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


                              FORM 10-QSB

(Mark One)

[X]  Quarterly report pursuant to Section 13 or 15(d) of the
     Securities Exchange Act of 1934
                  For the quarterly period ended July 31, 2002

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

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


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


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

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

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


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

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

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

Yes________ No_________

               APPLICABLE ONLY TO CORPORATE ISSUERS

  State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:  As
                                                              --
of September 11, 2002:           shares of Common Stock, par value
----------------------------------------------------------------
$0.0001 per share.
------------------

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

<PAGE>


                               PART I

                       FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

        The financial statements for the Company's fiscal
quarter ended July 31, 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 for
the fiscal year ended October 31, 2001 ("Fiscal 2001"), which
may cause actual results to differ materially from those
described.

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, management has implemented a strategy to broaden the
Company's services within the education marketplace.  As a
result, the Company has completed four acquisitions since 1997,
and now serves three education markets: (1) educational
assessment and evaluation, (2) the 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.  In the fiscal year ending October 31, 1997
("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 four
affordable "consumable" student workbook series that target
grades K-4, 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 subsidiary, TASA  Educational
Services Corp. ("TESC"), to operate and acquire post-secondary
schools.  TESC completed its first acquisition in the educational
delivery field in November 1998 through its acquisition in
November 1998 of the 750-student Mildred Elley Schools.

        Accordingly, in an effort to report revenues in a more
meaningful manner, the Company has segregated revenues into three
discrete segments: (1) assessment revenues, (2) instructional
revenues and (3) educational delivery revenues.  All prior
periods have been recharacterized into these three segments for
comparative purposes.

RESULTS OF OPERATIONS

        The following table compares the revenues for each of
the assessment division, and the instructional division for the
fiscal quarter and nine months ended July 31, 2002 versus the
fiscal quarter and nine months ended July 31, 2001.

<TABLE>
<CAPTION>

            RESULTS OF OPERATIONS FOR THE THIRD FISCAL QUARTER
            AND FOR THE NINE-MONTH PERIOD ENDED ON JULY 31, 2002

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

                         2002       2001      % Change      2002        2001      % Change
                         ----       ----      --------      ----        ----      --------
                          (in thousands                      (in thousands
                           of dollars)                        of dollars)

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


Assessment Products
Revenues              $5,214.4     $4,637.3      12.4      $2,030.6     $2,000.2     1.5

Instructional
Revenues
                      $2,129.4     $1,942.9       9.6      $1,497.5     $1,353.8    10.6

Total Revenues
from Continuing
Operations            $7,343.8     $6,580.2      11.6      $3,528.0     $3,354.0     5.2


</TABLE>

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

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

                                      2002       2001       2002       2001
                                      ----       ----       ----       ----
                                      (in percentages)      (in percentages)



Revenues                              100%       100%       100%       100%
        Gross Profit                   56         65         61         70

Operating Expense:

        Selling Expense                21         20         19         18

        General & Administrative       27         29         20         24

Income from Continuing
Operations                              9         16         23         29

        Other (Expense)                (6)        (7)        (4)        (5)

Net Income from
Continuing Operations                   2          6         11         15

Loss from Discontinued
Operations, net of taxes              (34)        (9)        (1)        (9)

Net Income (Loss)                     (32)        (4)        10          7

        REVENUES.  Revenues from continuing operations for the
        ---------
nine-month period ended July 31, 2002 (the "current period")
were $7,343,860 representing an 11.6% increase or $763,698 from
$6,580,162 for the nine-month period ended July 31, 2001 (the
"comparable period").  Net revenues from continuing operations
for the three-months ended July 31, 2002 (the "current
quarter") increased by 5.2% or $174,048 to $3,528,048 as
compared to net revenues of $3,354,000 in the three months ended
July 31, 2001 (the "comparable quarter").

        Revenues from our assessment division increased by
12.4%, or $577,154 during the current period or from $4,637,291
in the comparable period to $5,214,445 in the current period.
Revenues from the assessment division for the current quarter
increased 1.5%, or $30,346, from $2,000,210 in the comparable
quarter to $2,030,556 in the current quarter.  Our proprietary
testing products have been responsible for the greatest
percentage increases.  This is due to the impact of the new
product testing programs in Utah and Indiana, as well as
continued growth in our MAC II product.

        The instructional division's revenues increased by
$186,544, or 9.6%, in the current period or from $1,942,871 to
$2,129,415.  Net revenues increased by $143,702 in the current
quarter or 10.6% from $1,353,790 to $1,497,492 in the current
quarter.

        COST OF GOODS SOLD.  Cost of goods sold increased by
        -------------------
$898,751, or 38.8%, from $2,316,627 in the comparable period to
$3,215,378 in the current period.  Cost of goods sold is now 44%
of revenues versus 35% in the comparable period.  Cost of goods
sold for the current quarter increased by 39.8%, or $395,276,
from $993,837 in the comparable quarter to $1,389,113 in the
current quarter. Cost of goods sold is now 39% of revenues for
the quarter versus 30% for the comparable quarter.  The increase
in cost of goods sold is due to the volume growth of assessment
products.  The proprietary assessment unit has expanded its
revenue streams into areas that do not allow for our traditional
margins.  While these new revenue streams are profitable, they
have lower margins and reduce the gross margin blended rate.  In
the custom area, BETA had one assignment in the comparable period
that resulted in significantly higher margins.  This year, BETA
has a significant assignment that results in lower margins.

        GROSS PROFIT.  Gross profit from continuing operations
        -------------
decreased to $4,128,482 in the current period from $4,263,535 in
the comparable period or by $135,053.  The gross profit margin is
now 56% in the current period versus 65% in the comparable
period.   For the current quarter, the gross profit margin
decreased to $2,138,935 versus $2,360,163 in the comparable
quarter. These changes result from changes in the mix of revenue.

        SELLING EXPENSE.  Selling expense for the current
        ----------------
period increased by 16% or $205,139 versus the comparable period,
or from $1,301,129 to $1,506,268. For the current quarter,
selling expense increased by 11% or $63,577, or from $589,221 in
the comparable quarter to $652,798 in the current quarter.
Selling expenses increased because of the Company's decision to
accelerate marketing spending.  On both assessment and
instructional products, selling expenses for the period are 21%
in the current period versus 20% in the comparable period. For
the current quarter, selling expenses are 19% versus 18% in the
comparable quarter.

        GENERAL AND ADMINISTRATIVE (G&A) EXPENSES.  General and
        ------------------------------------------
administrative expenses for the current period are now $1,977,777
versus $1,911,949 for the comparable period. For the current
period, G&A is 27% of revenues versus 29% in the comparable
period. For the current quarter, G&A expenses are $700,650 versus
$805,147 in the comparable quarter. G&A is 20% in the current
quarter versus 24% in the comparable quarter. The Company
continues to reduce percentage G&A expense since it allocates
personnel to work directly on businesses.

        EBITDA.  Earnings before interest, taxes, depreciation
        -------
and amortization on the Company's continuing operations was
$1,315,897 for the current period versus $1,652,614 for the
comparable period.  EBITDA for the current quarter was $1,050,785
versus $1,247,160 for the comparable quarter.   EBITDA is behind
a year ago because of changes in revenue mix and the related
gross profit variance as well as increased marketing
expenditures.

        OTHER INCOME (EXPENSE).  The Company had net interest
        -----------------------
expense of $416,094 for the current period versus net interest
expense of $461,831 for the comparable period.  For the current
quarter the Company had net interest expense of $139,042 versus
net interest expense of $151,952 for the comparable quarter.
Interest expense has declined due to repayment of long-term debt,
as well as reduced utilization of the Company's line of credit.

        NET INCOME FROM CONTINUING OPERATIONS. Net income from
        --------------------------------------
the Company's continuing operations for the current period was
$141,573 versus $371,767 for the comparable period.  For the
current quarter, the Company had net income from continuing
operations of $400,583 versus $512,901 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.  The loss on
disposal of $3,664,761 on a pretax basis ($2,238,244 after tax)
includes the estimated costs and expenses associated with the
impairment of goodwill ($3,021,193) and the loss associated with
the sale of assets and liabilities ($643,568).

        NET (LOSS) INCOME.  Due to the discontinuance of
        ------------------
operations of its school division, the Company experienced a net
(loss) of ($2,329,060) in the current period versus a net (loss)
of ($252,217) in the comparable period. For the current quarter,
the Company experienced net income of $365,689 versus net income
of $222,782 in the comparable quarter.

        For the current period, the Company had $0.06 earnings
per share from continuing operations versus $0.15 earnings per
share in the comparable period. For the current quarter, the
Company had $0.15 earnings per share from continuing operations
versus $0.20 earnings per share in the comparable quarter.
Including the loss from discontinued operations, the Company had
a (loss) of ($0.96) per share in the current period versus a
($0.10) (loss) in the comparable period. For the current quarter,
the Company had $0.14 earnings per share versus $0.09 earnings
per share in the comparable quarter.

LIQUIDITY AND CAPITAL RESOURCES

        WORKING CAPITAL. Working capital increased by $20,203
        ----------------
during the current period from $1,698,592 at October 31, 2001, to
$1,718,795, at July 31, 2002. This increase resulted primarily
from an increase in accounts receivable and inventory offset in
part by increased borrowing under the Company's line of credit.
The ratio of current assets to current liabilities was
approximately 1.4 to 1.0 at the end of the current quarter.

        CASH FLOW FROM OPERATING ACTIVITIES. During the current
        ------------------------------------
period, the Company had net cash used in operating activities of
$68,671, as compared to $327,825 provided by operating activities
in the comparable period.  The increase in cash used in operating
activities resulted primarily from increases in accounts
receivable and inventories due to increased sales partially
offset by higher accounts payable.

        CASH FLOW FROM INVESTING ACTIVITIES. During the current
        ------------------------------------
period, the Company had net cash used in investing activities of
$371,796, as compared to $302,120 for the comparable period. The
cash used in the current period is primarily for costs relating
to several new products, which the Company expects to launch
during the next six months.

        CASH FLOW FROM FINANCING ACTIVITIES. During the current
        ------------------------------------
period, the Company had net cash provided by financing activities
of $412,083 as compared to $387,592 in cash used in financing
activities during the comparable period.  The increase in cash
provided by financing activities resulted from the Company's
borrowings on lines of credit during the current period.
In May 2002, the Company increased its availability
under a line of credit with a bank from $750,000 to $1 million.
At July 31, 2002, $597,182 was due on the line.  As a result of
the line of credit increase, certain financial covenants have
changed.

        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, 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.  Subject to
the completion of definitive documentation and the satisfaction
of closing conditions, the transaction is expected to be
completed by the end of October 2002.  The assets to be sold
constitute substantially all the assets and operations of the
Company's educational delivery segment (see Note 6 to the
Financial Statements).

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

        The preparation of financial statements and related
disclosures in conformity with accounting principles generally
accepted in the United States of America 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.

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)) on September 10, 2002, 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 July 31, 2000) 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

        Not Applicable.

ITEM 5. OTHER INFORMATION

        None.

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 July 31, 2002






         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
                                                             July 31,      October 31,
                                                             2 0 0 2         2 0 0 1
                                                             -------         -------
                                                           (Unaudited)
<S>                                                    <C>             <C>
        ASSETS
        ------

Current assets:
  Cash and temporary investments                          $    19,259     $    47,643
  Accounts receivable, net of allowance for doubtful
   accounts of $70,814                                      2,016,190       1,630,432
  Inventories                                                 752,508         600,361
  Prepaid expenses and other current assets                   215,372         212,822
  Current assets held for sale                              2,990,440       2,403,761
                                                          -----------     -----------

        Total current assets                                5,993,769       4,895,019

Property, plant and equipment - net of
  accumulated depreciation of $1,654,502 and
       $1,636,277, respectively                             1,617,636       1,652,737
Property, plant and equipment held for sale                   214,968         214,968

Other assets:
  Test passage bank and test development, net of
   accumulated amortization of $2,304,313 and
   $2,095,134, respectively                                 2,237,226       2,357,997
  Goodwill, net of accumulated amortization of $337,961
   and  $668,019, respectively                                524,296       3,649,130
  Deferred income taxes                                     2,681,110       1,078,027
  Other assets                                                624,201         664,353
  Other assets held for sale                                  335,873         856,823
                                                          -----------     -----------

        Total assets                                      $14,229,079     $15,369,054
                                                          ===========     ===========

</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

                                                             July 31,      October 31,
                                                             2 0 0 2         2 0 0 1
                                                             -------         -------
                                                           (Unaudited)
<S>                                                     <C>              <C>

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

Current liabilities:
  Lines of credit                                         $   597,182     $        --
  Current maturities of long-term debt                        104,079         286,627
  Accounts payable and accrued expenses                     1,563,345       1,656,642
  Current liabilities held for sale                         2,010,368       1,253,158
                                                          -----------     -----------

        Total current liabilities                           4,274,974       3,196,427

Long-term debt:
  Subordinated debt                                         3,530,141       3,530,141
  Long-term debt, net of current portion                    1,494,101       1,496,652
  Other liabilities held for sale                             501,679         494,556
                                                          -----------     -----------

        Total liabilities                                   9,800,895       8,717,776
                                                          -----------     -----------

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 and 2,559,453 shares
   issued and outstanding, respectively                           259             256
  Additional paid-in capital                                5,538,393       5,522,296
  Deferred interest                                          (146,938)       (235,553)
  Unearned compensatory stock                                      --          (1,251)
  Retained (deficit) earnings                                (963,530)      1,365,530
                                                          -----------     -----------

        Total stockholders' equity                          4,428,184       6,651,278
                                                          -----------     -----------

        Total liabilities and stockholders' equity        $14,229,079     $15,369,054
                                                          ===========     ===========

</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
                                                       Nine Months Ended              Three Months Ended
                                                           July 31,                        July 31,
                                                     2 0 0 2        2 0 0 1         2 0 0 2       2 0 0 1
                                                     -------        -------         -------       -------
                                                   (Unaudited)    (Unaudited)     (Unaudited)   (Unaudited)
<S>                                            <C>            <C>              <C>           <C>

Assessment revenues                                $5,214,445     $4,637,291      $2,030,556    $2,000,210
Instructional revenues                              2,129,415      1,942,871       1,497,492     1,353,790
                                                   ----------     ----------      ----------    ----------

Total net revenue                                   7,343,860      6,580,162       3,528,048     3,354,000

Cost of goods sold                                  3,215,378      2,316,627       1,389,113       993,837
                                                   ----------     ----------      ----------    ----------

Gross profit                                        4,128,482      4,263,535       2,138,935     2,360,163
                                                   ----------     ----------      ----------    ----------

Operating expenses:
  Selling expenses                                  1,506,268      1,301,129         652,798       589,221
  General and administrative expenses               1,977,777      1,911,949         700,650       805,147
                                                   ----------     ----------      ----------    ----------

Total operating expenses                            3,484,045      3,213,078       1,353,448     1,394,368
                                                   ----------     ----------      ----------    ----------

Income from operations                                644,437      1,050,457         785,487       965,795

Other income (expense):
  Interest expense, net                              (416,094)      (461,831)       (139,042)     (151,952)
                                                   ----------     ----------      ----------    ----------

Income before income taxes                            228,343        588,626         646,445       813,843

Income taxes                                           86,770        216,859         245,862       300,942
                                                   ----------     ----------      ----------    ----------

Net income (loss) from continuing operations          141,573        371,767         400,583       512,901
                                                   ----------     ----------      ----------    ----------

Loss from discontinued operations:
  Loss from operations net of income
    tax (benefit) of $(148,110), $(368,927),
    $(129,377) and $(169,974), respectively          (232,389)      (623,984)       (203,037)     (290,119)
  (Loss) gain on disposal, net of income tax
    (benefit) of $(1,426,517) and $78,047,
    respectively                                   (2,238,244)            --         168,143            --
                                                   ----------     ----------      ----------    ----------

Net loss from discontinued operations              (2,470,633)      (623,984)        (34,894)     (290,119)
                                                   ----------     ----------      ----------    ----------

Net (loss) income                                 $(2,329,060)   $  (252,217)    $   365,689   $   222,782
                                                  ===========    ===========     ===========   ===========

Weighted average shares outstanding
  Basic                                             2,584,802      2,559,453       2,594,453     2,559,453
  Diluted                                           2,584,802      2,559,453       2,594,453     2,559,453

Basic and diluted earnings (loss) per share
  Continuing operations                           $       .06    $       .15     $       .15   $       .20
  Discontinued operations                                (.96)          (.25)           (.01)         (.11)
                                                  -----------    -----------     -----------   -----------

                                                  $      (.90)   $      (.10)    $       .14   $       .09
                                                  ===========    ===========     ===========   ===========
</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

                                                       Nine Months Ended
                                                            July 31,
                                                     2 0 0 2        2 0 0 1
                                                     -------        -------
                                                   (Unaudited)    (Unaudited)
OPERATING ACTIVITIES
  Net loss                                        $(2,329,060)    $ (252,217)
  Adjustments to reconcile net loss to net
    cash flows from operating activities:
  Depreciation and amortization                       671,460        602,157
  Deferred income taxes                            (1,603,083)       (95,909)
  Deferred interest                                    88,615         87,647
  Financial advisory services                           1,251          7,018
  Loss on discontinued operations                     643,568             --
  Impairment of goodwill                            3,021,193             --
Changes in operating assets and liabilities:
  Accounts receivable                                (385,758)      (756,641)
  Inventories                                        (152,147)       (12,099)
  Other assets                                         13,551        (98,749)
  Net assets from discontinued operations              55,036        227,064
  Accounts payable                                    (93,297)       619,554
                                                  -----------     ----------

NET CASH FLOWS FROM OPERATING ACTIVITIES              (68,671)       327,825
                                                  -----------     ----------

INVESTING ACTIVITIES
  Acquisition of property, plant and equipment        (56,120)       (11,346)
  Test passage bank and test development             (189,564)      (245,812)
  Proceeds from the sale of auto                           --         17,000
  Prepublication costs                               (113,551)       (52,047)
  Software development costs                          (12,561)        (9,915)
                                                  -----------     ----------

NET CASH FLOWS FROM INVESTING ACTIVITIES             (371,796)      (302,120)
                                                  -----------     ----------

FINANCING ACTIVITIES
  Repayment of long-term debt                        (185,099)      (184,115)
  Net borrowings on note payable to bank              597,182       (203,477)
                                                  -----------     ----------

NET CASH FLOWS FROM FINANCING ACTIVITIES              412,083       (387,592)
                                                  -----------     ----------



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

                                                       Nine Months Ended
                                                            July 31,
                                                     2 0 0 2        2 0 0 1
                                                     -------        -------
                                                   (Unaudited)    (Unaudited)

NET CHANGE IN CASH AND TEMPORARY
  INVESTMENTS                                      $  (28,384)     $(361,887)

CASH AND TEMPORARY INVESTMENTS
  AT BEGINNING OF PERIOD                               47,643        392,101
                                                   ----------      ---------

CASH AND TEMPORARY INVESTMENTS
  AT END OF PERIOD                                 $   19,259      $  30,214
                                                   ==========      =========

SUPPLEMENTAL CASH FLOW INFORMATION:
  Interest paid                                    $  415,545      $ 590,398
                                                   ==========      =========

  Income taxes paid                                $   24,249      $  13,483
                                                   ==========      =========



















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 - SIGNIFICANT ACCOUNTING POLICIES
----------------------------------------

In the opinion of management, the accompanying consolidated
financial statements of Touchstone Applied Science Associates,
Inc. ("TASA") and its subsidiaries contain all adjustments
necessary to present fairly the Company's consolidated financial
position as of July 31, 2002 and October 31, 2001, the
consolidated statements of operations for the nine and three
months ended July 31, 2002 and 2001 and consolidated cash flows
for the nine months ended July 31, 2002 and 2001.

The consolidated results of operations for the nine and three
months ended July 31, 2002 and 2001 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, 2001.

NOTE 2 -  SEGMENT INFORMATION - CONTINUING OPERATIONS
-----------------------------------------------------

                             Assessment      Instructional      Total
                             ----------      -------------      -----

Nine Months Ended
    July 31, 2002:
  Revenues                   $5,214,445       $2,129,415      $7,343,860
  (Income) loss before
    income tax                  (34,259)         262,602         228,343
  Total segment assets        7,960,978        2,726,820      10,687,798

Nine Months Ended
    July 31, 2001:
  Revenues                   $4,637,291       $1,942,871     $ 6,580,162
  Income (loss) before
    income tax                  446,974          141,652         588,626
  Total segment assets        7,153,304        2,615,883       9,769,187


Included in the assessment segment reporting are corporate
overhead expenses of approximately $332,000 and $324,000 for the
nine months ended July 31, 2002 and 2001.

The Company's operations are primarily conducted in the United
States.  Information about the Company's operations in different
geographic areas for the nine months ended July 31, 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 - LINES OF CREDIT
------------------------

As of July 31, 2002, the Company owed an aggregate of $400,000 to a
bank, which is the maximum availability under the lines of credit
and is reflected as a component of current liabilities held for
sale.  These lines have been extended through August 28, 2002.  The
Company is currently negotiating an extension on these lines.

In May 2002, the Company increased its availability under a line of
credit with another bank from $750,000 to $1 million. In addition,
certain of the financial covenants have been amended.  At July 31,
2002, $597,182 was due on this line.

NOTE 4 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
--------------------------------------------------

In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141, "Business
Combinations", and No. 142, "Goodwill and Other Intangible
Assets", effective for fiscal years beginning after December 15,
2001.  Under the new rules, the pooling of interests method of
accounting for acquisitions is no longer allowed and goodwill and
intangible assets deemed to have indefinite lives will no longer be
amortized but will be subject to annual impairment tests in
accordance with the Statements.

The Company will apply the new rules for goodwill and other
intangible assets beginning in the first quarter of the fiscal year
ending October 31, 2003.  The Company will perform the first of the
required impairment tests of goodwill as of November 1, 2002 and
does not expect there to be a material effect on the earnings and
financial position of the Company. Application of the nonamortization
provisions of the Statement is expected to result in an increase in net
income of approximately $58,000 per year.






                                  F - 7

<PAGE>     F - 8

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)


NOTE 4 - RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS (CONTINUED)
--------------------------------------------------------------

On October 3, 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("SFAS 144"), that is applicable to financial
statements issued for fiscal years beginning after December 15, 2001.
The FASB's new rules on asset impairment supercede SFAS 121
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of", and portions of Accounting
Principles Board Opinion 30, "Reporting the Results of Operations".
This standard provides a single accounting model for long-lived assets
to be disposed of and significantly changes the criteria that would
have to be met to classify an asset as held-for-sale.  Classification
as held-for-sale is an important distinction since such assets are not
depreciated and are stated at the lower of fair value and carrying
amount.  This standard also requires expected future operating losses
from discontinued operations to be displayed in the periods in which
the losses are incurred, rather than as of the measurement date as
previously required.

NOTE 5 - LEGAL PROCEEDINGS
--------------------------

In January 2000, a former employee of Mildred Elley commenced an
action against the Company, MESI (Mildred Elley Schools, Inc.) and an
executive officer of MESI in the Supreme Court of the State of New York
in the County of Albany. The complaint alleged claims of wrongful
termination of employment and sought damages as compensation.  An
agreement to settle this action has been reached with the complainant.
The Company has fulfilled all its obligations under such settlement.

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









                                  F - 8

<PAGE>     F - 9

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (Unaudited)



NOTE 5- LEGAL PROCEEDINGS (CONTINUED)
-------------------------------------

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 MESI 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 6 below.

NOTE 6 - 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, 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
(see note 5).  The Company will receive $1,000,000, payable in cash
and a promissory note, approximately $250,000. The note is repayable
over four years with interest only due during the first twenty four
months. Thereafter, principal and interest is payable monthly with
a balloon payment due at the end of the term or forty eight months.

Subject to the completion of definitive documentation and the
satisfaction of closing conditions, the transaction is expected
to be completed by the end of October 2002. 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, since
the Company entered into a plan to dispose of the operations of MESI
during the current fiscal quarter, the Company is reporting the
proposed sale of the segment's operations as discontinued operations.
In addition, the Company has written down the assets of MESI to
reflect the fair value of the net assets to be sold, and has taken
an additional loss on disposal of approximately $3,665,000 less a
tax benefit of approximately $1,427,000 which included the impairment
of goodwill of approximately $3,021,000 less a tax benefit of
approximately $1,162,000. The revenues for the delivery segment were
$3,916,111, and $3,061,576 for the nine months ended July 31, 2002
and 2001 respectively and $1,089,535 and $870,603 for the three months
ended July 31, 2002 and 2001 respectively.





                                  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, Chief Executive Officer
                                 and Chief Financial Officer

Date:   September 11, 2002


                               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 July 31, 2002.

        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: September 11, 2002

/s/ ANDREW L. SIMON
-------------------

CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER