standby letter
of credit in the original stated amount of $194,750 against
availability under the revolving line of credit.  The Loan
Agreement contains ongoing financial covenants which are measured
on an annual basis beginning in October 2007.  The term loan was
interest-only for the first six months of the loan (through
November 2006), and thereafter is payable in fifty-four equal
monthly installments of principal and interest on a five-year
amortization schedule.  The Company has entered into an interest
rate swap agreement with Banknorth pursuant to which Banknorth is
paying the Company 250 basis points over the one month USD LIBOR
BBA rate and the Company is paying Banknorth a fixed rate of 7.95%
on a value of $9,600,000 declining concurrently with the term loan.
The interest rate swap agreement expires after thirty months on
December 1, 2008. The term loan balloons on May 30, 2011.  Advances
under the revolving line of credit are based on a borrowing base of
eligible accounts receivable and eligible inventory of the Company
and Questar.  The revolving line of credit is available until April
30, 2008.  Both the term loan and the revolving loan are secured by
the assets of the Company and by the assets of Questar.  The
proceeds from the loans were used to pay a portion of the purchase
price for the shares of Questar and closing costs for the
transaction, and for working capital.

          The Company also entered into a securities purchase agreement
(the "Series A Convertible Preferred Stock Purchase Agreement")
with Camden Partners Strategic Fund III, L.P. and Camden Partners
Strategic Fund III-A, L.P. (collectively, the "Investors"),
pursuant to which the Company issued and sold to the Investors
1,666,667 shares of its Series A-1 Convertible Preferred Stock
("Series A-1 Preferred Stock") valued at $7,500,000, based on a
price of $4.50 per share.  The proceeds from the sale of stock were
used to pay a portion of the purchase price for the shares of
Questar and closing costs for the transaction, with the balance
being retained by the Company for working capital.  Two members of
the Company's Board of Directors, Donald W. Hughes and David L.
Warnock are also principals of each of the Investors.
The Company has been aggressively integrating the operations of
AEC, ADI and Quester into its operations generally since the
respective acquisitions of such companies.

PROPOSED CHANGE OF CORPORATE NAME

          The Company will be changing its corporate name to Questar
Assessment, Inc.  This action was approved on January 24, 2007 by
our Board of Directors, and as of February 5, 2007 by the holders
of a majority of our issued and outstanding voting securities who
have executed a written consent in lieu of a special meeting in
accordance with the relevant sections of the Delaware General
Corporation Law.  Subject to compliance with the requirements of
applicable securities laws and regulations, we expect the change in
our corporate name to become effective in mid- March 2007.

RESULTS OF OPERATIONS

          Effective June 2006 TASA combined the previously separately
reported revenue categories of custom and proprietary since such
distinction is no longer representative of the Company's business.
Additionally, due the inclusion of the Questar revenues TASA will
be discussing Company revenues with Questar and without Questar.
Questar revenues have been included the Company's consolidated
operations since its acquisition in June 2006.  The following table
sets forth such revenues and the percentage change  for fiscal
quarters ended January 31, 2007 and 2006:

          Results of Operations for the Three Month Periods Ended
January 31, 2007 and January 31, 2006


                                     Fiscal Quarter Ended January 31,
                                     --------------------------------

                                     (Dollars in Thousands)
                                     ----------------------

                                                      %
                                      2007         Change        2006
                                      ----         ------        ----
Revenues without Questar            $3,695.0        20%        $3,074.0

Questar Revenues                    $5,897.0        n/a        $     --
                                    --------                   --------

Total Revenues                      $9,592.0       212%        $3,074.0


          The following are statement of income components as a
percentage of total revenues for each period:

                                          Fiscal Quarter Ended January 31,

                                             2007                 2006
                                             ----                 ----

Total Revenues                               100%                 100%
  Gross profit margins                        46%                  36%
Operating expenses:
  Selling expenses                             6%                  11%
  Depreciation and Amortization               10%                   2%
  General & administrative                    36%                  32%
Loss from operations                         (6)%                  (9)%
Other income (expense)                       (2)%                   -%
Loss before income taxes                     (8)%                  (9)%

Income tax benefit                           (3)%                  (3)%
Net Loss from operations                     (5)%                  (6)%







          REVENUES.  The Company's revenues for the three months ended
          --------
January 31, 2007 (the "current quarter") were $9,592,013,
representing a 212% increase, or $6,517,999, from $3,074,014, for
the three months ended January 31, 2006 (the "prior quarter").  The
overall increase was attributable to growth in the custom testing
arena along with the inclusion of Questar which was acquired May
2006. TASA revenue, exclusive of Questar, grew 20% year over year
from $3,074,014 in the prior quarter to $3,694,973 in the current
quarter.  Questar revenue for the current quarter is $5,897,040.

          COST OF GOODS SOLD.  Cost of goods sold increased by 165% or
          ------------------
$3,239,663 from $1,963,479 in the prior quarter to $5,203,142 in
the current quarter.  As a percentage of revenue, cost of goods
represented 54% of revenues in current quarter and 64% of revenues
in the prior quarter.  The dollar increase in cost of goods sold is
primarily attributable to the inclusion of Questar.  Cost of goods
sold as a percentage of revenue will fluctuate from period to
period as project mix changes.  The decrease in cost of good sold
as a percentage of revenue from the prior quarter is primarily
attributable to the gross margins realized from the Questar
revenues in the current quarter.

          GROSS PROFIT.  The Company's gross profit increased by
          ------------
$3,278,336, or 295%, from $1,110,535 in the prior quarter to
$4,388,871 in the current quarter.  The dollar increase in gross
profit is primarily attributable to the inclusion of Questar in the
current quarter however the Company's revenues exclusive of Questar
also realized slightly higher gross margins in the current quarter
compared to the prior quarter.

          SELLING EXPENSES.  The Company's selling expenses increased by
          ----------------
$232,242, or 66%, from $349,717 in the previous quarter to $581,959
in the current quarter.  Selling expense is 6% of revenue in the
quarter versus 11% of revenue in the prior quarter.  The decrease
in selling expenses as a percentage of revenue is primarily
attributable to the inclusion of Questar in the current quarter
which has minimal selling expenses associated with acquiring such
revenue. The Company expects selling expenses as a percentage of
revenue to continue to decrease as it leverages its existing
selling expense base over larger revenue volume.

          DEPRECIATION AND AMORTIZATION.  The Company's depreciation
          -----------------------------
and amortization expense increased by $866,822 or 1403% from
$61,769 in the prior quarter to $928,591 in the current quarter.
The increase in depreciation and amortization is due to two
factors.  First, in the third quarter of Fiscal 2006 the Company
acquired all the tangible assets of Questar; thus included in the
Company's current quarter amortization expense is the expense
associated with such assets. Additionally, the Company recognized
and recorded the value associated with certain intangible assets
during the Questar acquisition (See Note 2 of the accompanying
Condensed Consolidated Financial Statements). These assets
increased the Company's current quarter amortization expense
$654,299 over the prior quarter.

          GENERAL AND ADMINISTRATIVE.  The Company's general and
          --------------------------
administrative ("G&A") expenses for Fiscal 2007 increased
$2,456,600, or 250%, from $983,505 in prior quarter to $3,440,105
in the current quarter.  G&A expense is 36% in the current quarter
versus 32% in the prior quarter. The infrastructure component of
G&A costs increased significantly as a result of the acquisition of
Questar completed in Fiscal 2006.

          LOSS FROM OPERATIONS.  Loss from operations increased by
          --------------------
$277,328, or 97%, from $(284,456) in the prior quarter to a loss of
$(561,784) in current quarter.  Loss from operations for the three
months ended January 31, 2007 included $654,299 of amortization
expense from intangible assets acquired from Questar.  This expense
did not exist in the three months ended January 31, 2006.

          EBITDA FROM OPERATIONS.  EBITDA is defined as earnings before
          ----------------------
interest expense, income tax expense, depreciation and
amortization.  EBITDA is not a measure of financial performance
under accounting principles generally accepted in the U.S., or
GAAP, and should not be considered an alternative to net income, or
any other measure of performance under GAAP, or to cash flows from
operating, investing or financing activities as an indicator of
cash flows or as a measure of liquidity.  EBITDA has its
limitations as an analytical tool, and you should not consider it
is isolation or as a substitute for analysis of our results as
reported under GAAP.  Some of the limitations of EBITDA are:

          *  EBITDA does not reflect our cash used for capital
             expenditures;

          *  Although depreciation and amortization are non-cash
             charges, the assets being depreciated or amortized often
             will have to be replaced and EBITDA does not reflect the
             cash requirements for replacements;

          *  EBITDA does not reflect changes in, or cash requirements
             for, our working capital requirements; and

          *  EBITDA does not reflect the cash necessary to make
             payments of interest or principal on our indebtedness.

          Because of these limitations, EBITDA should not be considered
as a measure of discretionary cash available to us to service our
debt or to invest in the growth of our business.  We compensate for
these limitations by relying on both our GAAP and EBITDA results as
measures of profit and cash flow.  Our management believes that
EBITDA is useful in evaluating our operating performance in
relation to other companies in our industry because the calculation
of EBITDA generally eliminates the effects of financings and income
taxes which items may vary for different companies for reasons
unrelated to overall operating performance.

          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
operations to EBITDA from operations.

                                              EBITDA From Operations
                                                    Three Months
                                                 Ended January 31,

                                             2007                2006
                                             ----                ----
Loss from Operations
  before Interest & Taxes                 $(561,784)           $(284,456)
Depreciation & Amortization*             $1,004,032             $183,816
                                         ----------            ---------
EBITDA from Operations                     $442,248            $(100,640)

          *Included in Depreciation and Amortization above is
amortization expense recorded in Cost of Goods Sold in the
accompanying financial statements. These amounts were $75,441 and
$122,047 for the fiscal quarters ended January 31, 2007 and 2006,
respectively.

          OTHER INCOME (EXPENSE).  Net other income (expense) decreased
          ----------------------
from $11,156 in the prior quarter to $(177,742) in the current
quarter.  As the result of the acquisition of Questar in Fiscal
2006, the Company incurred an additional $242,107 of interest
expense with respect to the debt used to finance the acquisition.

          NET LOSS AND NET LOSS PER SHARE.  The Company had a net loss
          -------------------------------
of $(169,848) for the three months ended January 31, 2006 versus a
net loss of $(455,857) for the three months ended January 31, 2007.
Included in the current quarter net loss is $654,299 of
amortization expense attributable to the intangible asset valuation
of certain Questar assets acquired during Fiscal 2006. The Company
had a net loss per basic and diluted share of $(0.06) in the prior
quarter versus a net loss per basic and diluted share of $(.09) in
the current quarter. The intangible amortization expense for the
current quarter had a negative $(.08) per share effect to earnings
per share. The diluted weighted average shares outstanding were
2,909,738 in the prior quarter versus 4,866,850 in current quarter.

LIQUIDITY AND WORKING CAPITAL

          WORKING CAPITAL.  Working capital decreased by $169,993 during
          ---------------
the current quarter from $2,002,054 at October 31, 2006 to
$1,832,061 at January 31, 2007.  The ratio of current assets to
current liabilities was approximately 1.24 to 1.0 on January 31,
2007 versus 1.23 to 1.0 on October 31, 2006. The decrease in working
capital dollars in the current quarter was primarily the result of a
decrease in the Company's accounts receivable which was partially
offset by a decrease in the amount outstanding on the Company's
revolving credit agreements compared to October 31, 2006.

          CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES.  During
          ----------------------------------------------------
the current quarter, the Company had cash provided by operating
activities of $1,998,685, as compared to $118,193 used in operating
activities in the prior quarter.  The increase in cash provided by
operating activities resulted primarily from a reduction in accounts
receivable during the current quarter however this increase was
partially offset by an increase in net loss of $286,009 compared to
the prior quarter.

          CASH FLOW USED IN INVESTING ACTIVITIES.  During current
          --------------------------------------
quarter, the Company had net cash used in investing activities of
$210,958 as compared to $408,006 in the prior quarter.  The decrease
in cash used in investing activities during the current quarter was
primarily the result of a decrease $189,388 in the amount property
and equipment that the Company purchased during the current quarter
when compared to the prior quarter.

          CASH FLOW USED IN FINANCING ACTIVITIES.  The Company had net
          --------------------------------------
cash used in financing activities of $1,681,482 for the current
quarter as compared to $36,819 used by financing activities for the
prior quarter. The net cash used in financing activities in the
current quarter resulted primarily from the repayment of the
Company's net borrowings on its revolving credit facilities. The
balance outstanding on the Company's revolving credit facility on
January 31, 2007 was $0.

          The Company believes that the funds available under the
operating line of credit agreement along with anticipated cash flows
from operations will be sufficient to fund the cash requirements for
the foreseeable future.

          During the current quarter, options to purchase 100,125 shares
of the Company's Common Stock were exercised resulting in proceeds
totaling $145,004.

Repayments of our contractual obligations as of January 31, 2007 are
summarized as follows:


<TABLE>
<CAPTION>

                                                         Payments Due
                                                         ------------

                                                           13 - 36       37 - 60      More Than 60
                                                           -------       -------      ------------
Obligations               Total          0 - 12 months      months        months         months
-----------               -----          -------------      ------        ------         ------

<S>                 <C>               <C>              <C>             <C>            <C>
Long-term debt          $13,690,865       $1,744,044       $3,814,054     $8,132,767      $     --

Operating
Leases                    6,059,989        1,416,504        2,265,425      1,788,345       589,715

Other long-term
obligations(1)            4,196,319        2,745,945        1,450,374             --            --
                        --------------------------------------------------------------------------

TOTAL
OBLIGATIONS             $23,947,173       $5,906,493       $7,529,853     $9,921,112      $589,715
                        ===========       ==========       ==========     ==========      ========

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


ITEM 3.   CONTROLS AND PROCEDURES

(a)       Disclosure Controls and Procedures

          An evaluation of the Company's disclosures controls and
procedures (as defined in Exchange Act Rules 13a-15 (e) ) was
carried out under the supervision and with the participation of the
Company's Chief Executive Officer and Chief Financial Officer as of
the end of the Company's fiscal quarter ended January 31, 2007.
The Company's Chief Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures as
currently in effect are effective in ensuring that the information
required to be disclosed by the Company is the reports it files or
submits under the Exchange Act is (i) accumulated and communicated
to the Company's management (including the Chief Executive Officer
and Chief Financial Officer) to allow timely decisions regarding
required disclosures, and (ii) recorded, processed, summarized and
reported within the time periods specified in the Commission's
rules and forms.

(b)       Internal Control Over Financial Reporting

          An evaluation of any changes in the Company's internal control
over financial reporting (as defined in Exchange Act Rules 13a-
15(f) and 15d-15(f)), that occurred during the Company's fiscal
quarter ended January 31, 2007, was carried out under the
supervision and with the participation of the Company's Chief
Executive Officer and Chief Financial Officer.  The Company's Chief
Executive Officer and Chief Financial Officer concluded that no
change identified in connection with such evaluation has materially
affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.

PRIOR YEAR RESTATEMENTS:

          During Fiscal 2006 the Company identified a previously
unrecorded liability for employees' earned but unused vacation. The
Company's policy has been to allow employees who have earned
vacation hours as a result of their employment to carry forward a
limited amount of the unused vacation at the Company's fiscal year
end into the subsequent period. If an employee were to terminate
employment with the Company, the value (based upon such employee's
daily pay rate) of any earned but unused vacation would be paid by
the Company in the form of a cash payment to the former employee.
This carry forward provision within the Company's employee benefits
policy creates an accrued liability that, in accordance with
accounting principles generally accepted in the United States,
should be valued and recorded as a liability  during each fiscal
reporting period.  As a result, the Company recorded a liability
valued at $259,866 and $189,141 for the fiscal years ended October
31, 2005 and 2004, respectively. The effect of recording this
liability resulted in a reduction of net income before tax of
$70,725 and $33,602 for Fiscal 2005 and Fiscal 2004, respectively.
On January 16, 2007 the Company concluded that the Company should
restate its consolidated financial statements for Fiscal 2005 and
Fiscal 2004.  The Audit Committee of the Board also concluded that
the financial impact of such change in unused vacation liability on
the Company's unaudited consolidated financial statements for
individual fiscal quarters ended during Fiscal 2005, 2004 and 2003
was immaterial, and therefore no restatement of the interim
financial statements for such periods was deemed necessary.   The
restatements for Fiscal 2005 and Fiscal 2004 do not affect the
Company's revenues from operations for either such fiscal year.
These restatements reflect the inclusion of a previously unrecorded
liability for employees' earned but unused vacation. The restated
consolidated financial statements for Fiscal 2005 and Fiscal 2004
were filed with the SEC on January 26, 2007. The unaudited
condensed and consolidated financial statements for Fiscal 2006 and
2005 included in this Report include a recorded liability for
employees' earned but unused vacation.

          Included in Note 1 of the accompanying unaudited condensed and
consolidated financial statements of the Company's 10-QSB for the
quarter ended January 31, 2007 the Company has disclosed the
financial effect of unused vacation for the quarter ended January
31, 2006.  The previously issued consolidated statements of income
and cash flow for the quarter ended January 31, 2006 have been
restated herein to include the effect of unused employee vacation.
As a result of this inclusion loss before income taxes has
increased in the amount of $16,455 from the previously reported
loss of $256,845 to $273,300.

          As of the end of Fiscal 2004 and Fiscal 2005, the Company's
management, including the CEO, concluded that, because the Company
had not separated the CEO and CFO functions, the Company's
Disclosure Controls were not effective at the end of such fiscal
years 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 Board of Directors
of the Company authorized the hiring of a CFO for the Company. In
June 2006, the Company hired its current CFO thus achieving the
separation of the CEO function and the CFO function.








<PAGE>

                                  PART II

                            OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

          None.

ITEM 2.   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

          None.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          None.

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          None.

ITEM 5.   CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS
          OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

          Certain statements contained in this Report contain "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995.  These are statements that do not
relate strictly to historical or current facts.  Such forward-
looking statements involve known and unknown risks and
uncertainties.  The Company's actual actions or results may differ
materially from those discussed in the forward-looking statements.
These risk factors include, without limitation:

          *  Rapid changes in (i) the technology used to administer
             standardized tests generally or market educational
             materials or (ii) in the policy considerations which
             determine which test will be administered;

          *  Non-renewal of any of the Company's material state
             contracts;

          *  Deficits in state and school budgets;

          *  The loss of any significant customer;

          *  The ability of the Company to compete successfully with
             the other providers of standardized tests (see
             "Description of Business--Competition", above);

          *  The ability of the Company to accommodate any changes in
             government regulation which may impact the marketability
             of its tests (see "Description of Business--Government
             Regulation", above);

          *  The ability of the Company to secure additional financing
             as and when necessary;

          *  The ability of the Company to retain the services of its
             key management and to attract new members of the
             management team;

          *  The ability of the Company to effect and retain
             appropriate patent, copyright and trademark protection of
             its products; and

          *  Any decrease in the market for educational consulting
             services.

          The Company undertakes no obligation to release publicly any
revisions to the forward-looking statements or to reflect events or
circumstances after the date of this Report.

          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.

          *  As a result of the sale-leaseback of the building a
   deferred gain is being 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.

          *  We test goodwill for impairment annually or more
   frequently if changes in circumstances or the occurrence of
   events suggests an impairment exists. The test for impairment
   requires us to make several estimates about fair value, most
   of which are based on total market capitalization as compared
   to the carrying value of our net assets.  If our total market
   capitalization is at or below the carrying value of our net
   assets, it may prompt us to engage a third party valuation
   firm to perform a valuation to further assess whether our
   goodwill or other intangibles are impaired pursuant to SFAS
   142. We consider our goodwill impairment test estimates
   critical due to the amount of goodwill recorded on our balance
   sheet and the judgment required in determining fair value
   amounts.

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

          *  The Company's 2000 Stock Incentive Plan (the "Plan")
   is accounted for in accordance with the recognition and
   measurement provisions of Statement of Financial Accounting
   Standards ("FAS") No. 123 (revised 2004), Share-Based Payment
   ("FAS No. 123"R"), which replaces FAS No. 123. FAS No. 123(R)
   requires compensation costs related to share-based payment
   transactions, including employee stock options, to be
   recognized in the financial statements. In addition, the
   Company adheres to the guidance set forth within Securities
   and Exchange Commission" ("SEC") Staff Accounting Bulletin"
   ("SAB") No. 107, which provides the Staff's views regarding
   the interaction between FAS No. 123(R) and certain SEC rules
   and regulations and provides interpretations with respect to
   the valuation of share-based payments for public companies.

          In adopting FAS No. 123(R), the Company applied the
modified prospective approach to transition. Under the
modified prospective approach, the provisions of FAS No.
123(R) are to be applied to new awards and to awards modified,
repurchased, or cancelled after the required effective date.
Additionally, compensation cost for the portion of awards for
which the requisite service has not been rendered that are
outstanding as of the required effective date shall be
recognized as the requisite service is rendered on or after
the required effective date. The compensation cost for that
portion of awards shall be based on the grant-date fair value
of those awards as calculated for either recognition or pro-
forma disclosures under FAS No. 123.

          Stock option compensation expense in the current quarter
is the estimated fair value of options granted amortized on a
straight-line basis over the requisite service period for the
entire portion of the award.  The Company has not adjusted the
expense by the amount the estimated fair value of options
forfeited as indicated in FAS No. 123(R) since the forfeiture
rate based upon historical data was determined to be
immaterial.

ITEM 6.   OTHER INFORMATION

          None

ITEM 7.

          EXHIBITS

          (a) The following Exhibits are filed as part of this Report:


          3.1   Certificate of Incorporation, dated August
                22, 1991 filed with the Secretary of State
                of the State of Delaware (incorporated
                herein by reference to the exhibit
                contained in the Company's Quarterly Report
                on Form 10-QSB for the fiscal quarter ended
                January 31, 1999)

          3.2   Certificate of Merger dated August 26,
                1992, filed with the Secretary of State of
                the State of Delaware (incorporated herein
                by reference to the exhibit contained in
                the Company's Registration Statement on
                Form SB-2 under the Securities Act of 1933,
                as amended, filed with the Securities and
                Exchange Commission on July 7, 1993)

          3.3   Certificate of Amendment of Certificate of
                Incorporation dated March 4, 1999, filed
                with the Secretary of State of the State of
                Delaware (incorporated herein by reference
                to the exhibit contained in the Company's
                Quarterly Report on Form 10-QSB for the
                fiscal quarter ended January 31, 1999)

          3.4   Amended and Restated By-Laws (incorporated
                by reference to the exhibit contained in
                the Company's Registration Statement on
                Form S-3 (File No. 333-27659) under the
                Securities Act of 1933, as amended, filed
                with the Securities and Exchange Commission
                on May 22, 1997)

          3.5   Amended Certificate of Designations of
                Series A Convertible Preferred Stock filed
                with the Secretary of State of Delaware on
                May 25, 2006 (incorporated by reference to
                the exhibit contained in the Company's
                Current Report on Form 8-K, filed June 6,
                2006, as amended (the "June 2006 8-K")

          4.1   Specimen Certificate evidencing shares of
                Common Stock (incorporated herein by
                reference to the exhibit contained in the
                Company's Registration Statement on Form S-
                3 (File No. 333-75377) under the Securities
                Act of 1933, as amended, filed with the
                Securities and Exchange Commission on March
                31, 1999)

          4.2   Investor Rights Agreement, dated as of
                September 4, 1998, by and among the
                Company, Cahill Warnock Strategic Partners
                Fund, L.P., Strategic Associates, L.P., and
                the Individual Shareholders Named Therein
                (incorporated by reference to the exhibit
                contained in the Company's Current Report
                on Form 8-K, which was filed with the
                Securities and Exchange Commission on
                November 23, 1998 (the "November 1998 8-K"))

          4.3   Registration Rights Agreement, dated as of
                September 4, 1998, by and among the
                Company, Cahill, Warnock Strategic Partners
                Fund, L.P., and Strategic Associates, L.P.
                (incorporated by reference to the exhibit
                contained in the November 1998 8-K)

          4.4   Voting Agreement, dated as of May 31, 2006,
                by and among Camden Partners Strategic Fund
                III, L.P., Camden Partners Strategic Fund
                III-A, L.P. and Touchstone Applied Science
                Associates, Inc. (incorporated by reference
                to the exhibit contained in the June 2006
                8-K)

          4.5   Investor Rights Agreement, dated as of May
                31, 2006, by and among Camden Partners
                Strategic Fund III, L.P., Camden Partners
                Strategic Fund III-A, L.P. and Touchstone
                Applied Science Associates, Inc.
                (incorporated by reference to the exhibit
                contained in the June 2006   8-K)


          4.6   Questar Investor Rights Agreement, dated as
                of May 31, 2006, by and among John Adams,
                David Ihle, Theodore Naegeli, Terry
                Appleman, Mark Budde, MaJeana Hallstrom,
                Greg Lindstrom and Susan Trent, and
                Touchstone Applied Science Associates, Inc.
                (incorporated by reference to the exhibit
                contained in the June 2006 8-K)

          4.7   Warrant Certificate issued to Signal Hill
                Capital Group, LLC dated May 31, 2006
                (incorporated by reference to the exhibit
                contained in the June 2006 8-K)

          31    Certifications by Chief Executive Officer
                and Chief Financial Officer (filed
                herewith)

          32    Certifications by Chief Executive Officer
                and Chief Financial Officer pursuant to 18
                U.S.C. Section 1350, as adopted pursuant to
                Section 906 of the Sarbanes-Oxley Act of
                2002 (filed herewith)


<PAGE>





               INDEX TO CONSOLIDATED FINANCIAL STATEMENTS






                                                             	PAGE
                                                                ----

    CONDENSED CONSOLIDATED BALANCE SHEETS                       F - 2

    CONDENSED CONSOLIDATED STATEMENTS OF INCOME                 F - 4

    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS             F - 6

    NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS        F - 8


<PAGE>








                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES



                    CONDENSED CONSOLIDATED BALANCE SHEETS




                                                January 31,    October 31

                                                   2007            2006
                                                   ----            ----
                                               (Unaudited)

ASSETS
------

Current assets:
  Cash and cash equivalents                     $  895,533           $ 789,288
  Restricted cash                                   21,849              20,307
  Accounts receivable, net of
   allowance for doubtful accounts
   of $33,000                                    6,858,949           8,611,587
  Inventories                                      476,293             545,362
  Prepaid expenses and other current assets        666,942             496,509
  Deferred income taxes                            392,094             364,031
                                               -----------         -----------


      Total current assets                       9,311,660          10,827,084



Property and equipment - net of
  accumulated depreciation of
  $1,262,000 and $1,013,000,
  respectively                                   3,518,193           3,734,227

Other assets:
  Test passage bank and test
   development, net of accumulated
   amortization of $4,580,000 and
   $4,509,000, respectively                      2,389,189           2,335,670
  Non Compete Covenants, net of
   accumulated amortization of
   $70,000 and $44,000, respectively               289,354             315,659
  Customer contracts, net of accumulated
   amortization of $1,005,000 and $377,000,
   respectively                                  3,494,684           4,122,678
  Goodwill                                      13,647,586          13,647,586
  Deferred income taxes                          1,584,984           1,325,379
  Other assets                                     331,209             349,832
                                               -----------         -----------


      Total assets                             $34,566,859         $36,658,115
                                               ===========         ===========











See notes to consolidated financial statements.

                                   F-2

<PAGE>


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

              CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)



                                               January 31,          October 31,
                                                  2007                  2006
                                                  ----                  ----
                                               (Unaudited)

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

Current liabilities:
  Revolving credit agreements                 $         --          $1,774,819
  Current maturities of long-term debt           1,744,044           1,459,502
  Accounts payable                               2,003,145           2,794,301
  Income tax payable                               208,319             204,319
  Accrued expenses                               3,398,653           1,996,161
  Other liabilities                                     --             470,490
  Deferred gain on sale of building -
   current portion                                 125,438             125,438
                                               -----------         -----------


      Total current liabilities                  7,479,599           8,825,030



Long-term debt:
  Long-term debt, less current
   maturities                                   11,946,821          12,405,735
  Interest Rate Swap                                35,960              77,155
  Deferred gain on sale of building,
   net of current portion                          679,458             710,817
                                               -----------         -----------

      Total liabilities                         20,141,838          22,018,737
                                               -----------         -----------


Commitments and contingencies

Stockholders' equity:
  Preferred stock, $.0001 par value,
   5,000,000 shares authorized,
   issued and outstanding
   1,888,888 shares                                    189                 189
  Common stock, $.0001 par value,
   20,000,000 shares authorized,
   3,021,561 and 2,946,047 shares
   issued and outstanding,
   respectively                                        302                 295
  Additional paid-in capital                    15,310,527          15,069,034
  Accumulated deficit                             (885,997)           (430,140)
                                               -----------         -----------


      Total stockholders' equity                14,425,021          14,639,378
                                               -----------         -----------


Total liabilities and stockholders' equity     $34,566,859         $36,658,115
                                               ===========         ===========




See notes to consolidated financial statements.

                                   F-3

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 CONDENDED CONSOLIDATED STATEMENTS OF INCOME
                             FOR THE THREE MONTHS
                        ENDED JANUARY 31, 2007 and 2006
                                  (Unaudited)



                                          2007                    2006
                                          ----                    ----
                                                         (Restated - Note 1)



Net revenue earned                     $9,592,013             $3,074,014

Cost of goods sold                      5,203,142              1,963,479
                                       ----------             ----------

Gross profit                            4,388,871              1,110,535
                                       ----------             ----------

Operating expenses:
  Selling                                 581,959                349,717
  Depreciation and amortization           928,591                 61,769
  General and administrative            3,440,105                983,505
                                       ----------             ----------

Total operating expenses                4,950,655              1,394,991
                                       ----------             ----------

Loss from operations                     (561,784)             (284,456)

Other income (expense):
  Gain on sale of assets/leaseback
   of building                             63,996                31,360
  Interest income                             369                 3,902
  Interest expense                       (242,107)              (24,106)
                                       ----------             ----------

Loss before income taxes                 (739,526)             (273,300)

Income tax benefit                       (283,669)             (103,452)
                                       ----------             ----------

Net Loss                              $  (455,857)           $ (169,848)
                                       ----------             ----------






See notes to consolidated financial statements.

                                    F-4

<PAGE>


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

           CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Continued)
                            FOR THE THREE MONTHS
                     ENDED JANUARY 31, 2007 and 2006
                                 (Unaudited)






                                               2007                2006
                                               ----                ----
                                                           (Restated - Note 1)

Weighted average number
of common and
convertible preferred
shares outstanding:
  Basic                                      4,866,850          2,909,738
  Diluted                                    4,866,850          2,909,738

Net loss per common share:
  Basic                                     $    ( .09)        $     (.06)
  Diluted                                   $    ( .09)        $     (.06)




See notes to consolidated financial statements.

                                   F-5

<PAGE>

























                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
            FOR THE THREE MONTHS ENDED JANUARY  31, 2007 and 2006
                                 (Unaudited)




                                                  2007               2006
                                                  ----               ----
                                                            (Restated - Note 1)

OPERATING ACTIVITIES


Net loss                                     $  (455,857)     $   (169,848)
Adjustments to reconcile net
loss to net
Cash provided by (used in) operating
 activities:
   Depreciation and amortization               1,004,032           183,816
   Deferred income tax benefit                  (287,668)         (112,782)
   Gain on Sale of Equipment                    (32,637)                --
   Gain on sale/leaseback of building           (31,359)           (31,360)
   Stock option expense                           48,791                --
   Interest swap agreement devaluation          (41,195)                --
Changes in operating assets and liabilities:
   Accounts receivable                         1,752,638           451,486
   Inventories                                    69,069           (31,159)
   Restricted Cash                               (1,542)              (949)
   Prepaid expenses and other current
    assets                                     (170,433)            94,178
   Billings in excess of cost                  (470,490)          (109,535)
   Accounts payable and accrued
    expenses                                    615,336           (392,040)
                                             ----------           --------



CASH PROVIDED BY (USED IN)
 OPERATING ACTIVITIES                         1,998,685           (118,193)
                                             ----------           --------

INVESTING ACTIVITIES
  Purchase of property and equipment            (86,483)          (275,871)
  Test passage bank and test
   development                                 (124,475)          (104,105)
  Software development costs                         --            (28,030)
                                             ----------           --------

 CASH USED IN INVESTING ACTIVITIES             (210,958)          (408,006)
                                             ----------           --------








See notes to consolidated financial statements.

                                   F-6


<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
             FOR THE THREE MONTHS ENDED JANUARY 31, 2007 and 2006
                                 (Unaudited)




                                                  2007             2006
                                                  ----             ----
                                                          (Restated - Note 1)

FINANCING ACTIVITIES
  Repayment of long-term debt                   (174,372)          (36,819)
  Proceeds from sale of fixed asset               75,000                --
  Net Repayment on revolving
   credit agreement                           (1,774,819)               --
  Proceeds from the exercise of
   employee stock options                        192,709                --
                                              ----------           -------


CASH FLOWS USED IN FINANCING
  ACTIVITIES                                  (1,681,482)          (36,819)
                                              ----------           -------

NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                           106,245          (563,018)


CASH AND CASH EQUIVALENTS
  AT BEGINNING OF PERIOD                         789,288         1,289,630
                                              ----------         ---------

CASH AND CASH EQUIVALENTS
  AT END OF PERIOD                              $895,533          $726,612
                                              ----------          --------


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

  Interest                                      $312,032          $ 26,336
                                              ==========          ========
  Income taxes                                  $ 43,767          $ 51,218
                                              ==========          ========











See notes to consolidated financial statements.

                                   F-7

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
---------------------------------------------------------

Organization
------------

Touchstone Applied Science Associates, Inc. (the "Company" or
"TASA") conducts business in a single operating segment which is
the assessment marketplace.  With the advent of No Child Left
Behind legislation ("NCLB"), the Company's Board of Directors and
management made the strategic decision to focus the organization on
the fast-growing assessment segment of the K-12 education market.
The Company competes in both the custom and proprietary product
lines of the assessment marketplace.  Over the past decade, this
market has been moving towards custom testing as a result of NCLB
legislation requiring that student success be measured against
specific standards established by each individual state.  The
Company has recognized this trend and has aligned its long term and
short term strategic initiatives and resources to take advantage of
these changes in the market. During the fiscal year ended October
31, 2006 ("Fiscal 2006"), the Company decided to minimize its
efforts in growing its proprietary products business, and to devote
significant resources to expanding its custom testing services. The
Company implemented this strategy by acquiring all the outstanding
stock of Questar Educational Systems, Inc. ("Questar") in May 2006.
Questar provides test delivery, scoring, and score analysis
capabilities for state testing programs.  .  The Company operates
through different subsidiaries, but management believes that all
such subsidiaries constitute a single operating unit.


Basis of Presentation and Principles of Consolidation
-----------------------------------------------------

The accompanying unaudited condensed consolidated financial
information has been prepared by the Company in accordance with
accounting principles generally accepted in the United States of
America for the preparation of interim financial information and
the instructions to Form 10-QSB and Article 10 of Regulation S-X of
the Securities and Exchange Commission (SEC). Accordingly, it does
not include all of the information and notes required by accounting
principles generally accepted in the United States for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary
for a fair representation have been included. Financial results for
the three month periods ended January 31, 2007 and 2006 are not
necessarily indicative of the results that may be expected for the
year ended October 31, 2007 and 2006. The balance sheet at October
31, 2006 has been derived from the audited condensed consolidated
financial statements at that date but does not include all of the
information and footnotes required by accounting principles
generally accepted in the United States for complete financial
statements. This financial information should be read in
conjunction with the consolidated financial statements and notes
included in the Company's Annual Report on Form 10-KSB for the year
ended October 31, 2006

The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant inter-
company accounts and transactions have been eliminated in
consolidation.

                                   F-8

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)


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

Restatement
-----------

The unaudited consolidated financial statements included in this
Report for the Company's fiscal quarter ended January 31, 2006
have been restated and replace the Company's previously issued
unaudited consolidated financial statements for such quarter.

Subsequent to the issuance of the Company's audited consolidated
financial statements in its Form 10-KSB for the fiscal years ended
October 31, 2005 and 2004 but before the conclusion of the fiscal
year ended October 31, 2006, the Company concluded that it had
previously omitted an accrued liability recognizing the effect of its
employee's earned but unused vacation and that such omission was not
consistent with generally accepted accounting principles.  The
Company concluded that it was necessary to restate such financial
statements. The restatement did not affect previously reported
revenues for the restated period or future periods.

	A summary of the significant effects of the restatement is as
follows:
<TABLE>
<CAPTION>
                                       As Previously    As previously
                                       Reported         Reported            Restated        Restated
                                       2005             2004                2005            2004
                                       -------------    -------------       --------        --------
As of October 31,
-----------------
<S>                                <C>               <C>                 <C>             <C>
Accrued employee vacation              $ 0              $ 0                 $259,866        $189,141
Retained earnings                      850,625          375,661             694,705         262,176

For the fiscal year ended
 October 31,
-------------------------

Income before income taxes             799,032          1,415,051           728,307         1,381,449
Income taxes                           324,068          592,448             295,778         579,008
Income from continuing operations      474,964          822,603             432,529         802,441
Net Income                             474,964          822,603             432,529         802,441
Net Income per common share
        Basic                          .17              .31                 .15             .31
        Diluted                        .16              .29                 .14             .28

</TABLE>
                                       As Previously
                                       Reported                   Restated
                                       2006                       2006
                                       ----                       ----

For the quarter ended January 31;
---------------------------------
Accrued employee vacation              $ 0                        $276,321
Retained earnings                      690,649                    524,856
 Loss before income taxes              (256,845)                  (273,300)
Income tax benefit                     (96,870)                   (103,452)
Net loss                               (159,975)                  (169,848)
Net loss per common share
        Basic                          (.05)                      (.06)
        Diluted                        (.05)                      (.06)


                                    F-9

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)


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

Goodwill
--------

Goodwill is not amortized but is subject to impairment tests at
least annually.  The Company also reviews the carrying amount of
goodwill for impairment if an event occurs or circumstances
change that would indicate the carrying amount may be impaired.
The Company performed the annual test at October 31, 2006 and
determined there to be no impairment of the goodwill.  The net
carrying value of goodwill at January 31, 2007 and October 31,
2006 was $13,647,586.


Other Intangible Assets
-----------------------

In accordance with SFAS 141, the Company has recognized
separately from goodwill the acquisition-date fair value of
certain intangible assets acquired from Questar on May 31,
2006 that are identifiable.   The following are the net
book values as of January 31, 2007 and October 31, 2006 for
the Company's intangible assets:

<TABLE>
<CAPTION>
				Net Book
                                Value October   Net Book Value       Intangible
                                31, 2006        January 31, 2007     Asset life (months)
                                -------------   ----------------     -------------------
<S>                          <C>             <C>                  <C>
Non Compete covenants           $316,000        $289,000             41 months

Customer contracts              $4,123,000      $3,495,000           1 - 4 years

</TABLE>

A summary of the current period and future annual amortization expense
associated with the intangible assets acquired from Questar is as follows
(see Note 2):

                               Non Compete      Customer
                                Covenants       Contracts
                        -------------------     ---------
	Fiscal 2007	Q2	$26,250		$628,000
			Q3	$26,250		$628,000
			Q4	$26,250		$628,000


        Fiscal 2008             $105,000        $854,000
        Fiscal 2009             $105,000        $487,000
        Fiscal 2010             $    -          $270,000

                                   F-10

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)



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

Cash and Cash Equivalents
-------------------------

Cash and cash equivalents include all cash balances on hand and
short-term, highly liquid investments with original maturities of
three months or less. The Company maintains its cash in bank
accounts, which at times, exceed Federally insured limits. The
Company has not experienced any losses in such accounts.


Accounts Receivable and Allowance of Doubtful Accounts
------------------------------------------------------

Accounts receivable are carried at original invoice amount less an
estimate made for doubtful receivables based on a review of all
outstanding amounts on a quarterly basis. Management determines the
allowance for doubtful accounts by regularly evaluating individual
customer receivables and considering a customer's financial
condition and credit history, and current economic conditions.
Accounts receivable are written off when deemed uncollectible.
Recoveries of accounts receivable previously written off are
recorded when received.

Accounts receivable consist of the following:


                                      January 31,              October 31,

                                         2007                      2006
                                         ----                      ----



      Billed                          $4,940,671                $8,611,587
      Unbilled (costs in
        excess of billings)            1,918,278                        --
                                      ----------                ----------

                                      $6,858,949                $8,611,587
                                      ==========                ==========

The Company's revenues from the performance of assessment,
consulting and psychometric services under long term contracts are
recognized on the percentage of completion basis pursuant to the
provisions of Statement of Position No. 81-1, "Accounting for
Performance of Construction-type and Certain Production-type
Contracts" and Accounting Research Bulletin ("ARB") No. 45, "Long-
term Construction-type Contracts".  For each contract, the Company
compares the costs incurred in the course of performing such
contracts during a reporting period contract and recognizes a
proportionate amount of revenue for such period.  As of January 31,
2007, the Company reported costs in excess of billings of
$1,918,278.  As of October 31, 2006, the Company reported billings
in excess of costs of $470,490.

Inventories
-----------

Inventories based on the nature of the Company's operations consist
solely of finished goods.  These are stated at the lower of cost
(first-in, first-out method) or market.  At January 31, 2007, the
Company appropriately provided inventory reserves of $146,000
regarding impaired projects and other un-saleable inventory.

                                   F-11

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)

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

Property and Equipment
----------------------

Property and equipment are stated at cost.  The Company provides
for depreciation generally on an accelerated method (double-
declining balance) for personal property and on a straight line
method for real property, by charges to income at rates based upon
estimated recovery periods as follows:

     Leasehold improvements                  10 years (shorter of lease
                                               term or useful life)
     Furniture, fixtures and equipment       5 to 7 years


Income Taxes
------------

Income taxes are reported based upon Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes". The Company files a consolidated Federal income tax return
with its subsidiaries. Deferred taxes are provided on an asset and
liability method whereby deferred tax assets are recognized for
deductible temporary differences and operating loss and tax credit
carry forwards, and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities
and their tax basis. Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more than
likely than not that some portion or all of the deferred tax assets
will not be realized. Deferred tax assets and liabilities are
adjusted for the effects of changes in the tax laws and rates on
the date of enactment.


Other Liabilities
-----------------

As of October 31, 2006, other liabilities consist of billings in
excess of costs in the amount of $470,490.


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

Accrued expenses consist of the following:


                                         January 31,            October 31,
                                         ----------------------------------
                                            2007                    2006
                                            ----                    ----



Compensation                             $1,431,955            $ 1,080,174
Benefit Plans                               185,717                352,647
Interest                                     85,756                155,681
Other                                     1,695,225                407,659
                                         ----------            -----------

                                         $3,398,653            $ 1,996,161
                                         ==========            ===========


                                   F-12

<PAGE>


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)



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

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

The Company has a 2000 Stock Option Plan (the "Plan"). Effective
November 1, 2005, the Company's Plan was accounted for in accordance
with the recognition and measurement provisions of Statement of
Financial Accounting Standards ("FAS") No. 123 (revised 2004),
Share-Based Payment ("FAS No. 123(R)"), which replaced FAS No. 123,
Accounting for Stock-Based Compensation, and superseded Accounting
Principles Board Opinion ("APB") No. 25, Accounting for Stock Issued
to Employees, and related interpretations. FAS No. 123(R) requires
compensation costs related to share-based payment transactions,
including employee stock options, to be recognized in the financial
statements. In addition, the Company adheres to the guidance set
forth within Securities and Exchange Commission ("SEC") Staff
Accounting Bulletin ("SAB") No. 107, which provides the Staff's
views regarding the interaction between SFAS No. 123(R) and certain
SEC rules and regulations and provides interpretations with respect
to the valuation of share-based payments for public companies.

In adopting FAS No. 123(R), the Company applied the modified
prospective approach to transition. Under the modified prospective
approach, the provisions of FAS No. 123(R) are applied to new awards
and to awards modified, repurchased, or cancelled after the required
effective date. Additionally, compensation cost for the portion of
awards for which the requisite service has not been rendered that
were outstanding as of the required effective date are recognized as
the requisite service is rendered on or after the required effective
date. The compensation cost for that portion of awards is based on
the grant-date fair value of those awards as calculated for either
recognition or pro-forma disclosures under FAS 123.


















                                   F-13


<PAGE>





                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)


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


The Company's results for the three months ended January 31, 2007
include stock option compensation expense totaling $48,791. No
significant amount of stock option compensation expense was noted
for the three months ended January 31, 2006.  Such amounts have been
included in the Consolidated Statements of Operations within general
and administrative expenses.  The Company recognized related tax
benefits associated with share-based compensation arrangements
totaling approximately $20,000 during the three months end January
31, 2007.

Stock option compensation expense is the estimated fair value
of options granted amortized on a straight-line basis over
the requisite service period for the entire portion of the award.
The Company has not adjusted the expense by the amount the
estimated fair value of options forfeited as indicated in FAS No.
123(R) since the forfeiture rate based upon historical data was
determined to be immaterial.

The fair value of options at the date of grant was estimated using
the Black-Scholes option pricing model. During 2006, the Company
took into consideration guidance under FAS No. 123(R) and SEC Staff
Accounting Bulletin No. 107 (SAB 107) when reviewing and updating
assumptions. The expected volatility is based upon historical
volatility of our stock and other contributing factors. The expected
term is based upon observation of actual time elapsed between date
of grant and exercise of options for all employees.  Previously such
assumptions were determined based on historical data..

The assumptions made in calculating the fair values of options
are as follows:




                                                January 31, 2007
                                                ----------------

Expected term (in years)                                10
Expected volatility                                    125%
Expected dividend yield                                  0%
Risk-free interest rate                               4.88%






                                   F-14


<PAGE>







                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)



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

The Company granted 25,500 options to purchase shares of the Company's
Common Stock under the 2000 Plan during the three months ended January
31, 2007 at an exercise price of $7.28 per share. There were no
options granted during the three months ended January 31, 2006.

The following table represents stock options granted, exercised, and
forfeited for all Common Stock option plans during the three months
ended January 31, 2007:

<TABLE>
<CAPTION>

                                                Weighted        Weighted
                                                Average         Average
						Exercise	Remaining
				Number of 	Price per	Contractual
                                Shares          Share           Term            Intrinsic Value
                                ---------       ---------       -----------     ---------------
<S>                        <C>               <C>             <C>             <C>
Stock Options
Outstanding at
October 31, 2006		806,103		$2.96

Granted                          25,500         $7.28

Exercised                      (100,125)        $2.69                                 $  382,703
                               --------         -----                                 ----------
Outstanding at
January 31, 2007                731,478         $3.15           6 years, 6 months     $2,782,035

Exercisable at
January 31, 2007                550,978         $2.63           6 year, 2 months      $2,379,075

</TABLE>

Cash received from the exercise of all stock options during the
three months ended January 31, 2007 was $145,004.

As of January 31, 2007 there was $502,819 of total unrecognized
compensation cost, net of estimated forfeitures, related to all
unvested stock options and shares, which is expected to be
recognized over a weighted average period of approximately 3 years.

Loss per share
--------------

Loss per share for each of the quarters ended January 31, 2007 and
2006 was computed by dividing net loss by the weighted average
number of common and common equivalent shares outstanding and in
accordance with SFAS No. 128, "Earnings Per Share".  The total
potential dilutive common shares excluded from this computation due
to their anti-dilution effect, totaled 978,881 and 804,213 for the
three months ended January 31, 2007 and 2006, respectively. Because
the Company had a loss in the current and comparable quarters ended
January 31, 2007 and 2006 diluted shares were the same as basic
shares since the effect of options and warrants would have been
anti-dilutive.


                                   F-15

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)



NOTE 2 - ACQUISITIONS
---------------------

Questar Educational Systems, Inc.
---------------------------------

On May 31, 2006 the Company acquired all of the outstanding shares
of Questar. Total consideration paid by the Company was $20,000,000
consisting of $15,000,000 in cash, the issuance of 222,222 shares
of Series A-2 Preferred Stock of the Company valued at $1,000,000
and a $4,000,000 promissory note.  The Company has also agreed to
pay additional consideration in 2010 if Questar achieves certain
revenue goals during the three fiscal years ending October 31,
2007, 2008 and 2009.  The maximum contingent earn out payment is
$12,500,000, of which up to $10,000,000 shall be paid half in cash
and half in Series A-2 Preferred Stock and $2,500,000 shall be
paid, if earned, at the election of the Company, in cash or
additional shares of Series A-2 Preferred Stock, or any combination
thereof, valued at fair market value at the time of issuance.

The Company financed the acquisition of Questar through senior debt
and a private equity investment.  The Company entered into a loan
agreement (the "Loan Agreement") with TD Banknorth, N.A.
("Banknorth"), pursuant to which the Company borrowed a term loan
in an aggregate principal amount of $9,600,000, obtained a
revolving line of credit in the amount of $4,000,000 and had issued
on its behalf a standby letter of credit in the original stated
amount of $194,750 against availability under the revolving line of
credit.  The Loan Agreement contains ongoing financial covenants
which are measured on an annual basis beginning in Fiscal 2007.
The term loan is interest-only for the first six months of the
loan, and then is payable in fifty-four equal monthly installments
of principal and interest on a five year amortization schedule.
The Company has entered into an interest rate swap agreement with
Banknorth pursuant to which Banknorth is paying the Company 250
basis points over the one month USD LIBOR BBA rate and the Company
is paying Banknorth a fixed rate of 7.95% on a value of $9,600,000
declining concurrently with the term loan. The interest rate swap
agreement expires after thirty months on December 1, 2008. The term
loan balloons on May 30, 2011.  Advances under the revolving line
of credit are based on a borrowing base of eligible accounts
receivable and eligible inventory of the Company and Questar.  The
revolving line of credit is available until April 30, 2008.  Both
the term loan and the revolving loan are secured by the assets of
the Company and by the assets of Questar.  The proceeds from the
loans were used to pay a portion of the purchase price for the
shares of Questar and closing costs for the transaction, and for
working capital.







                                   F-16


<PAGE>


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)


NOTE 2 - ACQUISITIONS (continued)
---------------------

The Company also entered into a securities purchase agreement (the
"Series A Convertible Preferred Stock Purchase Agreement") with
Camden Partners Strategic Fund III, L.P. and Camden Partners
Strategic Fund III-A, L.P. (collectively, the "Investors"),
pursuant to which the Company issued and sold to the Investors
1,666,667 shares of its Series A-1 Convertible Preferred Stock
("Series A-1 Preferred Stock") (valued at $7,500,000, based on a
price of $4.50 per share).  The proceeds from the sale of stock
were used to pay a portion of the purchase price for the shares of
Questar and closing costs for the transaction, with the balance
being retained by the Company for working capital.  Two members of
the Company's Board of Directors, Donald W. Hughes and David L.
Warnock are also principals of each of the Investors.

Management allocated the purchase price of Questar to the assets
acquired with the assistance of third party independent appraisals
of all intangible assets and equipment acquired. The Company
allocated $2,990,000 to equipment which is a step up of $1,400,000
from its pre-acquisition book value.  The Company assigned a value
of $360,000 to the non-compete covenant agreements that were signed
by the selling shareholders of Questar. The covenants will expire
as of October 31, 2009. The Company is amortizing the value
assigned to this intangible asset on a straight line basis over its
expected life (41 months). Additionally, the Company has estimated
that the customer contracts acquired from Questar are valued at
$4,500,000.  This amount is being amortized on an accelerated basis
in relation to annual value of discounted cash flow the Company
expects to receive over the life of the contract. With the
exception of the non-compete covenants and customer contracts there
were no other identifiable intangible assets; therefore, the
balance of the purchase price of $11,678,044 was allocated to
goodwill.

The operations of Questar have been included in the consolidated
financial statements since the date of acquisition, June 1, 2006.
The Company has entered into employment agreements for an initial
twenty-four month term with certain members of the management of
Questar.  Such employment agreements with the Questar management
team include non-competition covenants and proprietary rights
agreements.

The following table summarizes the estimated fair value of the
assets acquired and liabilities assumed at the date of acquisition:

Current assets - including cash of
  ($1,443,772)                                         $ 1,544,363
Accounts receivable                                      3,432,911
Property and equipment                                   2,989,530
Non compete covenants                                      359,500
Customer contracts                                       4,500,000
Goodwill                                                11,678,044
Total assets acquired                                   24,504,348
Current liabilities                                     (3,477,274)
                                                       -----------
Total liabilities                                       (3,477,274)
                                                       -----------
Net assets acquired                                    $21,027,074
                                                       ===========


                                   F-17

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)


NOTE 2 - ACQUISITIONS (continued)
---------------------


The following unaudited pro forma income statement data presents
the consolidated results of operations of the Company for the
quarter ended January 31, 2006 had the acquisitions of Questar
occurred at the beginning of the earliest period presented:


                                        Pro forma
                                        ---------
Net revenue                            $8,302,586
Net loss                               $  (85,844)
Net loss per share                     $     (.02)

The above pro forma information does not purport to be indicative of
what would have occurred had the acquisitions been made as of such
date or the results which may occur in the future.


NOTE 3 - REVOLVING CREDIT AGREEMENTS
------------------------------------

The Company has a $4,000,000 revolving credit agreement which
expires on April 30, 2008 if not renewed. Advances are due on
demand, are secured by substantially all the assets of the
Company, and are subject to a defined borrowing base that shall
not exceed the sum of 80% of eligible accounts receivables and
50% of eligible inventory. The Company has secured under the
revolving credit agreement an 'Irrevocable Letter of Credit' of
$198,750 that reduces the total line available to $3,801,250.
Interest on the advances is at 2.5% above the LIBOR and is due
monthly. Advances of $1,774,819 were outstanding at October 31,
2006. The revolving credit agreement contains ongoing financial
covenants which are measured on an annual basis beginning in
October 2007. No advances were outstanding at January 31, 2007.

In Fiscal 2006, the Company secured an equipment financing line of
credit with its bank in the amount of $1,000,000.  The line is
secured by the equipment purchased through the line of credit.  At
both January 31, 2007 and October 31, 2006 the credit line had no
amounts outstanding.














                                   F-18


<PAGE>



                                 SIGNATURES

      In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                   TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.

March 20, 2007                     By:/s/ ANDREW L. SIMON
                                      --------------------------
                                      Andrew L. Simon
                                      President and Chief Executive Officer




March 20, 2007                     By:/s/ JAMES J. WILLIAMS
                                      --------------------------
                                      JAMES J. WILLIAMS
                                      CHIEF FINANCIAL OFFICER

      In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.

     Signature                        Title                   Date
     ---------                        -----                   ----

/s/ ANDREW L. SIMON            Director and Chairman       March 20, 2007
-------------------------
    Andrew L. Simon                of the Board

/s/ MICHAEL D. BECK                  Director              March 20, 2007
-------------------------
    Michael D. Beck

/s/ STEVEN R. BERGER                 Director              March 20, 2007
-------------------------
    Steven R. Berger

/s/ DONALD W. HUGHES                 Director              March 20, 2007
-------------------------
    Donald W. Hughes

/s/ CHRIS L. NGUYEN                  Director              March 20, 2007
-------------------------
    Chris L. Nguyen

/s/ LINDA G. STRALEY                 Director              March 20, 2007
-------------------------
    Linda G. Straley

/s/THOMAS STRUZZIERI                 Director              March 20, 2007
-------------------------
   Thomas Struzzieri

/s/ DAVID L. WARNOCK                 Director              March 20, 2007
-------------------------
    David L. Warnock

/s/ THEODORE NAEGELI                 Director              March 20, 2007
-------------------------
    Theodore Naegeli