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


                              FORM 10-QSB

(Mark One)

[X]  Quarterly report pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934
                  For the quarterly period ended January 31, 2003

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

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


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


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

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

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


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

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

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

Yes________ No_________

               APPLICABLE ONLY TO CORPORATE ISSUERS

  State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:  As
                                                              --
of March 17, 2003: 2,594,453 shares of Common Stock, par value
----------------------------------------------------------------
$0.0001 per share.
------------------

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

<PAGE>

                               PART I

                       FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

        The financial statements for the Company's fiscal
quarter ended January 31, 2003 are attached to this Report,
commencing at page F-1.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS

        Except for historical information, the material
contained in this Management's Discussion and Analysis or Plan of
Operation is forward-looking.  For the purposes of the safe
harbor protection for forward-looking statements provided by the
Private Securities Litigation Reform Act of 1995, readers are
urged to review the list of certain important factors set forth
in "Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act of
1995" contained in the Company's Annual Report on Form 10-KSB
for the fiscal year ended October 31, 2002 ("Fiscal 2002"),
which may cause actual results to differ materially from those
described.

BACKGROUND

        For over twenty-five years, TASA has served the rapidly
expanding education market, primarily through the publishing and
sale of its highly regarded proprietary reading tests.  Since
1994, management has implemented a strategy to broaden the
Company's services within the educational marketplace.  As a
result, the Company completed three acquisitions since the
beginning of Fiscal, 1997 in the K-12 assessment and
instructional markets:  In the second fiscal quarter of Fiscal
2002, the Company determined that its core businesses of
assessment and instruction provide better long-term growth and
profit potential than the proprietary school business.
Consequently, during the second fiscal quarter, the Company
reached a decision to sell its proprietary school.  See
"Discontinued Operations" below. TASA core revenues in Fiscal
1994 were $2.0 million and have increased by acquisition and
internal growth to $10.4 million in Fiscal 2002.

        In an effort to report revenues in a more meaningful
manner, the Company has segregated revenues from continuing
operations into two discrete segments:  (1) assessment products
and services revenues, and (2) instructional revenues.  Revenues
from discontinued operations are reported separately.

RESULTS OF OPERATIONS

        The following table compares the revenues for the
assessment division and the instructional division for the fiscal
quarter ended January 31, 2003 versus the fiscal quarter ended
January 31, 2002.

         RESULTS OF OPERATIONS FOR THE FIRST FISCAL QUARTER
                     ENDED ON JANUARY 31, 2003

                           Three Months
                         Ended January 31,
                         -----------------
                                                  %
                         2003        2002       Change
                         ----        ----       ------

                           (in thousands
                            of dollars)



Assessment Products     $1,745.7   $1,452.9      20.2
Revenues

Instructional Revenues    $247.3     $258.7      (4.4)

Total Revenues          $1,993.0   $1,711.6      16.4
from Continuing
Operations


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

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

                                    2003       2002
                                    ----       ----

                                    (in percentages)

Revenues                            100%       100%


        Gross Profit                 47         49


Operating Expense:


        Selling Expense              30         22


        General & Administrative     30         38


(Loss) from Operations              (13)       (11)


        Other (Expense)              (7)        (8)


(Loss) Income from
Continuing Operations               (13)       (12)


Loss from Discontinued
Operations, net of taxes             (2)       (17)


Net (Loss)                          (15)       (29)



        REVENUES. Net revenues from continuing operations for the
        --------
three-months ended January 31, 2003 (the "current quarter")
increased by 16.4%, or $211,382, to $1,922,988 as compared to net
revenues of $1,711,606 in the three months ended January 31, 2002
(the "comparable quarter").  The overall increase is
attributable to increased sales of the Company's assessment
products, both proprietary and custom. While revenues did increase
substantially for the current quarter of the Company's fiscal year,
it should be noted that historically, the first quarter has
the smallest percentage of yearly sales due to the inherent
seasonality of our business.

        Revenues from our assessment division increased by
20.2%, or $292,757, during the current quarter, or from
$1,452,922 in the comparable quarter to $1,745,679 in the current
quarter. Our proprietary testing products have been responsible
for the greatest percentage increases.  This is due to the
implementation of proprietary tests to meet the requirements of
the Educational Reauthorization Act of 2001 or the "No Child Left
Behind (NCLB)" Act.

        The instructional division's revenues decreased by
$11,375 or 4.4%, from $258,684 in the comparable quarter to
$247,309 in the current quarter.  This decrease was due to state
and district budget shortfalls anticipated for the 2002-2003
school year. Since mid-January, however, we are again seeing
moderate growth in our supplemental line of products.  While it
is too early to determine if this positive change will continue
for the year, the Company is encouraged by these preliminary
results.

        COST OF GOODS SOLD. Cost of goods sold for the current
        ------------------
quarter increased by 21%, or $185,251, from $876,687 in the
comparable quarter to $1,061,938 in the current quarter. Cost of
goods sold is now 53% of revenues for the current quarter versus
51% for the comparable quarter.  The increase in cost of goods
sold is due to both volume growth of assessment products as well
as decreasing margins.  While the percent of cost of goods sold
in the proprietary assessment unit has decreased by almost 10
percentage points from 48.4% in 2002 to 38.8% in 2003, in the
custom area, the mix of BETA assignments significantly increased
year-to-year costs by almost 15 percentage points, or from 58.5%
in 2002 to 73.0% in 2003. We believe the billing mix will change
as we move through the year and will reduce cost of goods sold as
a percentage of revenue.

        GROSS PROFIT.  Gross profit from continuing operations
        ------------
increased to $931,050 in the current quarter from $834,919 in the
comparable quarter, or by $96,131.  However, the gross profit
margin declined to 47% in the current quarter versus 49% in the
comparable quarter.

        SELLING EXPENSE.  Selling expense for the current
        ---------------
quarter increased by 56.2%, or $211,793, versus the comparable
quarter. Selling expenses increased because of the Company's
decision to accelerate marketing spending in the first quarter of
its fiscal year to drive business throughout the year.  Sales of
assessment products have increased in part due to increased
marketing activities and related expenditures. Further, since
supplemental instructional products have exhibited industry-wide
declines, we believe we have been able to stem this trend by
up-front spending. Thus, selling expense was 30% of revenues for
the current quarter versus 22% in the comparable quarter.

        GENERAL AND ADMINISTRATIVE EXPENSES.  General and
        -----------------------------------
administrative expenses for the current quarter were $591,523
versus $644,176 for the comparable quarter.  This decrease of
$52,653 was 8.2%. The Company has decreased G&A expense to 30% of
revenues in the current quarter from 38% of revenues in the
comparable quarter. This decrease has resulted from the conscious
effort on the part of the Company to hold non-personnel expenses
steady. Further, we have shifted certain manpower from general
and administrative to revenue-producing activities which are
classified as cost of goods sold.   As a result, we have
succeeded in increasing revenues without significantly increasing
manpower.

        EBITDA.  Earnings (loss) before interest, taxes,
        ------
depreciation and amortization on the Company's continuing
operations were ($60,940) for the current quarter versus $46,023
for the comparable quarter.  EBITDA was behind that for last year
in the first fiscal quarter because of the increased marketing
expenditure in the current quarter. Had the organization held
marketing expenditures consistent, EBITDA would have actually
increased in 2003 versus 2002.

        OTHER INCOME (EXPENSE). For the current quarter the
        ----------------------
Company had net interest expense of $134,780 versus a net
interest expense of $137,867 for the comparable quarter.
Interest expense declined due to repayment of long-term debt, as
well as reduced utilization of the Company's line of credit.

        NET (LOSS) FROM CONTINUING OPERATIONS. For the current
        -------------------------------------
quarter, the Company had a net (loss) from continuing operations
of ($262,569) versus $(204,957) in the comparable quarter.

        DISCONTINUED OPERATIONS. In evaluating TASA's strategic
        -----------------------
alternatives, the Company made the decision to focus or
concentrate on its core business, namely assessment and
instruction in the K-12 marketplace.   As such, it has negotiated
the sale of the Mildred Elley Schools.  Accordingly, this
division is accounted for as discontinued operations in the
accompanying Consolidated Financial Statements.  During the
current quarter, the Company reported a loss from discontinued
operations of $33,881.  Operating losses from this division
totaled $181,712 in the current quarter versus $291,552 in the
comparable quarter.  In addition, the Company reported a gain net
of tax on disposal of the division totaling $147,831 to reflect
the change in the net assets to be sold.

