----

----

**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** |
|------------------------------------------|-------------------------------------------|
| **June 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                  June 30,                  2007                             | 3                  |
|                             | Consolidated                  Income Statements 3⁄4                  Three Months                  Ended June 30, 2007 and  |               |
|                             | June                  30, 2006 and Six Months Ended June 30, 2007 and June 30,                  2006                           | 4                  |
|                             | Consolidated                  Statements of Cash Flows 3⁄4                  Six Months                  Ended June 30, 2007 |               |
|                             | and                  June 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**

**June        30, 2007**

**(unaudited)**

----

| **Assets**                                                                              |   |   |        |   |
|-----------------------------------------------------------------------------------------|--------|--------|-------------|--------|
|                                                                                    |   |   |        |   |
| Current                  assets:                                                        |   |   |        |   |
| Cash                  and cash                  equivalents                             |   | $      | 1,252,129   |   |
| Accounts                  receivable,                  net                              |   |   | 3,641       |   |
| Inventories                                                                             |   |   | 6,170       |   |
| Prepaid                  expenses and other                  current assets             |   |   | 32,414      |   |
| Total                  current assets                                                   |   |   | 1,294,354   |   |
|                                                                                    |   |   |
| Investments                                                                             |   |   | 184,527     |   |
| Property,                  and equipment, net                                           |   |   | 763,085     |   |
|                                                                                    |   | $      | 2,241,966   |   |
| **Liabilities                  and Shareholders’ Equity**                         |   |   |
|                                                                                    |   |   |
| Current                  liabilities:                                                   |   |   |
| Accounts                  payable                                                       |   | $      | 58,797      |   |
| Accrued                  payroll and related                  expenses                  |   |   | 68,529      |   |
| Other                  accrued                  expenses                                |   |   | 71,906      |   |
| Note                  payable                                                           |   |   | 120,000     |   |
| Total                  current liabilities                                              |   |   | 319,232     |   |
|                                                                                    |   |   |
| 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                            |   |   | 21,188,923  |   |
| Accumulated                  deficit                                                    |   |   | (19,278,309 | )      |
| Shareholders’                  equity, net                                        |   |   | 1,922,734   |   |
|                                                                                    |   | $      | 2,241,966   |   |

----

** **TOUCHSTONE        SOFTWARE CORPORATION AND SUBSIDIARIES****

**CONSOLIDATED        INCOME STATEMENTS**

**unaudited)**

|                                                                |   | **Three                  Months Ended****June                  30,** |       |   | **Six                  Months Ended****June                  30,** |   |
|---------------------------------------------------------------------|--------|----------------------------------------------------------------------|------------|--------|--------------------------------------------------------------------|--------|
|                                                                |   | **2007**                                                             |       |   | **2006**                                                           |   |   | **2007** |   |   | **2006** |   |
| Revenues:                                                           |   |                                                                 |       |   |                                                               |   |   |   |   |   |   |   |
| Product                  sales                                      |   | $                                                                    | 1,025,526  |   |                                                               | $      | 722,020 |   |   | $ | 2,112,561 |   |   | $ | 1,489,317 |   |
| Website                  income                                     |   |                                                                 | 8,682      |   |                                                               |   | 14,237 |   |   |   | 23,673 |   |   |   | 35,897 |   |
| Total                  revenues                                     |   |                                                                 | 1,034,208  |   |                                                               |   | 736,257 |   |   |   | 2,136,234 |   |   |   | 1,525,214 |   |
| Cost                  of revenues                                   |   |                                                                 | 24,511     |   |                                                               |   | 49,101 |   |   |   | 56,430 |   |   |   | 167,125 |   |
| Gross                  profit                                       |   |                                                                 | 1,009,697  |   |                                                               |   | 687,156 |   |   |   | 2,079,804 |   |   |   | 1,358,089 |   |
|                                                                |   |                                                                 |       |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Operating                  expenses:                                |   |                                                                 |       |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Sales,                  marketing, general and administrative       |   |                                                                 | 647,820    |   |                                                               |   | 342,929 |   |   |   | 1,251,375 |   |   |   | 673,714 |   |
| Research                  and development                           |   |                                                                 | 139,538    |   |                                                               |   | 161,069 |   |   |   | 277,375 |   |   |   | 287,247 |   |
| Total                  operating expenses                           |   |                                                                 | 787,358    |   |                                                               |   | 503,998 |   |   |   | 1,528,750 |   |   |   | 960,961 |   |
| Income  from                  operations                  |   |                                                                 | 222,339    |   |                                                               |   | 183,158 |   |   |   | 551,054 |   |   |   | 397,128 |   |
| Other                  Income (expense):                            |   |                                                                 |       |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Interest                  income (expense)-net                      |   |                                                                 | 18,074     |   |                                                               |   | (1,132 | ) |   |   | 22,950 |   |   |   | (8,947 | ) |
| Gain                  on acquisition of subsidiary                  |   |                                                                 | 38,564     |   |                                                               |   | — |   |   |   | 38,564 |   |   |   | — |   |
| Other                  income (expense)-net                         |   |                                                                 | 56,638     |   |                                                               |   | (1,132 | ) |   |   | 61,514 |   |   |   | (8,947 | ) |
| Income                  before provision for state income taxes     |   |                                                                 | 278,977    |   |                                                               |   | 182,026 |   |   |   | 612,568 |   |   |   | 388,181 |   |
| Provision                  for state income taxes                   |   |                                                                 | 19,402     |   |                                                               |   | — |   |   |   | 42,770 |   |   |   | — |   |
| Net                  Income before provision for state income taxes |   | $                                                                    | 259,575    |   |                                                               | $      | 182,026 |   |   | $ | 569,798 |   |   | $ | 388,181 |   |
|                                                                |   |                                                                 |       |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Basic                  earnings  per share                |   | $                                                                    | 0.02       |   |                                                               | $      | 0.01 |   |   | $ | 0.05 |   |   | $ | 0.03 |   |
|                                                                |   |                                                                 |       |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Basic                  weighted average shares outstanding          |   |                                                                 | 12,098,302 |   |                                                               |   | 11,940,060 |   |   |   | 12,019,618 |   |   |   | 11,940,060 |   |
|                                                                |   |                                                                 |       |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Diluted  earnings                  per share              |   | $                                                                    | 0.02       |   |                                                               | $      | 0.01 |   |   | $ | 0.05 |   |   | $ | 0.03 |   |
|                                                                |   |                                                                 |       |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |
| Diluted                  weighted average shares outstanding        |   |                                                                 | 12,098,302 |   |                                                               |   | 12,740,086 |   |   |   | 12,019,618 |   |   |   | 12,664,308 |   |
|                                                                |   |                                                                 |       |   |                                                               |   |   |   |   |   |   |   |   |   |   |   |

----

**TOUCHSTONE          SOFTWARE CORPORATION AND SUBSIDIARIES**

**CONSOLIDATED        STATEMENTS OF CASH FLOWS**

** (unaudited)**

|                                                                                                                |   | **Six                  months ended****June                  30,** |      |
|---------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------|-----------|
|                                                                                                                |   | **2007**                                                           |      |   | **2006** |   |
| Cash                  flows from operating activities:                                                              |   |                                                               |      |   |   |   |
| Net                  income                                                                                         |   | $                                                                  | 569,798   |   |   | $ | 388,181 |   |
| Adjustments                  to reconcile net income to net cash provided by operating                  activities: |   |                                                               |      |   |   |   |   |   |
| Depreciation                                                                                                        |   |                                                               | 56,796    |   |   |   | 45,502 |   |
| Gain                  on acquisition of subsidairy                                                                  |   |                                                               | (38,564   | ) |   |   |   |   |
| Stock                  option compensation                                                                          |   |                                                               | 18,322    |   |   |   | 5,770 |   |
| Changes                  in assets and liabilities:                                                                 |   |                                                               |      |   |   |   |   |   |
| Accounts                  receivable                                                                                |   |                                                               | 8,508     |   |   |   | 8,273 |   |
| Inventories                                                                                                         |   |                                                               | 8,527     |   |   |   | 17,665 |   |
| Prepaid                  expenses and other current assets                                                          |   |                                                               | (19,899   | ) |   |   | (12,967 | ) |
| Accounts                  payable                                                                                   |   |                                                               | (2,386    | ) |   |   | (34,182 | ) |
| Accrued                  liabilities                                                                                |   |                                                               | (23,482   | ) |   |   | (23,077 | ) |
| Net                  cash provided by operating activities                                                          |   |                                                               | 577,620   |   |   |   | 395,165 |   |
|                                                                                                                |   |                                                               |      |   |   |   |   |   |
| 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 long term debt                                                                         |   |                                                               | —   |   |   |   | (35,575 | ) |
| Net                  cash (used in) financing activities                                                            |   |                                                               | —   |   |   |   | (35,575 | ) |
|                                                                                                                |   |                                                               |      |   |   |   |   |   |
| Net                  increase in cash and cash equivalents                                                          |   |                                                               | 327,468   |   |   |   | 253,103 |   |
| Cash                  and cash equivalents, beginning of period                                                     |   |                                                               | 924,661   |   |   |   | 221,426 |   |
| Cash                  and cash equivalents, end of period.                                                          |   | $                                                                  | 1,252,129 |   |   | $ | 474,529 |   |
|                                                                                                                |   |                                                               |      |   |   |   |   |   |
| Supplemental                  disclosure of cash flow information:                                                  |   |                                                               |      |   |   |   |   |   |
| Cash                  paid during the period for:                                                                   |   |                                                               |      |   |   |   |   |   |
| Interest                                                                                                            |   | $                                                                  | —   |   |   | $ | 9,571 |   |
| Income                  taxes                                                                                       |   | $                                                                  | 1,368     |   |   | $ |  |   |
|                                                                                                                |   |                                                               |      |   |   |   |   |   |
| Non-cash                  investing and financing activity:                                                         |   |                                                               |      |   |   |   |   |   |
| Property                  and equipement additions financed                                                         |   | $                                                                  | 120,000   |   |   | $ | — |   |
| Common                  stock issued for property and equipment                                                     |   | $                                                                  | 142,2000  |   |   | $ | — |   |

----

**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** |
|----|-----------------|

----

**TOUCHSTONE          SOFTWARE CORPORATION AND SUBSIDIARIES**

**Notes          to Consolidated Financial Statements**

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

| **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** |
|--------|----------------------------------------------|

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**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 |
|--------------------------------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

**TOUCHSTONE          SOFTWARE CORPORATION AND          SUBSIDIARIES**

**Industry        Overview**

**Results        of Operations**

|                                                                     |   | **Three                  Months****ended** |   |   | **Three                  Months****ended** |   |   | **Six                  Months****ended** |   |   | **Six                  Months****ended** |   |
|--------------------------------------------------------------------------|--------|--------------------------------------------|--------|--------|--------------------------------------------|--------|--------|------------------------------------------|--------|--------|------------------------------------------|--------|
|                                                                     |   | **June                  30,**              |   |   | **June                  30,**              |   |   | **June                  30,**            |   |   | **June                  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                                        |   | 2                                          |   |   | 7                                          |   |   | 3                                        |   |   | 11                                       |   |
| Gross                  profit                                            |   | 98                                         |   |   | 93                                         |   |   | 97                                       |   |   | 89                                       |   |
| Operating                  expenses:                                     |   |                                  |   |   |                                  |   |   |                                |   |   |                                |   |
| Sales,                  marketing, general and  administrative |   | 63                                         |   |   | 46                                         |   |   | 59                                       |   |   | 44                                       |   |
| Research                  and development                                |   | 14                                         |   |   | 22                                         |   |   | 13                                       |   |   | 19                                       |   |
| Total                  operating expenses                                |   | 77                                         |   |   | 68                                         |   |   | 72                                       |   |   | 63                                       |   |
| Income                  from operations                                  |   | 21                                         |   |   | 25                                         |   |   | 25                                       |   |   | 26                                       |   |
| Other                  income (expense), net                             |   | 5                                          |   |   | —                                    |   |   | 3                                        |   |   | (1)                                      |   |
| Provision                  for state income tax                          |   | (1)                                        |   |   |                                  |   |   | (2)                                      |   |   |                                |   |
| Net                  income                                              |   | 25%                                        |   |   | 25%                                        |   |   | 26%                                      |   |   | 25%                                      |   |

----

**TOUCHSTONE        SOFTWARE CORPORATION AND SUBSIDIARIES**

**Comparison        of Six Month Periods Ended June 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***

----

**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** |
|------------------------------|-------------------------------------------------------|

----

**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**

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

----