U.S. SECURITIES AND EXCHANGE COMMISSION
                           Washington, DC 20549

                               FORM 10-KSB
(Mark One)
      [X]  Annual report under Section 13 or 15(d) of the Securities
           Exchange Act of 1934
               For the fiscal year ended October 31, 2005
      [ ]  Transition report pursuant to Section 13 or 15(d) of the Securities
           Exchange Act of 1934
               For the transition period from ________ to ________
      Commission file number            0-20303
                              --------------------------

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
         ---------------------------------------------------------
               (Name of small business issuer in its charter)

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



 4 Hardscrabble Heights, P.O. Box 382, Brewster, NY          10509
----------------------------------------------------------------------------
(Address of principal executive offices)                   (Zip Code)

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

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

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

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

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


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

     Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]

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

     State issuer's revenues for its most recent fiscal year:  $11,686,649
for the fiscal year ended October 31, 2005.

     State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which
the common equity was sold, or the average bid and asked price of such
common equity, as of a specified date within the past 60 days:  $7,196,656
as of January 25, 2006.  The aggregate market value was based upon the
closing price for the Common Stock, par value $.0001 per share, as quoted
by the NASDAQ for such date.

  (ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PAST FIVE YEARS)

Check whether the issuer has 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 a court.
Yes           	No
   ---------    ----------

               (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

     State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:  As of January 25,
2006, 2,909,738 shares of Common Stock, par value $.0001 per share.

                  DOCUMENTS INCORPORATED BY REFERENCE

     If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part
II, etc.) into which the document is incorporated:  (1) any annual report
to security holders; (2) any proxy or information statement; and (3) any
prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of
1933 ("Securities Act").  None.

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

<PAGE>


                                  PART I

ITEM 1. DESCRIPTION OF BUSINESS

OVERVIEW

        Touchstone Applied Science Associates, Inc. (the "Company" or
"TASA") now competes exclusively in the assessment marketplace.
With the advent of No Child Left Behind legislation ("NCLB"), the
Company's Board of Directors and management made the strategic
decision to refocus the organization on the fast-growing assessment
segment of the K-12 education market.  During the Company's fiscal
year ended October 31, 2003 ("Fiscal 2003"), TASA sold both its
post-secondary proprietary school, Mildred Elley (originally
acquired by TASA in fiscal 1999), and Modern Learning Press, its
supplemental instructional materials subsidiary (originally
acquired by TASA in fiscal 1997).  Revenues were $11.2 million
for the fiscal year ended October 31, 2004 ("Fiscal 2004"),
and $11.7 million for the fiscal year ended October 31, 2005
("Fiscal 2005"). Over the past ten years, assessment revenues have
increased from $2.1 million to $11.7 million, representing a
compounded annual growth rate of approximately 15%.

        The Company competes in both the custom and proprietary
segments of the assessment marketplace.  Over the past decade, this
market has been moving towards custom testing as a result of NCLB
legislation requiring that student success be measured against
specific standards established by each individual state.  The
Company has recognized this trend and has repositioned its
proprietary unit to take advantage of changes in the market.  As
such, during Fiscal 2005, the Company decided to bid on state
contracts that call for the printing, distributing, scanning,
scoring and reporting of custom testing programs.

        The Company has continued to develop and market its
proprietary products and services.  The Company's proprietary products
and services are currently part of major testing programs in Connecticut,
New York, Missouri, Rhode Island, Indiana, Arkansas and Idaho.

        The Company's custom services grew from one unit in the prior
year to three separate units in 2005.  The Company's wholly owned
subsidiary, Beck Evaluation & Testing Associates, Inc. ("BETA")
was acquired in 1997.  BETA performs "custom services" for state
education agencies as well as for other test publishers.

        In January 2005, the Company acquired all of the outstanding
stock of Assessment and Evaluation Concepts Inc. ("AEC"), a firm
with experience and relationships in the educational assessment field,
which complements the Company's experience and relationships.  The
purchase price of $122,000 paid by the Company consisted of $83,000 in
cash and the issuance of 12,000 shares of Common Stock of the Company.

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

        These three custom assessment units now account for more than
65% of the Company's revenues.

        TASA's corporate headquarters are located at 4 Hardscrabble
Heights, P.O. Box 382, Brewster, New York 10509.  The Company's
telephone number is (845) 277-8100 and its facsimile number is
(845) 277-3548.  The Company maintains a website at www.tasa.com.
Information contained on the Company's website is not, and should
not be deemed to be, incorporated into this Report.  As used in
this Report, the terms "Company" and "TASA" refer to Touchstone
Applied Science Associates, Inc. and its subsidiaries, unless the
context otherwise indicates.

        Except for historical information, the material contained in
this Description of Business 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" below, which may cause actual results to differ materially
from those described.

PROPRIETARY ASSESSMENT PRODUCTS AND RELATED SERVICES

        The bulk of the Company's proprietary test revenues came from
two tests in Fiscal 2005.  The Degrees of Reading Power tests (DRP)
and the MAC II, which is a comprehensive English language
assessment and evaluation program.

        The DRP tests are published in three versions: Primary,
Standard and Advanced.  These tests measure an individual student's
reading ability in a non-culturally biased manner and allow
tracking of an individual's reading development over time.  The DRP
test is used to evaluate approximately 4 million students per year
and is part of the state testing programs in Connecticut and New York.

        The Maculaitis Test, or MAC II, is used as a comprehensive
English assessment and evaluation program.  The MAC II is currently
authorized for use in New Jersey, Illinois, Florida and Wisconsin.
In 2005, the MAC II was part of the state mandated programs in
Rhode Island, Missouri and Arkansas.

        In 2005, the Company developed several additional proprietary
tests that will move it into the formative assessment category.
One program, Reading Power Essentials, or RPE, was launched in the
fall of 2005 and another program called SSSMART is expected to be
available in the winter of 2007.  In addition, the Company launched
an electronic version of its DRP test in the fall of 2005.

        During the past fiscal year, the Company's proprietary unit
has responded to trends in the K-12 assessment business.  TASA
determined that its "factory", namely the ability to print,
distribute, scan and score assessment materials, had significant
value.  As a result, the Company increased its bidding activities
for fulfillment-type projects and secured the Idaho English-as-a-
Second-Language state-wide program.  Additionally, we expanded our
Indiana Core 40 end-of-year high school assessment program and, as
previously reported, expanded our business with RALLY! Education and
Harcourt Achieve.

        All of the above services are reported under Proprietary
Assessment Revenue.

CUSTOM TEST PRODUCTS AND RELATED SERVICES

        BETA provides consulting services to states, school districts
and textbook publishers.  BETA's business is approximately equally
divided between work for states and work for publishers.  Since its
acquisition by TASA in January 1997, BETA has concentrated on
increasing its test assessment and design services to states.  This
effort has been successful, and BETA now provides its test
development and/or psychometric services to state customers in
Delaware, Indiana, Michigan, Minnesota, North Carolina, Texas,
Virginia, Washington and Wyoming.  In Fiscal 2003, BETA was awarded a
$7.5 million contract from the State of Michigan to develop an alternative
assessment test for special education students.  In January 2004,
BETA was notified that such contract has been extended through
September 2007.  The total value of this contract over its term is
$13,900,000.

        BETA's custom assessment services are provided to states
either directly or indirectly, typically through three of the
largest commercial contractors in the contract/customized
assessment markets, NCS Pearson, Harcourt, and Measurement, Inc.
Generally, the business strategy of BETA is to provide these
specialized services for major state contracts as a subcontractor,
primarily for assessment or psychometric services and actual test
design and development.  The prime contractor typically provides
for all the printing, logistics, warehousing, scoring and reporting
services necessary to complete state contracts.  In addition to
various assessment activities related to state assessment programs,
BETA provides test development and program evaluation services to
major textbook companies and other assessment developers.  The Company
reports revenues from BETA's operations as Custom Assessment Income.

        In January 2005, the Company acquired all of the outstanding
stock of AEC for $122,000 consisting of $83,000 in cash and 12,000 shares
of the Company's Common Stock.  In addition, options to purchase 50,000
shares of the Company's Common Stock were granted pursuant to the 2000
Stock Incentive Plan on the date of the closing exercisable at $3.06
per share.  The options are exercisable commencing one year from the
closing, through January 2015.  In addition, the Company entered
into two-year employment agreements with the two officers of AEC.
Pursuant to the agreements, the officers of AEC are entitled to a
base salary and bonuses determined by the attainment of certain
performance goals.  As of October 31, 2005, goodwill totaling $118,074
was recorded as a result of the acquisition.

        On July 1, 2005, the Company completed the acquisition of all
of the outstanding stock of ADI.  ADI provides on-line testing capabilities
to state testing programs and also offers an electronic testing engine.
The total consideration paid by the Company for the ADI stock was $1,650,000,
consisting of $1,155,000 in cash, the issuance of 89,488 shares of Common
Stock of the Company (valued at approximately $331,650, based on the average
of closing prices for the Company's Common Stock for the five trading
days preceding the closing) and $163,350 in subordinated promissory
notes issued to two of the former stockholders of ADI.  The
promissory notes bear interest at the rate of 5% per annum and are
payable in six semi-annual installments of principal plus interest.
As of October 31, 2005, goodwill totaling $1,653,309 was recorded as a
result of the acquisition.

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

        The Company has been integrating the operations of AEC and ADI
into its operations generally since the respective acquisitions of
such companies.

MARKETING

        The Company markets its assessment products and services as
follows:

        *  Sales of secure tests to large-scale users (such as
   state education departments) are conducted directly by the
   Company's staff.  This includes making presentations and
   negotiating contracts and license agreements.

        *  Sales of the Company's products and services as
   described in the Company's catalogs are made primarily through
   direct mail campaigns to elementary school, secondary school
   and college markets.  The Company also exhibits its products at
   educational trade shows and advertises in trade journals.

        *  The Company's staff and its independent consultants
   provide presentations and in-service workshops supporting the
   Company's products.

        *  The Company's proprietary unit hired three senior
   sales executives who are now responsible for deepening
   penetration of proprietary products and services as well as
   selling its full range of custom assessment services.

        *  Sales of custom-designed testing and consulting are
   accomplished via bidding processes and attendance at
   professional meetings.

        The Company sells its assessment products on a contract or
purchase order basis in accordance with a published price list.
Depending upon the contract or the purchase order, the Company
sells its products on a net 30-day or other contractual terms.  The
Company does not offer extended credit terms to its customers.
Historically, bad debts with respect to its assessment products
have not been material.

COMPETITION

        Success in the educational industry will be based on
technological superiority, service, product support, the
availability of patent protection, access to adequate capital,
the ability to successfully develop and market products and
processes and the ability to obtain government approvals.  Although
there is intense competition in the industry and there are both
domestic and foreign companies which may be deemed dominant
competitors, the Company believes that the features of its products
coupled with its ability to provide quality services will permit
the Company to compete successfully in its designated marketplace.

        The Company is subject to competition from various sources.
The Company's principal competition comes from established for-
profit and non-profit companies in the testing business and testing
departments within certain states and school districts, all of
which are considerably larger and have greater financial and human
resources and marketing capabilities.  Competition may also come
from education publishers who include reading comprehension tests
with their instructional materials and companies that distribute
reading motivation programs.

        Although there are a number of for-profit firms that develop,
publish, market, and distribute educational tests, the market is
dominated by three firms:  CTB/McGraw-Hill, Lake Forest, Illinois,
and Monterey, California; Harcourt, San Antonio, Texas; and The
Riverside Publishing Company, Chicago, Illinois.  As large, well-
established publishers of educational tests and related products
and services, these firms are considered strong competitors of the
Company.

        There are a number of non-profit organizations that develop,
publish and distribute educational tests.  For example, the
American College Testing Program (ACT), Iowa City, Iowa; American
Council on Education (ACE), Washington, DC; and Educational Testing
Service (ETS), Princeton, New Jersey.  In addition, there are
various organizations that sponsor educational tests even though
they do not have the technical capability to produce tests.  For
example, The College Board, New York, New York, sponsors the SAT
which is developed for The College Board by ETS.  All of these non-
profit organizations have, or have access to, the capability to
develop, publish and distribute tests to schools.  Currently, ACT,
The College Board, and ETS publish one or more educational tests
for the school market.

        There are a number of for-profit and non-profit organizations
that provide test design, production and consulting services to
states under contract.  For example, National Evaluation Systems
(NES), Amherst, Massachusetts; and Pearson Educational Measurement,
Iowa City, Iowa; are among the for-profit firms that supply test
development, printing, distribution, and scoring services to
individual states under contract.  Among the non-profit
organizations, Measured Progress, Inc. (Dover, New Hampshire), ACT
and ETS have conducted such contract work for states and ETS is the
current contractor for the National Assessment of Educational
Progress.  By enabling states to have tests developed and
administered to their own specifications, these for-profit and non-
profit organizations compete indirectly with the Company's
assessment division.  In terms of size alone, these firms have
greater marketing capability and resources than does the Company.

EMPLOYEES

        As of October 31, 2005, the Company employed a total of 73
employees, of which 64 work on a full-time basis, and 9 work on a
part-time basis.  Of the 73 employees, 20 are engaged in research
and/or test development, 32 are in operations, 11 are in executive
capacities and 10 are in marketing.

GOVERNMENT REGULATIONS

        The NCLB legislation bodes well for TASA.  NCLB provides
funding of approximately $26 billion.  Almost half of that amount
is for Title I funding, which requires schools that use a portion
of this funding to evaluate student progress in reading.

        NCLB also provides almost one-half billion dollars for annual
testing in reading and math; Title III allows for three-quarters of
a billion dollars for bilingual and immigrant education and almost
one billion dollars for early language literacy.  The following
chart illustrates that TASA is strategically positioned to take
advantage of the funding opportunities under NCLB:

        Section of NCLB Act            TASA Products & Services
        -------------------            ------------------------

        Title I                        DRP/Signposts
        -------------------            -------------------------
        Early Childhood Literacy       DRP/Signposts
        -------------------            -------------------------
        Title III/ESL                  MAC II
        -------------------            -------------------------
        Annual Testing                 DRP/BETA
        -------------------            -------------------------

PATENTS, COPYRIGHTS, TRADEMARKS, TRADE SECRETS AND ROYALTIES

        The Company owns the copyrights in all of the
assessments and instructional materials that it creates and asserts
such rights as against third parties.

        The following are registered trademarks and/or service marks
of the Company:  TASA, (for design and preparation of educational
testing materials and test scores); TASA (with logo) (for design and
preparation of educational testing materials and test scores); TASA
(with logo) (for computer programs used in association with educational
testing and instructional materials); Degrees of Reading Power; DRP
Program; The Readability Standard; BROWZER--> BOOKLINK (with logo);
DRP-->EZ Converter, DRP Linking Text to Ability; BookMatch; MicRA-->DRP
(with logo); TextSense; TASA Literacy; Signposts; Signposts (with logo),
We've Done the Research for You; The MAC II Test of English Language
Proficiency (with logo); DWM and Degrees of Word Meaning.  An application
for trademark registration is pending for SSSMART.

        Trade secrets are maintained by entering into license agreements,
containing trade secret clauses, with third parties for their use of
TASA software and certain proprietary data.  In addition, all employees
execute nondisclosure agreements as a condition of employment.  The Company
regularly asserts copyrights to all of its assessment and instructional
materials.

ITEM 2. DESCRIPTION OF PROPERTY

        The Company completed the sale/lease-back of its 30,000
square-foot headquarters building in Brewster, New York in July
2003.  The building was constructed in 1987, with the second phase
completed in 1991.  In July 2003, the Company sold its headquarters
building to 26 Palmer LLC for $2,875,000.  The building and related
improvements had a net book value of $1,458,481.  The Company
reported a pre-tax gain on the sale totaling $1,254,383, net of
closing costs totaling $162,136.  The Company then signed a ten-
year triple net lease for the building.  The cost per square foot
is $10.50 for the July 2003/June 2004 period and increases each
year thereafter.  The final year of the lease has a rental cost of
$13.69 per square foot.  As a result of the sale/leaseback, the
gain will be recognized over the ten-year term of the lease as
other income.  Proceeds from the sale of the building were used to
repay debt, to increase the Company's working capital and to fund
the expansion of its scanning and scoring facility.  In the fall of
2003, the Company completed an expansion of this scanning and
scoring facility at a cost of approximately $250,000.  This
facility is now four times the capacity of the prior facility and
will accommodate new growing business in this area.

        BETA rents a small office facility in Austin, Texas, which
affords good proximity to the Texas Education Agency.  Because of
increased business and personnel in Austin, effective November
2004, BETA increased that office space from 500 to 1,100 square
feet in the same complex.  The Company made the decision to open
the office in Texas because of the volume of business in that
state.

        ADI rents approximately 4,400 square feet of office space in
downtown Minneapolis, Minnesota.  This space is used for offices,
conference rooms, workstations and houses its project management
personnel.

        The Company expends its resources for capital improvements as
necessary.

ITEM 3. LEGAL PROCEEDINGS

        None.

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

        None.


<PAGE>
                                PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        The Company's common stock, par value $.0001 per share (the
"Common Stock"), is traded in the Nasdaq Electronic Bulletin Board
under the symbol TASA.OB.  The approximate high and low closing
prices for each fiscal quarter in the two fiscal years ended
October 31, 2004 and October 31, 2005 were as follows:

                      Common Stock Prices
       --------------------------------------------

       Fiscal Quarter:       High ($)       Low ($)
       ---------------       --------       -------

       1st Qtr 04              3.25          1.85
       2nd Qtr 04              4.35          2.50
       3rd Qtr 04              3.70          3.05
       4th Qtr 04              3.85          2.95
       1st Qtr 05              3.33          3.05
       2nd Qtr 05              3.70          3.00
       3rd Qtr 05              4.50          3.20
       4th Qtr 05              4.50          3.85


        During the first quarter of Fiscal 2006 (through January
25, 2006), the Company's Common Stock had a high closing price of
$4.20 and a low closing price of $3.75.

        The Company is authorized to issue 5,000,000 shares, par value
$.0001 per share, of preferred stock. The stock may be issued by
the Board of Directors of the Company in one or more series and
with such preferences, conversion or other rights, voting powers
and other provisions as may be fixed by the Board of Directors in
the resolution authorizing its issuance without any further action
of the stockholders.  There are no shares of preferred stock
outstanding.  The Company's Common Stock is traded on the Nasdaq
Electronic Bulletin Board.

        In September 2004, the Company issued to Signal Hill Capital
Group LLC ("Signal Hill") a five-year warrant to purchase up to
20,000 shares of the Company's Common Stock, at an exercise price
of $2.96 per share.  The warrant was issued in consideration of
strategic consulting services that Signal Hill has provided and has
agreed to provide to the Company.  Neither the warrant nor the
underlying shares of Common Stock have been registered under the
Securities Act of 1933, as amended (the "Securities Act"), in
reliance upon the exemption from registration pursuant to Section
4(2) of the Securities Act.

        As of January 25, 2006, there were 66 holders of record of the
Company's Common Stock.  This number of holders of record does not
include beneficial owners of the Company's Common Stock, whose
shares are held in the names of various security holders, dealers
and clearing agencies.  The Company believes that the number of
beneficial owners of its Common Stock held by others or in nominee
names exceeds approximately 600 in number.  The Company has not
paid any cash dividends, and does not anticipate doing so in the
immediate future as it intends to invest any earnings in the
development of the Company's business.

        The following table describes the equity securities of the
Company issuable as of October 31, 2005 pursuant to the Company's
equity compensation plans.  The Company has four equity
compensation plans, each of which has been approved by the
stockholders of the Company:  (1) the Amended and Restated 1991
Stock Incentive Plan (under which no further incentive awards may
be made); (2) the 2000 Stock Incentive Plan; (3) the Amended and
Restated Directors Stock Option Plan, and (4) the Consultants Stock
Incentive Plan.  For a description of each of the Company's equity
compensation plans, please see "Executive Compensation-Stock
Incentive Plans".

<TABLE>
<CAPTION>


                       EQUITY COMPENSATION PLAN INFORMATION
                              AS OF OCTOBER 31, 2005
<S>               <C>                       <C>                     <C>
                     -----------------------------------------------------------------------------
                             Number of
                          securities to be                                 Number of securities
                            issued upon           Weighted-average       remaining available for
                            exercise of           exercise price of       future issuance under
                            outstanding              outstanding        equity compensation plans
                         options, warrants        options, warrants       (excluding securities
                             and rights              and rights           reflected in column (a))
                                 (a)                     (b)                       (c)
--------------------------------------------------------------------------------------------------
Equity compensation
plans approved by
security holders               784,213                 $2.813                    277,425
--------------------------------------------------------------------------------------------------
Equity compensation
plans not approved by
security holders                  --                     --                         --
--------------------------------------------------------------------------------------------------
</TABLE>



ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

        Except for historical information, the material contained in
this Management's Discussion and Analysis or Plan of Operation is
forward-looking.  For the purposes of the safe harbor protection
for forward-looking statements provided by the Private Securities
Litigation Reform Act of 1995, readers are urged to review the list
of certain important factors set forth in "Cautionary Statement for
Purposes of the "Safe Harbor" Provisions of the Private Securities
Litigation Reform Act of 1995" below, which may cause actual
results to differ materially from those described.

COMPANY BACKGROUND

        For over twenty-eight years, TASA has served the rapidly
expanding education market, primarily through the publishing and
sale of its highly regarded proprietary reading tests.  In Fiscal
2002 and again in Fiscal 2003, the Company determined that its core
business was assessment.  It believed that this category provides
better long-term growth and profit potential than either the
proprietary school business or the supplemental instruction
segment.  Consequently, during the second fiscal quarter of Fiscal
2002, the Company reached a decision to sell its proprietary
school, and in the third quarter of Fiscal 2003, the Company
reached the decision to sell its supplemental instruction materials
business, Modern Learning Press.  Consequently both of these
segments have been reported as discontinued operations.  See
"Discontinued Operations" below.  TASA revenues from the assessment
segment in Fiscal 1994 were $2.1 million, and have increased by
acquisition and internal growth to $11.7 million in Fiscal 2005.

RESULTS OF OPERATIONS

        The assessment business has two units; proprietary products
and services, and custom test development and related services.
The following table sets forth the revenues in each of these units
and the annual percentage change for each of these units for Fiscal
2005, 2004 and 2003:


            TASA Revenues Breakdown (in thousands of dollars) and
                         % of Year-To-Year Change


<TABLE>
<CAPTION>
                                              Fiscal Year Ended October 31,
                          ----------------------------------------------------------------------------
                           2003-
                           2005               2005                 2004                  2003
                          ----------------------------------------------------------------------------

                             %                        %                     %                      %
                           Change         $        Change       $        Change        $        Change
                        ------------------------------------------------------------------------------
<S>                     <C>       <C>           <C>       <C>         <C>        <C>         <C>

Proprietary Products
and Services               10.2%      $3,976.7      11.3%     $4,481.0     1.2%     $4,428.3      3.9%

Custom Test
Development and
Services                   44.6%      $7,709.9      15.0%     $6,704.3    25.7%     $5,333.4     61.6%

Total Revenues
from Assessment
Products and Services      19.7%     $11,686.6       4.5%    $11,185.3    14.6%     $9,761.7     29.1%

</TABLE>

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

                                            Fiscal Year Ended October 31,
                                            -----------------------------

                                               2005      2004     2003
                                             ----------------------------

                                             ============================
Revenues from continuing operations. . . . .   100%      100%     100%
   Gross profit margins. . . . . . . . . . .    49%       48%      48%
Operating expenses:
   Selling expenses. . . . . . . . . . . . .    12%       11%      15%
   General & administrative. . . . . . . . .    31%       25%      22%
Income from operations. . . . . . . . . . . .    6%       12%      11%
Other income (expense). . . . . . . . . . . .    1%        1%      (4%)
   Interest expense, net. . . . . . . . . . .   --        --       (4%)
Income before income taxes
from continuing operations. . . . . . . . . .    7%       13%       7%
Income taxes. . . . . . . . . . . . . . . . .    3%        5%       3%
Income from continuing operations. . . . . .     4%        7%       4%
                                             ============================


FISCAL 2005 AS COMPARED TO FISCAL 2004

        REVENUES.  The Company's revenues from continuing operations
        --------
for the fiscal year ended October 31, 2005 were $11,686,649,
representing a 4.5% increase, or $501,395, from $11,185,254, for
the fiscal year ended October 31, 2004.  The overall increase was
attributable to growth in the custom testing arena.

        Revenues for assessment products and services, through the
Company's proprietary tests unit, decreased 11.3%, or $504,173,
from $4,480,954 in Fiscal 2004 to $3,976,781 in Fiscal 2005.  As
NCLB continues to role out, test publishers are seeing decreases in
their proprietary tests.  The Company is seeing similar declines.
These declines resulted from a shift to more custom testing as
required by NCLB. However, these declines have been partially offset by
increases in printing, distribution, scanning and scoring of third party
assessment programs.

        Revenues from the Company's custom testing unit, increased by
$1,005,568, or 15%, during the same period, to $7,709,868 in Fiscal
2005 from $6,704,300 in Fiscal 2004.  This increase was primarily
due to the expansion of the Company's core capabilities with the
acquisition of AEC and ADI as well as a modest increase in BETA
revenues due to the shift to custom testing as discussed above.

        COST OF GOODS SOLD.  Cost of goods sold increased by 3.4% or
        ------------------
$194,569 from $5,795,758 in Fiscal 2004 to $5,990,327 in Fiscal
2005.  As a percentage of revenue, cost of goods represented 52% of
revenues in Fiscal 2004 and 51% of revenues in Fiscal 2005.  The
Company believes this nominal increase is a positive achievement since,
in general, the delivery of custom assessment services has a higher cost
than delivery of proprietary services.  The mix of custom to proprietary
products and services increased from 60% in Fiscal 2004 to 66% in
Fiscal 2005.

        GROSS PROFIT.  The Company's gross profit for Fiscal 2005
        ------------
increased by $306,826, or 5.7%, from $5,389,496 in Fiscal 2004 to
$5,696,322 in Fiscal 2005.  The gross profit margin was 49% in
Fiscal 2005 and 48% in Fiscal 2004.

        SELLING EXPENSES.  The Company's selling expenses increased by
        ----------------
$154,109, or 12.1%, from $1,278,178 in Fiscal 2004 to $1,432,287 in
Fiscal 2005.  Selling expense is 12% of revenues in Fiscal 2005
versus 11% in Fiscal 2004.  Selling expenses increased due to the
Company's ongoing restructuring of its sales and marketing
organization to increase revenues in future years.

        GENERAL AND ADMINISTRATIVE.  The Company's general and
        --------------------------
administrative ("G&A") expenses for Fiscal 2005 increased $746,603,
or 26.5%, from $2,819,770 in Fiscal 2004 to $3,566,373 in Fiscal
2005.  G&A expense is 31% in Fiscal 2005 versus 25% in Fiscal 2004.
Almost half of the increase relates to the G&A expenses associated
with the evaluation and implementation of internal controls
necessary to achieve compliance with Section 404 of the Sarbanes-
Oxley Act of 2002.  Increased professional fees with respect to new
regulatory requirements and interior restructuring expenses also
include the Company's hiring of a new Chief Operating Officer for
its proprietary unit.  Further, the infrastructure component of G&A
costs increased as a result of the acquisitions of AEC and ADI
completed during Fiscal 2005.

        INCOME FROM OPERATIONS.  Income from operations decreased by
        ----------------------
$593,886, or 46% from $1,291,548 in Fiscal 2004 to $697,662 in
Fiscal 2005.  The decrease in income is primarily due to increases
in selling, scoring and administrative expenses.

        EBITDA FROM OPERATIONS.  Earnings before interest, taxes,
        ----------------------
depreciation and amortization on the Company's operations were
$1,376,670 for Fiscal 2005 versus $1,879,174 for Fiscal 2004. The
decline in EBITDA from operations is a direct result of the decline
in income from operations.

        EBITDA is a non-GAAP financial measure and should not be used
as a substitute for the directly comparable GAAP financial measure.
In order to facilitate an understanding of the components of EBITDA
and their effect on the results of operations, the following table
is provided as a reconciliation of reported income from operations
to EBITDA from operations.

                          EBITDA From Operations

                                   Fiscal 2005            Fiscal 2004
                                   -----------            -----------

Income from Operations             $  697,662             $1,291,548
Depreciation & Amortization        $  679,008             $  587,626
EBITDA from Operations             $1,376,670             $1,879,174

        OTHER INCOME.  Net other income decreased from $123,503
        ------------
in Fiscal 2004 to $101,370 in Fiscal 2005.  Other income is positively
affected by the gain on the sale/leaseback of the building, offset by
interest expense associated with the acquisition of ADI, as well as
capital equipment to expand our capabilities.  In Fiscal 2005 and 2004,
the Company recognized a gain of $125,439 from the sale/leaseback of
its corporate headquarters.

        INCOME AND EARNINGS PER SHARE.  The Company had net income of
        -----------------------------
$822,603 in Fiscal 2004 versus net income of $474,964 in Fiscal 2005.

        The Company had diluted earnings per share of $0.29 in Fiscal
2004 versus diluted earnings per share of $0.16 in Fiscal 2005.

        The diluted weighted average shares outstanding were 2,870,327
in Fiscal 2004 versus 3,023,262 in Fiscal 2005.

FISCAL 2004 AS COMPARED TO FISCAL 2003

        REVENUES.  The Company's revenues from continuing operations
        --------
for the fiscal year ended October 31, 2004 were $11,185,254,
representing a 14.6% increase or $1,423,616 over $9,761,638 for the
fiscal year ended October 31, 2003.  The overall increase was
primarily attributable to internal growth of the Company's custom
testing unit.

        Revenues for assessment products and services, through the
Company's proprietary tests unit, increased 1.2%, or $52,654, to
$4,480,954 in Fiscal 2004 from $4,428,300 in Fiscal 2003.  The
increase in proprietary testing revenues was mitigated because, in
Fiscal 2003, TASA received contracts from two states relating to
Reading First Grants.  These grants did not repeat in 2004.

        Revenues from BETA, the Company's custom testing unit,
increased by $1,370,900, or 25.7%, during the same period, to
$6,704,300 in Fiscal 2004 from $5,333,400 in Fiscal 2003.  This
increase is a function of executing on several multi-year contracts
as well as the award of new assignments during the year.  Our
ability to acquire multi-year contracts allows BETA to continue to
build its revenue stream.

        COST OF GOODS SOLD.  Cost of goods sold increased by 14.2% or
        ------------------
$720,610 from $5,075,148 in Fiscal 2003 to $5,795,758 in Fiscal
2004.  As a percentage of revenue, cost of goods was flat and
represented 52% of revenues for both Fiscal 2003 and Fiscal 2004.
We are pleased with this statistic since, in general, the delivery
of custom assessment services has a higher cost than delivery of
proprietary services.  The mix of custom to proprietary products
and services increased from 55% in Fiscal 2003 to 60% in Fiscal 2004.

        GROSS PROFIT.  The Company's gross profit for Fiscal 2004
        ------------
increased by $703,006, or 15.0%, from $4,686,490 in Fiscal 2003 to
$5,389,496 in Fiscal 2004.  The gross profit margin was 48% in both
Fiscal 2004 and Fiscal 2003.

        SELLING EXPENSES.  The Company's selling expenses decreased by
        ----------------
$175,012, or 12%, from $1,453,190 in Fiscal 2003 to $1,278,178 in
Fiscal 2004.  Two events that contributed to this decline were:  a
disproportionate amount of spending by the Company in Fiscal 2003
to jump-start marketing activities associated with NCLB and a
number of revenue activities in Fiscal 2004 that were not subject
to sales commissions.

        GENERAL AND ADMINISTRATIVE.  The Company's general and
        --------------------------
administrative expenses for Fiscal 2004 increased $630,452, or
28.8%, from $2,189,318 in Fiscal 2003 to $2,819,770 in Fiscal 2004.
Almost 45% of the increase in G&A expense is due to the lease on
the company building.  In July 2003, the Company entered into a
sale-lease back on its corporate headquarters.  Therefore, during
Fiscal 2004, the Company had lease expense for the full year versus
four months of lease expense in Fiscal 2003.  Additionally, because
of strong performance in Fiscal 2004, approximately 12% of the
increase in G&A expense is represented by performance bonuses in
excess of those awarded in Fiscal 2003.

        INCOME FROM OPERATIONS.  Income from operations increased by
        ----------------------
$247,566, or from $1,043,982 in Fiscal 2003 to $1,291,548 in Fiscal
2004.  The increase in income is due to increased revenues,
partially offset by higher cost of sales.

        EBITDA FROM OPERATIONS.  Earnings before interest, taxes,
        ----------------------
depreciation and amortization on the Company's operations were
$1,879,174 for Fiscal 2004 versus $1,649,292 for Fiscal 2003.
EBITDA has been adversely affected by the sale leaseback of the
Company's building.

        EBITDA is a non-GAAP financial measure and should not be used
as a substitute for the directly comparable GAAP financial measure.
In order to facilitate an understanding of the components of EBITDA
and their effect on the results of operations, the following table
is provided as a reconciliation of reported income from operations
to EBITDA from operations.

                          EBITDA From Operations

                                   Fiscal 2004            Fiscal 2003
                                   -----------            -----------

Income from Operations             $1,291,548             $1,043,982
Depreciation & Amortization        $  587,626             $  605,310
EBITDA from Operations             $1,879,174             $1,649,292


        OTHER INCOME (EXPENSE) FROM OPERATIONS.  Net other income
        --------------------------------------
(expense) decreased from ($362,127) in Fiscal 2003 to $123,503 in
Fiscal 2004.  Other income is positively affected by the gain on
the sale/leaseback of the building as well as a reduction in
interest expense, net interest expense.  In Fiscal 2004, the
Company recognized a gain of $125,439 from the sale/leaseback
transaction, compared to $41,813 recognized in Fiscal 2003.  The
decrease in interest expense in Fiscal 2004 was primarily due to a
reduction in interest expense from the repayment of the Company's
subordinated debt.  In Fiscal 2004, the Company's only interest
expense coincided with a capital loan to finance equipment
partially offset by excess cash in an interest-bearing money market
account.

        INCOME AND EARNINGS PER SHARE.  Combining income from both
        -----------------------------
continuing and discontinued operations, the Company had net income
of $535,533 in Fiscal 2003 versus net income of $822,603 in Fiscal
2004.

        For Fiscal 2003, the Company had diluted earnings per share of
$0.20, versus diluted earnings per share of $0.29 in Fiscal 2004.
Diluted earnings from continuing operations were $0.13 per share in
Fiscal 2003, as compared to $0.29 in Fiscal 2004.

        The diluted weighted average shares outstanding were 2,661,014
in Fiscal 2003 versus 2,870,327 in Fiscal 2004.

LIQUIDITY AND WORKING CAPITAL

        WORKING CAPITAL.  Working capital increased by $124,431 during
        ---------------
Fiscal 2005 from $2,981,951 at October 31, 2004 to $3,106,382 at
October 31, 2005.  This increase resulted primarily from the
increase in cash and accounts receivable.  A portion of the increase
in accounts receivable is attributable to the timing of invoices sent
by BETA shortly before the end of Fiscal 2005.  In addition, accounts
receivable increased from the acquisitions of AEC and ADI.  The ratio of
current assets to current liabilities was approximately 2.84 to 1.0 at
the end of the Fiscal 2004 versus 2.23 to 1.0 at the end of Fiscal 2005.

        CASH FLOW FROM OPERATING ACTIVITIES.  During Fiscal 2005, the
        -----------------------------------
Company had net cash provided by operating activities of $550,575,
as compared to $1,581,615 in Fiscal 2004.  The decrease in cash
provided by operating activities resulted primarily from lower net
income combined with a significant increase in accounts receivable.

        CASH FLOW FROM INVESTING ACTIVITIES.  During Fiscal 2005, the
        -----------------------------------
Company had net cash used in investing activities of $2,599,677 as
compared to $921,655 used in investing activities for Fiscal
2004.  The increase in cash used in investing activities during
Fiscal 2005 was primarily the result of the acquisitions of ADI and
AEC.  Cash was used to purchase fixed assets and to develop test products
totaling $1,198,327 in Fiscal 2005 and $921,655 in Fiscal 2004.


        CASH FLOW FROM FINANCING ACTIVITIES.  The Company had net cash
        -----------------------------------
provided by financing activities of $1,587,245 for Fiscal 2005 as
compared to $128,092 provided by financing activities for Fiscal
2004. The cash provided by financing activities in Fiscal 2005
resulted primarily from equipment financing in connection with the
purchase of equipment to expand the Company's scanning and scoring
facilities, proceeds from financing used in the acquisition of ADI
and proceeds from the exercise of stock options and warrants.

        During Fiscal 2005, options to purchase 42,500 shares of the
Company's Common Stock were exercised resulting in proceeds totaling
$28,990. Also during Fiscal 2005, warrants to purchase 138,047
shares of common stock were exercised resulting in proceeds of
$155,303.  During Fiscal 2004, options to purchase 24,250 shares of
the Company's Common Stock were exercised resulting in proceeds
totaling $17,195.


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

<TABLE>
<CAPTION>

                                               Payments Due
                                               ------------
                                     Less Than                                  More Than
                                     ---------                                  ---------
Obligations             Total         1 Year       1-3 Years     4-5 Years       5 Years
-----------             -----         ------       ---------     ---------       -------
<S>              <C>            <C>            <C>           <C>            <C>

Long-term debt      $1,562,962     $  166,750     $  655,796      $558,004      $  182,412

Operating Leases     2,976,222        424,763        767,879       721,085       1,062,995

Other long-term
obligations(1)       3,148,180      1,788,166      1,360,014            --              --
                    ----------     ----------     ----------    ----------      ----------

TOTAL
OBLIGATIONS         $7,687,364     $2,379,669     $2,783,689     $1,279,089     $1,245,407
                    ===========    ==========     ==========     ==========     ==========

</TABLE>

(1)  Relate to employment contracts in effect at the end of the
current fiscal year.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

        The preparation of financial statements and related
disclosures in conformity with generally accepted accounting
principles in the United States of America requires management to
make estimates and assumptions that affect the amounts reported in
the Consolidated Financial Statements and accompanying notes.
Estimates are used for, but not limited to, the accounting for the
allowance for doubtful accounts, inventories, capitalized labor for
long-lived assets, 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
Consolidated Financial Statements:

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

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

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

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

SELECTED FINANCIAL DATA

        The following tables summarize certain financial data for the
continuing operations of the Company for Fiscal 2005, 2004, and
2003, respectively.  See "Financial Statements" in Item 7 below.


                                           Fiscal Year Ended October 31,
                                    ------------------------------------------

                                        2005            2004            2003
                                    ------------------------------------------

Income Statement Data:
Operating revenues                  $11,686,649      $11,185,254    $9,761,638
Gross profit                          5,696,322        5,389,496     4,686,490
Income before income taxes              799,032        1,415,051       681,855
Income from continuing operations       474,964          822,603       355,315
Income (loss) from discontinued
   operations
   Loss from operations
   net of income tax (benefit) of
   ($248,127) in Fiscal 2003                  0                0      (372,190)
   Income on disposal, net
   of income tax of $309,349 in
   Fiscal 2003                                0                0       552,408
   Income from discontinued
   operations                                 0                0       180,218
Net income                               74,964          822,603       535,533
Diluted earnings per share from
continuing operations                     $0.16            $0.29         $0.13
Balance Sheets:
Current assets                       $5,633,491       $4,605,990    $2,998,149
Total assets                         11,774,879        8,690,506     7,546,876
Long-term obligations                 1,396,212          120,291        30,400
Total liabilities                     4,759,576        2,706,022     2,444,890
Working capital                       3,106,382        2,981,951     1,670,790
Stockholders' equity                  7,015,303        5,984,484     5,101,986

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

        Certain statements contained in this Report contain "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995.  These are statements that do not
relate strictly to historical or current facts.  Such forward-
looking statements involve known and unknown risks and
uncertainties.  The Company's actual actions or results may differ
materially from those discussed in the forward-looking statements.
These risk factors include, without limitation:

        *   Rapid changes in (i) the technology used to administer
            standardized tests generally or market educational
            materials or (ii) in the policy considerations which
            determine which test will be administered;

        *   Non-renewal of any of the Company's material state
            contracts;

        *   Deficits in state and school budgets;

        *   The loss of any significant customer;

        *   The ability of the Company to compete successfully with
            the other providers of standardized tests (see
            "Description of Business--Competition", above);

        *   The ability of the Company to accommodate any changes in
            government regulation which may impact the marketability
            of its tests (see "Description of Business--Government
            Regulation", above);

        *   The ability of the Company to secure additional financing
            as and when necessary;

        *   The ability of the Company to retain the services of its
            key management and to attract new members of the
            management team;

        *   The ability of the Company to effect and retain
            appropriate patent, copyright and trademark protection of
            its products; and

        *   Any decrease in the market for educational consulting
            services.

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



ITEM 7. FINANCIAL STATEMENTS

                            EXPLANATORY NOTE
                            ----------------

        Financial information required by this item appears in the
pages marked F-1 through F-29 at the end of this Report and are
incorporated herein by reference as if fully set forth herein.

<PAGE>

                 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



                                                        PAGE
                                                        ----


    REPORT OF INDEPENDENT REGISTERED PUBLIC
       ACCOUNTING FIRM                                   F-2


    CONSOLIDATED FINANCIAL STATEMENTS:



       CONSOLIDATED BALANCE SHEETS                       F-3


       CONSOLIDATED STATEMENTS OF OPERATIONS             F-5


       CONSOLIDATED STATEMENTS OF CHANGES IN
       STOCKHOLDERS' EQUITY                              F-7


       CONSOLIDATED STATEMENTS OF CASH FLOWS             F-8


    NOTES TO CONSOLIDATED FINANCIAL STATEMENTS           F-10




ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
        ACCOUNTING AND FINANCIAL DISCLOSURE

        None.


ITEM 8A. CONTROLS AND PROCEDURES

         (a) Evaluation of the Company's Disclosure Controls and
Procedures.  As of the end of the most recent fiscal year covered
by this Annual Report on Form 10-KSB, the Company evaluated the
effectiveness of the design and operation of its "disclosure
controls and procedures" ("Disclosure Controls"), and its "internal
controls and procedures for financial reporting" ("Internal
Controls").  This evaluation (the "Evaluation") was done under the
supervision and with the participation of management, including Mr.
Andrew Simon, the Company's Chief Executive Officer ("CEO") and
Chief Financial Officer ("CFO").  Rules adopted by the SEC require
that in each periodic report filed pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Company
presents the conclusion about the effectiveness of the Company's
Disclosure Controls and Internal Controls based on and as of the
date of the Evaluation.

         Disclosure Controls are procedures that are designed with the
objective of ensuring that information required to be disclosed in
our reports filed under the Exchange Act, such as this Annual
Report, is recorded, processed, summarized and reported within the
time periods specified in the rule and forms.  Disclosure Controls
are also designed with the objective of ensuring that such
information is accumulated and communicated to the Company's
management, including the CEO and CFO, as appropriate to allow for
timely decisions regarding required disclosure.  Internal Controls
are procedures which are designed with the objective of providing
reasonable assurance that (1) the Company's transactions are
properly authorized; (2) the Company's assets are safeguarded
against unauthorized or improper use; and (3) the Company's
transactions are properly recorded and reported, all to permit the
preparation of our financial statements in conformity with
generally accepted accounting principles.

         The Company's management does not expect that the Company's
Disclosure Controls or our Internal Controls will prevent all
errors and all fraud. Any control system, no matter how well
conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met.
Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must
be considered relative to their costs.  Because of the inherent
limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected.  These
inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because
of simple error or mistake.  Additionally, controls can be
circumvented by the individual acts of some persons, by collusion
of two or more people, or by management override of the control.
The design of any system of controls also is based in part upon
certain assumptions about the likelihood of future events, and
there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions; over time,
control may become inadequate because of changes in conditions, or
the degree of compliance with the policies or procedure may
deteriorate.  Because of the inherent limitations in a cost-
effective control system, misstatements due to error or fraud may
occur and not be detected.

         The Evaluation included a review of the controls' objectives
and design, the controls' implementation by the Company and the
effect of the controls on the information generated for use in this
Annual Report. In course of the Evaluation, we sought to identify
data errors, controls problems or acts of fraud and to confirm that
appropriate corrective action, including process improvements, were
being undertaken.  This type of evaluation will continue to be done
on a quarterly basis so that the conclusions concerning controls
effectiveness can be reported in each Quarterly Report on Form 10-
QSB and the Annual Report on Form 10-KSB.  The Company's Internal
Controls are also evaluated on an ongoing basis by the Company's
finance personnel and by the Company's independent auditors in
connection with their audit and review activities.  The overall
goals of these various evaluation activities are to monitor the
Company's Disclosure Controls and Internal Controls and to make
modifications as necessary; it is the Company's intent in this
regard that the Disclosure Controls and the Internal Controls will
be maintained as dynamic systems change (including improvements and
corrections) as conditions warrant.

         Among other matters, the Company sought in the Evaluation to
determine whether there were any "significant deficiencies" or
"material weaknesses" in the Company's Internal Controls, or
whether the Company had identified any acts of fraud involving
personnel who have a significant role in the Company's Internal
Controls.  This information was important both for the Evaluation
generally and because items 4, 5 and 6 in the Section 302
Certification require that the CEO and CFO disclose that
information to the Board's Audit Committee and to the Company's
independent auditors and to report on related matters in this
section of the Annual Report.  In the professional auditing
literature, "significant deficiencies" are referred to as
"reportable conditions"; these are control issues that could have a
significant adverse effect on the ability to record, process,
summarize and report financial data in the financial statements.  A
"material weakness" is defined in the auditing literature as a
particularly serious reportable condition where the internal
control does not reduce to a relatively low level the risk that
misstatements caused by error or fraud may occur in amounts that
would be material in relation to the financial statements and not
be detected within a timely period by employees in the normal
course of performing their assigned functions.  The Company also
sought to deal with other controls matters in the Evaluation, and
in case a problem was identified, we considered what revision,
improvement and/or correction to make in accordance with on-going
procedures.

         An Evaluation was carried out under the supervision and with
the participation of the Company's management, including the CEO
and CFO, of the effectiveness of the design and operation of our
disclosure controls and procedures (as defined in Rule 13a-15(e) or
15d-15(e) under the Exchange Act) as of the end of the fiscal year
covered by this Annual Report.  Based upon that Evaluation, the
Company's management, including the CEO and CFO, had concluded at
that time that the design and operation of these Disclosure
Controls and Internal Controls were effective as of the end of the
fiscal year covered by such reports.

         However, based on a subsequent evaluation in Fiscal 2005
the Company now believes that it did not have adequate personnel and
technical resources with respect to accounting for the sale-leaseback
of the Company's headquarters in July 2003.  As a result, the gain from
the sale-leaseback was originally recognized in its entirety in the third
fiscal quarter of 2003, during which the sale-leaseback occurred.
After consulting with the Company's independent registered public
accountants during Fiscal 2005, management concluded that such gain
should have been recognized over the ten-year term of the lease.
On May 24, 2005, the Company concluded that the Company should
restate its audited consolidated financial statements for the
fiscal years ended October 31, 2003 and 2004, and its quarterly
unaudited consolidated financial statements for the quarters ended
July 31, 2003, January 31, 2004, April 30, 2004, July 31, 2004, and
January 31, 2005.  Such restatements do not affect the Company's
revenues from operations for any of these periods.  These
restatements reflect the correction in the Company's accounting for
the sale-leaseback transaction.  As of the end of Fiscal 2004,
the Company's management, including the CEO, concluded that,
because the Company had not separated the CEO and CFO functions, the
Company's Disclosure Controls were not effective at the end of such
fiscal year to ensure that information required to be disclosed by the
Company in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods
specified in SEC rules and forms.  While the Company has been actively
searching for a CFO, the Company has not yet been successful in hiring
a new CFO.  The Company and the Audit Committee have implemented interim
measures with respect to Disclosure Controls in order to ensure that
Disclosure Controls are as effective as possible in the circumstances.
The Audit Committee has directed management to devote additional resources
to Disclosure Controls, and management is currently in the process of
implementing such directive.

         (b) Changes in Internal Controls.  There were no changes in
the Company's Internal Controls in the Company's fourth fiscal quarter
that materially affected, or are reasonably likely to materially affect,
the Company's Internal Controls.

ITEM 8B. OTHER INFORMATION

         None.


<PAGE>
                                 PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
        PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

        As of January 25, 2006, the directors and executive officers
of the Company were as follows:


     Name                  Age         Position
     ----                  ---         --------

Michael D. Beck             59   Director; Vice President, TASA; and
                                 President, Chief Executive Officer, BETA

Steven R. Berger(1)(2)      50   Director

Anne H. Cheevers            48   Senior Vice President, TASA

Donald W. Hughes(1)         55   Director

Chris L. Nguyen(1)(2)       44   Director

Andrew L. Simon             63   Chairman of the Board of Directors;
                                 President, Chief Executive Officer
                                 and Chief Financial Officer, TASA

Linda G. Straley            49   Director; Vice President, and Secretary, TASA

Thomas G. Struzzieri(1)(2)  47   Director

David L. Warnock(2)         48   Director

________________________
(1)	Member of the Audit Committee
(2)	Member of the Compensation Committee.


        Each director shall hold office until the earlier of the next
annual meeting of the Company's stockholders or his or her
resignation and until a successor is selected and qualified.

        MICHAEL D. BECK was elected as a Director of the Company in
March 1997 and has been Vice President of the Company since January
1997.  Mr. Beck is also a Director and President and Chief
Executive Officer of BETA.  Since 1983, Mr. Beck has been President
of BETA, which provides consulting and contractual services to
school districts, state education departments and test and textbook
publishers.  As of January 2, 1997, BETA became a wholly-owned
subsidiary of the Company and Mr. Beck continues to serve as the
President of BETA.  Mr. Beck has also provided consulting services
on matters of educational research and assessment for various
military, governmental and commercial organizations.  Mr. Beck
received an A.B. from John Carroll University and an M.A. from
Fordham University.

        STEVEN R. BERGER was elected as a Director of the Company in
March 1996 and he also serves on each of the Company's Compensation
and Audit Committees.  Mr. Berger was a partner in the law firm of
Salans from January 1989 through September 2002.  Salans acted as
special securities counsel to the Company from January 1995 through
September 2002.  Mr. Berger is currently a shareholder in the law
firm of Vedder, Price, Kaufman & Kammholz, P.C. in New York City.
The Company has retained Vedder, Price, Kaufman & Kammholz, P.C.
since October 2002 as its special securities counsel.  Mr. Berger
received an A.B. from Harvard University and a J.D. from Harvard
Law School.

        ANNE H. CHEEVERS was appointed as Senior Vice President and
Chief Operating Officer of TASA's proprietary unit in February
2005.  Prior to her employment by the Company, Ms. Cheevers was
Vice President at The McGraw-Hill Companies' Aviation Group.  She
served as Group Vice President of Marketing of Trilegiant
Corporation, a subsidiary of Cendant Corporation, in Norwalk,
Connecticut from 1999-2003.  From 1996 through 1999, Ms. Cheevers
was Vice President of Marketing, Product Development and Sales for
the Bureau of Business Practice in Waterford, Connecticut, a
division of Simon & Schuster.  Ms. Cheevers is a graduate of the
University of Chicago.

        DONALD W. HUGHES was elected as Director in June 2001.  Since
July 2001, Mr. Hughes has served on, and is Chairman of, the
Company's Audit Committee.  Since 1999, Mr. Hughes has served as
Executive Vice President and Chief Financial Officer of Camden
Partners, Inc. and a member of and Chief Financial Officer of
Camden Partners Holdings, LLC, each of which is an affiliate of
Cahill Warnock.  Mr. Hughes has served as an officer of Cahill
Warnock since February 1997 and is a General Partner and Chief
Financial Officer of Cahill Warnock.  Prior to joining Cahill
Warnock in February 1997, Mr. Hughes had served as Vice President,
Chief Financial Officer and Secretary of Capstone Pharmacy
Services, Inc. from December 1995 and as Executive Vice President
and Chief Financial Officer of Broventure Company, Inc., a closely-
held investment management company, from July 1984 to November
1995.  Mr. Hughes also serves on the board of Occupational Health +
Rehabilitation Inc.  Mr. Hughes received a B.A. from Lycoming
College and an M.S.F. from Loyola College in Maryland, and is a
Certified Public Accountant.

        CHRIS L. NGUYEN was elected as a Director at the Annual
Stockholders Meeting of the Company in April 2004.  Mr. Nguyen was
a senior executive with Sylvan Learning Systems from 1989 to 1996.
During his tenure at Sylvan, Mr. Nguyen was COO of Sylvan's
computer-based testing division, Sylvan Prometric.  From 1996
through 2001, Mr. Nguyen was President and CEO of Caliber Learning
Network, a publicly-traded company specializing in distance
learning services for adults.  Currently, Mr. Nguyen is the
principal and owner of Dynanet Consulting Services, LLC.  Dynanet
provides management consulting and technology development services
to companies within the education and testing markets.  Mr. Nguyen
received a B.A from Johns Hopkins University.

        ANDREW L. SIMON was elected as Director and as President and
Chief Financial Officer of the Company in March 1995.  Mr. Simon
serves as Chairman of the Board of Directors.  Mr. Simon is also a
Director and Secretary of BETA.  He served as Interim President of
TASA from June 1994 through March 1995.  He was a founder of the
Company and previously served as a Director from 1976 to 1991 and
has acted as a financial consultant to the Company since its
inception in 1976.  From 1983 to 1986, he was a Vice
President/Marketing Division Head in the Private Clients Group at
Bankers Trust Company.  He was a Vice President at Citibank, NA,
where he held a number of senior marketing and sales positions,
from 1980 to 1983.  Prior to 1980, Mr. Simon served as Marketing
Director for several consumer package goods companies including
Norcliff-Thayer and Lederle Laboratories.  He holds an M.B.A. from
Columbia University and a B.A. from Washington University.  Mr.
Simon is on The George Washington University National Council for
Education and Human Development and a director of The Hudson Valley
Trust.

        LINDA G. STRALEY was elected as a Director of the Company and
has been Vice President since June 1994.  From June 1994 through
March 1995, she was Chairman of the Board of Directors.  She has
been Secretary since August 1992 and, from 1984 to 1994, she served
as director of DRP Services for the Company.  Ms. Straley received
a B.A. in Education from Bethany College and an M.S. in Educational
Psychology and Statistics from the State University of New York.

        THOMAS G. STRUZZIERI was elected a Director of the Company in
June 2000.  He serves on each of the Company's Audit and
Compensation Committees.  Mr. Struzzieri is the owner of Horse
Shows In The Sun (HITS).  Based in Saugerties, New York, HITS
produces horse shows in California, Florida, Virginia, New York,
and Arizona.  Mr. Struzzieri is a director of the United States
Equestrian Federation, and is a founding member and a director of
the United States Hunter/Jumper Association.  He also serves on the
Board of Directors of the United Way of Ulster County and the
Ulster County Development Corporation, and is a member of the SUNY
Ulster County Community College Board of Trustees.  Mr. Struzzieri
is a member of the Chamber of Commerce of Ulster County as well as
the Business and Community Leaders' Advisory Committee of the
Institute of Ecosystem Studies.  Mr. Struzzieri attended Vassar College.

        DAVID L. WARNOCK was elected as a Director of the Company in
October 1998 and, since that time, he has also served on the
Company's Compensation Committee.  Since 1999, Mr. Warnock has been
President and Chief Executive Officer of each of Camden Partners,
Inc. and Camden Partners Holdings, LLC, each of which is an
affiliate of Cahill Warnock.  Mr. Warnock is a founding partner of
Cahill, Warnock & Company, LLC, an asset management firm
established in 1995 to invest in small public companies.  From 1983
to 1995, Mr. Warnock was with T. Rowe Price Associates in senior
management positions, including President of the corporate general
partner of T. Rowe Price Strategic Partners and T. Rowe Price
Strategic Partners II, and as the Executive Vice President of T.
Rowe Price New Horizons fund.  Mr. Warnock also serves on the
Boards of Directors of Bridges Learning Systems, Concorde Career
Colleges, Inc., the National Alliance to End Homelessness, the
Center for Fathers, Families and Workforce Development, Nobel
Learning Communities, CardSystems Solutions, Inc., and American
Public Education, Inc.  Mr. Warnock received a B.A. in History from
the University of Delaware and a Masters in Finance from the
University of Wisconsin.

ITEM 10.  EXECUTIVE COMPENSATION

        The following table shows compensation for services rendered
to the Company during Fiscal 2005, 2004 and 2003, respectively, by
the Chief Executive Officer, the President of BETA, the Senior Vice
President of TASA, a Vice President of TASA, and the former
Executive Vice President of the Company's proprietary secondary
school unit.  Each executive officer serves under the authority of
the Board of Directors. No other executive officer of the Company
received cash compensation that exceeded $100,000 during Fiscal
2005.  Therefore, pursuant to Item 402 of Regulation S-B, only
compensation for each of the persons listed below is shown in the
Summary Compensation Table below.


<TABLE>
<CAPTION>

                      SUMMARY COMPENSATION TABLE



                                            Annual Compensation                Long-Term Compensation
                                     ------------------------------------------------------------------
                                                                             Awards             Payouts
                                                                             --------------------------

                                                                         Restricted     Securities            All Other
                                                          Other Annual     Stock        Underlying     LTIP    Compen-
 Name and Principal                   Salary      Bonus   Compensation    Award(s)       Option/      Payouts  sation
     Position                Year       ($)        ($)         ($)          ($)          SARs(1)        ($)      ($)
-----------------------------------------------------------------------------------------------------------------------
<S>                       <C>     <C>         <C>       <C>            <C>         <C>              <C>       <C>
Andrew L. Simon,             2005    $244,000         --    $24,311(2)       0               --(2)       0        0
President, Chief             2004    $234,945    $70,000    $23,922(2)       0         20,000/0(2)       0        0
Executive Officer            2003    $227,000    $50,000    $23,346(2)       0         20,000/0(2)       0        0
and Chief Financial
Officer
------------------------------------------------------------------------------------------------------------------------
Michael D. Beck,             2005    $175,000         --    $24,589(3)       0               --(3)       0        0
Vice President,              2004    $160,684    $70,000    $24,251(3)       0         12,000/0(3)       0        0
TASA; President and          2003    $155,250    $65,048    $21,899(3)       0         12,000/0(3)       0        0
Chief Executive
Officer, BETA
------------------------------------------------------------------------------------------------------------------------
Peter A. Duhamel             2005    $ 92,771         --    $ 7,363(4)       0               --         --       --
Senior Vice                  2004    $155,250    $     0    $19,891(4)       0               --(4)       0        0
President, TASA              2003    $155,250    $25,857    $20,834(4)       0          5,000/0(4)       0        0
(resigned April 2005)
------------------------------------------------------------------------------------------------------------------------
Linda G. Straley             2005    $113,000          0    $14,830(5)       0                0(5)       0        0
Vice President               2004    $102,937    $13,000    $18,332(5)       0          6,000/0(5)       0        0
and Secretary, TASA          2003    $ 79,400    $ 6,000    $16,156(5)       0          6,000/0(5)       0        0
------------------------------------------------------------------------------------------------------------------------
Anne H. Cheevers,            2005    $114.024    $35,000    $ 3,127(6)       0           40,000(6)       0        0
Senior Vice President &      2004          --         --         --         --               --         --       --
COO                          2003          --         --         --         --               --         --       --
------------------------------------------------------------------------------------------------------------------------
</TABLE>


(1)	To date, the Company has issued no SARs.

(2)	Includes: contributions to the Company's qualified 401(k)
        Profit Sharing Plan (the "401(k)") and the Company's Money
        Purchase Pension Plan (the "Pension Plan") of $10,500 in Fiscal
        2005, $10,250 in Fiscal 2004, and $10,000 in Fiscal 2003, and
        $8,250, $8,250, $8,250, for a company car in Fiscal 2005, 2004,
        and 2003, respectively.  Also includes: stock options issued
        pursuant to the Company's 2000 Stock Incentive Plan after the
        end of each of Fiscal 2005, Fiscal 2004, and Fiscal 2003 in
        respect of such fiscal years, respectively.

(3)	Includes: contributions to the Company's 401(k) and Pension
        Plan of $10,500 in Fiscal 2005, $10,212 in Fiscal 2004, and
        $10,000 in Fiscal 2003; and $8,906, $8,906, and $7,091 for a
        company car in Fiscal 2005, 2004, and 2003, respectively.  Also
        includes: stock options issued pursuant to the Company's 2000
        Stock Incentive Plan after the end of each of Fiscal 2005,
        Fiscal 2004 and Fiscal 2003 in respect of such fiscal years,
        respectively.

(4)	Includes: contributions to the Company's 401(k) and Pension
        Plan of $0 in Fiscal 2005, $9,055 in Fiscal 2004, and $10,000 in
        Fiscal 2003; and $3,781, $5,671, and $5,994 for a company car in
        Fiscal 2005, 2004 and 2003, respectively.  Also includes:  stock
        options issued pursuant to the Company's 2000 Stock Incentive
        Plan after the end of each of Fiscal 2005, Fiscal 2004 and
        Fiscal 2003 in respect of such fiscal years, respectively.

(5)	Includes: contributions to the Company's 401(k) and Pension
        Plan of $6,305 in Fiscal 2005, $9,947 in Fiscal 2004, and $8,410
        in Fiscal 2003; and $3,540, $3,540 and $3,540 for a company car
        in Fiscal 2005, 2004 and 2003, respectively.  Also includes:
        stock options issued pursuant to the Company's 2000 Stock
        Incentive Plan after the end of each of Fiscal 2005, Fiscal 2004
        and Fiscal 2003 in respect of such fiscal years, respectively.

(6)	Includes:  stock options issued pursuant to the Company's 2000
        Stock Incentive Plan upon hiring and after the end of Fiscal
        2005 in respect of such fiscal year.

EMPLOYMENT CONTRACTS

        On March 1, 1996, the Company entered into an employment
agreement with each of Andrew L. Simon and Linda G. Straley,
pursuant to which the Company agreed to employ Mr. Simon and Ms.
Straley, and each of Mr. Simon and Ms. Straley agreed to remain, as
the Company's President and Chief Executive Officer, and Vice
President, respectively, for a term of three years, subject to
automatic yearly extensions and certain rights of termination as
provided in each such agreement.

        As of January 2, 1997, the Company entered into an employment
agreement with Michael D. Beck, pursuant to which the Company
agreed to employ Mr. Beck, and Mr. Beck agreed to remain, as Vice
President of TASA and President and Chief Executive Officer of
BETA, for a term of three years, subject to automatic yearly
extensions and certain rights of termination as provided in such
agreement.

        In the employment agreements with each of Messrs. Simon and
Beck and Ms. Straley, the Company has agreed to provide for certain
benefits and protections for such executive officers in connection
with a change of control of the Company.  Such agreements provide
that upon the occurrence of a change of control (as defined in each
agreement) and the termination of such executive's employment
agreement, each such executive officer would be awarded a lump sum
bonus equal to and one-half times such executive officer's base
salary plus such executive's highest annual bonus during the
preceding three fiscal years, such lump sum bonus to be paid for
each of three years following termination of employment following a
change in control.  In addition, the Company entered into two-year
employment agreements with the two officers of AEC.  Pursuant to
the agreements, the officers of AEC are entitled to a base salary
and bonuses determined by the attainment of certain performance
goals.

        In February 2005, the Company entered into an employment
agreement with Anne Cheevers as Senior Vice President and Chief
Operating Officer, TASA - Proprietary Division, for an initial one-
year term, automatically renewable for additional one-year terms,
subject to early termination notices given by either party prior to
the expiration of the then current term.  Pursuant to such
employment agreement, Ms. Cheevers will be paid an annual base
salary of $170,000, will be eligible to receive an incentive bonus
(to be not less than $35,000 for the first year of employment) and
was granted 40,000 options to purchase shares of the Company's
Common Stock pursuant to the Company's stock option plan, at an
exercise price of $3.10 per share, subject to vesting upon the
completion of one year of employment.

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

        Generally, each employee of the Company has agreed to the
assignment to the Company of the employee's rights to any
inventions relating to the Company's business or interest which
were conceived both prior to and during the period of employment
and, except under certain specified conditions, the Company's
employees are prohibited from competing for one year with the
Company in areas in which he or she was employed.

STOCK INCENTIVE PLANS

        The Board of Directors of the Company adopted the 1991 Stock
Option Incentive Plan (the "Option Plan") on August 25, 1991 in
order to attract and retain qualified personnel, which Option Plan
was approved by the stockholders on August 25, 1991.  The Board of
Directors adopted the Amended and Restated 1991 Stock Option
Incentive Plan (the "Amended Option Plan") in February 1996, which
Amended Option Plan amended and restated the Option Plan and was
approved by the stockholders of the Company on March 29, 1996.
Under the Amended Option Plan, options to purchase up to 625,000
shares of Common Stock were available to be granted to employees,
officers, directors and consultants of the Company.  The Amended
Option Plan terminated in 2001, after which no further options or
stock awards may be issued under the Amended Option Plan; all
options and other stock awards outstanding under the Amended Option
Plan at the termination date shall continue to be outstanding and
may be exercised in accordance with their respective terms, until
such options or other stock awards expire by their terms.

        The Board of Directors of the Company adopted the 2000 Stock
Incentive Plan (the "2000 Plan") in February, 2000. The
stockholders of the Company approved the 2000 Plan at the Company's
Annual Meeting of Stockholders held on March 31, 2000.  Under the
2000 Plan, options or other stock awards with respect to up to
300,000 shares of the Company's Common Stock may be granted to
employees, officers, directors and consultants of the Company.  In
addition, any options outstanding under the Amended Plan, which
expire after the adoption of the 2000 Plan, are added to the number
of shares available under the 2000 Plan.  The terms of the 2000
Plan are substantially identical to the terms of the Amended Option
Plan, except for provisions with respect to the number of shares
which may be issued under the 2000 Plan and the expiration date of
the 2000 Plan.  At the Annual Meeting of Stockholders held on April
29, 2005, the stockholders approved an amendment to the 2000 Plan
increasing by 200,000 the number of shares eligible to be issued
pursuant to the 2000 Plan.

        Each of the Amended Option Plan and the 2000 Plan
(collectively, the "Option Plans") is administered by the
Compensation Committee of the Board of Directors (the "Committee").
Subject to the terms of the Option Plans, the Committee is
authorized to select optionees and determine the number of shares
covered by each option and certain of its other terms.  The
exercise price of stock options granted under the Option Plans may
not be less than the fair market value of the Company's Common
Stock on the date of the grant.  In general, options become
exercisable after the first anniversary of the date of grant.  Effective
for options granted under the 2000 Plan in Fiscal 2006 and thereafter,
such options will become exercisable in three equal annual installments
following the grant date.  The period within which any stock option
may be exercised cannot exceed ten years from the date of grant.  Options
held by a terminated employee expire three months after termination
except in the event of death, disability or termination for cause.
No one participant may receive, in any one fiscal year, awards under
the Option Plans which would entitle the participant to receive more
than 50,000 shares.

        The following table summarizes the options granted, exercised
and cancelled or expired under the Amended Option Plan and the 2000
Option Plan during the preceding three fiscal years:

<TABLE>
<CAPTION>

                            Fiscal 2005          Fiscal 2004         Fiscal 2003

<S>                      <C>                  <C>                 <C>
Options granted               216,000               73,000              39,500
Options exercised              40,000               19,250               9,000
Restricted shares
awarded                            --                   --                  --
Options
cancelled/expired              53,500                   --              57,500

</TABLE>


        As of October 31, 2005, options to purchase up to an aggregate
of 334,300 shares were outstanding under the 2000 Plan.  As of
October 31, 2005, options to purchase up to an aggregate of 365,538
shares were outstanding under the Amended Option Plan.


<TABLE>
<CAPTION>


                    OPTION/SAR GRANTS IN LAST FISCAL YEAR
                             (INDIVIDUAL GRANTS)

                         Number of     Percent of Total
                         Securities      Options/SARs
                         Underlying       Granted to
                       Options/SARs(1)   Employees in      Exercise Or Base
Name                     Granted (#)      Fiscal Year      Price ($/Share)    Expiration Date
---------------------------------------------------------------------------------------------
<S>                   <C>               <C>             <C>                 <C>

Andrew L. Simon,
President, Chief
Executive Officer and
Chief Financial
Officer                     20,000             9.3%             $3.15           1/21/15
---------------------------------------------------------------------------------------------
Michael D. Beck,
Vice President, TASA;
President and Chief
Executive Officer,
BETA                        12,000             5.6%             $3.15           1/21/15
---------------------------------------------------------------------------------------------
Peter Duhamel,
Senior Vice President,
TASA                            --               --             $3.15           1/21/15
---------------------------------------------------------------------------------------------
Linda G. Straley,
Vice President and
Secretary, TASA              6,000             2.8%             $3.15           1/21/15
---------------------------------------------------------------------------------------------
Anne H. Cheevers,
Senior Vice President,
TASA                        40,000            18.6%             $3.10           2/28/15
---------------------------------------------------------------------------------------------
</TABLE>

(1) To date, the Company has issued no SARs.


<TABLE>
<CAPTION>

                  AGGREGATED OPTION/SAR EXERCISES IN LAST
                FISCAL YEAR AND FISCAL-END OPTION/SAR VALUES

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

                                                             Number of
                                                             Securities          Value of
                                                             Underlying         Unexercised In-
                                                            Unexercised           the-Money
                                                           Options/SARs(1)      Options/SARs(1)
                                                            at FY-End (#)        at FY-End ($)
------------------------------------------------------------------------------------------------
                            Shares
                         Acquired on     Value Realized      Exercisable/        Exercisable/
    Name                 Exercise (#)         ($)           Unexercisable       Unexercisable
------------------------------------------------------------------------------------------------

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

Andrew L. Simon,
President, Chief
Executive Officer
and Chief Financial
Officer                     0                0              191,875/20,000    $557,343/$87,000(2)
------------------------------------------------------------------------------------------------
Michael D. Beck,
Vice President, TASA;
President and Chief
Executive Officer,
BETA                     18,000          $55,680             82,750/12,000    $359,962/$52,200(2)
------------------------------------------------------------------------------------------------
Peter Duhamel,
Senior Vice
President, TASA
(resigned April 2005)    18,000          $55,680                   0                 0
------------------------------------------------------------------------------------------------
Linda G. Straley,
Vice President and
Secretary, TASA             0                0               79,800/6,000     $298,193/$26,100(2)
------------------------------------------------------------------------------------------------
Anne H. Cheevers,
Senior Vice President,
TASA                        0                0                     0                 0
------------------------------------------------------------------------------------------------
</TABLE>



(1)	To date, the Company has issued no SARs.  Amounts are
        calculated net of exercise price of the options.

(2)	Based on the closing price of the Company's Common Stock on
        NASDAQ on October 31, 2005, of $4.35.

DIRECTORS COMPENSATION

        The Board of Directors of the Company adopted the Directors
Plan in February 1996 in order to aid the Company in attracting,
retaining and motivating independent directors, which Directors
Plan was approved by the stockholders of the Company on March 29,
1996.  The Directors Plan initially authorized awards up to an
aggregate of 25,000 shares of Common Stock.  In February 2000, the
Board of Directors approved an amendment to the Directors Plan
increasing to 75,000 the number of shares which may be the subject
of stock options under the Directors Plan.  The stockholders of the
Company approved such amendment at the Annual Meeting of
Stockholders on March 31, 2000.  At the Annual Meeting of
Stockholders held on April 29, 2005, the stockholders approved
amendments to the Directors Plan to increase by 75,000 the number
of shares eligible to be issued pursuant to the Directors Plan and
to extend the expiration date of the Directors Plan from March 2006
to April 30, 2010.  Under the Directors Plan, non-qualified stock
options to purchase up to 150,000 shares of Common Stock may be
granted to non-employee directors of the Company, which options are
granted automatically at the times and in the manner stated in the
Directors Plan.

        Subject to the terms of the Directors Plan, each non-employee
director receives 5,000 options on the day he (she) first is
elected to the Board of Directors, and 2,500 options on the date of
each annual meeting of the stockholders of the Company, provided he
(she) is re-elected to the Board of Directors.  The exercise price
of stock options granted under the Directors Plan is the fair
market value of the Company's Common Stock on the date of grant.
The options become exercisable after the first anniversary of the
date of grant and the term of the option cannot exceed ten years.
Effective for options granted under the Directors Plan in Fiscal 2006
and thereafter, such options will become exercisable in three equal
annual installments following the grant date.  On April 25, 2003, the
Company granted 10,000 options under the Directors Plan; on April 30,
2004, the Company granted 15,000 options under the Directors Plan, and
on April 29, 2005, the Company granted 12,500 options under the Directors
Plan.  In Fiscal 2005, 2,500 options under the Directors Plan were exercised.
As of October 31, 2005, an aggregate of 76,875 options were outstanding
under the Directors Plan.

        Directors receive no compensation, other than the options
pursuant to the Directors Plan, for services in such capacity.

OTHER PLANS

        CONSULTANTS STOCK INCENTIVE PLAN.  In March 1997, the Board of
        --------------------------------
Directors of the Company adopted the Consultants Plan, pursuant to
which options to purchase up to 50,000 shares of Common Stock may
be granted to consultants to the Company. The Consultants Plan is
administered by the Board of Directors of the Company.  Subject to
the terms of the Consultants Plan, the Board is authorized to
select optionees and determine the number of shares covered by each
option and certain of its other terms.  In general, the exercise
price of stock options granted under the Consultants Plan is the
fair market value of the Company's Common Stock on the date of the
grant; however, the Board has the discretion to use another method
of valuation if it determines that such other valuation is
warranted.  In general, options become exercisable six months from
the date of grant, although the Board has discretion to set either
longer or shorter vesting periods.  The period within which any
stock option may be exercised cannot exceed ten years from the date
of grant.  If a consultant's association with the Company is
terminated prior to the end of its agreed term, all unexercised,
deferred and unpaid awards shall be canceled immediately, except in
the event of the Consultant's death or disability.  As of October
31, 2005, 7,500 options were outstanding under the Consultants
Plan.

        PROFIT SHARING PLAN. The Company has a qualified 401(k) Profit
        -------------------
Sharing Plan.  For fiscal years ended before November 1, 2000, the
401(k) Plan allowed eligible employees to contribute up to 15
percent (15%) of income through Company contributions and a salary
reduction mechanism.  Company contributions to the 401(k) Plan are
optional and accrue at the discretion of the Board of Directors.
Effective November 1, 2000, the Company amended the 401(k) Plan to
provide a matching component under the 401(k) Plan of up to five
percent (5%) of each eligible employee's compensation.  In
addition, the eligibility requirements were amended to provide that
an employee is not eligible until completing twelve months, or one
thousand hours, of employment, and may only enter the 401(k) Plan
at specified entry dates.

        MONEY PURCHASE PENSION PLAN.  In October 1991, the Company
        ---------------------------
adopted a Money Purchase Pension Plan, which has been qualified by
the Internal Revenue Service.  Under this Plan, for fiscal years
ended before November 1, 2000, the Company was required to make an
annual contribution to the Plan equal to ten percent (10%) of each
eligible employee's compensation.  Effective November 1, 2000, the
Company amended the Plan to exclude highly compensated employees
and to reduce the contribution to five percent (5%) of each
eligible employee's compensation.  In addition, the eligibility
requirements were amended so that an employee is not eligible until
completing twelve months, or one thousand hours, of employment, and
may only enter the Pension Plan at specified entry dates.

        For Fiscal 2005, 2004, and 2003, the Company's retirement
costs totaled $262,723, $238,107, and $197,998, respectively.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

        Section 16(a) of the Securities Exchange Act of 1934 requires
the Company's directors, executive officers and persons who own
beneficially more than ten percent of the Company's outstanding
common stock to file with the SEC initial reports of beneficial
ownership and reports of changes in beneficial ownership of common
stock and other securities of the Company on Forms 3, 4 and 5, and
to furnish the Company with copies of all such forms they file.
Based on a review of copies of such reports received by the
Company, all of the Company's directors and officers timely filed
all reports required with respect to Fiscal 2005.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The following table sets forth certain information regarding
the beneficial ownership of the Company's Common Stock, as of
January 25, 2006, by (i) each person who is known by the Company to
own beneficially more than 5% of the Company's outstanding Common
Stock; (ii) each of the Company's officers and directors; and (iii)
all officers and directors as a group.

        As of January 25, 2006, there were 2,909,738 shares of Common
Stock outstanding.  Each share of Common Stock is entitled to one
vote per share.

                                                   Shares of        Percent of
Name and Address of                              Common Stock      Common Stock
Beneficial Owners and                            Beneficially      Beneficially
Directors and Officers                              Owned             Owned
-------------------------------------------------------------------------------

5% Beneficial Owners:
--------------------

Cahill, Warnock Strategic                         592,849(1,2)          20.4%
Partners Fund, L.P.
c/o Cahill, Warnock & Co., LLC
1 South Street, Suite 2150
Baltimore, MD 21202
-------------------------------------------------------------------------------

Midsouth Investor Fund L.P.                       215,000                7.4%
1776 Peachtree St., N.W. Suite 412 North
Atlanta, GA 30309
-------------------------------------------------------------------------------
Kevin Gruneich                                    185,600                6.4%
12 White Pine Canyon Road
Park City, UT 84060
-------------------------------------------------------------------------------

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

Officers and Directors
----------------------

Michael D. Beck                                   198,875(3)             6.6%
4 Hardscrabble Heights
Brewster, NY 10509
-------------------------------------------------------------------------------
Steven R. Berger                                    8,125(4)               *
805 Third Avenue
New York, NY 10022
-------------------------------------------------------------------------------
Anne H. Cheevers                                   40,000(5)             1.4%
4 Hardscrabble Heights
Brewster, NY 10509
-------------------------------------------------------------------------------
Donald W. Hughes                                  638,100(6)            21.8%
1 South Street, Suite 2150
Baltimore, Maryland 21202
-------------------------------------------------------------------------------
Chris L. Nguyen                                     5,000(7)               *
4204 St. Paul Street
Baltimore, Maryland  21218
-------------------------------------------------------------------------------
Andrew L. Simon                                   305,088(8)             9.8%
4 Hardscrabble Heights
Brewster, NY 10509
-------------------------------------------------------------------------------
Linda G. Straley                                  136,494(9)             4.6%
4 Hardscrabble Heights
Brewster, NY 10509
-------------------------------------------------------------------------------
Thomas G. Struzzieri                               15,000(10)              *
319 Main Street
Saugerties, NY  12477
-------------------------------------------------------------------------------
David L. Warnock                                  640,699(11)           21.9%
1 South Street, Suite 2150
Baltimore, Maryland 21202
-------------------------------------------------------------------------------
Officers and Directors as a                     1,361,682(12)           38.5%
Group (9 persons)
-------------------------------------------------------------------------------

________________
* Less than 1%


        1  Excludes 32,850 shares owned by Strategic Associates, L.P., an
           affiliate of Cahill, Warnock Strategic Partners Fund, L.P. (the
           "Fund"), but as to which the Fund disclaims beneficial
           ownership.  ("Strategic Associates"; together, with the Fund,
           the "Cahill, Warnock Entities").  Pursuant to the Investor
           Rights Agreement (the "Investor Rights Agreement") between the
           Company and the Cahill, Warnock Entities, the Company has agreed
           that so long as the Cahill, Warnock Entities own at least 50% of
           the shares issuable or issued pursuant to warrants held by the
           Cahill, Warnock Entities), the Cahill, Warnock Entities have the
           right to nominate two directors to the Board of Directors of the
           Company.  David L. Warnock and Donald W. Hughes are the two
           current directors who were nominated by the Cahill, Warnock
           Entities.  Pursuant to the Investor Rights Agreement, the
           directors and executive officers of the Company have agreed, at
           each meeting of stockholders for the purpose of electing
           directors, to cast their eligible votes in favor of the nominees
           of the Cahill, Warnock Entities.

        2  Edward L. Cahill, David L. Warnock and Donald W. Hughes are
           general partners of Cahill, Warnock Strategic Partners, L.P.
           ("Cahill, Warnock Partners"), the Fund's sole general partner,
           and the sole general partner of Strategic Associates.  Each of
           David L. Warnock and Donald W. Hughes is also a director of the
           Company (see footnotes 6 and 11 to this table).

        3  Includes (i) 42,000 shares which are owned jointly with
           Mr. Beck's wife, (ii) 9,375 shares owned by Mr. Beck's daughter,
           and (iii) 94,750 shares which Mr. Beck has the right to acquire
           upon the exercise of currently exercisable stock options or
           options that will become exercisable within 60 days.  Excludes:
           9,375 shares owned by Mr. Beck's wife, as to which Mr. Beck
           disclaims beneficial ownership.

        4  Includes 8,125 shares which Mr. Berger has the right to acquire
           upon the exercise of currently exercisable stock options or
           stock options which become exercisable within 60 days, and
           excludes 2,500 shares which are the subject of options that are
           not currently exercisable.

        5  Includes 40,000 shares which Ms. Cheevers has the right to
           acquire upon the exercise of currently exercisable stock options
           or stock options which become exercisable within 60 days.

        6  Includes (i) 625,699 shares owned by the Cahill Warnock
           Entities, and (ii) 12,500 shares which Mr. Hughes has the right
           to acquire upon the exercise of options currently exercisable
           stock options or stock options which become exercisable within
           the next 60 days.  Excludes 2,500 shares which are the subject
           of options that are not currently exercisable.

        7  Includes 5,000 shares which Mr. Nguyen has the right to acquire
           upon the exercise of currently exercisable stock options pr
           options which become exercisable within the next 60 days.
           Excludes 2,500 shares which are the subject of options that are
           not currently exercisable.

        8  Includes 211,875 shares which Mr. Simon has the right to acquire
           upon the exercise of currently exercisable stock options or
           stock options that will become exercisable within 60 days.
           Excludes: 375 shares of Common Stock owned by the retirement
           account of Mr. Simon's wife, as to which Mr. Simon disclaims
           beneficial ownership.

        9  Includes 85,800 shares which Ms. Straley has the right to
           acquire upon the exercise of currently exercisable stock options
           or options that will become exercisable within 60 days.

       10  Includes 10,000 shares which Mr. Struzzieri has the right to
           acquire upon the exercise of currently exercisable stock options
           or options which become exercisable within the next 60 days.
           Excludes 2,500 shares which are the subject of options that are
           not currently exercisable.

       11  Includes (i) 625,699 shares owned by the Cahill Warnock
           Entities, and (ii) 14,375 shares which Mr. Warnock has the right
           to acquire upon the exercise of currently exercisable stock
           options or stock options which become exercisable within 60
           days.  Excludes 2,500 shares which are the subject of options
           that are not currently exercisable.

       12  Includes 312,425 shares which officers and directors have the
           right to acquire upon the exercise of currently exercisable
           stock options or options which become exercisable within the
           next 60 days.  Excludes 12,500 shares which are the subject of
           options that are not currently exercisable.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        In November 1998, the Company acquired substantially all of
the assets of Mildred Elley.  The Company financed the acquisition
through the issuance of debentures, with warrants attached,
pursuant to a Securities Purchase Agreement (the "Securities
Purchase Agreement"), with the Cahill, Warnock Entities.  Pursuant
to the Securities Purchase Agreement, the Company:  (i) issued and
sold to the Cahill, Warnock Entities 8% Debentures due 2003 (the
"Debentures"), dated October 28, 1998 (the "Purchase Closing
Date"), in the aggregate principal amount of $4,000,000, (ii)
issued and sold to the Cahill, Warnock Entities, as additional
consideration for purchasing the Debentures, the Warrants to
acquire an aggregate of 690,229.5 shares of the Company's Common
Stock, which, on the Purchase Closing Date, constituted 20% of the
Company's issued and outstanding common stock on a fully diluted
basis, after giving effect to the transactions contemplated in the
Securities Purchase Agreement and (iii) authorized the issuance and
sale in the future to the Cahill, Warnock Entities of additional
shares of the Company's Common Stock upon the Company's exercise of
a put option, the terms and conditions of which are set forth in
the Securities Purchase Agreement.  The exercise price of the
Warrants upon issuance was $1.40 per share of Common Stock, subject
to certain antidilution adjustments set forth in the Warrants.  On
December 3, 1999, in exchange for the Cahill, Warnock Entities'
consent, among other things, to subordinate the Debentures to
certain financing the Company was seeking to obtain in connection
with the implementation of the Company's strategic plan and
pursuant to a Consent, Agreement and Amendment, dated as of
December 3, 1999, among the Company and the Cahill, Warnock
Entities, the Board of Directors of the Company approved a
repricing of the Warrants to an exercise price of $1.125 per share
of Common Stock, subject to the same antidilution adjustments
referred to above.  On October 1, 2002, the Company and the Cahill
Warnock Entities agreed to an extension of the maturity date of the
Debentures from October 28, 2003 until February 1, 2004.  Using a
portion of the proceeds from the sale of MLP and the sale/leaseback
of the Company's headquarters building, both of which occurred in
Fiscal 2003, the Company prepaid the outstanding Debentures in the
fourth quarter of Fiscal 2003.  A portion of the Warrants held by
the Cahill, Warnock Entities expired at the end of Fiscal 2003. The
Cahill Warnock Entities exercised its remaining 138,047 warrants
outstanding in December 2004 (after the end of Fiscal 2004),
resulting in additional paid-in capital to the Company of $155,303.

        Pursuant to the Investor Rights Agreement between the Company
and the Cahill, Warnock Entities, the Company has agreed that so
long as the Cahill, Warnock Entities own at least 50% of the
Warrants (or if the Warrants have been exercised, the shares issued
pursuant thereto), the Cahill, Warnock Entities shall have the
right to nominate two directors to the Board of Directors of the
Company.  David L. Warnock and Donald W. Hughes are the current
directors who were nominated by the Cahill, Warnock Entities.
Pursuant to the Investor Rights Agreement, the directors and
executive officers have agreed, at each meeting of stockholders for
the purpose of electing directors, to cast their eligible votes in
favor of the nominees of the Cahill, Warnock Entities.

        Pursuant to the acquisition of AEC in January 2005, the
Company issued 12,000 shares of the Company's Common Stock to the
former stockholders of AEC in a transaction not involving a public
offering pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act.  This Registration Statement is
being filed pursuant to the Company's agreement to register such
shares under the Securities Act.

        Pursuant to the acquisition of ADI in July 2005, the Company
issued 89,488 shares of the Company's Common Stock to the former
stockholders of ADI who had elected to receive shares, in whole or
in part in lieu of cash, in a transaction not involving a public
offering pursuant to the exemption from registration provided by
Section 4(2) of the Securities Act.  This Registration Statement is
being filed pursuant to the Company's agreement to register such
shares under the Securities Act.

        One of the Company's directors, Steven R. Berger, is a
shareholder in Vedder, Price, Kaufman & Kammholz, P.C.  The Company
has retained Vedder, Price, Kaufman & Kammholz, P.C. as its special
securities counsel, and the Company paid an aggregate of $200,710
and $59,351 in legal fees and expenses to Vedder Price in Fiscal
2005 and Fiscal 2004, respectively.



ITEM 13. EXHIBITS

         (a)   The following Exhibits are filed as part of this Report:

         3.1   Certificate of Incorporation, dated August
               22, 1991 filed with the Secretary of State
               of the State of Delaware (incorporated
               herein by reference to the exhibit
               contained in the Company's Quarterly Report
               on Form 10-QSB for the fiscal quarter ended
               January 31, 1999)

         3.2   Certificate of Merger dated August 26,
               1992, filed with the Secretary of State of
               the State of Delaware (incorporated herein
               by reference to the exhibit contained in
               the Company's Registration Statement on
               Form SB-2 under the Securities Act of 1933,
               as amended, filed with the Securities and
               Exchange Commission on July 7, 1993)

         3.3   Certificate of Amendment of Certificate of
               Incorporation dated March 4, 1999, filed
               with the Secretary of State of the State of
               Delaware (incorporated herein by reference
               to the exhibit contained in the Company's
               Quarterly Report on Form 10-QSB for the
               fiscal quarter ended January 31, 1999)

         3.4   Amended and Restated By-Laws (incorporated
               by reference to the exhibit contained in
               the Company's Registration Statement on
               Form S-3 (File No. 333-27659) under the
               Securities Act of 1933, as amended, filed
               with the Securities and Exchange Commission
               on May 22, 1997)

         4.1   Specimen Certificate evidencing shares of
               Common Stock (incorporated herein by
               reference to the exhibit contained in the
               Company's Registration Statement on Form S-
               3 (File No. 333-75377) under the Securities
               Act of 1933, as amended, filed with the
               Securities and Exchange Commission on March
               31, 1999)

         4.2   Form of Warrant (incorporated by reference
               to the exhibit contained in the Company's
               Registration Statement on Form S-3 (File
               No. 333-27659) under the Securities Act of
               1933, as amended, filed with the Securities
               and Exchange Commission on May 22, 1997)

         4.3   Investor Rights Agreement, dated as of
               September 4, 1998, by and among the
               Company, Cahill Warnock Strategic Partners
               Fund, L.P., Strategic Associates, L.P., and
               the Individual Shareholders Named Therein
               (incorporated by reference to the exhibit
               contained in the Company's Current Report
               on Form 8-K, which was filed with the
               Securities and Exchange Commission on
               November 23, 1998 (the "November 1998 8-K"))

         4.4   Registration Rights Agreement, dated as of
               September 4, 1998, by and among the
               Company, Cahill, Warnock Strategic Partners
               Fund, L.P., and Strategic Associates, L.P.
               (incorporated by reference to the exhibit
               contained in the November 1998 8-K)

         4.5   Form of Warrant issued in connection with
               the Securities Purchase Agreement by and
               between the Company, Cahill, Warnock
               Strategic Partners Fund, L.P. and Strategic
               Associates, L.P. (incorporated by reference
               to the exhibit contained in the November 1998 8-K)

         4.6   Amendment No. 1 to the Securities Purchase
               Agreement, dated as of March 8, 1999, among
               the Company, Cahill, Warnock Strategic
               Partners Fund, L.P. and Strategic
               Associates, L.P. (incorporated by reference
               to the exhibit contained in the Company's
               Annual Report on Form 10-KSB for the fiscal
               year ended October 31, 1999)

         4.7   Consent, Agreement and Amendment, dated as
               of December 3, 1999, by and among the
               Company, Cahill, Warnock Strategic Partners
               Fund, L.P. and Strategic Associates, L.P.
               (incorporated by reference to the exhibit
               contained in the Company's Annual Report on
               Form 10-KSB for the fiscal year ended
               October 31, 1999)

         4.8   Consent, Agreement and Amendment, dated as
               of October 1, 2002, by and among the
               Company, Cahill, Warnock Strategic Partners
               Fund, L.P. and Strategic Associates, L.P.
               (incorporated by reference to the exhibit
               contained in the Company's Annual Report on
               Form 10-KSB for the fiscal year ended
               October 31, 2002)

        10.1   401(k) Plan (incorporated herein by
               reference to the exhibit contained in the
               Company's Registration Statement on Form
               SB-2 under the Securities Act of 1933, as
               amended, filed with the Securities and
               Exchange Commission on July 7, 1993)

        10.2   Patent Assignment by Bertram Koslin to the
               Company (incorporated herein by reference
               to the exhibit contained in the Company's
               Registration Statement on Form SB-2 (File
               No. 33-65766) under the Securities Act of
               1933, as amended, filed with the Securities
               and Exchange Commission on July 7, 1993)

        10.3   Amended and Restated 1991 Stock Option
               Incentive Plan (incorporated herein by
               reference to the exhibit contained in the
               Company's Quarterly Report on Form 10-QSB
               for the fiscal quarter ended April 30, 1996)

        10.4   Directors Stock Option Plan (incorporated
               herein by reference to the exhibit
               contained in the Company's Quarterly Report
               on Form 10-QSB for the fiscal quarter ended
               April 30, 1996)

        10.5   2000 Stock Incentive Plan (incorporated
               herein by reference to the exhibit
               contained in the Company's Annual Report on
               Form 10-KSB for the fiscal year ended
               October 31, 2001)

        10.6   Consultants Stock Incentive Plan
               (incorporated by reference to the exhibit
               contained in the Company's Quarterly Report
               on Form 10-QSB for the fiscal quarter ended
               April 30, 1997)

        10.7   Employment Agreement with Andrew L. Simon
               (incorporated herein by reference to the
               exhibit contained in the Company's
               Quarterly Report on Form 10-QSB for the
               fiscal quarter ended April 30, 1996)

        10.8   Employment Agreement with Linda G. Straley
               (incorporated herein by reference to the
               exhibit contained in the Company's
               Quarterly Report on Form 10-QSB for the
               fiscal quarter ended April 30, 1996)

        10.9   Stock Purchase Agreement, dated as of
               January 2, 1997, between Beck Evaluation &
               Testing Associates, Inc., Connie K. Beck,
               Michael D. Beck, Amanda P. Beck and the
               Company, together with all schedules and
               exhibits thereto (incorporated by reference
               to the exhibit contained in the Company's
               Quarterly Report on Form 10-QSB for the
               fiscal quarter ended January 31, 1997)

        10.10  Employment Agreement, dated as of January
               2, 1997, between the Company and Michael D.
               Beck (incorporated by reference to the
               exhibit contained in the Company's
               Quarterly Report on Form 10-QSB for the
               fiscal quarter ended January 31, 1997)

        10.11  Asset Sale Agreement, dated as of June 3,
               2003, among Mildred Elley School, Inc.,
               Touchstone Applied Science Associates,
               Inc., TASA Educational Services
               Corporation, Faith A. Takes and Empire
               Education Corporation (incorporated by
               reference to the exhibit contained in the
               Company's Current Report on Form 8-K, as
               amended, which was filed with the
               Securities and Exchange Commission on June
               18, 2003, as amended on September 15, 2003
               (the "ME 8-K"))

        10.12  Escrow Agreement, dated as of June 3, 2003,
               by and among Mildred Elley School, Inc.,
               Touchstone Applied Science Associates,
               Inc., TASA Educational Services
               Corporation, Empire Education Corporation,
               and Hodgson Russ LLP, as escrow agent.
               (incorporated by reference to the exhibit
               contained in the ME 8-K)

        10.13  Securities Purchase Agreement, dated as of
               September 4, 1998, by and among the
               Company, Cahill Warnock Strategic Partners
               Fund, L.P., and Strategic Associates, L.P.
               (incorporated by reference to the exhibit
               contained in the November 1998 8-K)

        10.14  Contract of Sale, dated as of January 31,
               2003, between the Company and 26 Palmer,
               LLC (incorporated by reference to the
               exhibit contained in the Company's
               Quarterly Report on Form 10-QSB for the
               fiscal quarter ended January 31, 2003)

        10.15  Agreement of Lease between the Company and
               26 Palmer, LLC (incorporated by reference
               to the exhibit contained in the Company's
               Quarterly Report on Form 10-QSB for the
               fiscal quarter ended January 31, 2003)

        10.16  Stock Purchase Agreement, dated as of
               January 1, 2005, by and between Pasquale J.
               DeVito, Ph.D. and Richard S. Zusman, Ed.D.,
               and Touchstone Applied Science Associates,
               Inc. (incorporated by reference to the
               exhibit contained in the Company's Current
               Report on Form 8-K, filed January 21, 2005)

        10.17  Employment Agreement, dated as of January
               1, 2005, between Assessment and Evaluation
               Concepts Inc. and Richard S. Zusman, Ed.D.
               (incorporated by reference to the exhibit
               contained in the AEC 8-K)

        10.18  Employment Agreement, dated as of January
               1, 2005, between Assessment and Evaluation
               Concepts Inc. and Pasquale J. DeVito, PH.D.
               (incorporated by reference to the exhibit
               contained in the AEC 8-K)

        10.19  Stock Purchase Agreement, dated June 15,
               2005, by and among Martin Borg, Kevin
               Byrne, Karen Gerard, Brad Begley, Russell
               Leverenz, and Debbie Leverenz, and
               Touchstone Applied Science Associates, Inc.
               (incorporated by reference to the exhibit
               to the Company's Current Report on Form 8-
               K, filed June 20, 2005, as amended) (the
               "ADI 8-K")

        10.20  Employment Agreement, dated as of July 1,
               2005, between Achievement Data, Inc. and
               Martin Borg (incorporated by reference to
               the exhibit contained in the AEC 8-K)

        10.21  Loan Agreement, dated July 1, 2005, between
               the Company and Hudson United Bank
               (incorporated by reference to the exhibit
               contained in the ADI 8-K)

        21     Subsidiaries of the Company (filed herewith)

        23     Consent of Lazar, Levine & Felix LLP (filed herewith)

        31     Certification by Chief Executive Officer
               and Chief Financial Officer (filed herewith)

        32     Certification by Chief Executive Officer
               pursuant to 18 U.S.C. Section 1350, as
               adopted pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002 (filed herewith)

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

        The Board of Directors of the Company appointed, and the Audit
Committee confirmed, the firm of Lazar, Levine & Felix LLP
("Lazar") as its independent auditors for the 2005 fiscal year.
Lazar has been serving the Company in this capacity since September
1995.  In Fiscal 2005 and Fiscal 2004, the Company incurred the
following professional fees from Lazar:

        AUDIT FEES. In Fiscal 2005 and Fiscal 2004, the Company
        ----------
incurred $184,710 and $62,283, respectively, in fees in connection
with the audits of the Company's annual financial statements for
the fiscal years ended October 31, 2005 and October 31, 2004,
respectively, and for the reviews of the financial statements of
the Company included in the Company's quarterly reports for such
fiscal years.

        AUDIT-RELATED, TAX AND OTHER FEES.  The Company did not incur
        ---------------------------------
any fees to Lazar in Fiscal 2005 or Fiscal 2004 for audit-related
services or for services related to tax compliance, tax planning,
and reporting, or for other types of services.

        AUDIT COMMITTEE POLICIES. The Audit Committee believes that,
        ------------------------
on the basis of the relevant facts and circumstances pertaining to
that firm's engagement by the Company, Lazar satisfies the
requirements for independence from the Company.  Consistent with
Sarbanes-Oxley and the SEC regulations promulgated thereunder, the
Audit Committee has established a policy to pre-approve all audit
and permissible non-audit services to be performed by the Company's
independent accountants.


<PAGE>          F-1

             INDEX TO CONSOLIDATED FINANCIAL STATEMENTS






                                                                PAGE
                                                                ----

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM         F - 2

CONSOLIDATED BALANCE SHEETS                                     F - 3

CONSOLIDATED STATEMENTS OF OPERATIONS                           F - 5

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY      F - 7

CONSOLIDATED STATEMENTS OF CASH FLOWS                           F - 8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                      F - 10



                                  F - 1


<PAGE>          F-2



          REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To The Board of Directors
Touchstone Applied Science Associates, Inc. and Subsidiaries
Brewster, NY


We have audited the accompanying consolidated balance sheets of
Touchstone Applied Science Associates, Inc. and Subsidiaries as of
October 31, 2005 and 2004, and the related consolidated statements of
income, changes in stockholders' equity and cash flows for the
three fiscal years ended October 31, 2005.  These consolidated
financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States).  Those standards
require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation.  We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Touchstone Applied Science Associates, Inc. and Subsidiaries as of
October 31, 2005 and 2004 and the results of its operations and its
cash flows for the three fiscal years ended October 31, 2005 in
conformity with accounting principles generally accepted in the United
States of America.



Lazar Levine & Felix LLP
New York, New York
January 19, 2006


                                  F - 2

<PAGE>          F-3

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES
<TABLE>
<CAPTION>

                        CONSOLIDATED BALANCE SHEETS

                                                                  October 31,
                                                                  -----------
                                                             2 0 0 5       2 0 0 4
                                                             -------       -------
<S>
                                                    <C>             <C>
ASSETS
------

Current assets:
  Cash and temporary investments                        $ 1,289,630      $ 1,751,487
  Accounts receivable, net of allowance for
   doubtful accounts of
   $2,683 and $4,417, respectively                        2,886,915        1,526,559
  Inventories                                               467,762          431,196
  Prepaid expenses and other current assets                 397,420          338,354
  Restricted cash                                            20,347           21,954
  Deferred income taxes                                     571,417          536,440
                                                        -----------      -----------

     Total current assets                                 5,633,491        4,605,990
                                                        -----------      -----------


Property, plant and equipment - net of
 accumulated depreciation of $488,863 and
  $284,567, respectively                                    675,999          525,319


Other assets:
  Test passage bank and test development,
   net of accumulated amortization of $3,579,751
   and $3,174,865, respectively                           2,750,239        2,227,077
  Goodwill                                                1,969,542          198,159
  Deferred income taxes                                     492,677          807,672
  Other assets                                              252,931          326,289
                                                        -----------      -----------

     Total assets                                       $11,774,879       $8,690,506
                                                        ===========      ===========




</TABLE>








See notes to consolidated financial statements.

                                  F - 3

<PAGE>          F-4



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

<TABLE>
<CAPTION>

                   CONSOLIDATED BALANCE SHEETS (Continued)
                                                                     October 31,
                                                                     -----------
                                                               2 0 0 5        2 0 0 4
                                                               -------        -------
<S>                                                    <C>              <C>

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


Current liabilities:
  Lines of credit                                           $       --     $         --
  Current maturities of long-term debt                         166,750           28,606
  Accounts payable                                             489,428          119,448
  Accrued expenses                                           1,427,963        1,288,230
  Other liabilities                                            317,529           62,316
  Deferred gain on sale of building -
   current portion                                             125,439          125,439
                                                            ----------     ------------

     Total current liabilities                               2,527,109        1,624,039
                                                            ----------     ------------

Long-term debt:
  Long-term debt, net of current portion                     1,396,212          120,291
  Deferred gain on sale of building, net
   of current portion                                          836,255          961,692
                                                            ----------     ------------

     Total liabilities                                       4,759,576        2,706,022
                                                            ----------     ------------

Commitments and contingencies

Stockholders' equity:
  Preferred stock, $.0001 par value,
   5,000,000 shares authorized,
   0 shares-issued and outstanding                                  --               --
  Common stock, $.0001 par value,
   20,000,000 shares authorized,
   2,909,738 and 2,627,703 shares issued
   and outstanding, respectively                                   291              263
  Additional paid-in capital                                 6,164,387        5,609,480
  Subscriptions receivable                                          --             (920)
  Retained earnings                                            850,625          375,661
                                                            ----------     ------------

     Total stockholders' equity                              7,015,303        5,984,484
                                                            ----------     ------------


Total liabilities and stockholders' equity                 $11,774,879     $  8,690,506
                                                           ===========     ============

</TABLE>



See notes to consolidated financial statements.

                                  F - 4

<PAGE>          F-5

                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES



<TABLE>
<CAPTION>
                      CONSOLIDATED STATEMENTS OF INCOME



                                                       Fiscal Years Ended October 31,
                                                       ------------------------------
                                                   2 0 0 5        2 0 0 4        2 0 0 3
                                                   -------        -------        -------
<S>                                          <C>            <C>             <C>


Net revenue                                     $11,686,649     $11,185,254      $9,761,638

Cost of goods sold                                5,990,327       5,795,758       5,075,148
                                                -----------     -----------      ----------

Gross profit                                      5,696,322       5,389,496       4,686,490
                                                -----------     -----------      ----------

Operating expenses:
  Selling expenses                                1,432,287       1,278,178       1,453,190
  General and administrative expenses             3,566,373       2,819,770       2,189,318
                                                -----------     -----------      ----------


Total operating expenses                          4,998,660       4,097,948       3,642,508
                                                -----------     -----------      ----------


Income from operations                              697,662       1,291,548       1,043,982


Other income (expense):
  Gain on sale/leaseback of building                125,439         125,439          41,813
  Interest expense, net                             (24,069)         (1,936)       (403,940)
                                                -----------     -----------      ----------

Income before income taxes                          799,032       1,415,051         681,855

Income taxes                                        324,068         592,448         326,540
                                                -----------     -----------      ----------

Income from continuing operations                   474,964         822,603         355,315
                                                -----------     -----------      ----------

Income (loss) from discontinued operations:
  Loss from operations
   net of income tax (benefit) of
   $(248,127) in Fiscal 2003                             --              --        (372,190)
  Income (loss) on disposal, net
   of income tax expense of
   $309,349 in Fiscal 2003                               --              --         552,408
                                                -----------     -----------      ----------
Income (loss) from discontinued operations               --              --         180,218
                                                -----------     -----------      ----------


Net income                                      $   474,964    $    822,603     $   535,533
                                                ===========    ============     ===========

</TABLE>




See notes to consolidated financial statements.

                                  F - 5

<PAGE>          F-6


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES


<TABLE>
<CAPTION>
                   CONSOLIDATED STATEMENTS OF INCOME (Continued)



                                                       Fiscal Years Ended October 31,
                                                       ------------------------------
                                                   2 0 0 5        2 0 0 4        2 0 0 3
                                                   -------        -------        -------
<S>                                          <C>            <C>             <C>

Weighted average shares outstanding:
  Basic                                          2,807,275       2,614,662       2,596,252
  Diluted                                        3,023,262       2,870,327       2,661,014

Basic earnings per share
  Continuing operations                         $      .17      $      .31      $      .14
  Discontinued operations                               --              --             .07
                                                ----------      ----------      ----------

                                                $      .17      $      .31      $      .21
                                                ==========      ==========      ==========

Diluted earnings per share
  Continuing operations                         $      .16      $      .29      $      .13
  Discontinued operations                               --              --             .07
                                                ----------      ----------      ----------

                                                $      .16      $      .29      $      .20
                                                ==========      ==========      ==========-










</TABLE>










See notes to consolidated financial statements.

                                  F - 6

<PAGE>          F-7



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

<TABLE>
<CAPTION>

         CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY




                                                             Additional                                     Retained
                  Preferred Stock         Common Stock       Paid-in      Deferred        Subscriptions     Earnings
                Shares      Amount     Shares      Amount    Capital      Interest        Receivable        (Deficit)
                ------      ------     ------      ------    -------      --------        -------------     --------


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


Balance at
 October 31,
 2002             --      $   --       2,594,453    $259      $5,538,393    $(117,293)    $    --         $  (982,475)

Exercise of
 employee
 stock options    --          --           9,000       1          10,275           --          --                  --
Interest expense  --          --              --      --              --      117,293          --                  --
Net income        --          --              --      --              --           --          --             535,533
                 ---      ------       ---------    ----      ----------    ---------     -------         -----------

Balance at
 October 31,
 2003             --          --       2,603,453     260       5,548,668           --          --            (446,942)

Issuance of
  warrants        --          --              --      --          42,700           --          --                  --
Exercise of
  employee
  stock
  options         --          --          24,250       3          18,112            --       (920)                 --
Net income        --          --              --      --              --            --         --             822,603
                 ---      ------       ---------    ----      ----------     ---------     -------         ----------

Balance at
 October 31,
 2004             --          --       2,627,703     263       5,609,480            --       (920)            375,661

Exercise of
 employee
 stock
 options          --          --          42,500       4          28,986            --         --                  --
Stock
 subscription
 received         --          --              --      --              --            --        920                  --
Acquisition
 of AEC           --          --          12,000       1          38,999            --         --                  --
Acquisition
 of ADI           --          --          89,488       9         331,633            --         --                  --
Exercise
 of warrants      --          --         138,047      14         155,289            --         --                  --
Net Income        --          --              --      --              --            --         --             474,954
                 ---      ------         -------     ---       ---------      --------      -----           ---------

Balance at
 October 31,
 2005             --          --       2,909,738    $291      $6,164,387    $       --    $    --            $850,625
                 ===      ======       =========    ====      ==========    ==========    =======           ---------

</TABLE>


See notes to consolidated financial statements.

                                  F - 7

<PAGE>          F-8


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

<TABLE>
<CAPTION>

                   CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                              Fiscal Years Ended October 31,
                                                              ------------------------------
                                                         2 0 0 5        2 0 0 4         2 0 0 3
                                                         -------        -------         -------
<S>                                                <C>            <C>             <C>

OPERATING ACTIVITIES
Net income                                            $   474,964     $  822,603     $   535,533
Adjustments to reconcile net
income to net cash provided
by operating activities:
  Depreciation and amortization                           679,008        587,626         605,310
  Deferred interest                                            --             --         117,293
  Deferred income taxes                                   280,018        516,916         252,759
  (Income) on discontinued
   operations                                                  --             --        (861,757)
  Bad debt expense                                         (1,732)            --         (17,463)
  (Gain) on sale/leaseback of building                   (125,439)      (125,439)        (41,813)
Changes in operating assets and liabilities:
  Restricted cash                                           1,607           (498)        (21,456)
  Accounts receivable                                  (1,219,977)      (566,572)        128,583
  Inventories                                             (36,566)        80,214         (82,668)
  Prepaid expenses                                        (55,555)        (8,906)        108,087
  Other assets                                               (866)            --          (1,388)
  Other liabilities                                       255,213         62,316              --
  Accounts payable and accrued expenses                   299,900        213,355         (32,666)
                                                      -----------     ----------       ---------


NET CASH FLOWS FROM OPERATING ACTIVITIES                  550,575      1,581,615         688,354
                                                      -----------     ----------       ---------


INVESTING ACTIVITIES
  Test passage bank and test development                 (928,048)      (480,463)       (355,518)
  Software development costs                                   --        (13,971)       (175,682)
  Prepublication costs                                         --       (135,927)       (169,960)
  Proceeds from the sale of building                           --             --       2,875,000
  Cash and fees paid to acquire
   stock of Achievement Data, Inc. ("ADI")             (1,318,350)            --              --
  Cash and fees paid to acquire
   stock of Assessment & Evaluation
   Concepts, Inc. ("AEC")                                 (83,000)            --              --
  Proceeds from the sale of
   discontinued operations                                     --             --       4,070,000
  Closing costs on sale of building                            --             --        (161,891)
  Closing costs on sale of
   discontinued operations                                     --             --        (556,037)
  Acquisition of fixed assets                            (270,279)      (291,294)       (299,174)
                                                      -----------     ----------       ---------



NET CASH FLOWS FROM INVESTING ACTIVITIES               (2,599,677)      (921,655)      5,226,738
                                                      -----------     ----------       ---------

</TABLE>








See notes to consolidated financial statements.

                                  F - 8

<PAGE>          F-9


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

<TABLE>
<CAPTION>

                   CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)



                                                              Fiscal Years Ended October 31,
                                                              ------------------------------
                                                         2 0 0 5        2 0 0 4         2 0 0 3
                                                         -------        -------         -------
<S>                                                <C>            <C>             <C>

FINANCING ACTIVITIES
Repayment of subordinated debt                                 --             --      (3,530,141)
Proceeds from the exercise of
  employee stock options                                   28,990         17,195          10,275
Proceeds from the exercise of
  warrants                                                155,303             --              --
Loan costs                                                (12,033)            --              --
Stock subscriptions received                                  920             --              --
Proceeds from long-term debt                            1,451,482        118,497          38,000
Repayment of long-term debt                               (37,417)        (7,600)     (1,585,700)
                                                      -----------     ----------       ---------

NET CASH FLOWS FROM FINANCING ACTIVITIES                1,587,245        128,092      (5,067,566)
                                                      -----------     ----------       ---------


NET CHANGE IN CASH AND TEMPORARY INVESTMENTS             (461,857)       788,052         847,526


CASH AND TEMPORARY INVESTMENTS
AT BEGINNING OF PERIOD                                  1,751,487        963,435         115,909
                                                      -----------     ----------       ---------


CASH AND TEMPORARY INVESTMENTS
AT END OF PERIOD                                       $1,289,630     $1,751,487     $   963,435
                                                      ===========     ==========     ===========


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

  Interest                                             $   35,234     $    5,621     $   404,333
                                                      ===========     ==========     ===========
  Income taxes                                         $    7,683     $   57,158     $    34,442
                                                      ===========     ==========     ===========


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




</TABLE>






See notes to consolidated financial statements.

                                  F - 9

<PAGE>          F-10


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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

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

Touchstone Applied Science Associates, Inc. (the "Company")
develops, publishes and distributes a proprietary line of tests
specifically to meet clients' measurement specifications to
elementary and secondary schools, colleges and universities
throughout the United States.  The remainder of the Company's
continuing operations is comprised of Beck Evaluation & Testing
Associates, Inc. ("BETA"), Assessment & Evaluation Concepts, Inc.
("AEC") (effective January 2005) and Achievement Data, Inc.
("ADI") (effective July 2005), companies which design, develop
and evaluate assessment needs for schools, school districts and
test and textbook publishers throughout the United States.  The
Company's instructional segment was comprised of Modern Learning
Press, Inc. ("MLP").  Substantially all the assets of MLP were
sold in July 2003 (Note 2).  The Company's educational delivery
segment was comprised of TASA Educational Services Corporation
("TESC"), and MESI Acquisition Corp. ("Elley"), the assets of
which were sold in June 2003 (Note 2).

The Company was originally incorporated in the State of New York
in 1976.  In August 1991, the Company changed its corporate
domicile to Delaware by merger into a Delaware corporation
created exclusively for that purpose.

The Company operates through different subsidiaries, but
management believes that all such subsidiaries constitute a
single operating segment since the subsidiaries have similar
economic characteristics.

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

The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries, BETA, ADI, AEC,
MLP, TESC and Elley.  All material intercompany transactions
have been eliminated in consolidation.  Due to the sale of
assets of Elley, TESC and MLP, the operations of the instructional
and educational delivery segments have been reflected as
discontinued operations (Note 2).  MLP and TESC were dissolved
in Fiscal 2004, and Elley was dissolved in Fiscal 2005.

Goodwill
--------

In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards ("SFAS") No. 141,
"Business Combinations", which applies to all business combinations
initiated after June 30, 2001, and No. 142, "Goodwill and Other
Intangible Assets", effective for fiscal years beginning after
December 15, 2001.  Under the 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 applied the rules for goodwill and other intangible
assets beginning in the first quarter of the fiscal year ending
October 31, 2003.  The Company performed the first of the
required impairment tests of goodwill as of November 1, 2002
and performed the annual tests at October 31, 2005 and 2004,
and has determined there to be no impairment of the
remaining goodwill on those dates.  The net carrying value of
goodwill at October 31, 2005 is $198,159 for BETA, $118,074 for
AEC and $1,653,309 for ADI.  The net carrying value of goodwill
at October 31, 2004 was $198,159 for BETA.

                                  F - 10

<PAGE>          F-11


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




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

Cash and Temporary Investments
------------------------------

Cash and temporary investments include all cash balances on hand
and short-term, highly liquid investments with original
maturities of three months or less.

Accounts Receivable
-------------------

Accounts receivable consists of the following:


                                             October 31,
                                        ---------------------
                                        2005             2004



        Billed                       $2,559,630       $1,526,559
        Unbilled (costs in excess
          of billings)                  327,285               --
                                     ----------       ----------

                                     $2,886,915       $1,526,559
                                     ==========       ==========

Management expects that the unbilled accounts receivable will be
collected; therefore, no allowance for doubtful accounts has
been recorded on this balance.  Allowance for doubtful accounts
of $2,683 and $4,417, at October 31, 2005 and 2004, respectively,
is based on prior collection experience and pertain to billed
accounts receivable.

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

Inventories based on the nature of the Company's operations
consist solely of finished goods.  These are stated at the lower
of cost (first-in, first-out method) or market.

Property, Plant and Equipment
-----------------------------

Property, plant and equipment are stated at cost.  The Company
provides for depreciation generally on an accelerated method
(double-declining balance) for personal property and on the
straight-line method for real property, by charges to income at
rates based upon estimated recovery periods as follows:

    Building (until its sale)                   31-1/2 years
    Building improvements (until its sale)      15 to 31-1/2 years
    Leasehold improvements                      10 years (shorter of lease
                                                  term or useful life)
    Furniture, fixtures and equipment            5 to 7 years

Income Taxes
------------

The Company has elected to file a consolidated Federal income
tax return with its subsidiaries. The Company's deferred income
taxes arise principally from the net operating losses and other
timing differences.  Income taxes are reported based upon
Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes".  (Note 12).

                                  F - 11

<PAGE>          F-12


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

Intangible Assets and Deferred Charges
--------------------------------------

Software Development
--------------------

The Company accounts for costs associated with the development
of software products pursuant to SFAS No. 86, "Accounting for the
Costs of Computer Software to be Sold, Leased or Otherwise Marketed".
Pursuant to these rules for product development, the work
performed prior to the determination of technological
feasibility is treated as research and development costs and is
expensed as incurred.  From the point a project obtains
technological feasibility until it is ready for sale, the
payroll and payroll-related charges and any direct material
costs are capitalized.  Capitalization of computer software
costs is discontinued when the product is available to be sold.

As of October 31, 2005, 2004 and 2003, unamortized software
development costs totaled $60,243, $84,939 and $243,655,
respectively, and were included as a component of other assets
within the Company's consolidated balance sheets.


Test Passage Bank and Test Development
--------------------------------------

The test passage bank is principally comprised of payroll and
payroll-related costs as well as freelance consulting costs
expended in the development of test passages which are used in
the creation of the Company's tests.  The process of writing
and calibrating a test passage takes approximately two years,
and all costs associated with the process in the cost of
production of each test passage and the cost of calibration of
each test passage are direct costs and are capitalized during
this period. Amortization of these costs begins once the
development period has elapsed, which in most cases, represents
the point in time at which the new test passage is placed into
the test passage bank and becomes available to be utilized
within the Company's existing tests, or the point in time at
which a newly developed test becomes available for sale.  Costs
capitalized in connection with the development of passages used
in the Company's Degrees of Reading Power Test ("DRP") have
been estimated to have a useful life of eleven years and,
accordingly, are being amortized over an eleven-year period.
Costs capitalized in connection with the development of
passages used in all other of the Company's tests have been
estimated to have a useful life of seven years and,
accordingly, are being amortized over a seven-year period.  On
October 31, 2005 and 2004, the Company tested the test passage bank
and test development costs for potential impairment using the
discounted cash flow method.  At that time, the Company deemed
no impairment had occurred.


Amortization
------------

Certain capitalized costs are amortized using the straight-line
method over a period of five (5) years for software development
and seven to eleven (7-11) years for test passage bank and test
development costs.  Loan origination costs (Note 8) are being
amortized using the straight-line method over the term of the
indebtedness.  As of October 31, 2005, unamortized loan
origination costs totaled $11,231.  Amortization expense from
continuing operations totaled $491,142, $486,274, and $522,584,
for the fiscal years ended October 31, 2005, 2004, and 2003,
respectively.

                                  F - 12

<PAGE>          F-13


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




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

Estimated amortization expense for the next five years is as
follows:

Year ending October 31,
      2006                      $480,327
      2007                      $470,369
      2008                      $393,476
      2009                      $178,175
      2010                      $132,345


Other Liabilities
-----------------

As of October 31, 2005, other liabilities consist of a customer
advance in the amount of $294,068 and billings in excess of costs
in the amount of $22,921.  As of October 31, 2004, billings in excess
of costs amounted to $62,316.

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

Accrued expenses consist of the following:


                                                   October 31,
                                                   -----------
                                               2005           2004
                                               ----           ----

    Retirement plans                       $  262,723     $  238,107
    Commissions                                11,109         14,651
    Salary                                    174,590        256,510
    Professional fees                         208,828        100,565
    Royalties                                  12,571         25,054
    Outside services                          212,024        127,939
    Rent                                       93,084         61,742
    Purchases                                  93,405             --
    Consulting                                128,573         42,848
    Other                                     231,056        483,130
                                           ----------     ----------

                                           $1,427,963     $1,350,546
                                           ==========     ==========

Concentration of Credit Risk
----------------------------

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash and
temporary investments and accounts receivable.  The Company
maintains substantially all its cash balances and temporary
investments in a limited number of financial institutions.  The
balances are insured by the Federal Deposit Insurance
Corporation up to $100,000.  At October 31, 2005 and 2004, the
Company's uninsured cash balances and temporary investments
totaled $1,102,081 and $1,551,086, respectively.  The Company
performs periodic reviews of the relative credit rating of its
banks to lower its risk.  The Company believes that
concentration with regards to accounts receivable is limited
due to its large customer base.


                                  F - 13

<PAGE>          F-14


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



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

Revenue Recognition
-------------------

Revenues from the Company's sales of its proprietary tests,
including sales of their related ancillary materials and
performance of scoring services are recognized when the
Company ships the physical product from its warehouse or when
the revenues have been realized or become realizable and have
been earned pursuant to Staff Accounting Bulletin No. 104,
"Revenue Recognition".  Shipping charges are included in
revenue in the accompanying consolidated statements of income.
The Company's revenue from the performance of assessment,
consulting and psychometric services under long term contracts
are recognized on the percentage of completion basis pursuant
to the provisions of Statement of Position No. 81-1,
"Accounting for Performance of Construction-type and Certain
Production-type Contracts" and Accounting Research Bulletin
("ARB") No. 45, "Long-term Construction-type Contracts".  For
each contract, the Company compares the costs incurred in the
course of performing such contract during a reporting period
to the total estimated costs of full performance of the
contract and recognizes a proportionate amount of revenue for
such period.  In addition, the Company records revenue from
software pursuant to the provisions of Statement of Position
No. 97-2, "Software Revenue Recognition", and in the
Statement of Position No. 98-9, "Modification of SOP 97-2,
Software Revenue Recognition With Respect to Certain Transactions".

Rights of Return
----------------

There is a right of return on test booklets, answer sheets and
certain software products. Upon return within a specified
period, a credit is issued, with certain chargeoffs, or, in the
case of software products, the item is replaced.  Historically,
the Company's returns have been insignificant.  As a result, no
reserve has been provided.

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

The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and
make disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues
and expenses during the reporting period.  Actual results could
differ from those estimates.

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

The Company has a number of financial instruments, none of which
is held for trading purposes.  The Company estimates that the
fair value of all financial instruments at October 31, 2005 and
2004 does not differ materially from the aggregate carrying
values of these financial instruments recorded in the
accompanying consolidated balance sheets.  The carrying value of
cash and temporary investments, accounts receivable, accounts payable
and accrued expenses approximate their fair value because of the short-
term nature of these financial instruments. The carrying value of long-
term debt approximates fair value as the rate of interest on the debt
approximates the market rate of interest as of October 31, 2005 and 2004.
Considerable judgment is necessarily required in interpreting market data
to develop the estimates of fair value, and accordingly, the estimates are
not necessarily indicative of the amounts that the Company could realize
in a current market exchange.

                                  F - 14

<PAGE>          F-15


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

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

In October 1995, the Financial Accounting Standards Board
("FASB") issued SFAS No. 123, "Accounting for Stock-Based
Compensation". The Company currently accounts for its stock-based
compensation plans using the accounting prescribed by Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees". As the Company is not yet required to adopt the
fair value based recognition provisions prescribed under SFAS
No. 123, as amended, it has elected only to comply with the
disclosure requirements set forth in the statement which
includes disclosing pro forma net income and earnings per share
as if the fair value based method of accounting had been
applied.

The fair value of each option grant was estimated on the date
of the grant using the Black-Scholes option-pricing model with
the following weighted average assumptions for the fiscal years
ended October 31, 2005, 2004, and 2003, respectively: expected
volatility of 121% to 138%, 109% and 142%, respectively; risk
free interest rate of 4.05% to 4.23%, 3.00% and 3.63%,
respectively; and expected lives of 5 to 10 years.

The effects of applying SFAS No. 123, as amended, in the below
pro forma disclosures are not indicative of future amounts as
they do not include the effects of awards granted prior to
Fiscal 1996.  Additionally, future amounts are likely to be
affected by the number of grants awarded since additional
awards are generally expected to be made at varying amounts.

The pro forma net income and income per share consists of the
following:

                                  Fiscal Years Ended October 31,
                                  ------------------------------
                                 2005          2004          2003
                                 ----          ----          ----

Net income as reported        $ 474,964     $ 822,603     $ 535,533
Effect of stock options,
 net of tax                    (290,650)     (138,993)      (18,443)
                              ---------     ---------     ---------
Pro forma net income          $ 184,314     $ 683,610     $ 517,090
                              =========     =========     =========


Historic basic earnings
 per share                    $     .17     $     .31     $     .21
Historic diluted earnings
 per share                    $     .16     $     .29     $     .20
Pro forma basic earnings
 per share                    $     .07     $     .26     $     .20
Pro forma diluted
 earnings per share           $     .06     $     .24     $     .19


See disclosure regarding the adoption of SFAS No. 123(R) summarized
below in the Recently Issued Accounting Pronouncements disclosure.


                                  F - 15

<PAGE>          F-16


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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

Earnings per Share
------------------

Earnings per share for each of the fiscal years ended October
31, 2005, 2004, and 2003 was computed by dividing net income by
the weighted average number of common and common equivalent
shares outstanding and also was adjusted for the assumed
conversion of shares issuable upon the exercise of options and
warrants in accordance with SFAS No. 128, "Earnings Per Share".
The total potential dilutive common shares excluded from this
computation due to the anti-dilution effect, totaled 588,227,
560,595 and 661,238 in the fiscal years ended October 31, 2005,
2004 and 2003, respectively.  The reconciliation between basic
and diluted average shares outstanding is as follows:



                                  Fiscal Years Ended October 31,
                                  ------------------------------
                                 2005          2004          2003
                                 ----          ----          ----

Basic weighted average
 shares outstanding           2,807,275     2,614,662     2,596,252
Dilutive effect of stock
 options                        212,227       170,678        64,762
Dilutive effect of warrants       3,760        84,987            --
                              ---------     ---------     ---------
Diluted weighted average
 shares outstanding           3,023,262     2,870,327     2,661,014
                              =========     =========     =========


Marketing and Promotional Costs
-------------------------------

Marketing and promotional costs are expensed as incurred and totaled
$343,025, $304,453 and $353,531 from continuing operations for the
fiscal years ended October 31, 2005, 2004 and 2003, respectively.
Such costs are included in selling expenses in the accompanying
consolidated statements of income.

Shipping Costs
--------------

The Company classifies shipping costs as a component of
selling expenses.  Shipping costs from continuing operations
totaled $72,627, $73,083 and $72,893 for the years ended
October 31, 2005, 2004 and 2003, respectively.


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

In November 2004, the FASB issued Statement No. 151, "Inventory
Costs".  This statement amends the guidance in ARB 43 (Chapter 43 -
Inventory Pricing) to clarify the accounting for abnormal amounts of
idle facility expense, freight, handling costs and wasted material
(spoilage).  SFAS No. 151 requires that such items be recognized
as current period charges.  SFAS No. 151 is effective for fiscal
years beginning after June 15, 2005 and is not expected to have
a material impact on the consolidated financial statements of
the Company.

In December 2004, the FASB issued Statement No. 153, "Exchange
of Non-monetary Assets - an amendment of APB No. 29".
Statement No. 153 eliminates the exception to fair value for
exchanges of similar productive assets and replaces it with a
general exception for exchange transactions that do not have
commercial substance, defined as transactions that are not
expected to result in significant changes in non-monetary
assets occurring after June 15, 2005.  The application of this
statement is not expected to have a material impact on the
consolidated financial statements of the Company.

                                  F - 16

<PAGE>          F-17


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


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


In December 2004, the FASB issued a revision of SFAS No. 123
"Share-Based Payment" ("SFAS No. 123(R)").  The statement
establishes standards for the accounting for transactions in
which an entity exchanges its equity investments for goods and
services. It also addresses transactions in which an entity
incurs liabilities in exchange for goods or services that are
based on the fair value of the entity's equity instruments or
that may be settled by the issuance of those equity instruments.
The statement does not change the accounting guidance for share-
based payments with parties other than employees.

The statement requires a public entity to measure the cost of
employee service received in exchange for an award of equity
instruments based on the grant-date fair value of the award
(with limited exception).  That cost will be recognized over the
period during which an employee is required to provide service
in exchange for the award (usually the vesting period).  A
public entity will initially measure the cost of employee
services received in exchange for an award of a liability
instrument based on its current fair value; the fair value of
that award will be remeasured subsequently at each reporting
date through the settlement date.  Changes in fair value during
the requisite service period will be recognized as compensation
over that period.

The grant-date for fair value of employee share options and
similar instruments will be estimated using option-pricing
models adjusted for the unique characteristics of these
instruments.  The Company will be required to comply with this
pronouncement with periods beginning after December 15, 2005.
The Company will be adopting SFAS No. 123(R) for the Company's
fiscal year ending October 31, 2007.  The adoption of this
pronouncement is expected to affect the Company's consolidated
statements of income in future periods.  The amount of the
effect cannot be measured at this time.  The Company is
currently evaluating the impact of SFAS No. 123(R) on its
consolidated financial statements.  As the Company currently
accounts for share-based compensation using the intrinsic value
method as allowed by APB Opinion No. 25, the adoption of the
fair value method under SFAS No. 123(R) will have an impact on
the Company's results of operations.

In June 2005, the FASB issued SFAS No. 154, "Accounting Changes
and Error Corrections" - a replacement of APB Opinion No. 20
(Accounting Changes) and FASB No. 3 (Reporting Accounting
Changes in Interim Financial Statements), which changed the
requirements for the accounting for and reporting of a change in
accounting principle.  This statement requires retrospective
application to prior periods' financial statements of changes in
accounting principle unless it is impracticable to determine
either the period-specific effects or the cumulative effect of
the change.  When it is impracticable to determine the period-
specific effects of an accounting change on one or more
individual prior periods presented, this statement requires that
the new accounting principle be applied to the balances of
assets and liabilities as of the beginning of the earliest
period for which retrospective application is practicable and
that a corresponding adjustment be made to the opening balance
of retained earnings (or other appropriate components of equity
or net assets in the statement of financial position) for that
period rather than being reported in an income statement.  When
it is impracticable to determine the cumulative effect of
applying a change in accounting principle to all prior periods,
this statement requires the new accounting principle be applied
as if it were adopted prospectively from the earliest date
practicable.  Statement No. 154 is effective for accounting
changes and error corrections made in fiscal years beginning
after December 15, 2005.

Reclassifications
-----------------

The Company has reclassified the presentation of certain prior
year information to the current year presentation.

                                  F - 17

<PAGE>          F-18


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 2 - SALE OF NON-CORE SEGMENTS/DISCONTINUED OPERATIONS
----------------------------------------------------------

With the advent of the No Child Left Behind legislation, the
Company made the strategic decision to refocus itself in the
assessment segment of the K-12 market.

Instructional Segment
---------------------

In July 2003, the Company sold substantially all the assets of
Modern Learning Press, Inc. ("MLP"), its wholly-owned subsidiary
and the sole component of the Company's instructional segment to
Delta Education, LLC ("Delta") for, $4,020,000 and Delta assumed
certain related liabilities.  In addition, the Company was
responsible, for the payment of up to $200,000 of certain
royalties for a one year period from June 1, 2003 through May
31, 2004.  The Company paid royalties based on historical
amounts of approximately $175,000, which has reduced the
gain from the sale of the segment.  The Company retained the
business and assets related to its test preparation materials,
Kingsbridge Press, which it considers consistent with the
activities of its sole remaining segment.  The Company recorded
a gain on the disposal of the Instructional segment totaling
$1,748,272 less taxes of $699,309.  Revenues from the
Instructional Segment totaled $1,321,278 for the period November
1, 2002 through the date of sale.

In addition, the Company entered into a transitional services
agreement with Delta, whereby the Company would continue to pay
the rent and employee costs of MLP through October 31, 2003 for
consideration of $130,000.  On October 31, 2003, the facilities
utilized by MLP were closed and the employees terminated.  The
Company recorded these termination costs as a cost of the sale
of the segment.

Educational Delivery Segment
----------------------------

On June 3, 2003, the Company sold substantially all the assets
of Elley.  Pursuant to the agreement, the Company received
$50,000.  In addition, the Company will receive 25 percent of
the proceeds from any sale or refinancing of the school by the
purchaser to a third party, which must take place within seven
years. The assets sold constitute substantially all the assets
and operations of the Company's educational delivery segment.
The Company recorded a loss on the disposal of Elley totaling
$974,901, and a tax benefit of $389,960, to reflect the change
in the fair value of the net assets sold during the period
November 1, 2002 through June 3, 2003.  The revenues for the
delivery segment were $3,225,417 and $5,882,026 for the period
from November 1, 2002 through June 3, 2003, the date of sale,
and the fiscal year ended October 31, 2002, respectively.

                                  F - 18

<PAGE>          F-19



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 3 - ACQUISITIONS
---------------------

Assessment and Evaluation Concepts, Inc.
----------------------------------------

In January 2005, the Company acquired all of the outstanding
stock of Assessment and Evaluation Concepts Inc. ("AEC") for
$122,000 consisting of $83,000 in cash and 12,000 shares of the
Company's common stock.  The value of the shares issued was determined
based on the average market price of the Company's common stock over
the two-day period before and after the date of the acquisition.  In
addition, options to purchase 50,000 shares of the Company's
common stock were granted pursuant to the 2000 Plan on the date
of the closing exercisable at $3.06 per share, the fair market
value on that date.  The options are exercisable commencing one
year from the closing, through January 2015.  The operations of
AEC are included in the consolidated financial statements since
the date of acquisition.

The following table summarizes the estimated fair value of the
assets acquired at the date of acquisition:

    Accounts receivable                        $ 22,930
    Goodwill                                     99,070
                                               --------
         Total and net assets acquired         $122,000
                                               ========


Achievement Data, Inc.
----------------------

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


The following table summarizes the estimated fair value of the
assets acquired and liabilities assumed at the date of
acquisition:

    Current assets                             $   53,530
    Accounts receivable                           138,645
    Property, plant and equipment                  73,756
    Goodwill                                    1,435,368
                                               ----------
    Total assets acquired                       1,701,299
                                               ----------
    Current liabilities                           (51,299)
                                               ----------
    Total liabilities                             (51,299)
                                               ----------
    Net assets acquired                        $1,650,000
                                               ==========


                                  F - 19

<PAGE>          F-20


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - ACQUISITIONS (Continued)
---------------------

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

                                   Year Ended October 31,
                                   ----------------------
                                   2005              2004
                                   ----              ----
Net revenue                   $12,968,960       $12,658,228
Net income                       $537,798          $951,112
Basic earnings per share             $.19              $.35
Diluted earnings per share           $.17              $.32

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


NOTE 4 - PROPERTY, PLANT AND EQUIPMENT
--------------------------------------



                                            October 31,
                                            -----------
                                         2005          2004
                                         ----          ----

Leasehold improvements               $  288,190     $ 253,290
Furniture, fixtures and
equipment                               876,672       556,596
                                     ----------     ---------
                                      1,164,862       809,886
Less: accumulated depreciation          488,863       284,567
                                     ----------     ---------
                                     $  675,999     $ 525,319
                                     ==========     =========

Depreciation expense for the fiscal years ended October 31, 2005,
2004, and 2003 was $187,866, $101,352 and $82,726, respectively.


NOTE 5 - SALE-LEASEBACK; COMMITMENTS
------------------------------------

In July 2003, the Company sold its headquarters building to 26
Palmer LLC for $2,875,000.  The building and related
improvements had a net book value of $1,458,481.  The Company
reported a gain on the sale totaling $1,254,383, net of closing
costs totaling $162,136 in fiscal 2003.  The building was then
leased back to the Company under a ten-year lease agreement.  As
a result of the sale/leaseback, the gain is being recognized
over the term of the lease at $125,439 per year.  Among other
provisions, the lease provides for additional rent to be paid by
the Company for real estate taxes and insurance.

                                  F - 20

<PAGE>          F-21


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 - SALE-LEASEBACK; COMMITMENTS (Continued)
------------------------------------

The Company also has three-year leases for both its Texas and
Minnesota offices for payments aggregating $26,414 and $96,000,
respectively, over the next two years.  In addition, the
Company has leases on certain of its equipment.  Future minimum
rentals on these operating leases are as follows:


Year ending October 31,
----------------------


      2006                       $  424,763
      2007                          420,686
      2008                          347,193
      2009                          355,250
      2010                          365,835
      2011 and thereafter         1,062,995
                                 ----------
                                 $2,976,722
                                 ==========


Rent expense was $381,848, $361,409 and $128,090 for the fiscal years
ended October 31, 2005, 2004 and 2003, respectively.


NOTE 6 - LINES OF CREDIT
------------------------

The Company obtained a line of credit totaling $1,000,000 from
a bank.  Borrowings under the line of credit accrue interest at
the bank's prime rate plus one percent (1.0%) per annum, and
the line of credit, as amended, expires on April 1, 2006.  The
line of credit is collateralized by the Company's accounts
receivable and inventory and contains financial covenants pertaining
to the maintenance of working capital and debt service coverage.
As of October 31, 2005, the Company was in compliance with all such
covenants.  There were no outstanding borrowings under this line as
of October 31, 2005 and 2004.

NOTE 7- MORTGAGE
----------------

The Company mortgaged its facilities for $1,800,000 in 1997.
Borrowings on the mortgage incurred interest at the rate of 8
1/8% per annum.  The mortgage was to be repaid through equal
monthly installments with a balloon payment due in Fiscal 2007.
The mortgage was prepaid in July 2003 from the proceeds of the
sale-leaseback of the facilities (Note 5).

                                  F - 21

<PAGE>          F-22


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 8 - LONG-TERM DEBT
-----------------------

Long-term debt consists of the following:


                                                                 October 31,
Description                Interest Rate      Due Date        2005         2004
-----------                -------------      --------        ----         ----

Equipment loan
payable in monthly
installments of
$2,295 including
interest,
collateralized by
the equipment                   6%              2009     $   97,686     $118,497

Equipment loan
payable in monthly
installments of
$633 plus interest,
collateralized by
the equipment               Prime + 1%
                             (8.0% at
                            10/31/2005)         2008         22,800       30,400
Equipment loan
payable in monthly
installments of
$1,708 including
interest,
collateralized by
the equipment                   6%              2010         79,126           --

Loan payable,
interest only for
first year then
monthly
installments of
$23,339 including
interest                        6.25%           2011      1,200,000*          --

Loans (unsecured)
payable in
semi-annual
installments of
$29,656 including
interest to the
former two shareholders
of ADI                          5%              2008        163,350           --
                                                        -----------    ---------

                                                          1,562,962      148,897

Less:  current
maturities                                                  166,750       28,606
                                                        -----------    ---------

                                                         $1,396,212     $120,291
                                                        ===========    =========

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

                                  F - 22

<PAGE>          F-23



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 - LONG-TERM DEBT (Continued)
-----------------------


Long-term debt matures as follows:

Fiscal year ending October 31,

2006                            $  166,750
2007                               318,331
2008                               337,465
2009                               290,066
2010                               267,938
2011 and thereafter                182,412
                                ----------
                                $1,562,962
                                ==========


NOTE 9 - SUBORDINATED DEBENTURE AGREEMENT
-----------------------------------------

In connection with the Company's October 1998 subordinated debenture
agreement, on October 31, 2004, there were warrants outstanding to
purchase 138,047 shares of the Company's common stock.  In July 2003,
the remaining principal balance due on the debentures was repaid.  In
December 2004, warrants to purchase 138,047 shares of the
Company's common stock were exercised for $155,303.


NOTE 10 - RETIREMENT PLANS
--------------------------

The Company has a qualified 401(k) Profit Sharing Plan, as
amended, under which eligible employees who are eighteen years of
age and have completed either twelve months', or one thousand
hours, of employment become participants.  The Plan provides a
matching component under the 401 (k) Profit Sharing Plan of up to
five percent (5%) of each eligible employee's compensation.

The Company has a Money Purchase Pension Plan, as amended, under
which eligible employees who are eighteen years of age and have
completed either twelve months, or one thousand hours, of
employment become participants.  The Plan excludes highly
compensated employees, as defined, and provides for annual
contributions of five percent (5%) of each eligible employee's
compensation.

For the fiscal years ended October 31, 2005, 2004, and 2003,
retirement plan costs totaled $262,723, $238,107 and $197,999,
respectively.

                                  F - 23

<PAGE>          F-24


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 11 - STOCKHOLDERS' EQUITY
------------------------------

Preferred Stock
---------------

The Company is authorized to issue 5,000,000 shares of $.0001 par
value preferred stock. The stock may be issued by the Board of
Directors of the Company in one or more series and with such
preferences, conversion or other rights, voting powers and other
provisions as may be fixed by the Board of Directors in the
resolution authorizing their issuance without any further action
of the stockholders.  At October 31, 2005 and 2004, there were no
preferred shares outstanding.

Warrants Issued for Services
----------------------------

In September 2004, the Company issued warrants to purchase 20,000
shares of the Company's common stock in exchange for certain
financial advisory services.  The warrants are exercisable through
September 24, 2009 at a price of $2.96 per share.  The warrants
were valued at $42,700.

Amended and Restated 1991 Stock Option Incentive Plan
-----------------------------------------------------

The Company adopted an Amended and Restated 1991 Stock Option
Incentive Plan (the "1991 Plan") whereby options to purchase up to
an aggregate of 625,000 shares of common stock, may be granted to
officers, key employees, directors, and consultants of the
Company. Subject to the terms of the 1991 Plan, the Board of
Directors is authorized to select optionees and determine the
number of shares covered by each option, its exercise price and
certain of its other terms.  No one participant may receive an
award in excess of 50,000 shares in any one fiscal year.  All
options are 100% vested after twelve months and may be exercised
for a nine-year period commencing one year from the date of the
grant.  The exercise price of an option granted under the Plan may
not be less than the fair market value of the Company's common
stock on the date of the grant.

1991 Plan activity is summarized as follows:


                                                         Option Price
                                             Shares      Per Share
                                             ------      ---------

Options outstanding - November 1, 2002      470,788    $1.668 - $11.00
  Granted                                      --            --
  Cancelled                                 (57,000)   $1.668 - $11.00
  Exercised                                      --          --
                                            -------

Options outstanding - October 31, 2003      413,788    $1.668 - $10.50
  Granted                                        --          --
  Canceled                                       --          --
  Exercised                                    (750)       $1.668
                                            -------

Options outstanding - October 31, 2004      413,038    $1.668 - $10.50
  Granted                                        --          --
  Canceled                                  (47,500)   $2.125 - $6.125
  Exercised                                      --          --
                                            -------

Options outstanding - October 31, 2005      365,538    $1.668 - $10.50
                                            =======

Options exercisable - October 31, 2005      365,538    $1.668 - 10.50
                                            =======


                                  F - 24

<PAGE>          F-25


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 11 - STOCKHOLDERS' EQUITY (Continued)
------------------------------

2000 Stock Incentive Plan
-------------------------

In February of Fiscal 2000, the Company adopted the 2000 Stock
Incentive Plan (the "2000 Plan") which supercedes the 1991 Plan.
Options outstanding under the 1991 Plan at October 31, 2000 will
remain effective until forfeited, cancelled, or expired without
exercise. The 2000 Plan calls for options to purchase up to an
aggregate of an additional 300,000 shares of the Company's
common stock plus such additional shares as becomes available
under the 1991 Plan by reason of forfeiture of awards granted
thereunder or cancellation or expiration of such shares without
exercise, and may be granted to officers, key employees,
directors, and consultants of the Company.  At the Annual
Meeting of Stockholders held on April 29, 2005, the stockholders
approved an amendment to the 2000 Plan increasing by 200,000 the
number of shares eligible to be issued pursuant to the 2000
Plan.  Subject to the terms of the 2000 Plan, the Board of
Directors is authorized to select optionees and determine the
number of shares covered by each option, its exercise price and
certain of its other terms.  No one participant may receive an
award in excess of 150,000 shares in any three fiscal-year
period.  Prior to Fiscal 2006, all options were 100% vested after
twelve months and may be exercised for a nine-year period commencing
one year from the date of grant.  Effective for options granted under
the 2000 Plan in Fiscal 2006 and thereafter, such options will become
exercisable in three equal annual installment following the grant date.
The exercise price of an option granted under the 2000 Plan may not be
less than the fair market value of the Company's common stock on the
date of grant.

                                                         Option Price
                                             Shares      Per Share
                                             ------      ---------

Options outstanding - November 1, 2002       79,800         $0.46
  Granted                                    39,500         $0.65
  Canceled                                     (500)        $0.46
  Exercised                                  (9,000)        $0.46
                                            -------

Options outstanding - October 31, 2003      109,800    $0.46 - $0.65
  Granted                                    73,000         $2.10
  Canceled                                       --          --
  Exercised                                 (18,500)   $0.46 - $0.65
                                            -------

Options outstanding - October 31, 2004      164,300    $0.46 - $2.10
  Granted                                   216,000    $3.06 - $3.785
  Canceled                                   (6,000)        $2.10
  Exercised                                 (40,000)   $0.46 - $2.10
                                            -------

Options outstanding - October 31, 2005      334,300    $0.46 - $3.785
                                            =======

Options exercisable - October 31, 2005      118,300    $0.46 - $2.10
                                            =======

                                  F - 25

<PAGE>          F-26


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 11 - STOCKHOLDERS' EQUITY (Continued)
------------------------------

Directors Stock Option Plan
---------------------------

In 1996, the Company adopted a Directors Stock Option Plan (the
"DSO Plan") whereby options may be granted to purchase up to an
aggregate of 25,000 shares of the Company's common stock to
directors of the Company who are not officers or employees of the
Company or otherwise eligible to receive awards under the 1991
Plan.  Pursuant to the DSO Plan, eligible directors would receive
an option to purchase 1,250 shares of the Company's common stock
on the date the director first becomes eligible.  The eligible
director would subsequently receive an option to purchase 625
shares of the Company's common stock on the date of each succeeding
annual meeting of the stockholders, unless the director's term ends
on or before that date.  Each option granted is exercisable at the
fair market value of the Company's common stock on the date granted,
and for options granted prior to Fiscal 2006, may be exercised for a
nine-year period commencing one year from the date of the grant.
Effective for options granted under the Directors Plan in Fiscal 2006
and thereafter, such options will become exercisable in three equal
annual installments following the grant date.

In February 2000, the Company adopted an amendment to the DSO Plan
increasing the number of options, which may be granted under the
DSO Plan, to an aggregate of 75,000 shares.  The amendment also
increased the number of shares of the Company's common stock to be
subject to the automatic grants made to directors from 1,250
shares to 5,000 shares upon first being elected to the Board of
Directors of the Company and 625 shares to 2,500 shares upon each
re-election to the Board of Directors.  At the Annual Meeting of
Stockholders held on April 29, 2005, the stockholders approved
amendments to the Directors Plan to increase by 75,000 the
number of shares eligible to be issued pursuant to the Directors
Plan and to extend the expiration date of the Directors Plan
from March 2006 to April 30, 2010.

Directors' stock option plan activity is summarized as follows:


                                                         Option Price
                                             Shares      Per Share
                                             ------      ---------

Options outstanding - November 1, 2002       46,875    $0.62 - $7.85
  Granted                                    10,000        $0.70
  Canceled                                       --         --
  Exercised                                      --         --
                                            -------

Options outstanding - October 31, 2003       56,875    $0.62 - $7.85
  Granted                                    15,000        $3.50
  Canceled                                       --         --
  Exercised                                  (5,000)   $.06875 - $1.00
                                            -------

Options outstanding - October 31, 2004       66,875    $0.62 - $7.85
  Granted                                    12,500        $3.20
  Canceled                                       --         --
  Exercised                                 ( 2,500)       $0.70
                                            -------

Options outstanding - October 31, 2005       76,875    $0.62 - $7.85
                                            =======

Options exercisable - October 31, 2005       64,375    $0.62 - $7.85
                                            =======

                                  F - 26

<PAGE>          F-27


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 11 - STOCKHOLDERS' EQUITY (Continued)
------------------------------

Consultants Stock Incentive Plan
--------------------------------

In 1997, the Company adopted a Consultants Stock Incentive
Plan (the "CSI Plan") whereby options to purchase up to 50,000
shares of the Company's common stock may be granted to consultants
or advisors of the Company.  Subject to the terms of the CSI Plan,
a committee of the Board of Directors is authorized to select
participants and determine the number of shares covered by each
option, its exercise price and other terms.  The exercise price,
however, may not be less than the fair market value of the
Company's common stock on the date of the grant.  CSI Plan activity
is as follows:



                                                         Option Price
                                             Shares      Per Share
                                             ------      ---------

Options outstanding - November 1, 2002        7,500         $0.90
  Granted                                        --           --
  Canceled                                       --           --
  Exercised                                      --           --
                                            -------

Options outstanding - October 31, 2005,
  2004 and 2003                               7,500         $.90
                                            =======
Options exercisable - October 31, 2005        7,500         $.90
                                            =======


NOTE 12 - INCOME TAXES
----------------------

Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes using the enacted tax rates in
effect in the years in which the differences are expected to
reverse.  Deferred income tax assets and liabilities are
comprised as follows:


                                                   October 31,
                                                   -----------
                                               2005           2004
                                               ----           ----

Deferred tax assets:
  Net operating loss                         $584,723       $806,436
  Sale/leaseback of building                  394,295        445,724
  Salaries                                     44,934         84,404
  Rent                                         38,164         24,697
  Other                                        44,302          7,160
                                            ---------      ---------

  Gross deferred tax assets                 1,106,418      1,368,421
                                            ---------      ---------

Deferred tax liabilities:

  Goodwill                                    (36,102)        (8,607)
  Test passage bank and
   test development                            (6,222)       (15,702)
                                            ---------      ---------

  Gross deferred tax liabilities              (42,324)       (24,309)
                                            ---------      ---------

Net deferred tax assets                    $1,064,094     $1,344,112
                                           ==========     ==========

                                  F - 27

<PAGE>          F-28


                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 12 - INCOME TAXES (Continued)
----------------------

The Company believes it is more likely than not that this net
deferred tax asset will be realized in future periods and,
accordingly, no valuation allowance has been recorded.

The Company's income tax expense from continuing operations
consists of the following:



                                  Fiscal Years Ended October 31,
                                  ------------------------------
                                 2005          2004          2003
                                 ----          ----          ----

Current:
  Federal                      $     --     $      --      $     --
  State                          44,050        75,531        73,781
                               --------     ---------      --------

                                 44,050        75,531        73,781
                               --------     ---------      --------

Deferred:
  Federal                       217,014       400,611       195,888
  State                          63,004       116,306        56,871
                               --------     ---------      --------

                                280,018       516,917       252,759
                               --------     ---------      --------

Provision for income taxes     $324,068     $ 592,448      $326,540
                               ========     =========      ========


A reconciliation of the difference between the expected income tax
rate using the statutory Federal tax rate and the Company's
effective rate for continuing operations is as follows:


                                  Fiscal Years Ended October 31,
                                  ------------------------------
                                 2005          2004          2003
                                 ----          ----          ----




U.S. Federal income tax
 statutory rate                   34%           34%           34%

State income tax, net of
Federal income tax benefit         5             5             7

Other, net                         3             3             3

Effective tax rate                42%           42%           44%
                                  ==            ==            ==


                                  F - 28

<PAGE>          F-29



                 TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
                              AND SUBSIDIARIES

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



NOTE 13 - EMPLOYMENT AGREEMENTS
-------------------------------

The Company has employment agreements with several of its key
employees.  The agreements are for varying terms ranging from one
to three years and are automatically extended each year unless the
Company notifies the employee, in writing, ranging from at least
60 to 180 days prior to the anniversary date, that the agreement
will not be extended.

Each agreement calls for a base salary, which may be adjusted
annually at the discretion of the Company's Board of Directors,
and also provides for eligibility in the Company's benefit plans
and incentive bonuses which are payable based upon the attainment
of certain profitability goals.  Among other provisions, the
agreements include a non-compete clause for varying periods not
exceeding three years following termination of employment.

The Company entered into employment agreements for an initial
forty-month term with two of the former shareholders of ADI.  In
addition, the former shareholders of ADI who are continuing with
ADI were granted, pursuant to the 2000 Plan, an aggregate of 60,000
ten-year options to purchase additional shares of the Company's Common
Stock at an exercise price of $3.75 per share, subject to
vesting upon the completion of one year of employment.  The Company
also entered into an employment agreement for an initial twenty-eight
month term with a key employee of ADI.

The aggregate commitment for future salaries as of October 31,
2005, excluding bonuses and benefits, is as follows:

Fiscal year ending October 31,

      2006                        $1,788,166
      2007                        $  904,400
      2008                        $  455,614


NOTE 14 - RELATED PARTY TRANSACTIONS
------------------------------------

One of the directors is a shareholder in the law firm which serves
as the Company's special securities counsel.  The Company incurred
$200,710, $59,351 and $83,082 in legal fees and disbursements to
this firm in the fiscal years ended October 31, 2005, 2004 and
2003, respectively.

One of the directors is the principal and owner of a firm which
provided consulting fees to the Company.  The Company incurred
$45,000 in fees to this firm in the year ended October 31, 2004.

                                  F - 29

<PAGE>

                                 SIGNATURES

      In accordance with Section 13 or 15(d) of the Exchange Act,
the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.



January 30, 2006

                                TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.

                                By: /s/ ANDREW L. SIMON
                                    -------------------------------
                                    Andrew L. Simon
                                    President and Chief Executive Officer
                                    (principal executive officer and
                                    principal financial officer)



      In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.

     Signature                        Title                   Date
     ---------                        -----                   ----

/s/ ANDREW L. SIMON            Director and Chairman       January 30, 2005
-------------------------
    Andrew L. Simon                of the Board

/s/ MICHAEL D. BECK                  Director              January 30, 2005
-------------------------
    Michael D. Beck

/s/ STEVEN R. BERGER                 Director              January 30, 2005
-------------------------
    Steven R. Berger

/s/ DONALD W. HUGHES                 Director              January 30, 2005
-------------------------
    Donald W. Hughes

    CHRIS L. NGUYEN                  Director              January 30, 2005
-------------------------
    Chris L. Nguyen

/s/ LINDA G. STRALEY                 Director              January 30, 2005
-------------------------
    Linda G. Straley

/s/THOMAS STRUZZIERI                 Director              January 30, 2005
-------------------------
   Thomas Struzzieri

/s/ DAVID L. WARNOCK                 Director              January 30, 2005
-------------------------
    David L. Warnock