        Completion of definitive documentation and closing has
been delayed as a result of two intervening actions of the United
States Department of Education (USDOE").  USDOE had permitted a
temporary suspension of the required Title IV recertification
process in lieu of Elley's pending application to change
ownership in connection with the sale.  In early October 2002,
USDOE advised Elley to complete the recertification process prior
to continuing pursuit of a change of ownership.  Elley also
received a Final Audit Determination letter from USDOE for the
audit period through October 31, 2001 which indicated a referral
to Administrative Actions and Appeals for action, if any, deemed
necessary from its "Repeat Finding-Failure to Take Corrective
Action" related to late refunds.  Although Elley permitted the
ELI to expire, the parties have agreed to continue negotiations
and to complete the definitive documentation upon receipt of the
USDOE recertification and determination related to the Repeat
Finding.

        NET (LOSS). For the current quarter, the Company had a
        ----------
net (loss) of ($296,450) versus $(496,509) in the comparable
quarter.

        For the current quarter, the Company had a ($0.10)
(loss) from continuing operations versus a $(0.08) in the
comparable quarter. Including the loss from discontinued
operations, the Company had a net (loss) of ($0.11) in the
current quarter versus a $(0.19) in the comparable quarter.

LIQUIDITY AND CAPITAL RESOURCES

        WORKING CAPITAL. Working capital decreased by $530,363
        ---------------
during the current quarter from $2,099,984 at October 31, 2002,
to $1,569,621, at January 31, 2003. This decrease was primarily
attributable to an increase  in accounts payable and a decrease
in accounts receivable.  The ratio of current assets to current
liabilities was 1.38 to 1.0 at the end of the current quarter.

        CASH FLOW FROM OPERATING ACTIVITIES. During the current
        -----------------------------------
quarter, the Company had net cash provided by operating
activities of $70,772, as compared to $352,795 in the comparable
quarter.  This decrease in the cash provided by operating
activities results primarily from smaller increases in accounts
receivable and net assets from discontinued operations as
partially offset by an increase in accounts payable.

        CASH FLOW FROM INVESTING ACTIVITIES. During the current
        -----------------------------------
quarter, the Company had net cash used in investing activities of
$140,679, as compared to $104,207 for the comparable quarter. The
cash used in the current quarter is slightly higher than the
comparable quarter as the Company continues to develop new
products.

        CASH FLOW FROM FINANCING ACTIVITIES. During the current
        -----------------------------------
quarter, the Company had net cash used in financing activities of
$12,746 as compared to $61,714 during the comparable quarter.
The decrease primarily relates to the repayment of the debt
originally incurred in connection with the MLP acquisition during
the second quarter of fiscal 2002.

        Subordinated debentures totaling $3,530,141 are
scheduled to mature on February 1, 2004.  The Company is
currently exploring its options with regards to repayment or
refinancing the debt, but has not yet decided on a course of
action.

        SALE-LEASEBACK TRANSACTION.  On January 31, 2003, the
        --------------------------
Company entered into an agreement for the sale and leaseback of
its 29,000 square foot office building in Brewster, New York.
The building was constructed in 1987, with the second phase
completed in 1991.  Such building is currently subject to a
mortgage with a balance of approximately $1.5 million, held by
Hudson United Bank.  The sale-leaseback transaction is expected
to close on or about May 31, 2003, subject to the satisfaction
of closing conditions.  Pursuant to this transaction, the Company
will receive approximately $2.7 million in net sales proceeds,
and will enter into a ten-year lease for the entire building at
market rents.  The Company will use the net proceeds to satisfy
the outstanding mortgage on the building, to build out a scoring
facility in the building, and for working capital.

        DISCONTINUED OPERATIONS.  The Company has determined
        -----------------------
that its core businesses of assessment and instruction provide
better long-term growth and profit potential than the proprietary
school business.  Consequently, during the second fiscal quarter
of 2002, the Company reached a decision to sell its proprietary
school.  Consistent with this determination, the Company entered
into a letter of intent to sell substantially all the assets and
liabilities of MESI to MESI's current president and former owner.
The transaction is subject to the completion of definitive
documentation and satisfaction of closing conditions.  The assets
to be sold constitute substantially all the assets and operations
of the Company's educational delivery segment (see Note 2 to the
Financial Statements).  The closing of this transaction has been
delayed, subject to receipt of regulatory approvals.  During this
period, the educational delivery division (discontinued) operated
at a loss.  The Company is uncertain as to the extent
to which the results of the regulatory approval process will
result in any additional expenses to be incurred by the Company.

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 and other assessment-related products, as well as from its
instructional materials, are recognized when product is shipped
from the Company's warehouse.  Assessment consulting revenues are
recognized when the consulting services are rendered.  Tuition
revenues from the Company's educational delivery division are
recognized at the point in time in which the Company has no
exposure to future tuition refunds associated with the respective
academic semester.

        The allowance for doubtful accounts is maintained to
provide for losses arising from customers' inability to make
required payments. If there is a deterioration of our customers'
credit worthiness and/or there is an increase in the length of
time that the receivables are past due greater than the
historical assumptions used, additional allowances may be
required.

        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 test passage bank is principally comprised of payroll and
payroll-related costs expended in the development of test passages which
are used in the creation of the Company's tests.  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 Degrees of Reading Power Test ("DRP") have been
estimated to have a useful life of eleven years and, accordingly, are
being amortized over an eleven-year period.  Costs capitalized in
connection with the development of passages used in all other of the
Company's tests have been estimated to have a useful life of seven
years and, accordingly, are being amortized over a seven-year period.


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 .
The Company's principal executive officer and principal financial
officer, after evaluating the effectiveness of the Company's
disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14(c) and 15d-14(c)) within 90 days preceding the date
of the report, has concluded that, as of such date, the Company's
disclosure controls and procedures were adequate and effective to
ensure that material information relating to the Company and its
consolidated subsidiaries would be made known to him by others
within those entities.

        (b)  Changes in internal controls.  There were no
significant changes in the Company's internal controls or in
other factors that could significantly affect the Company's
disclosure controls and procedures subsequent to the date of the
evaluation, nor were there any significant deficiencies or
material weaknesses in the Company's internal controls. As a
result, no corrective actions were required or undertaken


                               PART II

                         OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

        None.

ITEM 2. CHANGES IN SECURITIES

        None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

        On August 31,  2000, the Company received a letter from
the former owner of Mildred Elley School, Inc., alleging certain
defaults in the payment of amounts due under the asset purchase
agreement between the Company and Mildred Elley School, Inc. and
the accompanying promissory notes of the Company.  Such demand
letter also alleges additional defaults by MESI Acquisition Corp.
(TASA's wholly-owned subsidiary) ("MESI").  Such demand letter
also alleges additional defaults by MESI in the employment
agreement between MESI and Faith Takes, the former owner of the
Mildred Elley School who is currently MESI's president and chief
executive officer.  The amounts demanded by Ms. Takes aggregate
$985,270 plus interest, attorneys' fees and late fees.  The
Company believes that it has meritorious defenses and
counterclaims to such allegations and is pursuing resolution of
these issues.

        The foregoing alleged defaults trigger a potential
cross default under the Company's outstanding 8% Subordinated
Debentures, in the outstanding principal amount of $3,530,141 (as
of January 31, 2003) currently held by Cahill Warnock Strategic
Partners Fund, L.P. and Strategic Associates, L.P.  The Company
has not received a notice of default from the holders of such
Debentures.

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

        None.

ITEM 5. OTHER INFORMATION

        On January 31, 2003, the Company entered into an
agreement for the sale and leaseback of its 28,000 square foot
office building in Brewster, New York.  The building was
constructed in 1987, with the second phase completed in 1991.
Such building is currently subject to a mortgage with a balance
of approximately $1.5 million, held by Hudson United Bank.  The
sale-leaseback transaction is expected to close on or about March
31, 2003, subject to the satisfaction of closing conditions.
Pursuant to this transaction, the Company will receive
approximately $2.7 million in net sales proceeds, and will enter
into a ten-year lease for the entire building at market rents.
The Company will use the net proceeds to satisfy the outstanding
mortgage on the building, to build out a scoring facility in the
building, and for working capital.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a) Exhibits

            Exhibit 10.1 -- Contract of Sale, dated as of January 31, 2003,
                            between Touchstone Applied Science Associates,
                            Inc. and 26 Palmer, LLC

            Exhibit 10.2 -- Agreement of Lease between Touchstone Applied
                            Science Associates, Inc. and 26 Palmer, LLC

            Exhibit 11   -- Computation of Earnings per Common Share

            Exhibit 99.1 -- Certification pursuant to 18 USC Section 1350,
                            as adopted by Section 906 of the Sarbanes-
                            Oxley Act of 2002

        (b) Reports on Form 8-K

            None.

                TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.

          INDEX TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
               FOR THE FISCAL QUARTER ENDED JANUARY 31, 2003

Consolidated Balance Sheets                                F-1

Consolidated Statements of Operations and Comprehensive
    Income                                                 F-3

Consolidated Statements of Cash Flows                      F-4

Notes to Consolidated Financial Statements                 F-6


<PAGE>    F-1
                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES


<TABLE>
<CAPTION>

                                                                 Page 1 of 2
                       CONSOLIDATED BALANCE SHEETS

                                                             January 31,   October 31,
                                                               2 0 0 3      2 0 0 2
                                                               -------      -------
                                                             (Unaudited)

        ASSETS
        ------
<S>                                                      <C>            <C>
Current assets:
  Cash and temporary investments                             $   100,135  $   182,788
  Accounts receivable, net of allowance for doubtful
    accounts of  $29,345 and $72,597, respectively               957,192    1,285,727
  Inventories                                                    642,070      600,244
  Prepaid expenses and other current assets                      633,459      465,790
  Current assets held for sale                                 3,366,011    2,631,481
                                                             -----------  -----------

        Total current assets                                   5,698,867    5,166,030

Property, plant and equipment - net of
  accumulated depreciation of $1,364,347 and
  $1,336,875, respectively                                     1,583,040    1,588,546
Property, plant and equipment held for sale                      172,305      170,345

Other assets:
  Test passage bank and test development, net of
    accumulated amortization of $2,461,825 and
    $2,362,963, respectively                                   2,185,989    2,202,998
  Goodwill, net of accumulated amortization of $352,201          510,056      510,056
  Deferred income taxes                                        2,564,324    2,387,895
  Other assets                                                   579,891      604,970
  Other assets held for sale                                     480,213      175,922
                                                             -----------  -----------

        Total assets                                         $13,774,685  $12,806,762
                                                             ===========  ===========


</TABLE>
See notes to consolidated financial statements.



                                  F - 1
<PAGE>    F-2

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

<TABLE>
<CAPTION>

                                                                 Page 2 of 2
                       CONSOLIDATED BALANCE SHEETS

                                                             January 31,   October 31,
                                                               2 0 0 3       2 0 0 2
                                                               -------       -------
                                                             (Unaudited)

        LIABILITIES AND STOCKHOLDERS' EQUITY
        ------------------------------------
<S>                                                       <C>           <C>
Current liabilities:
  Current maturities of long-term debt                       $    56,631  $    55,556
  Accounts payable                                             1,140,598      631,454
  Accrued expenses                                               564,334      899,502
  Current liabilities held for sale                            2,367,683    1,479,534
                                                             -----------  -----------

        Total current liabilities                              4,129,246    3,066,046

Long-term debt:
  Subordinated debt                                            3,530,141    3,530,141
  Long-term debt, net of current portion                       1,516,323    1,530,144
  Other liabilities held for sale                                420,760      241,547
                                                             -----------  -----------

        Total liabilities                                      9,596,470    8,367,878
                                                             -----------  -----------

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $.0001 par value, 5,000,000
    authorized, 0  shares
    issued and outstanding, respectively                              --           --
  Common stock, $.0001 par value, 20,000,000
    shares authorized, 2,594,453 shares issued
    and outstanding                                                  259          259
  Additional paid-in capital                                   5,544,529    5,538,393
  Deferred interest                                              (87,648)    (117,293)
  Retained deficit                                            (1,278,925)    (982,475)
                                                             -----------  -----------

        Total stockholders' equity                             4,178,215    4,438,884
                                                             -----------  -----------

        Total liabilities and stockholders' equity           $13,774,685  $12,806,762
                                                             ===========  ===========

</TABLE>
See notes to consolidated financial statements.

                                  F - 2
<PAGE>    F-3


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF OPERATIONS

                                                  Three Months Ended
                                                      January 31,
                                                 2 0 0 3       2 0 0 2
                                                 -------       -------
                                               (Unaudited)   (Unaudited)

Assessment products and services revenues      $1,745,679    $1,452,922
Instructional revenues                            247,309       258,684
                                               ----------    ----------

Total net revenue                               1,992,988     1,711,606

Cost of goods sold                              1,061,938       876,687
                                               ----------    ----------

Gross profit                                      931,050       834,919
                                               ----------    ----------

Operating expenses:
  Selling expenses                                588,740       376,947
  General and administrative expenses             591,523       644,176
                                               ----------    ----------

Total operating expenses                        1,180,263     1,021,123
                                               ----------    ----------

Loss from operations                             (249,213)     (186,204)

Other income (expense):
  Interest expense, net                          (134,780)     (137,867)
                                               ----------    ----------

Loss before income taxes                         (383,993)     (324,071)

Income taxes (benefit)                           (121,424)     (119,114)
                                               ----------    ----------

Loss from continuing operations                  (262,569)     (204,957)
                                               ----------    ----------

Income (loss) from discontinued operations:
  Loss from operations net of income tax
      (benefit) of $(121,141) and $(169,439)     (181,712)     (291,552)
  Gain on disposal, net of income
      tax of $98,554                              147,831            --
                                               ----------    ----------

  Loss from discontinued operations               (33,881)     (291,552)
                                               ----------    ----------

Net loss                                       $ (296,450)   $ (496,509)
                                               ==========    ==========

Weighted average shares outstanding:
  Basic                                         2,594,453     2,565,606
  Diluted                                       2,594,453     2,565,606

Basic and diluted loss per share
  Continuing operations                        $     (.10)   $     (.08)
  Discontinued operations                      $     (.01)   $     (.11)


See notes to consolidated financial statements.

                                  F - 3

<PAGE>    F-4

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                                 Page 1 of 2

                                                  Three Months Ended
                                                      January 31,
                                                 2 0 0 3       2 0 0 2
                                                 -------       -------
                                               (Unaudited)   (Unaudited)

OPERATING ACTIVITIES
Net loss                                       $ (296,450)   $ (496,509)
Adjustments to reconcile net loss to net
  cash provided by operating activities:
  Depreciation and amortization                   188,273       232,227
  Deferred interest                                29,645        29,645
  Deferred income taxes                          (176,429)     (289,078)
  Financial advisory services                          --         1,251
Changes in operating assets and liabilities:
  Accounts receivable                             328,532     1,047,550
  Inventories                                     (41,826)      (39,631)
  Prepaid expenses                               (167,669)     (327,667)
  Other assets                                         --         4,417
  Net assets from discontinued operations          26,581       389,733
  Accounts payable and accrued expenses           180,115      (199,143)
                                               ----------    ----------

  NET CASH FLOWS FROM OPERATING ACTIVITIES         70,772       352,795
                                               ----------    ----------

INVESTING ACTIVITIES
  Test passage bank and test development          (81,853)      (54,068)
  Software development costs                         (136)       (6,611)
  Prepublication costs                            (36,724)      (28,911)
  Acquisition of fixed assets                     (21,966)      (14,617)
                                               ----------    ----------

  NET CASH FLOWS FROM INVESTING ACTIVITIES       (140,679)     (104,207)
                                               ----------    ----------










See notes to consolidated financial statements.

                                  F - 4

<PAGE>    F-5

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

              CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

                                                                 Page 2 of 2

                                                  Three Months Ended
                                                      January 31,
                                                 2 0 0 3       2 0 0 2
                                                 -------       -------
                                               (Unaudited)   (Unaudited)

FINANCING ACTIVITIES
  Repayment of long-term debt                  $  (12,746)   $  (61,714)
                                               ----------    ----------

NET CHANGE IN CASH AND TEMPORARY INVESTMENTS      (82,653)      186,874

CASH AND TEMPORARY INVESTMENTS
  AT BEGINNING OF PERIOD                          182,788        47,643
                                               ----------    ----------

CASH AND TEMPORARY INVESTMENTS
  AT END OF PERIOD                             $  100,135    $  234,517
                                               ----------    ----------

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

  Interest                                     $  152,748    $  162,344
                                               ==========    ==========
  Income taxes                                 $   14,935    $    4,418
                                               ==========    ==========

  Noncash investing and financing activities:

  Conversion of debt to common stock           $       --    $   16,100
                                               ==========    ==========













See notes to consolidated financial statements.

                                  F - 5

<PAGE>    F-6

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

In the opinion of management, the accompanying consolidated
financial statements of Touchstone Applied Science Associates,
Inc. ("TASA") and its subsidiaries contain all adjustments
necessary to present fairly the Company's consolidated financial
position as of January 31, 2003 and October 31, 2002, and its
consolidated statements of operations and cash flows for the three
months ended January 31, 2003 and 2002.

The consolidated results of operations for the three months ended
January 31, 2003 and 2002 are not necessarily indicative of the
results to be expected for the full year.

The accounting policies followed by the Company are set forth in
Note 1 to the Company's consolidated financial statements included
in its Annual Report on Form 10-KSB for the fiscal year ended
October 31, 2002.

NOTE 2 - SALE OF DELIVERY SEGMENT
---------------------------------

The Company has determined that its core businesses of assessment
and instruction provide better long-term growth and profit potential
than the proprietary school business.  Consequently, during the
second fiscal quarter of the fiscal year ended October 31, 2002, the
Company reached a decision to sell its proprietary school.
Consistent with this determination, the Company entered into a
letter of intent to sell substantially all the assets and
liabilities of Mildred Elley School, Inc. ("Elley") to Elley's
current president and former owner (the Elley Letter of Intent -
"ELI"). (See Note 4.) The Company will receive $1,000,000, payable
in cash and a promissory note.  At closing, the amount due on the
promissory note will be equal to the note payable to the United
States Small Business Administration ("SBA"). The remainder is payable
in cash. The promissory note will incur interest at prime plus .75%
commencing on the first anniversary of the closing with monthly
interest only payments for months 13 through 24.  Beginning with
month 25, the payments will consist of principal and interest
amortized over a four-year period. At the end of the 48 months, a
balloon payment is due. At January 31, 2003, the SBA loan totaled
approximately $230,000.


                                  F - 6

<PAGE>    F-7

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SALE OF DELIVERY SEGMENT (Continued)
---------------------------------

The assets to be sold constitute substantially all the assets and
operations of the Company's educational delivery segment.  Under the
provisions of SFAS 144, the Company is reporting the proposed sale
of the segment's operations as discontinued operations.  In
addition, during 2002, the Company wrote down the assets of Elley to
reflect the fair value of the net assets to be sold, and reported an
additional loss on disposal of approximately $4,137,000 less a tax
benefit of approximately $1,605,000, which included the impairment of
goodwill of approximately $3,021,000 and a related tax benefit of
approximately $1,162,000. During the three months ended January 31,
2003, the Company recorded a gain on the disposal of Elley totaling
$246,385 to reflect the change in the fair value of the net assets
to be sold.  The revenues for the delivery segment were $1,004,522
and $846,911 for the three months ended January 31, 2003 and 2002,
respectively.

Completion of definitive documentation and closing has been delayed
as a result of two intervening actions of the United States
Department of Education ("USDOE"). USDOE had permitted a temporary
suspension of the required Title IV recertification process in lieu
of Elley's pending application to change ownership in connection
with the sale.  In early October 2002, USDOE advised Elley to
complete the recertification process prior to continuing pursuit of
a change of ownership.  Elley also received a Final Audit
Determination letter from USDOE for the audit period through October
31, 2001 which indicated a referral to Administrative Actions and
Appeals for action, if any, deemed necessary from its "Repeat
Finding-Failure to Take Corrective Action" related to late refunds.
 Although Elley permitted the ELI to expire, the parties have agreed
to continue negotiations to complete the definitive documentation
upon receipt of the USDOE recertification and determination related
to the Repeat Finding.  The transaction is expected to be completed
upon the completion of the USDOE recertification process.


                                  F - 7

<PAGE>    F-8

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




<TABLE>
<CAPTION>

NOTE 3 - SEGMENT INFORMATION
----------------------------

                                        Assessment    Instructional    Total
                                        ----------    -------------    -----
<S>                                  <C>            <C>            <C>
Three Months Ended
    January 31, 2003:
Revenues - continuing operations        $1,745,679     $  247,309    $1,992,988
Loss from continuing operations            (99,364)      (163,205)     (262,569)
Total segment assets -
    continuing operations                7,843,107      1,913,049     9,756,156

Three Months Ended
    January 31, 2002:
Revenues - continuing operations        $1,452,922     $  258,684    $1,711,606
Loss from continuing operations            (88,445)      (116,512)     (204,957)
Total segment assets -
    continuing operations                6,665,608      1,953,830     8,619,438

</TABLE>

Included in the assessment segment reporting are corporate overhead
expenses of approximately $135,000 and $87,000 for the three months
ended January 31, 2003 and 2002, respectively.




                                  F - 8

<PAGE>    F-9

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                               AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 4 - COMMITMENTS AND CONTINGENCIES
--------------------------------------

Litigation proceedings
----------------------

The former owner of the Mildred Elley School, Inc. ("Plaintiff")
commenced an action alleging defaults in the payment of certain
amounts under the asset purchase agreement between the Company and
Mildred Elley School, Inc. and the accompanying promissory notes of
Elley (TASA's wholly-owned subsidiary).  The complaint also alleges
certain defaults by Elley in the employment agreement between Elley
and the Plaintiff, the former owner of the Mildred Elley School,
Inc. who is currently Elley's president and chief executive
officer.  The Company has defended primarily based on offsets
related to breaches of warranties in the asset purchase agreement.

The court issued a decision which granted summary judgment to the
plaintiff on two demand notes in the total principal amount of
$67,000 plus attorneys fees of $7,690 and recognized the right of
offset and granted summary judgment in favor of Elley on a separate
issue.  Cross-appeals of the lower court's decision are pending
currently in the New York State Appellate Division and enforcement
of the decision is stayed pending adjudication of the appeal.  An
agreement to settle all the claims in this litigation is part of
the contemplated sale transaction referenced in Note 2.

The foregoing alleged defaults trigger a potential cross default
under the Company's outstanding 8% subordinated debentures, in the
outstanding principal amount of $3,530,141 currently held by Cahill,
Warnock Strategic Partners Fund, LP (CWSPF) and Strategic Associates,
LP (SA). As of January 31, 2003, the Company has not received a
notice of default from CWSPF and SA.

NOTE 5 - SALE-LEASEBACK
-----------------------

On January 31, 2003, the Company entered into an agreement for a
sale-leaseback transaction with an unrelated third party.  Pursuant
to the agreement, the Company will sell its premises in Brewster, New
York for $2,875,000.  The gain on the sale of the premises will be
approximately $1,400,000.  In addition, the Company will enter into a
lease agreement for a period of 10 years on the premises.  The base
rent is expected to total $25,375 per month initially and will
include scheduled increases annually.  The Company expects to close
on the transaction on May 31, 2003.







                                  F - 9


                              SIGNATURE

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

                           TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.



                           By: /s/ ANDREW L. SIMON
                           -----------------------
                               Andrew L. Simon
                               President and Chief Executive Officer
                               and Principal Financial Officer

Date:   March 17, 2003

                          CERTIFICATIONS

        I, ANDREW L. SIMON, certify that:

        1.  I have reviewed this Quarterly Report on Form 10-
QSB of TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC. for the fiscal
quarter ended January 31, 2003.

        2.  Based on my knowledge, this Quarterly Report does
not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements made, in
light of the circumstances necessary to make the statements made,
in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this
Quarterly Report;

        3.  Based on my knowledge, the financial statements,
and other financial information included in this quarterly
report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant
as of, and for, the periods presented in this quarterly report;

        4.  The registrant's other certifying officers and I
are responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-14
and 15d-14) for the registrant and have:

        a)  designed such disclosure controls and procedures to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this quarterly report is being prepared;

        b)  evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days
prior to the filing date of this quarterly report (the
"Evaluation Date"); and

        c)  presented in this quarterly report our conclusions
about the effectiveness of the disclosure controls and procedures
based on our evaluation as of the Evaluation Date;

        5.  The registrant's other certifying officers and I
have disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent
functions):

        a)  all significant deficiencies in the design or
operation of internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's auditors
any material weaknesses in internal controls; and

        b)  any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and

        6.  The registrant's other certifying officers and I
have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the
date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material
weaknesses.

Date: March 17, 2003

/s/ ANDREW L. SIMON
-------------------
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER