----

----

**UNITED      STATES**

**SECURITIES      AND EXCHANGE COMMISSION **

**Washington,      D.C. 20549 **

**FORM      10-QSB**

**QUARTERLY      REPORT PURSUANT TO SECTION 13 OR 15(d) OF**

**THE      SECURITIES EXCHANGE ACT OF 1934**

| **For                the quarter ended**   | **Commission                File Number** |
|--------------------------------------------|-------------------------------------------|
| **September 30,                2007** | **0-12969**                               |

**TOUCHSTONE      SOFTWARE CORPORATION **

**(Exact      name of registrant as specified in its charter) **

| **Delaware**                                                       | **95-3778226**                     |
|--------------------------------------------------------------------|------------------------------------|
| (State                or other jurisdiction                        | (I.R.S.                Employer    |
| of                incorporation or organization)                   | Identification                No.) |
|                                                               |                               |
|                                                               |                               |
| **1538                Turnpike St., North Andover, Massachusetts** | **01845**                          |
| (Address                of principal executive offices)            | (Zip                Code)          |

**(978)      686-6468**

**None**

----

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**TOUCHSTONE            SOFTWARE CORPORATION AND SUBSIDIARIES**

**INDEX**

**      **

**                      **

|                             |                                                                                                                                  | **Page****Number** |
|----------------------------------|---------------------------------------------------------------------------------------------------------------------------------------|--------------------|
| **PART                I.**       | **Financial                  Information**                                                                                            |               |
|                             |                                                                                                                                  |               |
| **ITEM                1.**       | Financial                  Statements                                                                                                 |               |
|                             | Consolidated                  Balance Sheet 3⁄4                  September 30,                  2007                               | 3                  |
|                             | Consolidated                  Income Statements 3⁄4                  Three Months                  Ended September 30, 2007 and    |               |
|                             | September                  30, 2006 and Nine Months Ended September 30, 2007 and September                  30,                  2006 | 4                  |
|                             | Consolidated                  Statements of Cash Flows 3⁄4                  Nine Months                  Ended September 30, 2007  |               |
|                             | and                  September 30, 2006                                                                                               | 5                  |
|                             | Notes                  to Consolidated Financial Statements                                                                           | 6-7                |
|                             |                                                                                                                                  |               |
| **ITEM                2.**       | Management’s                  Discussion and Analysis of Financial Condition and Results                  of                    |               |
|                             |    Operations                                                                                                          | 8-10               |
|                             |                                                                                                                                  |               |
| **ITEM                3. ** | Controls                  and Procedures                                                                                              | 11                 |
|                             |                                                                                                                                  |               |
|                             |                                                                                                                                  |               |
|                             |                                                                                                                                  |               |
| **PART                II.**      | **Other                  Information**                                                                                                |               |
|                             |                                                                                                                                  |               |
| **ITEM                1.**       | Legal                  Proceedings                                                                                                    | 11                 |
|                             |                                                                                                                                  |               |
| **ITEM                2.**       | Changes                  in Securities                                                                                                | 11                 |
|                             |                                                                                                                                  |               |
| **ITEM                3.**       | Defaults                  Upon Senior Securities                                                                                      | 11                 |
|                             |                                                                                                                                  |               |
| **ITEM                4.**       | Submission                  of Matters To a Vote of Security Holders                                                                  | 11                 |
|                             |                                                                                                                                  |               |
| **ITEM                5.**       | Other                  Information                                                                                                    | 11                 |
|                             |                                                                                                                                  |               |
| **ITEM                6.**       | Exhibits                  and Reports on Form 8-K                                                                                     | 11                 |
|                             |                                                                                                                                  |               |
| Signatures                       | 12                                                                                                                                    |
|                             |                                                                                                                                  |               |
| Exhibits                         | 13-15                                                                                                                                 |
|                             |                                                                                                                                  |               |

----

**TOUCHSTONE            SOFTWARE CORPORATION AND            SUBSIDIARIES**

**PART          I – FINANCIAL INFORMATION**

**ITEM          1.  Financial Statements**

**CONSOLIDATED          BALANCE SHEET**

**September          30, 2007**

**(unaudited)**

----

| **Assets**                                                                                  |   |   |        |   |
|---------------------------------------------------------------------------------------------|--------|--------|-------------|--------|
| Current                    assets:                                                          |   |   |        |   |
| Cash                    and cash                    equivalents                             |   | $      | 1,528,979   |   |
| Accounts                    receivable,                    net                              |   |   | 3,197       |   |
| Inventories                                                                                 |   |   | 5,685       |   |
| Prepaid                    expenses and other                    current assets             |   |   | 51,768      |   |
| Total                    current assets                                                     |   |   | 1,589,629   |   |
|                                                                                        |   |   |
| Investments                                                                                 |   |   | 184,527     |   |
| Property                    and equipment, net                                              |   |   | 731,197     |   |
|                                                                                        |   | $      | 2,505,353   |   |
| **Liabilities                    and Shareholders’ Equity**                           |   |   |
| Current                    liabilities:                                                     |   |   |
| Accounts                    payable                                                         |   | $      | 86,292      |   |
| Accrued                    payroll and related expenses                                     |   |   | 92,509      |   |
| Other                    accrued expenses                                                   |   |   | 69,847      |   |
| Note                    payable                                                             |   |   | 80,000      |   |
| Total                    current liabilities                                                |   |   | 328,648     |   |
|                                                                                        |   |   |
| Shareholders’                    equity:                                              |   |   |
| Preferred                    stock, $.001 par value,                    3,000,000 shares    |   |   |
| authorized,                    none issued or                    outstanding                |   |   |
| Common                    stock, $.001 par value,                    20,000,000 shares      |   |   |
| authorized;                    issued and                    outstanding, 12,120,060 shares |   |   | 12,120      |   |
| Additional                    paid-in                    capital                            |   |   | 21,199,054  |   |
| Accumulated                    deficit                                                      |   |   | (19,034,469 | )      |
| Shareholders’                    equity, net.                                         |   |   | 2,176,705   |   |
|                                                                                        |   | $      | 2,505,353   |   |

----

**TOUCHSTONE            SOFTWARE CORPORATION AND            SUBSIDIARIES**

**CONSOLIDATED          INCOME STATEMENTS**

**unaudited)**

|                                                                                                                                                                                         |   | **Three                    Months Ended****September                    30,** |       |   | **Nine                    Months Ended****September                    30,** |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------|------------|--------|------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                         |   | **2007**                                                                      |       |   | **2006**                                                                     |   |   | **2007** |   |   | **2006** |   |
| Revenues:                                                                                                                                                                                    |   |                                                                          |       |   |                                                                         |   |   |   |   |   |   |   |
| Product                    sales                                                                                                                                                             |   | $                                                                             | 1,076,825  |   |                                                                         | $      | 763,195 |   |   | $ | 3,189,386 |   |   | $ | 2,252,512 |   |
| Website                    income                                                                                                                                                            |   |                                                                          | 8,593      |   |                                                                         |   | 13,713 |   |   |   | 32,266 |   |   |   | 49,610 |   |
| Total                    revenues                                                                                                                                                            |   |                                                                          | 1,085,418  |   |                                                                         |   | 776,908 |   |   |   | 3,221,652 |   |   |   | 2,302,122 |   |
| Cost                    of revenues                                                                                                                                                          |   |                                                                          | 15,715     |   |                                                                         |   | 17,633 |   |   |   | 72,145 |   |   |   | 184,758 |   |
| Gross                    profit                                                                                                                                                              |   |                                                                          | 1,069,703  |   |                                                                         |   | 759,275 |   |   |   | 3,149,507 |   |   |   | 2,117,364 |   |
|                                                                                                                                                                                         |   |                                                                          |       |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |
| Operating                    expenses:                                                                                                                                                       |   |                                                                          |       |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |
| Sales,                    marketing, general and administrative                                                                                                                              |   |                                                                          | 656,031    |   |                                                                         |   | 460,378 |   |   |   | 1,907,406 |   |   |   | 1,134,092 |   |
| Research                    and development                                                                                                                                                  |   |                                                                          | 181,471    |   |                                                                         |   | 130,105 |   |   |   | 458,846 |   |   |   | 417,352 |   |
| Total                    operating expenses                                                                                                                                                  |   |                                                                          | 837,502    |   |                                                                         |   | 590,483 |   |   |   | 2,366,252 |   |   |   | 1,551,444 |   |
| Income                    from operations                                                                                                                                                    |   |                                                                          | 232,201    |   |                                                                         |   | 168,792 |   |   |   | 783,255 |   |   |   | 565,920 |   |
| Other                    income (expense):                                                                                                                                                   |   |                                                                          |       |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |
| Interest                    income (expense)-net                                                                                                                                             |   |                                                                          | 11,639     |   |                                                                         |   | 237 |   |   |   | 34,589 |   |   |   | (8,710 | ) |
| Gain                    on acquisition of subsidiary                                                                                                                                         |   |                                                                          | -          |   |                                                                         |   | - |   |   |   | 38,564 |   |   |   | - |   |
| Other                    income (expense)-net                                                                                                                                                |   |                                                                          | 11,639     |   |                                                                         |   | 237 |   |   |   | 73,153 |   |   |   | (8,710 | ) |
| Income                    before provision for state income taxes                                                                                                                            |   |                                                                          | 243,840    |   |                                                                         |   | 169,029 |   |   |   | 856,408 |   |   |   | 557,210 |   |
| Provision                    for state income taxes-.net of research and development credit                    of $18,800                    during the three month ended September 30, 2007 |   |                                                                          | -          |   |                                                                         |   | - |   |   |   | 42,770 |   |   |   | - |   |
| Net                    Income                                                                                                                                                                |   | $                                                                             | 243,840    |   |                                                                         | $      | 169,029 |   |   | $ | 813,638 |   |   | $ | 557,210 |   |
|                                                                                                                                                                                         |   |                                                                          |       |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |
| Basic                    earnings  per share                                                                                                                                       |   | $                                                                             | 0.02       |   |                                                                         | $      | 0.01 |   |   | $ | 0.07 |   |   | $ | 0.05 |   |
|                                                                                                                                                                                         |   |                                                                          |       |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |
| Basic                    weighted average shares outstanding                                                                                                                                 |   |                                                                          | 12,120,060 |   |                                                                         |   | 11,940,060 |   |   |   | 12,053,467 |   |   |   | 11,940,060 |   |
|                                                                                                                                                                                         |   |                                                                          |       |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |
| Diluted  earnings                    per share                                                                                                                                     |   | $                                                                             | 0.02       |   |                                                                         | $      | 0.01 |   |   | $ | 0.07 |   |   | $ | 0.05 |   |
|                                                                                                                                                                                         |   |                                                                          |       |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                    weighted average shares outstanding                                                                                                                               |   |                                                                          | 12,120,060 |   |                                                                         |   | 12,022,574 |   |   |   | 12,053,467 |   |   |   | 12,009,463 |   |
|                                                                                                                                                                                         |   |                                                                          |       |   |                                                                         |   |   |   |   |   |   |   |   |   |   |   |

----

**TOUCHSTONE            SOFTWARE CORPORATION AND            SUBSIDIARIES**

**CONSOLIDATED          STATEMENTS OF CASH FLOWS**

** (unaudited)**

|                                                                                                                    |   | **Nine                    months ended****September                    30,** |                       |
|-------------------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------|----------------------------|
|                                                                                                                    |   | **2007**                                                                     |                       |   | **2006** |   |
| Cash                    flows from operating activities:                                                                |   |                                                                         |                       |   |   |   |
| Net                    income                                                                                           |   | $                                                                            | 813,638                    |   |   | $ | 557,210 |   |
| Adjustments                    to reconcile net income to net cash provided by operating                    activities: |   |                                                                         |                       |   |   |   |   |   |
| Depreciation                                                                                                            |   |                                                                         | 88,684                     |   |   |   | 72,161 |   |
| Gain                    on acquisition of subsidairy                                                                    |   |                                                                         | (38,564                    | ) |   |   |   |   |
| Stock                    option compensation                                                                            |   |                                                                         | 28,453                     |   |   |   | 15,083 |   |
| Changes                    in assets and liabilities:                                                                   |   |                                                                         |                       |   |   |   |   |   |
| Accounts                    receivable                                                                                  |   |                                                                         | 8,952                      |   |   |   | 2,160 |   |
| Inventories                                                                                                             |   |                                                                         | 9,012                      |   |   |   | 16,619 |   |
| Prepaid                    expenses and other current assets                                                            |   |                                                                         | (39,253                    | ) |   |   | (36,517 | ) |
| Accounts                    payable                                                                                     |   |                                                                         | 25,109                     |   |   |   | (5,527 | ) |
| Accrued                    liabilities                                                                                  |   |                                                                         | (1,561                     | ) |   |   | (13,224 | ) |
| Net                    cash provided by operating activities                                                            |   |                                                                         | 894,470                    |   |   |   | 607,965 |   |
|                                                                                                                    |   |                                                                         |                       |   |   |   |   |   |
| Cash                    flows from investing activities:                                                                |   |                                                                         |                       |   |   |   |   |   |
| Collection                    of notes receivable – related party                                                 |   |                                                                         | -                          |   |   |   | 8,427 |   |
| Additions                    to Property and Equipment                                                                  |   |                                                                         | (122,089                   | ) |   |   | (114,914 | ) |
| Net                    assets of business acquired                                                                      |   |                                                                         | (128,063                   | ) |   |   |   |   |
| Net                    cash used in investing activities                                                                |   |                                                                         | (250,152                   | ) |   |   | (106,487 | ) |
|                                                                                                                    |   |                                                                         |                       |   |   |   |   |   |
|                                                                                                                    |   |                                                                         |                       |   |   |   |   |   |
| Cash                    flows from financing activities:                                                                |   |                                                                         |                       |   |   |   |   |   |
| Payments                    on note payable                                                                             |   |                                                                         | (40,000                    | ) |   |   | - |   |
| Payments                    on long term debt                                                                           |   |                                                                         | -                          |   |   |   | (35,575 | ) |
| Net                    cash used in financing activities                                                                |   |                                                                         | (40,000                    | ) |   |   | (35,575 | ) |
|                                                                                                                    |   |                                                                         |                       |   |   |   |   |   |
| Net                    increase in cash and cash equivalents                                                            |   |                                                                         | 604,318                    |   |   |   | 465,903 |   |
| Cash                    and cash equivalents, beginning of period                                                       |   |                                                                         | 924,661                    |   |   |   | 221,426 |   |
| Cash                    and cash equivalents, end of period.                                                            |   | $                                                                            | 1,528,979                  |   |   | $ | 687,329 |   |
|                                                                                                                    |   |                                                                         |                       |   |   |   |   |   |
| Supplemental                    disclosure of cash flow information:                                                    |   |                                                                         |                       |   |   |   |   |   |
| Cash                    paid during the period for:                                                                     |   |                                                                         |                       |   |   |   |   |   |
| Interest                                                                                                                |   | $                                                                            | -                          |   |   | $ | 17,549 |   |
| Income                    taxes                                                                                         |   | $                                                                            | 1,368                    - |   |   | $ |   |   |
|                                                                                                                    |   |                                                                         |                       |   |   |   |   |   |
| Non-cash                    investing and financing activity:                                                           |   |                                                                         |                       |   |   |   |   |   |
| Property                    and equipement additions financed                                                           |   | $                                                                            | 120,000                    |   |   | $ | - |   |
| Common                    stock issued for property and equipment                                                       |   | $                                                                            | 142,200                    |   |   | $ | - |   |

----

**TOUCHSTONE              SOFTWARE CORPORATION AND              SUBSIDIARIES**

**Notes          to Consolidated Financial Statements**

| **1.** | **Summary                    of Significant Accounting                    Policies** |
|--------|--------------------------------------------------------------------------------------|

**Nature          of Operations**
**.**

**Principles          of Consolidation**

**Basis          of Presentation.**

| **2.** | **Earnings                    Per Share** |
|--------|-------------------------------------------|

*Earnings Per Share”*

| 3. | **Investments** |
|----|-----------------|

| 4. | **State Income                    Tax** |
|----|----------------------------------------------|

----

**TOUCHSTONE                SOFTWARE CORPORATION AND                SUBSIDIARIES**

| **5.** | **Stock                    Options** |
|--------|--------------------------------------|

| 6. | **Acquisition                    of Property and Equipment** |
|----|--------------------------------------------------------------|

| On                      the date of the closing               |   | $ | 30,000 |   |
|---------------------------------------------------------------|--------|---|--------|--------|
| Upon                      delivery of first software product  |   | $ | 40,000 |   |
| Upon                      delivery of second software product |   | $ | 40,000 |   |
| Upon                      deliver of third software product   |   | $ | 40,000 |   |

| 7. | **Acquisition                    of Business** |
|----|------------------------------------------------|

| **8.** | **Subsequent                    Events** |
|--------|------------------------------------------|

----

**TOUCHSTONE              SOFTWARE CORPORATION AND SUBSIDIARIES**

**ITEM          2.   Management’s Discussion and Analysis of Financial Condition          and Results of Operations**

**Overview**

*        *

* *
* *

| · | Registry                    Cleaner-Clean, repair and monitor the Windows®                    registry |
|--------|-------------------------------------------------------------------------------------------------------------|

| · | Hard                    Drive Cleanup-Gets rid of all the unused clutter on a hard drive                    using                    proprietary technology |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Startup                    Maintenance-Cleans up the PC by finding, identifying and managing                    known                    and hidden programs that run automatically at startup using a                    special                    proprietary four step process |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

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**TOUCHSTONE              SOFTWARE CORPORATION AND SUBSIDIARIES**

**Industry          Overview**

**Results          of Operations**

|                                                                                    | **Three                    Months ended** | **Three                    Months ended** | **Nine                    Months ended** | **Nine                    Months ended** |
|-----------------------------------------------------------------------------------------|-------------------------------------------|-------------------------------------------|------------------------------------------|------------------------------------------|
|                                                                                    | **September                    30,**      | **September                    30,**      | **September                    30,**     | **September                    30,**     |
|                                                                                    | **2007**                                  | **2006**                                  | **2007**                                 | **2006**                                 |
| Revenues:                                                                               |                                      |                                      |                                     |                                     |
| Product                    sales                                                        | 99%                                       | 98%                                       | 99%                                      | 98%                                      |
|      Website                    income                         | 1                                         | 2                                         | 1                                        | 2                                        |
|          Total                    revenues | 100                                       | 100                                       | 100                                      | 100                                      |
| Cost                    of revenues                                                     | 1                                         | 2                                         | 2                                        | 8                                        |
| Gross                    profit                                                         | 99                                        | 98                                        | 98                                       | 92                                       |
|  Operating                    expenses:                                            |                                      |                                      |                                     |                                     |
|  Sales,                    marketing, general and  administrative        | 60                                        | 59                                        | 59                                       | 49                                       |
| Research                    and development                                             | 17                                        | 17                                        | 14                                       | 18                                       |
| Total                    operating expenses                                             | 77                                        | 76                                        | 73                                       | 67                                       |
| Income                    from operations                                               | 22                                        | 22                                        | 25                                       | 25                                       |
| Other                    income (expense), net                                          | 1                                         | -                                         | 2                                        | (1)                                      |
| Provision                    for state income tax                                       | -                                         | -                                         | (2)                                      | -                                        |
| Net                    income                                                           | 23%                                       | 22%                                       | 25%                                      | 24%                                      |

----

**TOUCHSTONE              SOFTWARE CORPORATION AND SUBSIDIARIES**

**Comparison          of Nine Month Periods Ended September 30, 2007  and          2006**

***Revenues***
**.  **

***Cost          of Revenues.***

***Sales,          Marketing, General and          Administrative***
**.**

***Research          and Development***
**.**

**Liquidity          and Capital Resources**

***SPECIAL          NOTE REGARDING FORWARD-LOOKING STATEMENTS***

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**TOUCHSTONE              SOFTWARE CORPORATION AND SUBSIDIARIES**

|   | **ITEM                    3.  Controls and                    Procedures** |
|--------|--------------------------------------------------------------------------------------|

**PART          II3⁄4OTHER          INFORMATION**

| **ITEM                    1.** | **Legal                    Proceedings** |
|--------------------------------|------------------------------------------|

| **ITEM                    2.** | **Changes                    in Securities** |
|--------------------------------|----------------------------------------------|

| **ITEM                    3.** | **Defaults                    Upon Senior Securities** |
|--------------------------------|--------------------------------------------------------|

| **ITEM                    4.** | **Submission                    of Matters To a Vote of Security                    Holders** |
|--------------------------------|-----------------------------------------------------------------------------------------------|

| **ITEM                    5.** | **Other                    Information** |
|--------------------------------|------------------------------------------|

| **ITEM                    6.** | **Exhibits                    and Reports on Form 8-K** |
|--------------------------------|---------------------------------------------------------|

|  | (a) | Exhibits |
|--|-----|----------|

|  | (b) | Reports                    on Form 8-K |
|--|-----|----------------------------------------|

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**TOUCHSTONE            SOFTWARE CORPORATION AND SUBSIDIARIES**

**SIGNATURES**

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

|   | **TouchStone                      Software Corporation**(Registrant) |
|--------|----------------------------------------------------------------------|

| **Name**                                                                  |   | **Title**                                                  |   | **Date**                               |
|---------------------------------------------------------------------------|--------|------------------------------------------------------------|--------|----------------------------------------|
|                                                                      |   |                                                       |   |                                   |
|                                                                      |   |                                                       |   |                                   |
|                                                                      |   |                                                       |   |                                   |
| /s/                      Jason K. Raza                                    |   | Chief                      Executive Officer and President |   | November                      14, 2007 |
| **    Jason                      K. Raza**            |   |                                                       |   |                                   |
|                                                                      |   |                                                       |   |                                   |
|                                                                      |   |                                                       |   |                                   |
|                                                                      |   |                                                       |   |                                   |
|                                                                      |   |                                                       |   |                                   |
| /s/                      Michelle L. Carrozzella                          |   | Accounting                      Manager               |   | November                      14, 2007 |
| **                          Michelle L. Carrozzella** |   |                                                       |   |                                   |

----