SEC 2344     POTENTIAL PERSONS WHO ARE TO RESPOND TO THE
(5-99)       COLLECTION OF INFORMATION CONTAINED IN THIS FORM ARE
             NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
             CURRENTLY VALID OMB CONTROL NUMBER.



                            UNITED STATES               OMB APPROVAL
                  SECURITIES AND EXCHANGE COMMISSION    OMB Number 3235-0416
                       Washington, D.C. 20549
                                                        Expires: April 30, 2003

                                                        Estimated average
                                                        burden hours per
                                                        response: 9708.0



                              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 April 30, 2001

[ ]  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 May 31, 2001: 2,559,453 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 April
30, 2001 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, as amended, for the fiscal year ended October 31, 2000
("Fiscal 2000"), which may cause actual results to differ materially
from those described.

COMPANY BACKGROUND

          For over twenty years, TASA has served the rapidly expanding
education market, primarily through the publishing and sale of its
highly regarded proprietary reading tests. Since 1994, new management
has implemented a strategy to broaden the Company's services within
the educational marketplace. As a result, the Company has completed
four acquisitions since the beginning of its fiscal year ended October
31, 1997 ("Fiscal 1997") and now serves three educational markets: (1)
educational assessment and evaluation, (2) educational instruction,
and (3) educational delivery.

          Prior to 1997, the Company's revenues were derived from the
publishing and distribution of its proprietary line of reading tests.
During Fiscal 1997, the Company acquired Beck Evaluation and Testing
Associates, Inc. ("BETA"), which operates as the Company's custom test
design division. In that same fiscal year, the Company organized
Modern Learning Press, Inc. ("MLP"), which purchased substantially all
of the assets of Programs for Education, Inc., and marked the
Company's entrance into the instructional marketplace. MLP designs,
publishes and distributes affordable "consumable" student workbooks
that target grades K-6, and creates and publishes books and pamphlets
for elementary school teachers and parents. Also in Fiscal 1997, the
Company purchased the Maculaitis Assessment of Competencies test (the
"Maculaitis Test"), which is a comprehensive language assessment and
evaluation program for English as a second language. In its fiscal
year ended October 31, 1998 ("Fiscal 1998"), the Company organized a
wholly-owned subsidiary, TASA Educational Services Corp. ("TESC"), to
operate and acquire post-secondary proprietary schools. TESC completed
its first acquisition in the educational delivery field through its
acquisition in November 1998 of the Mildred Elley Schools ("Elley").

          Accordingly, in an effort to report revenues in a more meaningful
manner, the Company has segregated revenues into three discrete
segments: (1) assessment products and services revenues, (2)
instructional revenues, and (3) educational delivery revenues.

RESULTS OF OPERATIONS

          The following table compares the revenues for the assessment,
educational delivery, and instructional divisions for the six month
period ended April 30, 2001 versus the six month period ended April
30, 2000, and for the second quarter ended April 30, 2001 versus the
second quarter ended April 30, 2000.

<TABLE>
<CAPTION>
                                        Six Months                         Three Months
                                     Ended April 30,                      Ended April 30,
                                    2001         2000     % Change       2001      2000       % Change
                                    ----         ----     --------       ----      ----        --------

<S>                           <C>          <C>          <C>       <C>
Assessment Products Revenues    $2,637,081   $1,862,892     41.6     $1,544,002   $1,146,454     34.7

Instructional Revenues             589,081      671,452    (12.3)       385,927      409,630     (5.8)

Educational Delivery Revenues    2,190,973    2,385,244     (8.1)     1,588,872    1,798,137    (11.6)


Total Revenues                 $ 5,417,135   $4,919,588     10.1     $3,518,801   $3,354,221      4.9

</TABLE>


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

<TABLE>
<CAPTION>
                                        Six Months              Three Months
                                     Ended April 30,           Ended April 30,
                                    2001         2000        2001         2000
                                    ----         ----        ----         ----
                                     (In percentages)         (In percentages)

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

Revenues                           100%          100%        100%         100%

Gross Profit                        57            57          61           63

Operating Expense:

  Selling Expense                   22            23          17           17
  General & Administrative          43            53          30           43

Income (Loss) from Operations       (8)          (18)         13            3

Other (Expense)                     (6)           (8)         (5)          (6)

Pre- Tax (Loss) Income             (14)          (26)          9           (3)

Net Income (Loss)                   (9)          (17)          5           (2)

</TABLE>

          REVENUES.  The Company's revenues for the six-month period ended
          ---------
April 30, 2001 (the "Current Period"), were $5,417,135, representing a 10%
increase, or $497,547, from $4,919,588 for the six-month period ended
April 30, 2000 (the "Comparable Period"). Net revenues for the three
months ended April 30, 2001 (the "Current Quarter") increased by
$164,580, or 5%, to $3,518,801 as compared to net sales of $3,354,221
for the three months ended April 30, 2000 (the "Comparable Quarter").
The overall increase was primarily attributable to internal growth of
the Company's assessment division. Revenues for assessment products
and services, through the Company's proprietary test and custom test
design divisions, increased 42%, or $774,189, from $1,862,892 in the
Comparable Period to $2,637,081 during the Current Period. Revenues
for assessment products and services for the Current Quarter increased
by $397,548, or 35%, to $1,544,002 as compared to $1,146,454 for the
Comparable Quarter. Revenues from the Company's proprietary test
division, featuring DRP products, reflected a revenue increase of 12%
for the Current Period primarily as a result of the Company's
launching of its new series (with new norms) of DRP tests in the Fall
of 2000. In addition, the Company's custom test design division, BETA,
posted a revenue increase of approximately 81.5% during the Current
Period and an increase of 75% for the Current Quarter. This increase
can be attributed to growth in BETA's contractual business through
attainment of new contracts from both state governments and agencies
and publishers.

          The instructional division's revenues decreased by $82,371,
or 12%, from $671,452 in the Comparable Period to $589,081 during the
Current Period. Net revenues for the Current Quarter decreased by
$23,703, or 6%, to $385,927 as compared to net sales of $409,630 for
the Comparable Quarter. As reported by syndicated data retrieval
companies, the entire K-12 instructional category is experiencing
softness.  However, over the past two months (April and May), the
Company has seen a reversal and has achieved modest revenue gains.

          The educational delivery division's revenues decreased by
$194,271, or 8%, from $2,385,244 in the Comparable Period to
$2,190,973 during the Current Period. Net revenues for the Current
Quarter decreased by $209,265, or 12%, to $1,588,872 as compared to
net sales of $1,798,137 for the Comparable Quarter. TASA's post-
secondary school business, Mildred Elley Career College, is
countercyclical-that is, its financial performance runs counter to
the typical strength of businesses in times of good economic
conditions. Thus, the school has faced increased difficulty in
recruiting new students due to the generally improving economic
conditions in its key market area of Albany, New York, where the
unemployment rate is currently running around 3.3%.

          COST OF GOODS SOLD. Cost of goods sold increased to $2,342,826
          -------------------
in the Current Period, or 11%, as compared to  $2,107,269 in the Comparable
Period. Cost of goods sold increased to $1,373,986 in the Current Quarter,
or 11%, as compared to $1,240,528 in the Comparable Quarter. Cost of goods
sold as a percentage of revenues remained the same at 43% in both the
Current Period and the Comparable Period.  Cost of goods sold as a
percentage of revenues increased from 37% in the Comparable Quarter to
39% in the Current Quarter. This increase is a function of a
significant volume increase at BETA, upgrading of the teaching staff
at Elley, partially offset by the reduced costs of the test passage
amortization at TASA.

          GROSS PROFIT. The Company's gross profit for the Current Period
          -------------
increased by $261,990, or 9%, to $3,074,309 as compared to the Comparable
Period gross profit of $2,812,319. The Company's gross profit for the Current
Quarter increased by $31,122, or 1%, to $2,144,815 as compared to
$2,113,693 for the Comparable Quarter.  The gross profit margin
percentage remained the same for Current Period and Comparable Period
at 57%. The gross profit margin percentage decreased from 63% in the
Comparable Quarter to 61% in the Current Quarter.

          SELLING EXPENSES. The Company's selling expenses for the Current
          -----------------
Period increased by $38,198, or 3%, as compared to the Comparable Period.
Selling expenses for the Current Quarter increased by $30,010, or 5%, as
compared to the Comparable Quarter. These increases are primarily due
to the cost of attracting new students in the educational delivery
division.

          GENERAL AND ADMINISTRATIVE EXPENSES. The Company's general and
          ------------------------------------
administrative expenses for the Current Period decreased by $272,674, or
11%, as compared to the Comparable Period. The Company's general and
administrative expenses for the Current Quarter decreased by $377,137,
or 26%, as compared to such expenses in the Comparable Quarter. These
decreases were attributable to the reduction in overhead expenses resulting
from management's cost reduction plan and efforts during the Company's prior
fiscal year. In addition, as part of the Company's normal recurring review,
Management significantly increased its reserves for collections on its
accounts and tuition receivables in the Comparable Period and Comparable
Quarter. The Company also wrote off approximately $76,000 in costs
during the Comparable Period in connection with an abandoned potential
acquisition of a school.

          EBITDA. Earnings before interest, taxes, depreciation, and
          -------
amortization increased $373,752 to a loss of $7,681 in the Current Period
from a loss of $381,433 in the Comparable Period. Earnings before interest,
taxes, depreciation, and amortization increased $291,768 to $671,131
in the Current Quarter from $379,363 in the Comparable Quarter. These
increases are the result of the increase in revenues during the
Current Quarter and reduction in operating costs.

          OTHER INCOME (EXPENSE). Net interest expense decreased in the
          -----------------------
Current Period by $23,770, or 6%, as compared to Comparable Period. Net interest
expense decreased in the Current Quarter by $28,413, or 15%, as compared
to the Comparable Quarter. These decreases are primarily due to additional
interest income earned, as well as decreased debt and lower interest
rates.

          NET EARNINGS (LOSS) AND EARNINGS (LOSS) PER SHARE. Net (loss) was
          --------------------------------------------------
$474,999 for the Current Period as compared to a net (loss) of $829,379 for
the Comparable Period. (Loss) per share in the Current Period was ($.19)
based on weighted average shares outstanding of 2,559,453. In the Comparable
Period, (loss) per share was ($.36) based upon weighted average shares
outstanding of 2,314,866. Net income was $169,044 for the Current Quarter
as compared to a net (loss) of $73,506 for the Comparable Quarter. Earnings
per share in the Current Quarter were $.07 based on weighted average
shares outstanding of 2,559,453. In the Comparable Quarter, (loss) per
share was ($.03) based upon weighted average shares outstanding of
2,493,759.

LIQUIDITY AND CAPITAL RESOURCES

          WORKING CAPITAL. Working capital decreased by $801,009 during
          ----------------
Current Period from $1,053,496 at October 31, 2000, to $252,487, at April
30, 2001. This decrease resulted primarily from the net loss incurred during
the Current Period and an increase in accounts payable and accrued
expenses. The ratio of current assets to current liabilities was
approximately 1.1 to 1.0 at the end of the Current Period.

          CASH FLOW FROM OPERATING ACTIVITIES. During the Current Period,
          ------------------------------------
the Company had net cash provided by operating activities of $3,574, as
compared to $1,251,991 used in operating activities in the Comparable Quarter.
The increase in cash provided by operating activities resulted from the
decrease in accounts receivable of $514,341 and an increase in deferred
revenue of $464,288.

          CASH FLOW FROM INVESTING ACTIVITIES. During the Current Period,
          ------------------------------------
the Company had net cash used in investing activities of $209,980, as
compared to $162,954 for the Comparable Period. The increase in cash used
in investing activities resulted primarily from investments made in test
development.

          CASH FLOW FROM FINANCING ACTIVITIES. During the Current Period,
          ------------------------------------
the Company had net cash from financing activities of $226,620 in the Current
Period, as compared to $451,647 from financing activities for the Comparable
Period.  The increase in cash used for financing activities resulted from the
Company repaying certain debt.

SUBSEQUENT EVENTS

          On January 2, 2001, the Company received a notice from NASDAQ
stating that the Company had failed to meet the continued listing
requirement of the Small Cap Market because the price of the Company's
common stock had been less than $1.00 for thirty consecutive trading
days.  At that date, in order to rectify this deficiency, the Company
had ninety days within which to maintain its stock price at $1.00 or
more for ten consecutive trading days in accordance with NASDAQ's
continued listing requirements. On March 2, 2001, the Company
responded to NASDAQ asserting that it is currently in compliance with
NASDAQ's continued listing requirements since the Company's common
stock had maintained a price of $1.00 or more for at least ten
consecutive trading days.  On April 5, 2001, the Company received
notice that NASDAQ had made a determination that the Company did not
demonstrate an ability to sustain compliance with the minimum bid
price applicable to the Small Cap market.  The Company received a
hearing before NASDAQ but has not yet received NASDAQ's final
determination. If the Company's securities are delisted from the
NASDAQ Small Cap Market, the liquidity of the market for the Company's
Common Stock may be adversely affected and the Company may encounter
difficulty in raising financing that may be necessary in the future.

          As of April 30, 2001, the Company owed $200,000 to a bank,
which is the maximum availability under a particular line of credit
promissory note.  This line had expired as of March 31, 2001.  The
bank extended the credit line through June 30, 2001.  The Company is
currently negotiating an additional extension on the line.

          As of April 30, 2001, the Company owed an additional $200,000
which is the maximum availability under another line of credit
promissory note with the same bank.  This line also expired as of
March 31, 2001.   The bank extended the credit line through June 30,
2001.  The Company is currently negotiating an additional extension on
the line.

          As of April 30, 2001, the Company had approximately $598,000
outstanding on an additional line of credit facility totaling $750,000
with a bank.  This line contains various financial covenants
pertaining to the maintenance of working capital and debt service
coverage which are to be calculated as of the Company's fiscal year
end and which the Company was in breach of as of October 31, 2000.
Under the terms of the line of credit agreement, the bank may call the
line if the Company is in violation of any of the covenants.  In March
2001, the bank granted a one time waiver of the covenant requirements
at October 31, 2000.  In addition, the due date of the line was
extended to October 1, 2001 and new financial covenant requirements
were set effective July 31, 2001.

          On March 30, 2001, the Company granted options to four directors
pursuant to its Directors'  Stock Option Plan to purchase an aggregate
of 10,000 common shares at an exercise price of $.6875 per share.



                                   PART II

                             OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

          In January 2000, a former employee of Mildred Elley commenced
an action against the Company, MESI Acquisition Corp., an indirect
wholly-owned subsidiary of the Company ("MESI"), and an executive
officer of MESI in the Supreme Court of the State of New York in the
County of Albany. The complaint alleges claims of wrongful termination
of employment and seeks damages as compensation. The Company believes
that the allegations are without merit and is vigorously defending the
action. The Company maintains directors and officers liability
insurance which, subject to a policy deductible, insures the defendant
officer, but not the Company, against such claims.

          In October 2000, Faith Takes, the former owner of Mildred Elley
School, Inc., commenced an action against the Company, MESI, TASA
Educational Services Corporation and an investor in the Company.  The
action was commenced in the Supreme Court of the State of New York in the
County of Albany.   The complaint alleges 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 MESI.
The amounts originally demanded by Ms. Takes aggregate $985,270 plus
interest, attorneys' fees and late fees.  Ms. Takes is currently MESI's
president and chief executive officer.  On June 7, 2001, the court denied
plaintiff's motion for summary judgment, finding that MESI and the
Company were entitled to certain offsets against certain of the
promissory notes issued in connection with the acquisition.  With respect
to demand notes payable to Ms. Takes in the aggregate principal amount of
approximately $60,000 representing funds advanced to MESI, the court
found that the Company was not entitled to any offsets and granted
summary judgment to Ms. Takes.  The court also denied the Company's
motion for summary judgment with respect to certain breach of warranty
claims with respect to a third party note. The Company intends to appeal
the portions of the decision which are adverse to the Company.

ITEM 2.   CHANGES IN SECURITIES

          None

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES

          In October 2000, Faith Takes, the former owner of Mildred Elley
School, Inc., commenced an action against the Company, MESI, TASA
Educational Services Corporation and an investor in the Company.  See
Item 1 above.

          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 April 30, 2001)
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

          The Company held its annual meeting of stockholders on March 30,
2001.  At the meeting, the stockholders took the following actions:

          (i) The proposal to elect Michael D. Beck as a director of the
Company was approved by a vote of 2,416,461 votes in favor of his election,
with 13,400 votes against and no abstentions and broker non-votes,
representing a vote of 99.5% of the votes present cast in favor of
the election of Mr. Beck.

