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


                                     FORM 10-QSB

(Mark One)

  [X]  Quarterly report under Section 13 or 15(d) of the Securities Exchange
       Act of 1934
                  For the fiscal quarter ended January 31, 2008

  [ ]  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     1-16689
                         ----------------


                             QUESTAR ASSESSMENT, INC.
----------------------------------------------------------------------------
                 (Name of Small Business issuer in its charter)


                Delaware                                 13-2846796
-----------------------------------------      -----------------------------
     (State or Other Jurisdiction of                  (I.R.S. Employer
      Incorporation or Organization)                 Identification No.)

   4 Hardscrabble Heights, P.O. Box 382,
          Brewster, New York                                10509
-----------------------------------------      -----------------------------
 (Address of Principal Executive Offices)                 (Zip Code)

                                  (845) 277-8100
----------------------------------------------------------------------------
                  (Issuer's Telephone Number, including Area Code)

        Securities registered under Section 12(b) of the Exchange Act: None.
                                                                       ----
        Securities registered under Section 12(g) of the Exchange Act:


                                 Title of Class
                                 --------------

                         Common Stock, $.0001 par value
                         ------------------------------

      Check whether the issuer is not required to file reports pursuant
to Section 13 or 15(d) of the Exchange Act. [  ]

      Check whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days.
Yes___X___	No ________

      Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).  Yes ______  No ___X___


                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

     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 1, 2008,
3,133,046 shares of Common Stock, par value $.0001 per share.


     Transitional Small Business Disclosure Format (check one):
Yes _______  No ___X___


<PAGE>

                                 PART I

ITEM 1. FINANCIAL STATEMENTS

        The Company's financial statements for the three months ended
January 31, 2008 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.

OVERVIEW

        Questar Assessment, Inc. (the "Company") 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
state-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. ("QES") in
May 2006.  QES provides test delivery, scoring, and score analysis
capabilities for state testing programs. This acquisition has
allowed the Company to expand its service offerings in the large-
scale assessment industry.

        As a result of the QES acquisition, the change in the
Company's strategic initiatives and the industry shift from
proprietary to custom work, the Company believes that the
description of its revenues as either custom or proprietary no
longer fully represents the Company's business. Consequently, the
Company combined categories in the reporting of its assessment
revenues.  Additionally, beginning with the first reporting period
that included the QES acquisition, which occurred in the third
quarter of Fiscal 2006, the Company has been reporting revenues
with QES and without QES in this section since that acquisition had
a significant impact on the overall revenues for the Company.
However, effective with the fiscal quarter ended January 31, 2008,
and for all future periods, the Company will not be separately
reporting in this section revenues with and without QES.  The
Company has determined that because of the completed integration of
staff personnel, brands, systems and management that such
separation of revenue is no longer meaningful.

        The Company'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.questarai.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 term "Company" refers to
Questar Assessment, Inc. and its subsidiaries, unless the context
otherwise indicates.

ACQUISITION OF QES

        In May 2006, the Company acquired all of the outstanding
shares of QES.  QES 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
$11,229,541 was recorded as a result of the acquisition. The
Company also has valued and recorded $4,500,000 in intangible
assets related to customer contracts acquired and $360,000 in non-
competition covenants identified during the acquisition.  The
Company has also agreed to pay additional consideration in Fiscal
2010 if QES 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, if earned, 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, 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.
Advances under the revolving line of credit are based on a
borrowing base of eligible accounts receivable and eligible
inventory of the Company and QES.  The revolving line of credit is
available until April 30, 2008, if not renewed.  Both the term loan
and the revolving loan are secured by the assets of the Company.
The proceeds from the loans were used to pay a portion of the
purchase price for the shares of QES and related 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 QES
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.

RESULTS OF OPERATIONS

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

                                        Fiscal Quarter Ended January 31,
                                        --------------------------------
                                            2008               2007
                                            ----               ----

     Total Revenues                         100%               100%
       Gross profit margins.............     43%                46%
     Operating expenses:
       Selling expenses.................     11%                 6%
       Depreciation and amortization....     10%                10%
       General & administrative.........     68%                36%
                                            ---                ---
     Loss from operations...............    (46)%               (6)%
     Other expense......................     (8)%               (2)%
                                            ---                ---
     Loss before income tax benefit.....    (54)%               (8)%
     Income tax benefit.................    (21)%               (3)%
                                            ---                ---
     Net loss from operations...........    (33)%               (5)%


        REVENUES.  The Company's revenues for the three months ended
        --------
January 31, 2008 (the "current quarter") were $4,940,928
representing a 48% decrease, or $4,651,085, from $9,592,013 for the
three months ended January 31, 2007 (the "prior quarter").  The
decrease is primarily related to the completion, during Fiscal
2007, of two large contracts for custom project-related work that
were acquired from QES in Fiscal 2006.  The Company has been
aggressively engaging in significant business development
activities to replace the revenue from such contracts.  Although
the Company has obtained new contracts, related revenue to be
earned has not yet offset the loss of the revenues previously
earned in the comparable prior quarter from the contracts that were
concluded.

        COST OF GOODS SOLD.  Cost of goods sold decreased by 46%, or
        ------------------
$2,383,207, from $5,203,142 in the comparable prior quarter to
$2,819,935 in the current quarter.  As a percentage of revenue,
cost of goods represented 57% of revenues in current quarter and
54% of revenues in the comparable prior quarter.  The dollar
decrease in cost of goods is primarily related to the conclusion in
Fiscal 2007 of two large contracts.

        GROSS PROFIT.  The Company's gross profit decreased by
        ------------
$2,267,878, or 52%, from $4,388,871 in the comparable prior quarter
to $2,120,993 in the current quarter.  The gross profit margin was
46% in the comparable prior quarter and 43% in the current quarter.
The overall dollar decrease in gross profit dollars is primarily
the result of the conclusion of two contracts as outlined in the
revenues and cost of goods sold sections above.  As the Company
continues to bid and win larger custom assessment projects, the
gross margin as a percentage of revenue may be less than the
Company has historically realized, though the net gross profit
amounts may be larger.  Gross margins from period to period may
vary as the mix of the type and size of projects change.  In
addition, during the course of a project's life, scope changes in
the project may affect the overall total costs associated with such
project and may affect the profit margin ultimately realized by the
Company on such project.

        SELLING EXPENSES.  The Company's selling expenses decreased by
        ----------------
$49,494, or 9%, from $581,959 in the comparable prior quarter to
$532,465 in the current quarter.  Selling expenses represented 6%
of revenues in the comparable prior quarter compared to 11% in the
current quarter.  The increase as a percentage of revenue was the
result of the Company earned significantly lower revenues in the
current quarter versus the comparable prior quarter.  The amount of
dollars the Company spends on sales-related activities is primarily
attributable to staffing costs, both internally and in the form of
consultants, agents and representatives engaged by the Company in
particular strategic markets.  The labor cost associated with
staffing is not variable to revenue on a quarter-by-quarter basis.
The Company expects to continue to invest, when appropriate, in
selling-related activities in order to drive future revenue growth.


        DEPRECIATION AND AMORTIZATION.  The Company's depreciation and
        -----------------------------
amortization expense decreased by $447,401, or 48%, from $928,591
in the comparable prior quarter to $481,190 in the current quarter.
The decrease in depreciation and amortization is primarily the
result of reduced amortization expense in the current quarter
versus the comparable prior quarter associated with certain
intangible assets acquired in the QES acquisition.  These assets
will be fully amortized in Fiscal 2009.  The amortization expense
for these assets in the comparable prior quarter was $654,299
compared to $184,400 in the current quarter.

Future Amortization Expense of QES Intangible Assets (through Fiscal 2009)


                     Non-Competition     Customer
                     ---------------     --------
                        Covenants        Contracts         Total
                        ---------        ---------         -----

Fiscal 2008    Q2        $26,305         $158,095         $184,400
               Q3        $26,305         $158,905         $184,400
               Q4        $26,305         $158,905         $184,400

Fiscal 2009    Q1        $26,305         $100,700         $127,005
               Q2        $26,305         $100,700         $127,005
               Q3        $26,305         $100,700         $127,005
               Q4        $26,305         $100,700         $127,005


        GENERAL AND ADMINISTRATIVE.  The Company's general and
        --------------------------
administrative ("G&A") expenses for the current quarter decreased
$38,567, or 1%, from $3,440,105 in the comparable prior quarter to
$3,401,538 in the current quarter.  G&A expense was 68% of revenues
in the current quarter versus 36% in comparable prior quarter. The
overall amount expended on G&A costs in the current quarter
compared to the comparable prior quarter was essentially flat as
the Company has undertaken various cost efficiency initiatives
since the QES acquisition to leverage all staff and personnel
within the organization.  G&A, as a percentage of revenue,
increased as a result of a substantial decrease in current quarter
revenues when compared to the comparable prior quarter. The Company
currently expects that in the near term, total dollars expended on
G&A will remain relatively flat when compared to expenditures in
the current quarter.

        OTHER INCOME (EXPENSE).  Net other income (expense) increased
        ----------------------
from $(177,742) in the comparable prior quarter to ($397,258) in
the current quarter.  Interest expense increased $195,816 in the
current quarter compared with the comparable prior quarter. The
additional interest expense was the result of recognizing the non-
cash impact of the change in market interest rates when compared to
the fixed interest rate the Company pays on its term loan and SWAP
agreement.

        NET LOSS AND LOSS PER SHARE.  The Company had a net loss of
        ---------------------------
$(1,656,371) in the current quarter compared with a net loss of
$(455,857) in the comparable prior quarter.  The increase in net
loss is attributable to the large reduction in both revenue and
corresponding gross profit dollars when compared to the comparable
prior quarter.  The reduction was due to the conclusion in Fiscal
2007 of two large contracts originally acquired from QES.  The
Company had a basic loss per share of $(0.33) for the current
quarter versus a basic loss per share of $(0.09) for the comparable
prior quarter.  The basic and diluted weighted average shares
outstanding were 5,021,935 for the current quarter versus 4,866,850
basic and diluted weighted average shares outstanding for the
comparable prior quarter.

        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
in 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 our GAAP results as well as on our
EBITDA.  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 financing and income tax items that 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 loss from
operations to EBITDA from operations. Management believes that this
table enables a better understanding of the current and prior
amount of depreciation and amortization included in loss from
operations.

<TABLE>
<CAPTION>
                                                         EBITDA
                                                         ------

                                 Quarter Ended January 31,     Quarter Ended January 31,
                                           2008                          2007
                                           ----                          ----
<S>                                 <C>                            <C>
Loss from Operations............       $(2,294,200)                   $ (561,784)
Depreciation & Amortization*....           598,518                     1,004,032
                                       -----------                    ----------
EBITDA from Operations..........       $(1,695,682)                     $442,248

<FN>
* Included in Depreciation and Amortization above is amortization recorded in Cost of Goods
Sold in the accompanying financial statements. These amounts were $117,328 and $75,441 for
the fiscal quarters ended January 31, 2008 and 2007, respectively.

</FN>
</TABLE>


LIQUIDITY AND WORKING CAPITAL

        WORKING CAPITAL.  Working capital decreased by $1,779,034
        ---------------
during the current quarter from $4,544,666 at October 31, 2007 to
$2,765,632 at January 31, 2008.  The ratio of current assets to
current liabilities was approximately 1.48 to 1.0 on January 31,
2008 versus 1.84 to 1.0 on October 31, 2007.  The decrease in
working capital dollars as well as the decrease in the corresponding
ratio is primarily the result of the net loss for the current
quarter.

        CASH FLOW PROVIDED BY (USED IN) OPERATING ACTIVITIES.  During
        ----------------------------------------------------
the current quarter, the Company had net cash used in operating
activities of $(170,051), as compared to $1,998,685 provided by
operating activities in the comparable prior quarter.  The decrease
in cash provided from operating activities resulted primarily from
an increase in the net loss recorded in the current quarter compared
to the comparable prior quarter.

        CASH FLOW USED IN INVESTING ACTIVITIES.  During the current
        --------------------------------------
quarter, the Company had net cash used in investing activities of
$(140,344) as compared to $(210,958) for the comparable prior
quarter.  The cash used in investing activities during the current
quarter was the result of purchases of equipment which the Company
utilizes in operations, as well as minor investments in the
maintenance of the Company's proprietary products.

        CASH FLOW PROVIDED BY (USED IN) FINANCING ACTIVITIES.  The
        ----------------------------------------------------
Company had net cash used in financing activities of $(458,898) for
the current quarter as compared to net cash used in financing
activities of $(1,681,482) for the comparable prior quarter.  The
net cash used in financing activities in the current quarter
resulted from the payment of current principal due on long term debt
associated with the acquisition of QES in Fiscal 2006.
Additionally, in the prior quarter the Company repaid the balance
outstanding on its revolving credit agreement in the amount of
$1,774,819.  Subsequent to the end of the current quarter, the Company
requested and obtained from its lender a waiver of certain technical
defaults under its credit agreement that existed on the last day of
the quarter.

        The Company's current operating line of credit is due to
expire in April 2008, if not renewed.  The Company in August 2007
requested, and received, an increase in its operating line of
credit.  The line of credit will seasonally increase from $4
million to $6 million annually during the February through July
period.  This increase coincides with the Company's peak working
capital demands as it pertains to custom project related expenses.

        We believe we have sufficient liquidity to meet our needs
over the next twelve months.  However, we may need to raise
additional financing to support our operations and planned growth
activities in the future. To achieve profitability in the future,
we must generate substantially more revenue than we have in the
current quarter. Our ability to achieve significant revenue growth
will depend, in large part, on our ability to obtain additional new
contracts and to maintain existing contracts, although there can be
no assurance that this will occur.  In this regard, during Fiscal
2007 and 2008, we added approximately $75 million of new contract
revenues to our backlog for Fiscal 2008 and subsequent years.  Our
total backlog volume, as of the end of the current quarter is in
excess of $100 million.  Additionally, in order to fuel revenue
generating activities, we have tripled in the past twelve months
the number of personnel engaged principally in business development
initiatives.

Long-term debt, operating leases, and other long-term obligations as
of January 31, 2008 mature 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            $11,946,914         $1,853,266     $4,043,918    $6,049,730       $     --

Operating Leases            4,683,600          1,141,219      2,312,911     1,030,965        198,505

Interest payments (1)       1,975,578            759,591      1,092,823       123,164             --

Other long-term
obligations(2)              1,716,734          1,605,567        111,167            --             --
                          -----------         ----------     ----------    ----------       --------
TOTAL
OBLIGATIONS               $20,322,826         $5,359,643     $7,560,819    $7,203,859       $198,505
                          ===========         ==========     ==========    ==========       ========
<FN>
(1)  Relates to future interest payments due on long-term debt

(2)  Relate to employment contracts in effect at the end of the
current quarter.  If an employee covered by an employment contract
is terminated by the company without cause a portion of the long
term obligation recorded above would be payable to the terminated
employee.
</FN>
</TABLE>


ITEM 3.	CONTROLS AND PROCEDURES

(a)	Disclosure Controls and Procedures

        An evaluation of the Company's disclosure 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 ("CEO") and Chief Financial
Officer ("CFO") as of the end of the Company's fiscal quarter
ended January 31, 2008.  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, 2008, 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.

    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 may include, but are not limited to:

        *  Rapid changes in (i) the technology used to administer
           standardized tests generally or market educational
           materials or (ii) the policy considerations that
           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
           other providers of standardized tests;

        *  The ability of the Company to accommodate any changes in
           government regulation which may impact the marketability
           of its tests;

        *  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;

        *  Any decrease in the market for educational consulting
           services; and

        *  The period over which the Company's backlog of services
           will be performed.

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

<PAGE>

                                   PART II

                             OTHER INFORMATION

ITEM1.  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. OTHER INFORMATION

        None.

ITEM 6. 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)

 31.1   Certification by Chief Executive Officer (filed
        herewith)

 31.2   Certification by Chief Financial Officer (filed
        herewith)

 32     Certification 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>

                 QUESTAR ASSESSMENT, INC. AND SUBSIDIARIES

           INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


                                                                       PAGE
                                                                       ----
      Condensed Consolidated Balance Sheets                            F-2&3

      Condensed Consolidated Statements Of Income                      F-4

      Condensed Consolidated Statements Of Cash Flows                  F-5&6

      Notes to Condensed Consolidated Financial Statements             F-7






                                    F-1

<PAGE>

                 QUESTAR ASSESSMENT, INC. AND SUBSIDIARIES

                   CONDENSED CONSOLIDATED BALANCE SHEETS


                                            January 31, 2008    October 31, 2007
                                            ----------------    ----------------
                                               (Unaudited)
                                               -----------

ASSETS
------
Current assets:
Cash and cash equivalents                     $ 1,643,828         $ 2,413,121
Restricted cash                                    23,227              23,455
Accounts receivable, net of allowance
 for doubtful accounts of $33,000               4,775,632           6,254,095
Inventories                                       367,598             319,524
Prepaid expenses and other current assets       1,016,778             652,486
Deferred income taxes                             685,715             269,010

Total current assets                            8,512,778           9,931,691

Property and equipment                          3,276,808           3,483,049

Other assets:
Test passage bank and test development          2,460,890           2,509,631
Non-competition covenants                         184,134             210,439
Customer contracts                              1,141,121           1,299,216
Goodwill                                       13,199,084          13,199,084
Deferred income taxes                           1,749,103           1,064,532
Deferred financing costs and other assets         263,534             282,326
                                              -----------         -----------

Total assets                                  $30,787,452         $31,979,968
                                              ===========         ===========






See notes to condensed consolidated financial statements.



                                    F-2






<PAGE>

                 QUESTAR ASSESSMENT, INC. AND SUBSIDIARIES

              CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)




                                            January 31, 2008    October 31, 2007
                                            ----------------    ----------------
                                               (Unaudited)
                                               -----------

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

Current liabilities:
  Current maturities of long-term debt         $ 1,853,266        $ 1,848,187
  Accounts payable                               1,065,587            947,657
  Accrued expenses                               1,741,108          2,465,743
  Billings in excess of costs                      961,747                 --
  Deferred gain on sale of building -
    current portion                                125,438            125,438
                                               -----------        -----------

      Total current liabilities                  5,747,146          5,387,025

Long-term debt, less current maturities         10,093,648         10,557,625
Interest rate swap agreement                       283,307             73,382
Other                                              213,299                 --
Deferred gain on sale of building, net
  of current portion                               554,019            585,379
                                               -----------        -----------

      Total liabilities                         16,891,419         16,603,411
                                               -----------        -----------

Commitments and contingencies

Stockholders' equity:
 Preferred stock, $.0001 par value,
   5,000,000 shares authorized;
   1,888,888 shares issued and
   outstanding                                         189                189
 Common stock, $.0001 par value,
   20,000,000 shares authorized;
     3,133,046 and 3,084,443 shares
   issued and outstanding, respectively                313                308
 Additional paid-in capital                     15,809,649         15,502,129
 Accumulated deficit                            (1,914,118)          (126,069)
                                               -----------        -----------

      Total stockholders' equity                13,896,033         15,376,557
                                               -----------        -----------

Total liabilities and stockholders' equity     $30,787,452        $31,979,968
                                               ===========        ===========


See notes to condensed consolidated financial statements.



                                    F-3



                 QUESTAR ASSESSMENT, INC. AND SUBSIDIARIES


                CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                THREE MONTHS ENDED JANUARY 31, 2008 and 2007
                                (Unaudited)



                                                     2008              2007
                                                     ----              ----


Net revenue earned                               $ 4,940,928        $9,592,013

Cost of goods sold                                 2,819,935         5,203,142
                                                 -----------        ----------

Gross profit                                       2,120,993         4,388,871
                                                 -----------        ----------

Operating expenses:
  Selling                                            532,465           581,959
  Depreciation and amortization                      481,190           928,591
  General and administrative                       3,401,538         3,440,105
                                                 -----------        ----------

Total operating expenses                           4,415,193         4,950,655
                                                 -----------        ----------

Loss from operations                              (2,294,200)         (561,784)

Other income (expense):
  Deferred gain realized on
   leaseback of building                              31,360            31,359
  Gain on sale of assets                                  --            32,637
  Interest income                                      9,305               369
  Interest expense                                  (437,923)         (242,107)
                                                 -----------        ----------

Loss before income tax benefit                    (2,691,458)         (739,526)

Income tax benefit                                (1,035,087)         (283,669)
                                                 -----------        ----------

Net loss                                         $(1,656,371)       $ (455,857)
                                                 ===========        ==========

Weighted average number of common
and convertible preferred shares
outstanding:
  Basic and diluted                                5,021,935         4,866,850


Net loss per common share:
  Basic and diluted                              $     (.33)        $     (.09)




See notes to condensed consolidated financial statements.



                                    F-4


                 QUESTAR ASSESSMENT, INC. AND SUBSIDIARIES

              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                THREE MONTHS ENDED JANUARY 31, 2008 and 2007
                                (Unaudited)



                                                     2008              2007
                                                     ----              ----



OPERATING ACTIVITIES
Net loss                                         $(1,656,371)       $ (455,857)

Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
  Depreciation and amortization                      598,518         1,004,032
  Deferred income taxes                           (1,053,996)         (287,668)

  Gain on sale of equipment                               --           (32,637)
  Deferred gain realized                             (31,360)          (31,359)
  Stock-based compensation expense                    96,272            48,791
  Change in interest swap agreement
   liability                                         209,925           (41,195)

  Non-cash restricted stock awards                   213,525                --

  Taxes paid in conjunction with exercise
   of stock options                                   (2,272)               --
  Income tax and interest expense
   adjustments to other liability
   relating to the adoption of FIN 48                 21,958                --
  Other                                               12,383                --
Changes in operating assets and liabilities
  Restricted cash                                        228            (1,542)
  Accounts receivable                              1,478,463         1,752,638
  Inventories                                        (48,074)           69,069
  Prepaid expenses and other current assets         (364,292)         (170,433)

  Accounts payable and accrued expenses             (606,705)         (470,490)
  Billings in excess of cost                         961,747           615,336
                                                 -----------        ----------

NET CASH PROVIDED BY (USED IN)
 OPERATING ACTIVITIES                               (170,051)        1,998,685
                                                 -----------        ----------


INVESTING ACTIVITIES
  Purchase of property and equipment                 (75,924)          (86,483)
  Test passage bank and test development             (64,420)         (124,475)
                                                 -----------        ----------

NET CASH USED IN INVESTING ACTIVITIES               (140,344)         (210,958)
                                                 -----------        ----------



See notes to condensed consolidated financial statements.



                                    F-5





                 QUESTAR ASSESSMENT, INC. AND SUBSIDIARIES



              CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
         THREE MONTHS ENDED JANUARY 31, 2008 and 2007 (continued)
                                (Unaudited)



                                                     2008              2007
                                                     ----              ----

FINANCING ACTIVITIES
  Net payments on revolving credit agreement              --        (1,774,819)
  Principal payments on long-term debt              (458,898)         (174,372)
  Proceeds from sale of fixed assets                      --            75,000
  Proceeds from the exercise of employee
    stock options                                         --           192,709
                                                 -----------        ----------


NET CASH USED IN FINANCING ACTIVITIES               (458,898)       (1,681,482)
                                                 -----------        ----------

NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS                                         (769,293)          106,245

CASH AND CASH EQUIVALENTS
AT BEGINNING OF PERIOD                             2,413,121           789,288
                                                 -----------        ----------

CASH AND CASH EQUIVALENTS
AT END OF PERIOD                                  $1,643,828          $895,533
                                                 ===========        ==========

SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES:
  Changes due to adoption of FIN 48:
  Charge to accumulated deficit                   $ (131,678)               --
                                                 ===========        ==========
  Other long term liabilities                     $  178,958                --
                                                 ===========        ==========

Deferred Income taxes                             $  (47,280)               --
                                                 ===========        ==========




See notes to condensed consolidated financial statements.



                                    F-6



                 QUESTAR ASSESSMENT, INC. AND SUBSIDIARIES


           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)


NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

---------------------------------------------------------

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

Effective March 16, 2007, Touchstone Applied Science Associates,
Inc. changed its corporate name to Questar Assessment, Inc. (the
"Company"). This action was approved on January 24, 2007 by the
Company's Board of Directors, and as of February 5, 2007 by the
holders of a majority of the Company's issued and outstanding
voting securities who had executed a written consent in lieu of
a special meeting.

The Company 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, and
to devote significant resources to expanding its custom testing
products. The Company implemented this strategy by acquiring
Questar Educational Systems, Inc. ("QES") in May 2006.  QES
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 segment since the subsidiaries have similar economic
characteristics.

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

The accompanying condensed unaudited 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 statement presentation.  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 period
ended January 31, 2008 are not necessarily indicative of the
results that may be expected for the year ending October 31,
2008.

The condensed consolidated balance sheet at October 31, 2007 has
been derived from the audited consolidated financial statements
as of 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
presentation.

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, 2007.

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-7


                 QUESTAR ASSESSMENT, INC. AND SUBSIDIARIES


           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)


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

Use of Estimates
----------------

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and
expenses during the reporting period.  Significant estimates
include allowance for obsolete inventories, impairment
considerations and useful lives for other assets.  Actual results
could differ from those estimates.


Revenue, Account Receivable and Allowance for Doubtful Accounts
---------------------------------------------------------------

The Company recognizes revenue from two primary sources - sales
and services associated with its proprietary tests and the
recognition of revenue from performance on custom assessment
contracts.

Revenues from the sales of proprietary tests, including sales of
related ancillary materials and performance of scoring services
are recognized when the Company ships the physical product from
its warehouse or when the revenues have been realized or become
realizable and have been earned pursuant to Staff Accounting
Bulletin No. 104, "Revenue Recognition".  Shipping charges are
included in revenue in the accompanying condensed consolidated
statements of income.

The Company's revenues from the performance of assessment,
consulting and psychometric services under long term custom
assessment 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, for each reporting period, the
Company compares the costs incurred in the course of performing
such contract to the total estimated costs of full performance
of the contract and recognizes a proportionate amount of revenue
for such period.  In addition, the Company records revenue from
software pursuant to the provisions of Statement of Position No.
97-2, "Software Revenue Recognition", and in the Statement of
Position No. 98-9, "Modification of SOP 97-2, Software Revenue
Recognition With Respect to Certain Transactions".

As of January 31, 2008, the Company reported billings in excess
of costs of $961,747, which are listed as deferred revenue.  As
of October 31, 2007, the Company reported costs in excess of
billings of $138,672, which were included within accounts
receivable.

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.


                                    F-8

                 QUESTAR ASSESSMENT, INC. AND SUBSIDIARIES


           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)

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

Accounts receivable consists of the following:


                                        January 31,          October 31,
                                           2008                  2007
                                           ----                  ----

Billed, net of allowance                $4,775,632           $6,115,423
Costs and estimated profits
in excess of billings                           --              138,672
                                        ----------           ----------
                                        $4,775,632           $6,254,095
                                        ==========           ==========

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

Based on the nature of the Company's operations, inventories
consist solely of finished goods.  These are stated at the lower
of cost (first-in, first-out method) or market.  At both January
31, 2008 and October 31, 2007, inventories were net of reserves of
$148,000.

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

Property and equipment are stated at cost.  The Company generally
provides for depreciation generally on an accelerated method
(double-declining balance) for personal property and on the
straight line method for real property, based upon the assets'
estimated useful lives as follows:

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

Total depreciation expense was $282,165 and $260,154 for the
three months ended January 31, 2008 and 2007 respectively.


                                    F-9

                 QUESTAR ASSESSMENT, INC. AND SUBSIDIARIES


           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)



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

In accordance with SFAS 141, the Company has recognized separately
from goodwill the acquisition-date fair values of certain
identifiable finite life tangible assets acquired from QES on May
31, 2006.

The following is a summary of finite life intangible assets as
of January 31, 2008 and October 31, 2007:


                              Gross Carrying     Accumulated
                                  Amount         Amortization      Net Value
                                  ------         ------------      ---------


As of January 31, 2008:
-----------------------
Test passage bank and test
development                     $7,362,524        $4,901,634      $2,460,890
Non competition covenants          359,500           175,366         184,134
Customer contracts               3,867,362         2,726,241       1,141,121
Software development               203,000           155,343          47,657
Deferred financing costs           292,516            97,505         195,011

As of October 31, 2007:
-----------------------
Test passage bank and test
development                     $7,298,104        $4,788,473      $2,509,631
Non competition covenants          359,500           149,061         210,439
Customer contracts               3,867,362         2,568,146       1,299,216
Software development               203,000           151,175          51,825
Deferred financing costs           292,516            82,880         209,636



Goodwill
--------

Goodwill is not amortized but is subject to an annual impairment
test.  The Company also reviews the carrying amount of goodwill
for impairment if an event occurs or circumstances change that
would potentially indicate the carrying amount may be impaired.
The Company performed its annual tests at October 31, 2007 and
2006, and determined there to be no impairment of the goodwill.
During Fiscal 2007 the amount of goodwill was reduced by
$448,502 upon the realization of an additional tangible asset
(unrecorded vendor rebate receivable) received as a result of
the QES acquisition.

AMORTIZATION
------------

Certain capitalized costs are amortized using the straight-line
method over estimated useful lives of 5 years for software
development and 7 to 11 years for test passage bank and test
development costs.  Loan origination costs are being amortized
over the term of the indebtedness.  Non-competition covenants are
amortized over the life of the agreement of approximately 3.5
years.  Customer contracts are amortized over their expected lives
of 1 to 5 years, in proportion to the annual discounted cash flow
the Company expects to receive by performing the contractual
services as defined by each contract.  Total amortization expense
was $316,354 and $743,878 for the three months ended January 31,
2008 and 2007 respectively.

Estimated remaining annual amortization expense for the next five
fiscal years ending October 31, is as follows:

         2008 - remainder            $949,000
         2009                        $913,000
         2010                        $651,000
         2011                        $333,000
         2012                        $289,000



                                    F-10

                 QUESTAR ASSESSMENT, INC. AND SUBSIDIARIES


           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)


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

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

Accrued expenses consist of the following:



                                      January 31,              October 31,
                                         2008                     2007
                                         ----                     ----

     Compensation                     $1,417,765               $1,564,598
     Benefit Plans                        55,005                  499,162
     Interest                             69,411                  137,385
     Other                               198,927                  264,598
                                      ----------               ----------

                                      $1,741,108               $2,465,743
                                      ==========               ==========

Fair Value
----------

The Company has a number of financial instruments, none of which
is held for trading purposes.  The carrying value of cash and cash
equivalents, accounts receivable, revolving credit agreement,
accounts payable and accrued expenses approximate their fair value
because of the short-term nature of these financial instruments.
The carrying value of long-term debt approximates its fair value
as the rate of interest on the debt approximates the market rate
of interest as of January 31, 2008 and October 31, 2007.  No
separate comparison of fair values versus carrying values is
presented for the aforementioned financial instruments since their
fair values are not significantly different than their balance
sheet carrying amounts.  Considerable judgment is necessary in
interpreting market data to develop the estimates of fair value,
and accordingly, the estimates are not necessarily indicative of
the amounts that the Company could realize in a current market
exchange.

Long-Lived Assets
-----------------

Long-lived assets at January 31, 2008 and October 31, 2007 consist
primarily of property and equipment, and intangible assets.  The
Company reviews its long-lived assets for impairment whenever
events or business circumstances indicate that the carrying amount
of an asset may not be recoverable.  Recoverability of assets to
be held and used is measured by a comparison of the carrying
amount of an asset to future undiscounted net cash flows expected
to be generated by the asset.  If such assets are considered to be
impaired, the impairment recognized is measured by the amount by
which the carrying amount of the assets exceeds the fair value of
the assets.  Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.


                                    F-11


                 QUESTAR ASSESSMENT, INC. AND SUBSIDIARIES


           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)


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

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

At January 31, 2008, the Company has stock based compensation
plans which are accounted for in accordance with the recognition
and measurement provisions of Statement of Financial Accounting
Standards Statement No. 123 (revised 2004), Share-Based Payment
("FAS No. 123(R)").  This statement 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.

Stock option compensation expense is the estimated fair value of
options granted and the remaining portion of any unvested and
outstanding options granted prior to Fiscal 2006, amortized on a
straight-line basis over the requisite service period for the
entire portion of the award.

The fair value of options at the date of grant was estimated
using the Black-Sholes option pricing model. During the three
months ended January 31, 2008 and for the entire Fiscal 2007, 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 the Company's 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, 2008           October 31, 2007
                                   ----------------           ----------------

     Expected term (in years)              10                         10
     Expected volatility                  168%                       125%
     Expected dividend yield              None                       None
     Risk-free interest rate              3.58%                  4.65 - 4.77%




The Company granted 183,000 options to purchase shares of its
stock during the three months ended January 31, 2008 at a
weighted average exercise price of $4.77 per share.





                                    F-12



                 QUESTAR ASSESSMENT, INC. AND SUBSIDIARIES


           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)


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

The following table represents stock options granted, exercised,
and forfeited for all Common Stock option plans during the three
months ended January 31, 2008:


                                 Weighted    Weighted
                                 Average     Average
                                 Exercise    Remaining
                     Number of   Price per   Contractual
                     Shares      Share       Term                Intrinsic Value
                     ------      -----       ----                ---------------


Stock Options
Outstanding at
October 31, 2007     621,583     $3.15

Granted              183,000      4.77

Exercised            (20,000)     3.75                           $7,000
                     -------     -----                           ------

Outstanding at
January 31, 2008     784,583     $3.51        4 years, 9 months  $396,005
                     =======     =====

Exercisable at
January 31, 2008     461,250     $2.66        4 years, 7 months  $391,589
                     =======     =====

As of January 31, 2008, there was $1,180,219 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.

During the three months ended January 31, 2008, the Company's
Compensation Committee awarded 105,450 shares of restricted
common stock to senior management under the Company's 2007
Incentive Compensation Plan.

Basic and Diluted Net Loss per Share
------------------------------------

Basic per share amounts are computed, generally, by dividing net
income (loss) by the weighted-average number of common shares
outstanding.  Diluted per share amounts assume the conversion,
exercise, or issuance of all potential common stock instruments
unless their effect is anti-dilutive, thereby reducing the loss
per share or increasing the income per share.  Due to the net loss
in the current and prior year quarter, diluted shares were the
same as basic shares since the effect of options and warrants
would have been anti-dilutive.  Options and warrants that were
excluded from the calculation of diluted share, as their effect
would have been anti-dilutive were 82,524 for the three months
ended January 31, 2008 and 978,881 for the three months ended
January 31, 2007.  Escrow shares were not included in basic or
diluted computations because all necessary conditions have not
been satisfied as of January 31, 2008 and therefore, no shares
would have been issuable even if the end of the reporting period
were to have represented the end of the contingency period.



                                    F-13



                 QUESTAR ASSESSMENT, INC. AND SUBSIDIARIES


           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)



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

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

In September 2006, the Financial Accounting Standards Board
(FASB) issued Statement No. 157, "Fair Value Measurements" (FASB
No. 157").  FASB No. 157 defines fair value, establishes a
framework for measuring fair value in generally accepted
accounting principles (GAAP), and expands disclosures about fair
value measurements. FASB No. 157 applies under other accounting
pronouncements that require or permit fair value measurements,
the Board having previously concluded in those accounting
pronouncements that fair value is the relevant measurement
attributes. Accordingly, this Statement does not require any new
fair value measurements. However, for some entities, the
application of this Statement will change current practice.

FASB No. 157 is effective for financial statements issued for
fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. Earlier application is
encouraged, provided that the reporting entity has not yet
issued financial statements for that fiscal year, including
financial statements for an interim period within that fiscal
year.  The Company is currently reviewing the potential effect
of this statement on its financial statements.

In February 2007, the FASB issued Statement of Financial
Accounting Standards (SFAS) No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities" (No. 159) which
included an amendment of FASB Statement 115. This statement
provides companies with an option to report selected financial
assets and liabilities at fair value. This statement is
effective for fiscal years beginning after November 15, 2007,
with early adoption permitted. The Company is in the process of
evaluating the effect, if any, that the adoption of No. 159 will
have on its consolidated results of operations and financial
condition.

In December 2007, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No.
141 (revised 2007), Business Combinations ("SFAS No. 141R").
SFAS No. 141(R), among other things, establishes principles and
requirements for how the acquirer in a business combination (i)
recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any
non-controlling interest in the acquired business, (ii)
recognizes and measures the goodwill acquired in the business
combination or a gain from a bargain purchase, and (iii)
determines what information to disclose to enable users of the
financial statements to evaluate the nature and financial
effects of the business combination.  SFAS No. 141R is effective
for fiscal years beginning on or after December 15, 2008, with
early adoption prohibited.  The Company is required to adopt
SFAS No. 141(R) for all business combinations for which the
acquisition date is on or after January 1, 2009. Earlier
adoption is prohibited.  This standard will change our
accounting treatment for business combinations on a prospective
basis.

In December 2007, the FASB issued Statement of Financial
Accounting Standard (SFAS) No. 160, Noncontrolling Interests in
Consolidated Financial Statements, which requires all entities
to report noncontrolling (minority interests) in subsidiaries
with equity in the consolidated financial statements, but
separate from the parent stockholders' equity. SFAS No. 160 also
requires any acquisitions or dispositions of noncontrolling
interests that do not result in a change of control to be
accounted for as equity transactions.  In addition, SFAS No. 160
requires that a parent recognize a gain or loss in net income
when a subsidiary is deconsolidated. SFAS No. 160 will be
effective for financial statements issued for fiscal years
beginning after November December 15, 2008.  The Company will
adopt the standard beginning in fiscal year 2010. The Company is
currently evaluating the impact that the adoption of SFAS 160
may have on the financial statements.


                                    F-14



                 QUESTAR ASSESSMENT, INC. AND SUBSIDIARIES


           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)


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

Income taxes are reported based upon Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes".  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.

Effective November 1, 2007, the Company adopted Financial
Accounting Standards Board (FASB) Interpretation No. 48 ("FIN
48"), 'Accounting for Uncertainty in Income Taxes," as amended
by FASB Staff Position No. 48-1 ("FSP-FIN 48-1"), "Definition of
Settlement in FASB Interpretation 48". FIN 48 prescribes a
comprehensive model for how a company should recognize, measure,
present, and disclose in its financial statements uncertain tax
positions that the company has taken or expects to take on a tax
return. FIN 48 states that a tax benefit from an uncertain tax
position maybe recognized only if it is "more likely than not"
that the position is sustainable, based on its technical merits.
The tax benefit of a qualifying position is the largest amount
of tax benefit greater than 50% likely of being realized upon
settlement with a taxing authority having full knowledge of all
relevant information. A tax benefit from an uncertain position
was previously recognized if it was probable of being sustained.
Under FIN 48, the liability for unrecognized tax benefits is
classified as non-current unless the liability is expected to be
settled in cash within twelve months of the reporting date. The
impact of adopting FIN 48 and FSP-FIN 48-1 on the Company's
consolidated financial statements is summarized below:


                                     Balance at                      Balance at
                                     October 31,      FIN 48         November 1,
                                        2007          Adjustment        2007
                                        ----          ----------        ----


Deferred tax asset (non-current)     $1,064,532        $45,247       $1,109,779
Other non-current liabilities            -0-          $176,925         $176,925
Accumulated deficit                  $(126,069)      $(131,678)      $ (257,747)

The Company operates in multiple taxing jurisdictions within the
United States and faces audits from various tax authorities
regarding the deductibility of certain expenses and other
matters. At November 1, 2007 and January 3l, 2008, the total
amount of net liability for unrecognized tax benefits related to
federal and state taxes and accrued interest was approximately
$132,000 and $154,000, respectively, which would impact the
effective tax rate, if recognized. The Company anticipates that
approximately $27,000 of net unrecognized tax benefits will be
recognized during the next twelve months due to the expiration
of the statute of limitations and impact the Company's effective
tax rate.

The Company recognizes interest and, if applicable, penalties
which could be assessed related to unrecognized tax benefits in
income tax expense. As of November 1, 2007 and January 31, 2008,
the total amount of accrued interest and penalties, before
federal and, if applicable, state effect, was approximately
$33,000 and $38,000, respectively.

The Company files income tax returns in the U.S. federal
jurisdiction and various states. For federal income tax
purposes, fiscal 2004 through 2007 tax years remain open for
examination by the tax authorities under the normal three year
statute of limitations. For state tax purposes, fiscal 2003
through 2007 tax years remain open for examination by the tax
authorities under a four-year statute of limitations.

                                    F-15


                 QUESTAR ASSESSMENT, INC. AND SUBSIDIARIES


           NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)


NOTE 2 - REVOLVING CREDIT AGREEMENTS
------------------------------------

In August 2007, the Company requested and received an increase
in availability under its revolving credit agreement.
Availability under the revolving credit agreement was increased
from $4 million to $6 million each year during the Company's
seasonal peak period which occurs during the March through July
time-frame. The revolving credit agreement matures on April 30,
2008, if not renewed.  Advances are due on demand, are secured
by substantially all assets of the Company and its subsidiaries,
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.  Additionally, the Company has secured
under the revolving credit agreement three separate Irrevocable
Letters of Credit totaling $2,631,810 that reduce the total line
available to $1,368,190 during the period of August 2007 through
February 2008; and to $3,368,190 during the period of March 2008
through July 2008.  Interest on the advances is at 2.5% above
LIBOR and is due monthly.  There were no advances outstanding as
of January 31, 2008 and October 31, 2007.  The revolving credit
agreement contains ongoing financial covenants which are
measured on a quarterly basis. Subsequent to the end of the current
quarter, the Company requested and obtained from its lender a waiver
of certain technical defaults under its credit agreement that
existed on the last day of the current quarter.

                                    F-16


<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.

                                            QUESTAR ASSESSMENT, INC.

March 31, 2008                              By:/s/ ANDREW L. SIMON
                                               ---------------------
                                               Andrew L. Simon
                                               Chief Executive Officer



March 31, 2008                              By:/s/ JAMES J. WILLIAMS
                                               ----------------------
                                               James J. Williams
                                               Chief Financial Officer