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 July 31, 2005

[ ]  Transition report pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934
                  For the transition period from              to
                                                 ------------    -------------

                  Commission file number     0-20303
                                         -------------------------------------


              TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
------------------------------------------------------------------------------
   (Exact name of small business issuer as specified in its charter)


            Delaware                                 13-2846796
-----------------------------------     --------------------------------------
  (State or other jurisdiction of                 (I.R.S. Employer
  incorporation or organization)                 Identification No.)

      P.O. Box 382, 4 Hardscrabble Heights, Brewster, New York  10509
------------------------------------------------------------------------------
               (Address of principal executive offices)

                              (845) 277-8100
------------------------------------------------------------------------------
                      (Issuer's telephone number)


------------------------------------------------------------------------------
          (Former name, former address and former fiscal year,
                      if changed since last report)

        APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
           PROCEEDINGS DURING THE PRECEDING FIVE YEARS

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

Yes________ No_________

               APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:  As
                                                              --
of September 8, 2005: 2,903,738 shares of Common Stock, par value
-----------------------------------------------------------------
$0.0001 per share.
------------------

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

<PAGE>

                                PART I

                        FINANCIAL INFORMATION


ITEM 1.   FINANCIAL STATEMENTS

          The financial statements for the Company's fiscal
quarter ended July 31, 2005 are attached to this Report,
commencing at page F-1.

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

          Except for historical information, the material
contained in this Management's Discussion and Analysis or Plan
of Operation is forward-looking.  For the purposes of the safe
harbor protection for forward-looking statements provided by the
Private Securities Litigation Reform Act of 1995, readers are
urged to review the list of certain important factors set forth
in "Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of
1995" contained in the Company's Annual Report on Form 10-KSB/A
for the fiscal year ended October 31, 2004 ("Fiscal 2004"),
which may cause actual results to differ materially from those
described.

BACKGROUND

          For over twenty-nine years, TASA has served the rapidly
expanding education market, primarily through the publishing and
sale of its highly regarded proprietary tests and by providing
custom tests and consulting services.  During the current fiscal
year, TASA completed two acquisitions:  Assessment and
Evaluation Concepts in January 2005, and Achievement Data, Inc.
in July 2005.  These two companies increase our capabilities in
the custom testing services, and as such, the revenues and
expenses from these subsidiaries are included as part of the
results of operations for custom testing services.

                           RESULTS OF OPERATIONS

          The following table compares the revenues for the
fiscal quarter and nine months ended July 31, 2005 versus the
fiscal quarter and nine months ended July 31, 2004, as restated.


<TABLE>
<CAPTION>

                   RESULTS OF OPERATIONS FOR THE THIRD FISCAL QUARTER
                   AND FOR THE NINE-MONTH PERIOD ENDED ON JULY 31, 2005

                               Nine Months                         Three Months
                              Ended July 31,                      Ended July 31,
                             ---------------                     ---------------

                                                    %                                    %
                           2005         2004      Change        2005         2004      Change
                           ----         ----      ------        ----         ----      ------
                             (in thousands                        (in thousands
                              of dollars)                          of dollars)

<S>                   <C>          <C>         <C>         <C>          <C>         <C>


Proprietary              $2,826.3      $3,268.3    (13.5)     $1,073.4     $1,087.0     (1.3)
Custom Testing           $5,182.6      $4,399.5     17.8      $1,902.4     $1,796.2      5.9
Total Revenues           $8,008.9      $7,667.8      4.4      $2,975.8     $2,883.2      3.2

</TABLE>

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



                                       Nine Months           Three Months
                                      Ended July 31,        Ended July 31,
                                      --------------        --------------

                                      2005       2004       2005       2004
                                      ----       ----       ----       ----

                                      (in percentages)      (in percentages)

Revenues                              100%       100%       100%       100%

     Gross Profit                      52         46         51         47

Operating Expense:

     Selling Expense                   14         13         13         13

     General & Administrative          32         25         32         24

Income from Operations                  6          8          6         10

     Other Income (Expense)             1          1          1          1

Income before Taxes                     7          9          7         11

Income Taxes                            3          4          2          4

Net Income                              5          6          5          7


          REVENUES.  Revenues for the nine-month period ended
          --------
July 31, 2005 (the "current period") were $8,008,945
representing a 4.4% increase or $341,125  from $7,667,820 for
the nine-month period ended July 31, 2004 (the "comparable
period").  Net revenues for the three months ended July 31, 2005
(the "current quarter") increased by 3.2% or $92,675 to
$2,975,833 as compared to net revenues of $2,883,158 in the
three months ended July 31, 2004 (the "comparable quarter").
ADI, acquired by the Company as of July 1, 2005, contributed
$59,760 to the Company's revenues for the current quarter.

          Revenues from our proprietary testing unit have
decreased by 13.5% year-to-date and have declined by 1.3% for
the current quarter. In the comparable period the Company had
large order placements in the first half of 2004; most notably
Los Angeles, California and Orange County, Florida.  Proprietary
test revenues firmed up in the current quarter and we appear to
have arrested the sharp decline that occurred in the first half
of the current fiscal year.

          Revenues from our custom-testing unit increased 17.8%
in the current period over the comparable period, and by 5.9%
for the current quarter over the comparable quarter.  This
increase would have been significantly greater had the Company
been able to recognize during the current period $684,123 in
deferred revenues as the Company had originally expected.  We
believe that most of these deferred revenues will be recognized
prior to the end of Fiscal 2005.

          New contract business continues to grow for both the
proprietary and custom units.  Since March 1, 2005, the Company
has entered into contracts for $13.2 million in future revenues,
and as of August 31, 2005, has contracts providing for future
revenues of $23.8 million.

          COST OF GOODS SOLD.  Cost of goods sold decreased by
          ------------------
$289,412, or 7.0%, from $4,126,310 in the comparable period to
$3,836,898 in the current period.  Cost of goods sold is now 48%
of revenues versus 54% in the comparable period.  Cost of goods
sold for the current quarter decreased by 4.2% or $63,569 from
$1,524,146 in the comparable quarter to $1,460,577 in the
current quarter. Cost of goods sold is now 49% of revenues for
the current quarter versus 53% for the comparable quarter.  The
favorable variance is due to the mix of products and services
for the current period and the current quarter.

          GROSS PROFIT.  Gross profit from operations increased
          ------------
by $630,537 from $3,541,510 in the comparable period to
$4,172,047 in the current period.  The gross profit margin is
now 52% in the current period versus 46% in the comparable
period.   For the current quarter, the gross profit increased to
$1,515,256 versus $1,359,012 in the comparable quarter.  The
gross profit margin is now 51% in the current quarter versus 47%
in the comparable quarter.  Again, increased revenues and a
favorable mix of products are responsible for the improvement in
the gross profit margin.

          SELLING EXPENSE.  Selling expense for the current
          ---------------
period increased by 13%, or $129,274, versus the comparable
period, or from $1,009,437 to $1,138,711. For the current
quarter, selling expense increased by 4% or $14,446, or from
$378,131 in the comparable quarter to $392,577 in the current
quarter.  Selling expenses are 14% of revenue in the current
period versus 13% in the comparable period. For the current
quarter, selling expenses remained unchanged at 13% when
compared to selling expenses in the comparable quarter.   We
anticipate selling expenses increasing modestly over the next
twelve months as we revamp our marketing and sales organizations
to effect revenue gains.

          GENERAL AND ADMINISTRATIVE (G&A) EXPENSES.  General
          -----------------------------------------
and administrative expenses increased by $625,687, or 33%, for
the current period and are now $2,534,308 versus $1,908,621 for
the comparable period.  For the current period, G&A is 32% of
revenues versus 25% in the comparable period.  For the current
quarter, G&A expenses increased by $235,115, or 33%, and are now
$939,785 versus $704,670 in the comparable quarter. G&A is 32%
of revenues in the current quarter versus 24% in the comparable
quarter.  A significant portion of the period and quarter
increases relate to the expenses associated with the evaluation
and implementation of internal controls necessary to achieve
compliance with Section 404 of the Sarbanes-Oxley Act of 2002.
Increased professional fees with respect to new regulatory
requirements and internal restructuring expenses also include
the Company's hiring of a new Chief Operating Officer for its
proprietary unit.  Further, the infrastructure component of G&A
costs increased as a result of the acquisitions of AEC and ADI
completed during Fiscal 2005.

          OTHER INCOME (EXPENSE).  The Company had net other
          ----------------------
income of $90,334 for the current period versus net other income
of $90,880 for the comparable period.  For the current quarter,
the Company had net other income of $23,700 versus net other
income of $31,290 for the comparable quarter.  Net other income
decreased for the current quarter by 24% because of interest
expenses associated with the acquisition of ADI.  Other income
for both the current period and the current quarter includes
amortization of deferred gain on the sale/leaseback of the
Company's headquarters building in July 2003, of $94,079 in both
the current period and the comparable period, and $31,359 in
each of the current quarter and the comparable quarter.

          INCOME FROM OPERATIONS. Income from the Company's
          ----------------------
operations for the current period was $499,028 versus $623,452
for the comparable period.  For the current quarter, the Company
had income from operations of $182,894 versus $276,211 in the
comparable quarter.

          EBITDA FROM OPERATIONS.  Earnings before interest,
          ----------------------
taxes, depreciation and amortization on the Company's operations
was $984,973 for the current period versus $1,070,550 for the
comparable period.  EBITDA for the current quarter was $347,670
versus $431,815 for the comparable quarter.

          EBITDA is a non-GAAP financial measure and should not
be used as a substitute for the directly comparable GAAP
financial statements.  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:

<TABLE>
<CAPTION>
                             EBITDA From Operations

                                 Nine Months Ended          Three Months Ended
                                      July 31,                    July 31,
                                  2005        2004            2005        2004
                                  ----        ----            ----        ----

<S>                         <C>         <C>             <C>          <C>
Income from operations         $ 499,028   $  623,452      $ 182,894    $ 276,211

Depreciation & amortization      485,945      447,098        164,776      155,604
                               ---------   ----------      ---------    ---------

EBITDA from operations         $ 984,973   $1,070,550      $ 347,670    $ 431,815
                               =========   ==========      =========    =========

</TABLE>

          NET INCOME AND EARNINGS PER SHARE.  Net income for the
          ---------------------------------
current period was $365,422 versus net income of $424,522 in the
comparable period. For the current quarter, the Company had net
income of $148,184 versus net income of $193,756 in the
comparable quarter.

          For the current period, the Company earned $0.12 per
share (diluted) versus $0.15 earnings per share (diluted) in the
comparable period. For the current quarter, the Company had
$0.05 earnings per share (diluted) versus $0.07 earnings per
share (diluted) in the comparable quarter.

LIQUIDITY AND CAPITAL RESOURCES

          WORKING CAPITAL. Working capital increased by $160,493
          ---------------
during the current period from $2,981,951 at October 31, 2004,
to $3,142,444 at July 31, 2005.  This increase resulted
primarily from a an increase in accounts receivable and a
decrease in accrued expenses, as partially offset by an increase
in deferred revenue.  The ratio of current assets to current
liabilities was approximately 2.84 to 1 at October 31, 2004
versus 2.43 to 1.0 at July 31, 2005.

          CASH FLOW FROM OPERATING ACTIVITIES. During the
          -----------------------------------
current period, the Company had net cash provided by operating
activities of $342,439, as compared to $306,143 in the
comparable period.  The increase in cash provided by operating
activities in the current period resulted primarily from an
increase in deferred revenue as partially offset by a decrease
in accounts payable and accrued expenses.

          CASH FLOW TO INVESTING ACTIVITIES. During the current
          ---------------------------------
period, the Company had net cash used in investing activities of
$2,308,503, as compared to net cash used in investing activities
of $651,590 in the comparable period.  The increase in cash used
in investing activities resulted primarily from increased test
product development and the cash expended in the acquisitions of
Assessment & Evaluation Concepts Inc. ("AEC") and Achievement
Data, Inc. ("ADI") during the current period.

          CASH FLOW FROM FINANCING ACTIVITIES. In the current
          -----------------------------------
period, the Company had net cash provided by financing
activities of $1,593,528 as compared to $9,195 in the comparable
period.  The cash provided by financing activities in the
current period resulted primarily from the proceeds from the
exercise of warrants and employee stock options, the financing
provided for certain equipment and the financing provided for
the acquisition of ADI.

          During the current period, options to purchase 36,500
shares of the Company's Common Stock were exercised, resulting
in proceeds to the Company aggregating $25,090.  In addition,
warrants for the purchase of 138,047 shares of Common Stock were
exercised in the current period providing proceeds to the
Company of $155,303.

          During the current period, options to purchase 56,000
shares of the Company's Common Stock were granted to existing
employees of the Company pursuant to the 2000 Stock Incentive
Plan, options to purchase 50,000 shares were granted to new
employees upon commencement of employment and options to
purchase 110,000 shares were granted to new employees pursuant
to the Company's acquisitions of AEC and ADI (as further
described below).  The options granted during the current period
had exercise prices equal to the closing sales price on the date
of the grant, ranging from $3.15 to $3.79 per share, and are all
subject to vesting periods contained in the individual grants.
In addition, options to purchase 12,500 shares of Common Stock
were granted to non-employee directors pursuant to the Company's
Directors Stock Option Plan at an exercise price of $3.20 per
share.

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

          On July 1, 2005, the Company completed the acquisition
of all of the outstanding stock of ADI.  ADI provides on-line
testing capabilities to state testing programs and also offers
an electronic testing engine.  The total consideration paid by
the Company for the ADI stock was $1,650,000, consisting of
$1,155,000 in cash, the issuance of 89,488 shares of Common
Stock of the Company (valued at $331,650, based on the average
of closing prices for the Company's Common Stock for the five
trading days preceding the closing) and $163,350 in subordinated
promissory notes issued to two of the former stockholders of
ADI.  The promissory notes bear interest at the rate of 5% per
annum and are payable in six semi-annual installments of
principal plus interest.

          In connection with the acquisition of ADI, the Company
entered into a loan agreement with its bank, pursuant to which
the Company borrowed an aggregate principal amount of
$1,200,000, almost all of which was used to pay the purchase
price for the shares of ADI and closing costs for the
transaction, with the balance being retained by the Company for
working capital.  Borrowings under the loan incur interest at
the rate of 6.25% per annum.  Interest only payments are due for
the first year, and thereafter monthly payments of principal and
interest of $23,339 through July 2011.  The promissory note
contains several financial covenants with respect to which the
Company was in compliance as of the end of the current quarter.

          The Company has entered into employment agreements for
an initial forty-month term with two of the former shareholders
of ADI.  In addition, the former shareholders of ADI who are
continuing with ADI were granted an aggregate of 60,000 options
to purchase additional shares of the Company's Common Stock, at
an exercise price of $3.75 per share, subject to vesting upon
the completion of one year of employment.  The Company also
entered into an employment agreement for an initial twenty-eight
month term with a key employee of ADI.

          Long-term debt, operating leases and other long-term
obligations outstanding as of July 31, 2005 mature as follows:



<TABLE>
<CAPTION>

                                                           Payments Due
                                                           ------------
                           -------------------------------------------------------------------------
Obligations                                   Less than                                    More than
                                  Total        1 year        1-3 years      4-5 years       5 years
                           -------------------------------------------------------------------------
<S>                        (C)            <C>           <C>            <C>            <C>


Long-term debt                 $1,574,065    $   97,426     $  645,423     $  560,401     $  270,815

Operating leases                2,899,800       335,301        692,259        715,720      1,156,520

Other long-term
obligations (1)                 3,241,004     1,572,928      1,594,326         73,750             --
                               ----------     ---------      ---------       --------     ----------
Total obligations              $7,714,869    $2,005,655     $2,932,008     $1,349,871     $1,427,335
                               ==========    ==========     ==========     ==========     ==========
<FN>
_______________
(1)  Related to employment contracts in effect at the end of the current quarter.

</FN>
</TABLE>


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

          The preparation of financial statements and related
disclosures in conformity with accounting principles generally
accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in
the unaudited Consolidated Financial Statements and accompanying
notes. Estimates are used for, but not limited to, the
accounting for the allowance for doubtful accounts, inventories,
income taxes and loss contingencies. Management bases its
estimates on historical experience and on various other
assumptions that are believed to be reasonable under the
circumstances. Actual results could differ from these estimates
under different assumptions or conditions.

          The Company believes the following critical accounting
policies, among others, may be impacted significantly by
judgment, assumptions and estimates used in the preparation of
the unaudited Consolidated Financial Statements:

               *  Revenues from the Company's sales of its
proprietary tests, including sales of the related ancillary
materials, are recognized when the Company ships the
physical product from its warehouse.  The Company's
revenues from performance of assessment consulting and
psychometric services under long-term contracts are
recognized on the percentage-of-completion basis pursuant
to the provisions of Statement of Position No. 81-1,
"Accounting for Performance of Construction-Type and
Certain Production-Type Contracts" and Accounting Research
Bulletin No. 45, "Long-Term Construction-Type Contracts".
For each contract, the Company compares the costs incurred
in the course of performing such contract during a fiscal
period to the total estimated costs of full performance of
the contract, and recognizes a proportionate amount of
revenue for such period.

               *  In July 2003, the Company sold its headquarters
building to 26 Palmer LLC for $2,875,000.  The building and
related improvements had a net book value of $1,458,481.
The Company reported a gain on the sale totaling
$1,254,383, net of closing costs totaling $162,136.  The
building was then leased by the Company under a ten year
lease agreement.  As a result of the sale-leaseback of the
building, the gain has been deferred and will be recognized
over the ten-year term of the lease as other income for
each period.

               *  Deferred tax assets are recorded based on the
Company's projected future taxable income and the resulting
utilization of the deferred tax assets. To the extent that
the Company would not be able to realize all or part of its
deferred tax assets in the future, an adjustment to the
deferred tax assets would be necessary and charged to
income.

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

ITEM 3. CONTROLS AND PROCEDURES

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

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

          An evaluation was carried out under the supervision
and with the participation of the Company's management,
including the Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rule 13a-15(e)
or 15d-15(e) under the Exchange Act) as of the end of the period
covered by this Quarterly Report.  Based upon that evaluation,
the Company's Chief Executive Officer/Chief Financial Officer
concluded that the Company does not have sufficient personnel
and technical resources necessary to assure compliance with such
controls and procedures as a whole.  However, for the period
covered by this Quarterly Report, the Company has adopted
compensating controls and procedures to insure that the
Company's disclosure controls and procedures were effective at
the end of the period covered by this Quarterly Report and that
information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act is recorded,
processed, summarized and reported within the time periods
specified in SEC rules and forms.  The Audit Committee has
directed management to devote additional resources to disclosure
controls and management is in the process of implementing such
directive.

          (b)  Changes in internal controls.  There was no
change in the Company's internal controls over financial
reporting occurring in the Company's fiscal quarter covered by
this Quarterly Report that has materially affected, or is
reasonably likely to materially affect, the Company's internal
controls over financial reporting.

<PAGE>

                                PART II

                          OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

          None.

ITEM 2.   CHANGES IN SECURITIES

          None.

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          None.

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

          None.

ITEM 5.   OTHER INFORMATION

          None.

ITEM 6.   EXHIBITS

          Exhibit 31     Certification Pursuant To 18 U.S.C.
                         Section 1350, As Adopted Pursuant
                         To Section 302 of The Sarbanes-
                         Oxley Act of 2002.

          Exhibit 32     Certification Pursuant To 18 U.S.C.
                         Section 1350, As Adopted Pursuant
                         To Section 906 of The Sarbanes-
                         Oxley Act of 2002


<PAGE>
                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES


           INDEX TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
         FOR THE FISCAL QUARTER AND NINE MONTHS ENDED JULY 31, 2005

         Consolidated Balance Sheets                            F-2

         Consolidated Statements of Operations                  F-4

         Consolidated Statements of Cash Flows                  F-5

         Notes to Consolidated Financial Statements             F-7


                                   F - 1


<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

<TABLE>
<CAPTION>
                        CONSOLIDATED BALANCE SHEETS


                                                              July 31,      October 31,
                                                              2 0 0 5         2 0 0 4
                                                              -------         -------
                                                            (Unaudited)    (As Restated)
<S>                                                     <C>             <C>

ASSETS
------


Current assets:
 Cash and temporary investments                             $ 1,378,951     $1,751,487
 Accounts receivable, net of allowance
  for doubtful accounts of
  $870 and $4,417, respectively                               2,510,331      1,526,559
 Inventories                                                    477,043        431,196
 Prepaid expenses and other current
  assets                                                        389,124        338,354
 Restricted cash                                                 43,012         21,954
 Deferred income taxes                                          536,440        536,440
                                                            -----------     ----------

      Total current assets                                    5,334,901      4,605,990
                                                            -----------     ----------

Property, plant and equipment - net of
 accumulated depreciation of $518,230
 and $284,567, respectively                                     668,759        525,319
                                                            -----------     ----------

Other assets:
 Test passage bank and test development,
   net of accumulated amortization of
   $3,474,156 and $3,174,865, respectively                    2,596,309      2,227,077
 Goodwill                                                     1,958,132        198,159
 Deferred income taxes                                          607,942        807,672
 Other assets                                                   272,528        326,289
                                                            -----------     ----------


     Total assets                                           $11,438,571     $8,690,506
                                                            ===========     ==========

</TABLE>

See notes to consolidated financial statements.


                                   F - 2


<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

<TABLE>
<CAPTION>
                   CONSOLIDATED BALANCE SHEETS (Continued)


                                                              July 31,      October 31,
                                                              2 0 0 5         2 0 0 4
                                                              -------         -------
                                                            (Unaudited)    (As Restated)
<S>                                                     <C>             <C>

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

Current liabilities:
 Lines of credit                                           $       --       $       --
 Current maturities of long-term debt                          97,426           28,606
 Accounts payable                                             184,758          119,448
 Accrued expenses                                           1,100,711        1,350,546
 Deferred revenue                                             684,123               --
 Deferred gain on sale of building -
  current portion                                             125,439          125,439
                                                           ----------       ----------



     Total current liabilities                              2,192,457        1,624,039
                                                           ----------       ----------

Long-term debt:
 Long-term debt, net of current portion                     1,476,639          120,291
 Deferred gain on sale of building, net
  of current portion                                          867,614          961,692
                                                           ----------       ----------


     Total liabilities                                      4,536,710        2,706,022
                                                           ----------       ----------


Commitments and contingencies

Stockholders' equity:
 Preferred stock, $.0001 par value,
  5,000,000 shares
  authorized, 0 shares-issued and
  outstanding, respectively                                        --               --
 Common stock, $.0001 par value,
  20,000,000 shares authorized,
   2,903,378 and 2,627,703 shares issued
   and outstanding, respectively                                  290              263
 Additional paid-in capital                                 6,160,488        5,609,480
 Subscriptions receivable                                          --             (920)
 Retained earnings                                            741,083          375,661
                                                           ----------       ----------


     Total stockholders' equity                             6,901,861        5,984,484
                                                           ----------       ----------


Total liabilities and stockholders' equity                $11,438,571       $8,690,506
                                                          ===========       ==========

</TABLE>


See notes to consolidated financial statements.


                                   F - 3


<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

<TABLE>
<CAPTION>
                    CONSOLIDATED STATEMENTS OF OPERATIONS

                                                      Nine Months Ended               Three Months Ended
                                                            July 31,                       July 31,
                                                     2 0 0 5        2 0 0 4         2 0 0 5        2 0 0 4
                                                     -------        -------         -------        -------
                                                   (Unaudited)    (Unaudited)     (Unaudited)    (Unaudited)
                                                                 (As Restated)                  (As Restated)

<S>                                            <C>            <C>              <C>           <C>

Net revenue                                        $8,008,945     $7,667,820      $2,975,833     $2,883,158

Cost of goods sold                                  3,836,898      4,126,310       1,460,577      1,524,146
                                                   ----------     ----------      ----------     ----------

Gross profit                                        4,172,047      3,541,510       1,515,256      1,359,012
                                                   ----------     ----------      ----------     ----------

Operating expenses:
 Selling expenses                                   1,138,711      1,009,437         392,577        378,131
 General and
  administrative expenses                           2,534,308      1,908,621         939,785        704,670
                                                   ----------     ----------      ----------     ----------

Total operating expenses                            3,673,019      2,918,058       1,332,362      1,082,801
                                                   ----------     ----------      ----------     ----------

Income from operations                                499,028        623,452         182,894        276,211

Other income (expense):
Gain on sale/leaseback
 of building                                           94,079         94,079          31,359         31,359
Interest income
 (expense) net                                         (3,745)        (3,199)         (7,659)           (69)
                                                   ----------     ----------      ----------     ----------

Income before income taxes                            589,362        714,332         206,594        307,501

Income taxes                                          223,940        289,810          58,410        113,745
                                                   ----------     ----------      ----------     ----------

Net income                                         $  365,422     $  424,522      $  148,184     $  193,756
                                                   ==========     ==========      ==========     ==========

Weighted average
 shares outstanding:
Basic                                               2,774,768      2,611,584       2,829,104      2,621,488
Diluted                                             2,964,884      2,857,832       3,052,577      2,867,736

Basic earnings per share                           $      .13     $      .16      $      .05     $      .07
Diluted earnings per share                         $      .12     $      .15      $      .05     $      .07





</TABLE>


See notes to consolidated financial statements.


                                   F - 4


<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES



                   CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                       Nine Months Ended
                                                            July 31,
                                                     2 0 0 5        2 0 0 4
                                                     -------        -------
                                                   (Unaudited)    (Unaudited)
                                                                 (As Restated)


OPERATING ACTIVITIES
 Net income                                       $   365,422     $   424,522
 Adjustments to reconcile net income to
  net cash provided by operating activities:
  Depreciation and amortization                       485,945         447,098
  Deferred income taxes                               163,197         233,695
  (Gain) on sale/leaseback of building                (94,079)        (94,079)
Changes in operating assets and liabilities:
 Accounts receivable                                 (845,127)       (824,486)
 Inventories                                          (45,847)         61,493
 Other assets                                          38,138          (2,578)
 Deferred revenue                                     684,123         167,324
 Accounts payable and accrued expenses               (409,333)       (106,846)
                                                   ----------      ----------


NET CASH FLOWS FROM OPERATING ACTIVITIES              342,439         306,143
                                                   ----------      ----------


INVESTING ACTIVITIES
 Acquisition of property, plant and
  equipment                                          (191,932)       (176,704)
 Test passage bank and test development              (668,523)       (353,300)
 Cash and fees paid to acquire stock
  of Assessment & Evaluation Concepts Inc.            (83,000)             --
 Cash and fees paid to acquire stock
  of Achievement Data Inc.                         (1,365,048)             --
 Software development costs                                --         (13,971)
 Prepublication costs                                      --        (107,615)
                                                   ----------      ----------


NET CASH FLOWS TO INVESTING ACTIVITIES             (2,308,503)       (651,590)
                                                   ----------      ----------





See notes to consolidated financial statements.


                                   F - 5

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)


                                                       Nine Months Ended
                                                            July 31,
                                                     2 0 0 5        2 0 0 4
                                                     -------        -------
                                                   (Unaudited)    (Unaudited)
                                                                 (As Restated)
FINANCING ACTIVITIES
 Repayment of long-term debt                         (26,214)         (5,700)
 Proceeds from long-term debt                      1,451,382              --
 Costs associated with obtaining
  long-term debt                                     (12,033)             --
 Proceeds from the exercise of warrants              155,303              --
 Proceeds from the exercise of
  employee stock options                              25,090          14,895
                                                   ---------       ---------


NET CASH FLOWS FROM FINANCING ACTIVITIES           1,593,528           9,195
                                                   ---------       ---------


NET CHANGE IN CASH AND TEMPORARY INVESTMENTS        (372,536)       (336,252)



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


CASH AND TEMPORARY INVESTMENTS
AT END OF PERIOD                                  $1,378,951       $ 648,639
                                                  ----------       ---------


SUPPLEMENTAL CASH FLOW INFORMATION:
 Interest paid                                    $   12,412       $   4,881
                                                  ==========       =========
 Income taxes paid                                $    7,683       $  57,158
                                                  ==========       =========


Noncash investing and financing activities:
 Stock issued in acquisition of AEC               $   39,000              --
                                                  ==========       =========
 Stock issued in acquisition of ADI               $  331,650              --
                                                  ==========       =========





See notes to consolidated financial statements.


                                   F - 6

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 July 31, 2005


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

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

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

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

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

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

In January 2005, the Company granted options to purchase 56,000
shares of the Company's Common Stock pursuant to the 2000 Stock
Option Plan at an exercise price of $3.15 per share.  Also in
January 2005, the Company granted options to purchase an
aggregate of 50,000 shares of the Company's Common Stock
pursuant to the 2000 Stock Option Plan to the two officers of
AEC pursuant to employment agreements.  In February 2005,
options to purchase 40,000 shares of the Company's Common Stock
were granted pursuant to the 2000 Stock Option Plan on the date
of the closing exercisable at $3.10 per share, the fair market
value on that date.  In June 2005, the Company granted options
to purchase 10,000 shares of the Company's common stock at an
exercise price of $3.79 per share.  In July 2005, the Company
granted options to purchase an aggregate of 60,000 shares of the
Company's common stock at an exercise price of $3.75 to two of
the officers of ADI pursuant to employment agreements (note 3).

                                   F - 7

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 July 31, 2005


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

The Company measures compensation cost in connection with employee
stock option plans using the intrinsic value based method and
accordingly, does not recognize compensation expense for the
issuance of options with an exercise price equal to or greater
than the market price on the date of the grant.  Had the fair
value based method been adopted by the Company, the effect on the
net income and earnings per share for the nine and three months
ended July 31, 2005 and 2004 would have been as follows:

<TABLE>
<CAPTION>
                                                      Nine Months Ended               Three Months Ended
                                                            July 31,                       July 31,
                                                     2 0 0 5        2 0 0 4         2 0 0 5       2 0 0 4
                                                     -------        -------         -------       -------
                                                                 (As Restated)                 (As Restated)

<S>                                            <C>            <C>              <C>           <C>


Net income - as reported                            $365,422       $424,522         $148,184      $193,756
Less: Total share-based employee
 compensation awards determined under the
 fair-value based method net of tax (1)              183,532         90,913           83,269        51,797
                                                    --------       --------         --------      --------

Net income - proforma                               $181,890       $333,609         $ 64,915      $141,959
                                                    ========       ========         ========      ========

Net income per share:
 Basic - as reported                                $    .13       $    .16         $    .05      $    .07
 Basic - proforma                                   $    .07       $    .13         $    .02      $    .05
 Diluted - as reported                              $    .12       $    .15         $    .05      $    .07
 Diluted - proforma                                 $    .06       $    .12         $    .02      $    .05

<FN>
(1) The fair value of each option grant was estimated on the date
of the grant using the Black-Scholes option-pricing model with
the following weighted average assumptions: Expected volatility
of 121%, risk free interest rate of 4.23%, and expected lives of
10 years for the nine and three months ended July 31, 2005;
expected volatility of 109%, risk free interest rate of 3.00%,
and expected lives of 10 years for the nine and three months
ended July 31, 2004.
</FN>
</TABLE>

                                   F - 8

<PAGE>

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
                                 July 31, 2005




NOTE 3 - ACQUISITION OF ACHIEVEMENT DATA, INC.
----------------------------------------------

On July 1, 2005, the Company completed the acquisition of all of
the outstanding stock of Achievement Data, Inc. ("ADI").  ADI
provides on-line testing capabilities to state testing programs
and also offers an electronic testing engine.  The total
consideration paid by the Company for the ADI stock was
$1,650,000, consisting of $1,155,000 in cash, the issuance of
89,488 shares of Common Stock of the Company (valued at
$331,650, based on the average of closing prices for the
Company's Common Stock for the five trading days preceding the
closing) and $163,350 in subordinated promissory notes issued to
two of the former stockholders of ADI.  The promissory notes
incur interest at the rate of 5% per annum and are payable
through six semi-annual installments of principal plus interest.

In connection with the acquisition of ADI, the Company entered
into a loan agreement with its bank, pursuant to which the
Company borrowed an aggregate principal amount of $1,200,000,
almost all of which was used to pay the purchase price for the
shares of ADI and closing costs for the transaction, with the
balance being retained by the Company for working capital.
Borrowings under the loan incur interest at the rate of 6.25%
per annum.  Interest only payments are due for the first year,
and thereafter monthly payments of principal and interest of
$23,339 through July 2011.  The note is secured by the assets of
the Company and is guaranteed by BETA and ADI.  The promissory
note contains several financial covenants with respect to which
the Company is in compliance at July 31, 2005.

The Company has entered into employment agreements for an
initial forty-month term with two of the former shareholders of
ADI.  In addition, the former shareholders of ADI who are
continuing with ADI were granted an aggregate of 60,000 options
to purchase additional shares of the Company's Common Stock, at
an exercise price of $3.75 per share, subject to vesting upon
the completion of one year of employment.  The Company also
entered into an employment agreement for an initial twenty-eight
month term with a key employee of ADI.

The following unaudited pro forma income statement data presents
the consolidated results of operations of the Company had the
acquisition of ADI occurred at the beginning of the earliest
period presented:


<TABLE>
<CAPTION>

                                Nine months ended July 31,           Three months ended July, 31,
                                --------------------------           ----------------------------
                                   2005            2004                 2005             2004
                                   ----            ----                 ----             ----
<S>                         <C>             <C>                  <C>              <C>
Net revenue                    $9,273,576      $8,605,280           $3,040,319       $3,196,755
Net income                        430,442         414,117               (5,613)         189,142
Basic earnings per share              .15             .15                  .00              .07
Diluted earnings per share            .14             .14                  .00              .06


</TABLE>

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


                                   F - 9

<PAGE>


                                 SIGNATURE

          In accordance with the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                        TOUCHSTONE APPLIED SCIENCE
                                        ASSOCIATES, INC.



                                        By: /s/ ANDREW L. SIMON
                                            -----------------------
                                            Andrew L. Simon
                                            President, Chief Executive Officer
                                            and Chief Financial Officer
Date:  September 14, 2005