          (ii) The proposal to elect Steven R. Berger as a director of the
Company was approved by a vote of 2,413,961 votes in favor of his election,
with 15,900 votes against and no abstentions and broker non-votes,
representing a vote of 99.4% of the votes present cast in favor of
the election of Mr. Berger.

          (iii) The proposal to elect Joseph A. Fernandez as a director of
the Company was approved by a vote of 2,413,961 votes in favor of his
election, with 15,900 votes against and no abstentions and broker
non-votes, representing a vote of 99.4% of the votes present cast in
favor of the election of Dr. Fernandez.

          (iv) The proposal to elect Andrew L. Simon as a director of
the Company was approved by a vote of 2,316,386 votes in favor of his
election, with 113,475 votes against and no abstentions and broker
non-votes, representing a vote of 95.3% of the votes present cast
in favor of the election of Mr. Simon.

          (v) The proposal to elect Linda G. Straley as a director of
the Company was approved by a vote of 2,316,386 votes in favor of her
election, with 113,475 votes against and no abstentions and broker
non-votes, representing a vote of 95.3% of the votes present cast
in favor of the election of Ms. Straley.

          (vi) The proposal to elect Thomas G. Struzzieri as a director
of the Company was approved by a vote of 2,413,961 votes in favor of his
election, with 15,900 votes against and no abstentions and broker
non-votes, representing a vote of 99.4% of the votes present cast in
favor of the election of Mr. Struzzieri.

          (vii) The proposal to elect David L. Warnock as a director of
the Company was approved by a vote of 2,416,461 votes in favor of his
election, with 13,400 votes against and no abstentions and broker
non-votes, representing a vote of 99.5% of the votes present cast
in favor of the election of Mr. Warnock.

          (viii) The proposal to ratify the appointment of Lazar, Levine
& Felix LLP as the independent auditors of the Company was adopted by a
vote of 2,418,036 votes in favor of the proposal, with 825 votes
against, no votes abstaining and no broker non-votes, representing
a vote of 99.9% of the votes present cast in favor of the
proposal.


ITEM 5.   OTHER INFORMATION

          On January 2, 2001, the Company received a notice from NASDAQ
stating that the Company had failed to meet the continued listing
requirement of the Small Cap Market because the price of the Company's
common stock had been less than $1.00 for thirty consecutive trading
days.  At that date, in order to rectify this deficiency, the Company
had ninety days within which to maintain its stock price at $1.00 or
more for ten consecutive trading days in accordance with NASDAQ's
continued listing requirements. On March 2, 2001, the Company
responded to NASDAQ asserting that it is currently in compliance with
NASDAQ's continued listing requirements since the Company's common
stock had maintained a price of $1.00 or more for at least ten
consecutive trading days.  On April 5, 2001, the Company received
notice that NASDAQ had made a determination that the Company did not
demonstrate an ability to sustain compliance with the minimum bid
price applicable to the Small Cap market.  The Company received a
hearing before NASDAQ but has not yet received NASDAQ's final
determination. If the Company's securities are delisted from the
NASDAQ Small Cap Market, the liquidity of the market for the Company's
Common Stock may be adversely affected and the Company may encounter
difficulty in raising any financing

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          (a) Exhibits

              Exhibit 11 -- Computation of Earnings per Common Share

          (b) Reports on Form 8-K

              None.


                    TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.

             INDEX TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                  FOR THE FISCAL QUARTER ENDED APRIL 30, 2001


    Consolidated Balance Sheets                                          F-1

    Consolidated Statements of Operations                                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

                                                       April 30,      October 31,
                                                        2 0 0 1         2 0 0 0
                                                        -------         -------
                                                      (Unaudited)
     ASSETS
     ------
<S>                                               <C>             <C>
Current assets:
  Cash and temporary investments                       $   79,062     $   512,088
  Accounts receivable, net of allowance for doubtful
   accounts of $82,037 and $97,545, respectively        1,090,432       1,294,756
  Tuition receivable, net of allowance for doubtful
   accounts of $507,870 and $436,483,
   respectively                                         2,398,033       2,097,329
  Inventories                                             582,326         596,654
  Prepaid expenses and other current assets               477,670         263,641
                                                       ----------     -----------

        Total current assets                            4,627,523       4,764,468

Property, plant and equipment - net of
  accumulated depreciation of $1,717,952 and
  $1,628,899, respectively                              1,857,025       1,945,948

Other assets:
  Noncurrent tuition receivable, net of allowance for
   doubtful accounts of $169,290 and $145,494,
   respectively                                         1,103,867       1,106,868
  Test passage bank and test development, net of
   accumulated amortization of $1,791,519 and
   $1,668,324, respectively                             2,374,212       2,337,253
  Goodwill, net of accumulated amortization of
   $536,981 and $452,059, respectively                  3,734,051       3,818,974
  Deferred income taxes                                 1,567,707       1,276,606
  Other assets                                            903,269         954,532

        Total assets                                  $16,167,654     $16,204,649
                                                      ===========     ===========

</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

                                                       April 30,      October 31,
                                                        2 0 0 1         2 0 0 0
                                                        -------         -------
                                                      (Unaudited)
     LIABILITIES AND STOCKHOLDERS' EQUITY
     ------------------------------------
<S>                                                <C>            <C>
Current liabilities:
  Lines of credit                                     $   997,748    $ 1,097,748
  Current maturities of long-term debt                    782,124        620,479
  Current maturities of capitalized lease
   obligations                                             16,748         15,950
  Deferred revenue                                             --         75,792
  Accounts payable and accrued expenses                 2,578,416      1,901,003
                                                      -----------    -----------

        Total current liabilities                       4,375,036      3,710,972

Long-term debt:
  Subordinated debt                                     3,530,141      3,530,141
  Long-term debt, net of current portion                2,385,352      2,666,054
  Long-term capitalized lease obligations, net of
    current portion                                         7,746         16,107
                                                      -----------    -----------

        Total liabilities                              10,298,275      9,923,274
                                                      -----------    -----------

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $.0001 par value, 5,000,000
   authorized, 0  shares
   issued and outstanding                                      --             --
  Common stock, $.0001 par value, 20,000,000 shares
   authorized, 2,559,453 shares issued and
   outstanding                                                256            256
  Additional paid-in capital                            5,522,296      5,522,296
  Deferred interest                                      (294,199)      (352,523)
  Unearned compensatory stock                              (5,929)       (10,608)
  Retained earnings                                       646,955      1,121,954
                                                      -----------    -----------

        Total stockholders' equity                      5,869,379      6,281,375

        Total liabilities and stockholders'
          equity                                      $16,167,654    $16,204,649
                                                      ===========    ===========

</TABLE>

See notes to consolidated financial statements.

                                     F - 2


<PAGE>     F - 3

                    TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                                 AND SUBSIDIARIES


<TABLE>
<CAPTION>

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                       Six Months Ended               Three Months Ended
                                                           April 30,                      April 30,
                                                     2 0 0 1        2 0 0 0         2 0 0 1       2 0 0 0
                                                     -------        -------         -------       -------
                                                   (Unaudited)    (Unaudited)     (Unaudited)   (Unaudited)

<S>                                            <C>            <C>              <C>           <C>
Assessment products revenues                       $2,637,081    $ 1,862,892      $1,544,002    $1,146,454
Educational delivery revenues                       2,190,973      2,385,244       1,588,872     1,798,137
Instructional revenues                                589,081        671,452         385,927       409,630
                                                   ----------    -----------      ----------    ----------

Total net revenue                                   5,417,135      4,919,588       3,518,801     3,354,221

Cost of goods sold                                  2,342,826      2,107,269       1,373,986     1,240,528
                                                   ----------    -----------      ----------    ----------

Gross profit                                        3,074,309      2,812,319       2,144,815     2,113,693
                                                   ----------    -----------      ----------    ----------

Operating expenses:
  Selling expenses                                  1,165,533      1,127,335         604,579       574,569
  General and administrative
   expenses                                         2,315,850      2,588,524       1,066,824     1,443,961
                                                   ----------    -----------      ----------    ----------

Total operating expenses                            3,481,383      3,715,859       1,671,403     2,018,530
                                                   ----------    -----------      ----------    ----------

(Loss) income from operations                        (407,074)      (903,540)        473,412        95,163

Other income (expense):
  Interest expense, net                              (350,971)      (374,741)       (166,248)     (194,661)
                                                   ----------    -----------      ----------    ----------

(Loss) income before income taxes                    (758,045)    (1,278,281)        307,164       (99,498)


Income tax (benefit)                                 (283,046)      (448,902)        138,120       (25,992)
                                                   ----------    -----------      ----------    ----------

Net (loss) income                                   $(474,999)   $  (829,379)     $  169,044    $  (73,506)
                                                   ==========    ===========      ==========    ==========

Weighted average shares outstanding
  Basic                                              2,559,453     2,314,866       2,559,453     2,493,759
  Diluted                                            2,559,453     2,314,866       2,559,453     2,493,759

(Loss) earnings per share
  Basic                                             $     (.19)   $     (.36)     $      .07    $     (.03)
  Diluted                                           $     (.19)   $     (.36)     $      .07    $     (.03)


</TABLE>

See notes to consolidated financial statements.


                                     F - 3
<PAGE>     F - 4


                    TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                                 AND SUBSIDIARIES
                                                                   Page 1 of 2
                       CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                        Six Months Ended
                                                            April 30,
                                                     2 0 0 1        2 0 0 0
                                                     -------        -------
                                                   (Unaudited)    (Unaudited)


OPERATING ACTIVITIES
  Net loss                                         $ (474,999)    $  (829,379)
  Adjustments to reconcile net loss to net
   cash (used) provided in operating activities:
  Depreciation and amortization                       399,393         522,107
  Deferred interest                                    58,324          58,646
  Deferred income taxes                              (291,101)       (449,902)
  Financial advisory services                           4,679           4,679
  Bad debt expense                                     99,691         181,523
Changes in operating assets and liabilities:
  Accounts receivable                                 192,272         163,164
  Inventories                                          14,328        (131,371)
  Other assets                                       (215,302)       (356,481)
  Tuition receivable                                 (385,332)       (560,028)
  Deferred revenue                                    (75,792)         33,750
  Accounts payable                                    677,413         111,301
                                                   ----------      ----------

NET CASH FLOWS FROM OPERATING ACTIVITIES                3,574      (1,251,991)
                                                   ----------      ----------

INVESTING ACTIVITIES
  Acquisition of property, plant and equipment        (17,130)        (94,192)
  Test passage bank and test development             (160,154)       (138,339)
  Prepublication costs                                (40,276)       (105,423)
  Proceeds from sale of marketable securities              --         175,000
  Proceeds from sale of auto                           17,000              --
  Software development costs                           (9,420)             --
                                                   ----------      ----------

NET CASH FLOWS FROM INVESTING ACTIVITIES             (209,980)       (162,954)
                                                   ----------      ----------





See notes to consolidated financial statements.


                                     F - 4

<PAGE>     F - 5

                    TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                                 AND SUBSIDIARIES



                                                                   Page 2 of 2
                       CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                        Six Months Ended
                                                            April 30,
                                                     2 0 0 1        2 0 0 0
                                                     -------        -------
                                                   (Unaudited)    (Unaudited)


FINANCING ACTIVITIES
  Net borrowings on loan payable                   $(100,000)     $   525,000
  Repayment of long-term debt                       (126,620)         (73,353)
                                                   ---------      -----------

NET CASH FLOWS FROM FINANCING ACTIVITIES            (226,620)         451,647
                                                   ---------      -----------

NET CHANGE IN CASH AND TEMPORARY INVESTMENTS        (433,026)        (963,298)

CASH AND TEMPORARY INVESTMENTS
 AT BEGINNING OF PERIOD                              512,088        1,140,893
                                                   ---------      -----------

CASH AND TEMPORARY INVESTMENTS AT END OF PERIOD    $  79,062      $   177,595
                                                   =========      ===========

SUPPLEMENTAL CASH FLOW INFORMATION:
 Interest paid                                     $ 346,442      $   407,701
                                                   =========      ===========

 Income taxes paid                                 $   1,204      $     1,000
                                                   =========      ===========

 Stock issued in repayment of subordinated note    $      --      $   469,859
                                                   =========      ===========



See notes to consolidated financial statements.


                                     F - 5

<PAGE>     F - 6

                    TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                                 AND SUBSIDIARIES

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

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 April 30,
2001 and October 31, 2000, the consolidated statements of operations
for the six and three months ended April 30, 2001 and 2000 and
consolidated cash flows for the six months ended April 30, 2001 and
2000.

The consolidated results of operations for the six and three months
ended April 30, 2001 and 2000 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,
2000.

NOTE 2 -  SEGMENT INFORMATION
-----------------------------

<TABLE>
<CAPTION>
                                         Assessment       Delivery      Instructional        Total
                                         ----------       --------      -------------        -----

<S>                                  <C>             <C>             <C>                <C>
Six Months Ended April 30, 2001:
  Revenues                              $2,637,081      $2,190,973       $  589,081        $ 5,417,135
  Income (loss) before income tax           16,462       (532,828)         (241,679)          (758,045)
  Total segment assets                   7,085,125       7,006,359        2,076,170         16,167,654

Six Months Ended April 30, 2000:
  Revenues                              $1,862,892      $2,385,244       $  671,452        $ 4,919,588
  Loss before income tax                  (888,971)       (190,180)        (199,130)        (1,278,281)
  Total segment assets                   7,080,258       6,759,758        2,375,045         16,215,061

</TABLE>

Included in the assessment segment reporting are corporate overhead
expenses of approximately $348,000 and $362,000 for the six months
ended April 30, 2001 and 2000, respectively.

The Company's operations are primarily conducted in the United States.
Information about the Company's operations in different geographic
areas for the six months ended April 30, 2001 and 2000, is not
considered material to the financial statements.


                                     F - 6

<PAGE>     F - 7

                    TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                                 AND SUBSIDIARIES

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

NOTE 3 - NASDAQ LISTING COMPLIANCE
----------------------------------

On January 2, 2001, the Company received a notice from NASDAQ stating
that the Company had failed to meet the continued listing requirement
of the Small Cap Market because the price of the Company's common
stock had been less than $1.00 for thirty consecutive trading days.
At that date, in order to rectify this deficiency, the Company had
ninety days within which to maintain its stock price at $1.00 or more
for ten consecutive trading days in accordance with NASDAQ's continued
listing requirements. On March 2, 2001, the Company responded to
NASDAQ asserting that it is currently in compliance with NASDAQ's
continued listing requirements since the Company's common stock had
maintained a price of $1.00 or more for at least ten consecutive
trading days.  On April 5, 2001, the Company received notice that
NASDAQ had made a determination that the Company did not demonstrate
an ability to sustain compliance with the minimum bid price applicable
to the Small Cap market. The Company received a hearing before NASDAQ
but has not yet received NASDAQ's final determination.

NOTE 4 - LINES OF CREDIT EXTENSIONS
-----------------------------------

As of April 30, 2001, the Company owed $200,000 to a bank, which is
the maximum availability under a particular line of credit promissory
note.  This line had expired as of March 31, 2001.  The bank extended
the credit line through June 30, 2001. The Company is currently
negotiating an additional extension on the line.

As of April 30, 2001, the Company owed an additional $200,000 which is
the maximum availability under another line of credit promissory note
with the same bank.  This line also expired as of March 31, 2001.
The bank extended the credit line through June 30, 2001.  The Company
is currently negotiating an additional extension on this line.

As of April 30, 2001, the Company had approximately $598,000
outstanding on an additional line of credit facility totaling $750,000
with a bank.  This line contains various financial covenants
pertaining to the maintenance of working capital and debt service
coverage which are to be calculated as of the Company's fiscal year
end and which the Company was in breach of as of October 31, 2000.
Under the terms of the line of credit agreement, the bank may call the
line if the Company is in violation of any of the covenants.  In March
2001, the bank granted a one-time waiver of the covenant requirements
at October 31, 2000.  In addition, the due date of the line was
extended to October 1, 2001 and new financial covenant requirements
were set.


                                     F - 7

<PAGE>     F - 8

                    TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                                 AND SUBSIDIARIES

               NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)


NOTE 5 - DIRECTORS STOCK OPTIONS
--------------------------------

On March 30, 2001, the Company granted options to four directors
pursuant to its Directors'  Stock Option Plan to purchase an
aggregate of 10,000 common shares at an exercise price of $.6875
per share.


































                                     F - 8


                                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
                                 Principal Accounting Officer


Date: June 15, 2001