content: UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549
  
  
  
                                 FORM 8-K
  
             Current Report Pursuant to Section 13 or 15(d) of
                      the Securities Exchange Act of 1934
  
  Date of report (Date of earliest event reported):  May 31, 2006
                                                     ------------
  
  
                TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
  
          (Exact Name of Registrant as Specified in its Charter)
  
  
               -----------------------------------------------
  
                Delaware                0-20303             13-2846796
                --------                -------             ----------
     (State or other jurisdiction    (Commission        (I.R.S. employer
           of incorporation)          file number)       identification no.)
  
  
         4 Hardscrabble Heights
             P.O. Box 382
             Brewster, NY                                      10509
         ----------------------                                -----
         (Address of principal                               (Zip Code)
           executive offices)
  
  
     Registrant's telephone number, including area codes: (845) 277-8100
                                                          --------------
  
  
  
                                NOT APPLICABLE
  
         (Former name or former address, if changed since last report)
  
  
  
        Check the appropriate box below if the Form 8-K filing is intended to
  simultaneously satisfy the filing obligation of the registrant under any of
  the following provisions (See General Instruction A.2 below):
  
  
  [  ]    Written communications pursuant to Rule 425 under the
          Securities Act (17 CFR 230.425)
  
  [  ]    Soliciting material pursuant to Rule 14a-12 under the
          Exchange Act (17 CFR 240.14a-12)
  
  [  ]    Pre-commencement communications pursuant to Rule 14d-2(b)
          under the Exchange Act (17 CFR 240.14d-2(b))
  
  [  ]    Pre-commencement communications pursuant to Rule 13e-4(c)
          under the Exchange Act (17 CFR 240.13e-4(c))
  
  
  <PAGE>
  
  
  ITEM 1.01.   ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
               ------------------------------------------
  
               Effective at the close of business on May 31, 2006,
  Touchstone Applied Science Associates, Inc. (the "Company")
  acquired all of the outstanding shares of Questar Educational
  Systems, Inc. ("Questar").  Questar provides test delivery,
  scoring and score analysis capabilities to state testing
  programs and also provides test material development.  The total
  consideration paid by the Company at closing for the Questar
  stock was $20,000,000, consisting of $15,000,000 in cash, the
  issuance of 222,222 shares of Series A-2 Convertible Preferred
  Stock of the Company ("Series A-2 Preferred Stock") (valued at
  $1,000,000, based on a price of $4.50 per share) and $4,000,000
  in a subordinated promissory note issued for the benefit of the
  eight selling shareholders of Questar.  The Company has also
  agreed to pay additional consideration in 2010 if Questar
  achieves certain revenue goals during the three fiscal years
  ending October 31, 2007, 2008 and 2009.  The maximum contingent
  earnout payment is $12,500,000, of which up to $10,000,000 shall
  be paid half in cash and half in shares of Series A-2
  Convertible Preferred Stock (valued on the closing date at $4.50
  per share), and $2,500,000 shall be paid, at the election of the
  Company, in cash or in additional shares of Series A-2
  Convertible Preferred Stock, valued at fair market value at the
  time of issuance, or any combination thereof.  The Company
  received a fairness opinion from Signal Hill Capital Group LLC
  ("Signal Hill"), with respect to the fair market value of the
  shares issued.  A copy of the stock purchase agreement with the
  selling shareholders of Questar (the "Stock Purchase Agreement")
  is filed as Exhibit 10.1 to this Report.  A copy of the
  subordinated note is filed as Exhibit 10.2 to this Report.
  
               In connection with the acquisition of Questar, the Company
  entered into an escrow agreement (the "Escrow Agreement") with
  the former shareholders of Questar pursuant to which the Company
  placed 1,111,111 shares of Series A-2 Convertible Preferred
  Stock in an escrow account pending release according to certain
  earn-out provisions in the Stock Purchase Agreement.  While in
  escrow, such shares do not have voting or dividend rights.  A
  copy of the Escrow Agreement is filed as Exhibit 10.3 to this
  Report.
  
               The Company financed the acquisition of Questar through
  senior debt and a private equity investment.  The Company
  entered into a loan agreement (the "Loan Agreement") with TD
  Banknorth, N.A. ("Banknorth"), pursuant to which the Company
  borrowed a term loan in an aggregate principal amount of
  $9,600,000, obtained a revolving line of credit in the amount of
  $4,000,000 and had issued on its behalf a standby letter of
  credit in the original stated amount of $194,750 against
  availability under the revolving line of credit.  The Loan
  Agreement contains ongoing financial covenants on a quarterly
  basis.  The term loan is interest-only for the first six months
  of the loan, and then is payable in fifty-four equal monthly
  installments of principal and interest on a five year
  amortization schedule.  The Company has entered into an interest
  rate swap agreement with Banknorth pursuant to which Banknorth
  is paying the Company 250 basis points over the one month USD
  LIBOR BBA rate and the Company is paying Banknorth a fixed rate
  of 7.9% on a value of $9,600,000 declining concurrently with the
  term loan.  The term loan balloons on May 30, 2011.  Advances
  under the revolving line of credit are based on a borrowing base
  of eligible accounts receivable and eligible inventory of the
  Company and Questar.  The revolving line of credit is available
  until April 30, 2008.  Both the term loan and the revolving loan
  are secured by the assets of the Company and by the assets of
  Questar.  The proceeds from the loans were used to pay a portion
  of the purchase price for the shares of Questar and closing
  costs for the transaction, and for working capital.  A copy of
  the Loan Agreement is filed as Exhibit 10.4 to this Report.  A
  copy of the security agreement between the Company and Banknorth
  is filed as Exhibit 10.5 to this Report.  A copy of the security
  agreement between Questar and Banknorth is filed as Exhibit 10.6
  to this Report.
  
               The Company also entered into a securities purchase
  agreement (the "Series A Convertible Preferred Stock Purchase
  Agreement") with Camden Partners Strategic Fund III, L.P. and
  Camden Partners Strategic Fund III-A, L.P. (collectively, the
  "Investors"), pursuant to which the Company issued and sold to
  the Investors 1,666,667 shares of its Series A-1 Convertible
  Preferred Stock ("Series A-1 Preferred Stock") (valued at
  $7,500,000, based on a price of $4.50 per share).  The proceeds
  from the sale of stock were used to pay a portion of the
  purchase price for the shares of Questar and closing costs for
  the transaction, with the balance being retained by the Company
  for working capital.  Two members of the Company's Board of
  Directors, Donald W. Hughes and David L. Warnock are also
  principals of each of the Investors.  A copy of the Series A
  Convertible Preferred Stock Purchase Agreement is filed as
  Exhibit 10.7 to this Report.
  
               In connection with the sale of shares of Series A-1
  Preferred Stock to the Investors, the Company entered into a
  voting agreement (the "Voting Agreement") with the Investors
  pursuant to which the Company has agreed that so long as the
  Investors own at least 50% of the Series A-1 Convertible
  Preferred Stock or the equivalent number of shares of Common
  Stock of the Company if converted, the Investors shall have the
  right to nominate up to three members of the Board of Directors
  of the Company.  As of the date of this Report, the Investors
  have nominated David L. Warnock, and Donald W. Hughes as two of
  the members of the Board of Directors they are permitted to
  nominate.  Messrs. Warnock and Hughes are incumbent directors on
  the Board.  The Investors have not yet named the third director
  nominee to which they are entitled.  A copy of the Voting
  Agreement is filed as Exhibit 4.1 to this Report.
  
               Pursuant to the Voting Agreement, certain executive
  officers who are stockholders of the Company have agreed that so
  long as the Investors own at least 833,333 shares of Series A-1
  Preferred Stock of the Company or the equivalent shares of
  Common Stock of the Company if converted, at each meeting of
  stockholders for the purpose of electing directors, to cast
  their eligible votes in favor of the nominees of the Investors.
  In addition, at each meeting of stockholders for the purpose of
  electing directors, the Investors have agreed to cast all of
  their eligible votes in favor of the directors nominated by the
  Company.
  
               The Company entered into an investor rights agreement
  (the "Investor Rights Agreement"), with the Investors pursuant to
  which the Company has granted the Investors rights to register
  under the Securities Act of 1933, as amended (the "Act"), the
  shares of Common Stock into which the Series A-1 Preferred Stock
  is convertible in accordance with provisions of the Investor
  Rights Agreement and the Amended Certificate of Designations of
  Series A Convertible Preferred Stock (the "Certificate of
  Designations").  A copy of the Investor Rights Agreement is
  filed as Exhibit 4.2 to this Report.  A copy of the Certificate
  of Designations is filed as Exhibit 3.1 to this Report.
  
               In connection with the acquisition of Questar, the Company
  entered into an investor rights agreement (the "Questar Investor
  Rights Agreement") with certain former shareholders of Questar
  pursuant to which the Company has granted to such persons rights
  to register under the Act the shares of Common Stock into which
  the Series A-2 Preferred Stock is convertible.  A copy of the
  Questar Investor Rights Agreement is filed as Exhibit 4.3 to
  this Report.
  
               The Company has entered into employment agreements for an
  initial twenty-four month term with certain members of the
  management of Questar.  Such employment agreements with the
  Questar management team include non-competition covenants and
  proprietary rights agreements.
  
  ITEM 2.01.   COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
               --------------------------------------------------
  
          (a)  See the discussion in Item 1.01 of this Current Report
  which is incorporated herein by reference.
  
        Effective May 31, 2006, the Company completed its
  acquisition of Questar under the Stock Purchase Agreement
  described under Item 1.01 above.  The consideration paid or to
  be paid by the Company for Questar consists of the following:
  
               1. $15,000,000 in cash;
  
               2. the issuance to the selling shareholders of Questar
     of 222,222 shares of Series A-2 Preferred Stock of the
     Company (valued at $1,000,000, based on a price of $4.50
     per share);
  
               3. $4,000,000 in a subordinated promissory note issued
     to the paying agent of the eight former shareholders of
     Questar;
  
               4. a contingent earnout payment of $10,000,000,
     payable, half in cash and half in Series A-2 Preferred
     Stock (based on a purchase price of $4.50 per share), only
     to the extent that Questar satisfies cumulative revenue
     goals over the earnout period of the three fiscal years
     ending October 31, 2007, 2008 and 2009; and
  
               5. an additional contingent earnout payment of
     $2,500,000, payable, at the election of the Company, in
     cash or in additional shares of Series A-2 Preferred Stock
     (based on market value of the Company's Common Stock at the
     time of payment), only to the extent that Questar exceeds
     cumulative revenue goals over the earnout period of the
     three fiscal years ending October 31, 2007, 2008 and 2009.
  
          (e)  Camden Partners Strategic Fund III, L.P. ("Camden
  III") is a Delaware limited partnership formed in 2004.  It is a
  private equity fund that invests in emerging micro-cap public
  and late stage private companies, focusing on companies in the
  business and financial services, education, and healthcare
  industries.  Camden III is managed by its general partner,
  Camden Partners Strategic III, LLC which, in turn, is managed by
  its managing member, Camden Partners Strategic Manager, LLC.
  David Warnock and Donald Hughes, who are directors of the
  Company, are each managing members of Camden Partners Strategic
  Manager, LLC.
  
        Camden Partners Strategic Fund III-A, L.P. ("Camden III-A")
  is a Delaware limited partnership formed in 2004.  It is a
  private equity fund that invests in parallel with Camden III.
  Camden III-A is managed by its general partner, Camden Partners
  Strategic III, LLC, which in turn is managed by its managing
  member, Camden Partners Strategic Manager, LLC.  David Warnock
  and Donald Hughes, who are directors of the Company, are each
  managing members of Camden Partners Strategic Manager, LLC.
  
        Cahill, Warnock Strategic Partners Fund, L.P. ("CW") and
  Strategic Associates, L.P. ("SA") are stockholders of the
  Company and affiliates of Camden III and Camden III-A.
  Immediately prior to the consummation of the Questar
  transactions described in this Report, CW and SA together
  beneficially owned 20.4% of the Company's common stock on a
  fully diluted basis.
  
        David Warnock and Donald Hughes, who are directors of the
  Company, are each managers of Camden Partners Strategic Manager,
  LLC and general partners of the general partner of CW and SA.
  Mr. Warnock is President and Mr. Hughes is Executive Vice
  President of Camden Partners Holdings, LLC, which serves as a
  manager and advisor to Camden III, Camden III-A, CW and SA.
  
        After giving effect to the issuance and sale of the Series
  A-1 Preferred Stock and the Series A-2 Preferred Stock, the
  Investors will own 34.7% of the Company's Common Stock on a
  fully-diluted basis, and CW and SA together will own 12.3% of
  the Company's Common Stock on a fully diluted basis.  The
  entities controlled by Messrs. Warnock and Hughes -- CW, SA,
  Camden III and Camden III-A -- will own an aggregate of 47.0% of
  the Company's Common Stock on a fully diluted basis.
  
        The disinterested members of the Board of Directors of the
  Company discussed and approved the transactions between the
  Company and the Investors, and concluded that the terms of such
  transactions were no less favorable to the Company than those
  that would otherwise have been available to the Company from
  unrelated third parties.
  
        On June 1, 2006, the Company issued a press release
  announcing its acquisition of Questar.  A copy of this press
  release has been filed with the Securities and Exchange
  Commission.
  
  ITEM 3.02.   UNREGISTERED SALES OF EQUITY SECURITIES.
               ---------------------------------------
  
        See the discussion in Item 1.01 of this Current Report,
  which is incorporated herein by reference.
  
        Upon consummation of the transactions discussed above, the
  Company (a) issued to the selling shareholders of Questar,
  222,222 shares of Series A-2 Preferred Stock (valued at $4.50
  per share), as part payment of the purchase price at closing and
  (b) delivered to the escrow agent, 1,111,111 shares of the
  Series A-2 Preferred Stock (valued at $4.50 per share), which
  will be deemed earned by, and will be released to, the former
  shareholders of Questar if revenue goals over the earnout period
  of the three fiscal years ending October 31, 2007, 2008 and
  2009, are met.  The issuance and sale of the Series A-2
  Preferred Stock did not involve a public offering pursuant to
  the exemption from registration provided by Section 4(2) of the
  Act.  With respect to the 222,222 shares of Series A-2 Preferred
  Stock issued as part payment of the purchase price at closing,
  the Company has agreed to include such shares of Common Stock
  underlying the Series A-2 Preferred Stock in a registration
  statement if, and when, filed by the Company, upon demand of the
  Investors, at any time following one year after the issuance
  date of the Series A-1 Preferred Stock.  With respect to the
  escrowed shares, the Company has agreed to file a registration
  statement under the Act for the shares of Common Stock into
  which the Series A-2 Preferred Stock will be convertible, upon
  demand of the former shareholders of Questar following the
  release, if any, of the escrowed shares, or to include such
  shares of Common Stock in a registration statement if, and when,
  filed by the Company with respect to the shares of Common Stock
  beneficially owned by the Investors.
  
        The Company issued 1,666,667 shares of the Series A-1
  Preferred Stock to Camden III and Camden III-A, in a transaction
  not involving a public offering pursuant to the exemption from
  registration provided by Section 4(2) of the Act.  The Company
  has agreed to file a registration statement under the Act with
  respect to the shares of Common Stock underlying the Series A-1
  Preferred Stock, upon demand of the Investors, at any time
  following one year after the issuance date of the Series A-1
  Preferred Stock, in accordance with the Investor Rights
  Agreement.
  
        Initially, the shares of Series A-1 Preferred Stock and the
  Series A-2 Preferred Sock are convertible into shares of Common
  Stock on a one-for-one basis.  The conversion rate is subject to
  anti-dilution adjustments set forth in the Certificate of
  Designations, filed as Exhibit 3.1 to this Report.  For the
  first three years after the issuance, neither Series A-1
  Preferred Stock nor Series A-2 Preferred Stock will accrue
  dividends.  Thereafter, dividends will accrue at the rate of 8%
  per annum, payable in cash or additional shares of Series A
  Preferred Stock, at the election of the Company; provided,
  however, that no shares of Series A-2 Preferred Stock will
  accrue any dividends until, and after the time when, the Series
  A-2 Preferred Stock is released to the selling shareholders of
  Questar in accordance with the Escrow Agreement.
  
        Each share of Series A-1 Preferred Stock is entitled to
  cast one vote per each share of Common Stock into which such
  share of Series A-1 Preferred Stock is convertible as of the
  record date for a stockholder vote.  Each share of Series A-2
  Preferred Stock that has been issued to the selling shareholders
  of Questar on the closing date is entitled to cast one vote per
  each share of Common Stock into which such share of Series A-2
  Preferred Stock is convertible as of the record date for a
  stockholder vote.  The shares of Series A-2 Preferred Stock that
  are held in escrow pending release if the earnout hurdles are
  satisfied, will not be entitled to vote so long as such shares
  remain in escrow.  The shares of Series A-1 Preferred Stock and
  Series A-2 Preferred Stock which are entitled to vote shall vote
  together with the Common Stock as a single class.
  
        Upon closing of the transactions described in Item 1.01 of
  this Current Report, the Company issued to Signal Hill a five-
  year warrant to purchase up to 50,000 shares of the Company's
  Common Stock, at an exercise price of $4.50 per share.  The
  warrant was issued as part of the consideration paid to Signal
  Hill for its role as the Company's investment banker and
  financial advisor in the acquisition of Questar and the
  financing thereof.  Neither the warrant nor the underlying
  shares of Common Stock have been registered under the Act, in
  reliance upon the exemption from registration pursuant to
  Section 4(2) of the Act.  A copy of the warrant certificate
  issued to Signal Hill is filed as Exhibit 4.4 to this Report.
  
  ITEM 3.03.   MATERIAL MODIFICATION TO RIGHTS OF SECURITY HOLDERS.
               ---------------------------------------------------
  
        See the discussions in Item 1.01 and Item 3.02 of this
  Current Report, which are incorporated herein by reference.
  
        In connection with the acquisition of Questar, the Company
  authorized the issuance of a new class of preferred stock (the
  "Series A Preferred Stock") pursuant to the Certificate of
  Designations filed with the Secretary of State of Delaware.  The
  Series A Preferred Stock consists of 5,000,000 authorized
  shares, and may, at the discretion of the Board, be issued in
  sub-series, designated as "Series A-1 Convertible Preferred
  Stock" and "Series A-2 Convertible Preferred Stock".  The Series
  A-1 Convertible Preferred Stock and the Series A-2 Convertible
  Preferred Stock rank senior to the Company's Common Stock and to
  any future issuances of preferred stock with respect to dividend
  payments and the distribution of assets.
  
        For a period of three (3) years following the date of
  issuance of the shares of Series A Preferred Stock, the holders
  of outstanding shares of Series A Preferred Stock shall not be
  entitled to receive any dividends, and no dividends shall accrue
  with respect to shares of Series A Preferred Stock, during such
  period.  Commencing on the first day of the fourth (4th) year
  following the date of issuance of the shares of Series A
  Preferred Stock, the holders of the outstanding shares of Series
  A Preferred Stock (except as discussed below) shall be entitled
  to receive dividends at the rate of eight percent (8.0%) per
  annum of the face value ($4.50 per share) of the Series A
  Preferred Stock.  Such dividends shall accrue on a quarterly
  basis.  Whether the dividends on the Series A Preferred Stock
  are to be paid in cash or in-kind shall be at the sole election
  of the Company at the end of each fiscal quarter of the Company,
  but such election shall be applicable to all holders at the time
  of such election.
  
        The shares of Series A-2 Preferred Stock held in escrow,
  pending the achievement of the earnout goals, will not be
  entitled to voting rights and will not accrue dividends until
  such time as the shares have been delivered, if at all, out of
  escrow in payment of the earnout.  Any shares held in escrow
  that are not paid as part of the earnout will be returned to the
  Company and cancelled.
  
  ITEM 5.02.   DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS;
               ---------------------------------------------
               ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL
               -----------------------------------------------
               OFFICERS.
               --------
  
        (d)    In connection with the acquisition of Questar, the
  Company adopted resolutions to expand its Board of Directors
  from eight to ten members.  Theodore Naegeli has been elected to
  fill the newly-created vacancy on the Company's Board of
  Directors as of June 1, 2006.  Mr. Naegeli, a former principal
  shareholder and former Chief Executive Officer of Questar, was
  asked by the Company to join the Board.  Mr. Naegeli acquired
  43,488 shares of Series A-2 Preferred Stock and $2,935,500 as
  consideration paid on the closing date for the sale of his
  shares in Questar to the Company.  Mr. Naegeli also has a 19.57%
  interest in the contingent earnout payment under the Stock
  Purchase Agreement.  Mr. Naegeli has served as Chief Executive
  Officer of Questar since 2000 and as President and Chief
  Executive Officer of Questar Data Systems, Inc. since 1991.
  
        In conjunction with the financing between the Company and
  the Investors, the Investors have been granted the right to
  nominate up to three members of the Company's Board of
  Directors.  Two such members nominated by the Investors, Donald
  W. Hughes and David L. Warnock, are incumbent members of the
  Board, and had been previously nominated by CW and SA.  When the
  Investors nominate an additional director, the final vacancy
  created by Board expansion will be filled.  The Company, certain
  management stockholders of the Company, CW and SA have agreed to
  endorse the nominees of the Investors at each annual meeting of
  stockholders of the Company, in accordance with the Voting
  Agreement.
  
  ITEM 5.03.   AMENDMENTS TO ARTICLES OF INCORPORATION OR BY-LAWS;
               ---------------------------------------------------
               CHANGE IN FISCAL YEAR.
               ----------------------
  
        See discussion in Item 3.03 of this Current Report which is
  incorporated herein by reference.
  
  ITEM 9.01.   FINANCIAL STATEMENTS AND EXHIBITS.
               ----------------------------------
  
          (a)  FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
  
        The Company will file the financial statements required by
  Rule 3-05(b) of Regulation S-X by amendment to this Current
  Report on Form 8-K not later than 71 calendar days following the
  date on which this Current Report was required to be filed.
  
          (b)  PRO FORMA FINANCIAL INFORMATION.
  
        The Company will file the pro forma financial statements
  required by Article 11 of Regulation S-X by amendment to this
  Current Report on Form 8-K not later than 71 calendar days
  following the date on which this Current Report was required to
  be filed.
  
          (d)  EXHIBITS.
  
        The following Exhibits are filed as part of this Report:
  
        3.1    Amended Certificate of Designations of
               Series A Convertible Preferred Stock filed
               with the Secretary of State of Delaware on
               May 25, 2006.
  
        4.1    Voting Agreement, dated as of May 31, 2006,
               by and among Camden Partners Strategic Fund
               III, L.P., Camden Partners Strategic Fund
               III-A, L.P. and Touchstone Applied Science
               Associates, Inc.
  
        4.2    Investor Rights Agreement, dated as of May
               31, 2006, by and among Camden Partners
               Strategic Fund III, L.P., Camden Partners
               Strategic Fund III-A, L.P. and Touchstone
               Applied Science Associates, Inc.
  
        4.3    Questar Investor Rights Agreement, dated as
               of May 31, 2006, by and among John Adams,
               David Ihle, Theodore Naegeli, Terry
               Appleman, Mark Budde, MaJeana Hallstrom,
               Greg Lindstrom and Susan Trent, and
               Touchstone Applied Science Associates, Inc.
  
        4.4    Warrant Certificate issued to Signal Hill
               Capital Group, LLC dated May 31, 2006.
  
       10.1    Stock Purchase Agreement, dated as of May
               31, 2006, by and among John Adams, David
               Ihle, Theodore Naegeli, Terry Appleman,
               Mark Budde, MaJeana Hallstrom, Greg
               Lindstrom and Susan Trent, and Touchstone
               Applied Science Associates, Inc.
  
       10.2    Subordinated Note, dated May 31, 2006,
               issued by Touchstone Applied Science
               Associates, Inc. to Questar Data Systems,
               Inc., as paying agent for the selling
               shareholders of Questar Educational
               Systems, Inc.
  
       10.3    Escrow Agreement, dated as of May 31, 2006,
               by and among John Adams, David Ihle,
               Theodore Naegeli, Terry Appleman, Mark
               Budde, MaJeana Hallstrom, Greg Lindstrom,
               Susan Trent, and Rider, Weiner & Frankel,
               P.C. and Touchstone Applied Science
               Associates, Inc.
  
       10.4    Loan Agreement, dated as of May 31, 2006,
               by and among Touchstone Applied Science
               Associates, Inc., Questar Educational
               Systems, Inc. and TD Banknorth, N.A.
  
       10.5    Security Agreement, dated as of May 31,
               2006, between Touchstone Applied Science
               Associates, Inc. and TD Banknorth, N.A.
  
       10.6    Security Agreement, dated as of May 31,
               2006, between Questar Educational Systems,
               Inc. and TD Banknorth, N.A.
  
       10.7    Series A Convertible Preferred Stock
               Purchase Agreement, dated as of May 31,
               2006, by and among Camden Partners
               Strategic Fund III, L.P., Camden Partners
               Strategic Fund III-A, L.P. and Touchstone
               Applied Science Associates, Inc.
  
       21      Subsidiaries of the Company (filed herewith).
  
       99.1    Press Release dated June 1, 2006
               (incorporated by reference from Current
               Report on Form 8-K, dated June 1, 2006).
  
  <PAGE>
  
  
                                SIGNATURES
  
        Pursuant to the requirements of the Securities Exchange Act
  of 1934, the Registrant has duly caused this report to be signed
  on its behalf by the undersigned hereunto duly authorized.
  
  
                                            TOUCHSTONE APPLIED SCIENCE
                                            ASSOCIATES, INC.
  
  
                                            By: ANDREW L. SIMON
                                                ----------------------
                                                Andrew L. Simon
  Date:   June 6, 2006                          President and Chief
                                                Executive Officer and
                                                Chief Financial Officer
  
  
  <PAGE>
  
                             EXHIBIT INDEX
  
   3.1   Amended Certificate of Designations of Series A Convertible
         Preferred Stock filed with the Secretary of State of Delaware
         on May 25, 2006.
  
   4.1   Voting Agreement, dated as of May 31, 2006, by and among
         Camden Partners Strategic Fund III, L.P., Camden Partners
         Strategic Fund III-A, L.P. and Touchstone Applied Science
         Associates, Inc.
  
   4.2   Investor Rights Agreement, dated as of May 31, 2006, by and
         among Camden Partners Strategic Fund III, L.P., Camden
         Partners Strategic Fund III-A, L.P. and Touchstone Applied
         Science Associates, Inc.
  
   4.3   Questar Investor Rights Agreement, dated as of May 31, 2006,
         by and among John Adams, David Ihle, Theodore Naegeli, Terry
         Appleman, Mark Budde, MaJeana Hallstrom, Greg Lindstrom and
         Susan Trent, and Touchstone Applied Science Associates, Inc.
  
   4.4   Warrant Certificate issued to Signal Hill Capital Group, LLC
         dated May 31, 2006.
  
  10.1   Stock Purchase Agreement, dated as of May 31, 2006, by and
         among John Adams, David Ihle, Theodore Naegeli, Terry
         Appleman, Mark Budde, MaJeana Hallstrom, Greg Lindstrom and
         Susan Trent, and Touchstone Applied Science Associates, Inc.
  
  10.2   Subordinated Note, dated May 31, 2006, issued by Touchstone
         Applied Science Associates, Inc. to Questar Data Systems,
         Inc., as paying agent for the selling shareholders of Questar
         Educational Systems, Inc.
  
  10.3   Escrow Agreement, dated as of May 31, 2006, by and among John
         Adams, David Ihle, Theodore Naegeli, Terry Appleman, Mark
         Budde, MaJeana Hallstrom, Greg Lindstrom, Susan Trent, and
         Rider, Weiner & Frankel, P.C. and Touchstone Applied Science
         Associates, Inc.
  
  10.4   Loan Agreement, dated as of May 31, 2006, by and among
         Touchstone Applied Science Associates, Inc., Questar
         Educational Systems, Inc. and TD Banknorth, N.A.
  
  10.5   Security Agreement, dated as of May 31, 2006, between
         Touchstone Applied Science Associates, Inc. and TD Banknorth, N.A.
  
  10.6   Security Agreement, dated as of May 31, 2006, between Questar
         Educational Systems, Inc. and TD Banknorth, N.A.
  
  10.7   Series A Convertible Preferred Stock Purchase Agreement,
         dated as of May 31, 2006, by and among Camden Partners
         Strategic Fund III, L.P., Camden Partners Strategic Fund III-A, L.P.
         and Touchstone Applied Science Associates, Inc.
  
  21     Subsidiaries of the Company (filed herewith).
  
  99.1   Press Release dated June 1, 2006 (incorporated by reference
         from Current Report on Form 8-K, dated June 1, 2006).
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text: UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549
  
                                 FORM 8-K
  
             Current Report Pursuant to Section 13 or 15(d) of
                      the Securities Exchange Act of 1934
  
  Date of report (Date of earliest event reported):  May 31, 2006
                                                     ------------
  
                TOUCHSTONE APPLIED SCIENCE ASSOCIATES, INC.
  
          (Exact Name of Registrant as Specified in its Charter)
  
               -----------------------------------------------
  
                Delaware                0-20303             13-2846796
                --------                -------             ----------
     (State or other jurisdiction    (Commission        (I.R.S. employer
           of incorporation)          file number)       identification no.)
  
         4 Hardscrabble Heights
             P.O. Box 382
             Brewster, NY                                      10509
         ----------------------                                -----
         (Address of principal                               (Zip Code)
           executive offices)
  
     Registrant's telephone number, including area codes: (845) 277-8100
                                                          --------------
  
                                NOT APPLICABLE
  
         (Former name or former address, if changed since last report)
  
        Check the appropriate box below if the Form 8-K filing is intended to
  simultaneously satisfy the filing obligation of the registrant under any of
  the following provisions (See General Instruction A.2 below):
  
  [  ]    Written communications pursuant to Rule 425 under the
          Securities Act (17 CFR 230.425)
  
  [  ]    Soliciting material pursuant to Rule 14a-12 under the
          Exchange Act (17 CFR 240.14a-12)
  
  [  ]    Pre-commencement communications pursuant to Rule 14d-2(b)
          under the Exchange Act (17 CFR 240.14d-2(b))
  
  [  ]    Pre-commencement communications pursuant to Rule 13e-4(c)
          under the Exchange Act (17 CFR 240.13e-4(c))
  ITEM 1.01.   ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
               ------------------------------------------
  
               Effective at the close of business on May 31, 2006,
  Touchstone Applied Science Associates, Inc. (the "Company")
  acquired all of the outstanding shares of Questar Educational
  Systems, Inc. ("Questar").  Questar provides test delivery,
  scoring and score analysis capabilities to state testing
  programs and also provides test material development.  The total
  consideration paid by the Company at closing for the Questar
  stock was $20,000,000, consisting of $15,000,000 in cash, the
  issuance of 222,222 shares of Series A-2 Convertible Preferred
  Stock of the Company ("Series A-2 Preferred Stock") (valued at
  $1,000,000, based on a price of $4.50 per share) and $4,000,000
  in a subordinated promissory note issued for the benefit of the
  eight selling shareholders of Questar.  The Company has also
  agreed to pay additional consideration in 2010 if Questar
  achieves certain revenue goals during the three fiscal years
  ending October 31, 2007, 2008 and 2009.  The maximum contingent
  earnout payment is $12,500,000, of which up to $10,000,000 shall
  be paid half in cash and half in shares of Series A-2
  Convertible Preferred Stock (valued on the closing date at $4.50
  per share), and $2,500,000 shall be paid, at the election of the
  Company, in cash or in additional shares of Series A-2
  Convertible Preferred Stock, valued at fair market value at the
  time of issuance, or any combination thereof.  The Company
  received a fairness opinion from Signal Hill Capital Group LLC
  ("Signal Hill"), with respect to the fair market value of the
  shares issued.  A copy of the stock purchase agreement with the
  selling shareholders of Questar (the "Stock Purchase Agreement")
  is filed as Exhibit 10.1 to this Report.  A copy of the
  subordinated note is filed as Exhibit 10.2 to this Report.
  
               In connection with the acquisition of Questar, the Company
  entered into an escrow agreement (the "Escrow Agreement") with
  the former shareholders of Questar pursuant to which the Company
  placed 1,111,111 shares of Series A-2 Convertible Preferred
  Stock in an escrow account pending release according to certain
  earn-out provisions in the Stock Purchase Agreement.  While in
  escrow, such shares do not have voting or dividend rights.  A
  copy of the Escrow Agreement is filed as Exhibit 10.3 to this
  Report.
  
               The Company financed the acquisition of Questar through
  senior debt and a private equity investment.  The Company
  entered into a loan agreement (the "Loan Agreement") with TD
  Banknorth, N.A. ("Banknorth"), pursuant to which the Company
  borrowed a term loan in an aggregate principal amount of
  $9,600,000, obtained a revolving line of credit in the amount of
  $4,000,000 and had issued on its behalf a standby letter of
  credit in the original stated amount of $194,750 against
  availability under the revolving line of credit.  The Loan
  Agreement contains ongoing financial covenants on a quarterly
  basis.  The term loan is interest-only for the first six months
  of the loan, and then is payable in fifty-four equal monthly
  installments of principal and interest on a five year
  amortization schedule.  The Company has entered into an interest
  rate swap agreement with Banknorth pursuant to which Banknorth
  is paying the Company 250 basis points over the one month USD
  LIBOR BBA rate and the Company is paying Banknorth a fixed rate
  of 7.9% on a value of $9,600,000 declining concurrently with the
  term loan.  The term loan balloons on May 30, 2011.  Advances
  under the revolving line of credit are based on a borrowing base
  of eligible accounts receivable and eligible inventory of the
  Company and Questar.  The revolving line of credit is available
  until April 30, 2008.  Both the term loan and the revolving loan
  are secured by the assets of the Company and by the assets of
  Questar.  The proceeds from the loans were used to pay a portion
  of the purchase price for the shares of Questar and closing
  costs for the transaction, and for working capital.  A copy of
  the Loan Agreement is filed as Exhibit 10.4 to this Report.  A
  copy of the security agreement between the Company and Banknorth
  is filed as Exhibit 10.5 to this Report.  A copy of the security
  agreement between Questar and Banknorth is filed as Exhibit 10.6
  to this Report.
  
               The Company also entered into a securities purchase
  agreement (the "Series A Convertible Preferred Stock Purchase
  Agreement") with Camden Partners Strategic Fund III, L.P. and
  Camden Partners Strategic Fund III-A, L.P. (collectively, the
  "Investors"), pursuant to which the Company issued and sold to
  the Investors 1,666,667 shares of its Series A-1 Convertible
  Preferred Stock ("Series A-1 Preferred Stock") (valued at
  $7,500,000, based on a price of $4.50 per share).  The proceeds
  from the sale of stock were used to pay a portion of the
  purchase price for the shares of Questar and closing costs for
  the transaction, with the balance being retained by the Company
  for working capital.  Two members of the Company's Board of
  Directors, Donald W. Hughes and David L. Warnock are also
  principals of each of the Investors.  A copy of the Series A
  Convertible Preferred Stock Purchase Agreement is filed as
  Exhibit 10.7 to this Report.
  
               In connection with the sale of shares of Series A-1
  Preferred Stock to the Investors, the Company entered into a
  voting agreement (the "Voting Agreement") with the Investors
  pursuant to which the Company has agreed that so long as the
  Investors own at least 50% of the Series A-1 Convertible
  Preferred Stock or the equivalent number of shares of Common
  Stock of the Company if converted, the Investors shall have the
  right to nominate up to three members of the Board of Directors
  of the Company.  As of the date of this Report, the Investors
  have nominated David L. Warnock, and Donald W. Hughes as two of
  the members of the Board of Directors they are permitted to
  nominate.  Messrs. Warnock and Hughes are incumbent directors on
  the Board.  The Investors have not yet named the third director
  nominee to which they are entitled.  A copy of the Voting
  Agreement is filed as Exhibit 4.1 to this Report.
  
               Pursuant to the Voting Agreement, certain executive
  officers who are stockholders of the Company have agreed that so
  long as the Investors own at least 833,333 shares of Series A-1
  Preferred Stock of the Company or the equivalent shares of
  Common Stock of the Company if converted, at each meeting of
  stockholders for the purpose of electing directors, to cast
  their eligible votes in favor of the nominees of the Investors.
  In addition, at each meeting of stockholders for the purpose of
  electing directors, the Investors have agreed to cast all of
  their eligible votes in favor of the directors nominated by the
  Company.
  
               The Company entered into an investor rights agreement
  (the "Investor Rights Agreement"), with the Investors pursuant to
  which the Company has granted the Investors rights to register
  under the Securities Act of 1933, as amended (the "Act"), the
  shares of Common Stock into which the Series A-1 Preferred Stock
  is convertible in accordance with provisions of the Investor
  Rights Agreement and the Amended Certificate of Designations of
  Series A Convertible Preferred Stock (the "Certificate of
  Designations").  A copy of the Investor Rights Agreement is
  filed as Exhibit 4.2 to this Report.  A copy of the Certificate
  of Designations is filed as Exhibit 3.1 to this Report.
  
               In connection with the acquisition of Questar, the Company
  entered into an investor rights agreement (the "Questar Investor
  Rights Agreement") with certain former shareholders of Questar
  pursuant to which the Company has granted to such persons rights
  to register under the Act the shares of Common Stock into which
  the Series A-2 Preferred Stock is convertible.  A copy of the
  Questar Investor Rights Agreement is filed as Exhibit 4.3 to
  this Report.
  
               The Company has entered into employment agreements for an
  initial twenty-four month term with certain members of the
  management of Questar.  Such employment agreements with the
  Questar management team include non-competition covenants and
  proprietary rights agreements.
  
  ITEM 2.01.   COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
               --------------------------------------------------
  
          (a)  See the discussion in Item 1.01 of this Current Report
  which is incorporated herein by reference.
  
        Effective May 31, 2006, the Company completed its
  acquisition of Questar under the Stock Purchase Agreement
  described under Item 1.01 above.  The consideration paid or to
  be paid by the Company for Questar consists of the following:
  
               1. $15,000,000 in cash;
  
               2. the issuance to the selling shareholders of Questar
     of 222,222 shares of Series A-2 Preferred Stock of the
     Company (valued at $1,000,000, based on a price of $4.50
     per share);
  
               3. $4,000,000 in a subordinated promissory note issued
     to the paying agent of the eight former shareholders of
     Questar;
  
               4. a contingent earnout payment of $10,000,000,
     payable, half in cash and half in Series A-2 Preferred
     Stock (based on a purchase price of $4.50 per share), only
     to the extent that Questar satisfies cumulative revenue
     goals over the earnout period of the three fiscal years
     ending October 31, 2007, 2008 and 2009; and
  
               5. an additional contingent earnout payment of
     $2,500,000, payable, at the election of the Company, in
     cash or in additional shares of Series A-2 Preferred Stock
     (based on market value of the Company's Common Stock at the
     time of payment), only to the extent that Questar exceeds
     cumulative revenue goals over the earnout period of the
     three fiscal years ending October 31, 2007, 2008 and 2009.
  
          (e)  Camden Partners Strategic Fund III, L.P. ("Camden
  III") is a Delaware limited partnership formed in 2004.  It is a
  private equity fund that invests in emerging micro-cap public
  and late stage private companies, focusing on companies in the
  business and financial services, education, and healthcare
  industries.  Camden III is managed by its general partner,
  Camden Partners Strategic III, LLC which, in turn, is managed by
  its managing member, Camden Partners Strategic Manager, LLC.
  David Warnock and Donald Hughes, who are directors of the
  Company, are each managing members of Camden Partners Strategic
  Manager, LLC.
  
        Camden Partners Strategic Fund III-A, L.P. ("Camden III-A")
  is a Delaware limited partnership formed in 2004.  It is a
  private equity fund that invests in parallel with Camden III.
  Camden III-A is managed by its general partner, Camden Partners
  Strategic III, LLC, which in turn is managed by its managing
  member, Camden Partners Strategic Manager, LLC.  David Warnock
  and Donald Hughes, who are directors of the Company, are each
  managing members of Camden Partners Strategic Manager, LLC.
  
        Cahill, Warnock Strategic Partners Fund, L.P. ("CW") and
  Strategic Associates, L.P. ("SA") are stockholders of the
  Company and affiliates of Camden III and Camden III-A.
  Immediately prior to the consummation of the Questar
  transactions described in this Report, CW and SA together
  beneficially owned 20.4% of the Company's common stock on a
  fully diluted basis.
  
        David Warnock and Donald Hughes, who are directors of the
  Company, are each managers of Camden Partners Strategic Manager,
  LLC and general partners of the general partner of CW and SA.
  Mr. Warnock is President and Mr. Hughes is Executive Vice
  President of Camden Partners Holdings, LLC, which serves as a
  manager and advisor to Camden III, Camden III-A, CW and SA.
  
        After giving effect to the issuance and sale of the Series
  A-1 Preferred Stock and the Series A-2 Preferred Stock, the
  Investors will own 34.7% of the Company's Common Stock on a
  fully-diluted basis, and CW and SA together will own 12.3% of
  the Company's Common Stock on a fully diluted basis.  The
  entities controlled by Messrs. Warnock and Hughes -- CW, SA,
  Camden III and Camden III-A -- will own an aggregate of 47.0% of
  the Company's Common Stock on a fully diluted basis.
  
        The disinterested members of the Board of Directors of the
  Company discussed and approved the transactions between the
  Company and the Investors, and concluded that the terms of such
  transactions were no less favorable to the Company than those
  that would otherwise have been available to the Company from
  unrelated third parties.
  
        On June 1, 2006, the Company issued a press release
  announcing its acquisition of Questar.  A copy of this press
  release has been filed with the Securities and Exchange
  Commission.
  
  ITEM 3.02.   UNREGISTERED SALES OF EQUITY SECURITIES.
               ---------------------------------------
  
        See the discussion in Item 1.01 of this Current Report,
  which is incorporated herein by reference.
  
        Upon consummation of the transactions discussed above, the
  Company (a) issued to the selling shareholders of Questar,
  222,222 shares of Series A-2 Preferred Stock (valued at $4.50
  per share), as part payment of the purchase price at closing and
  (b) delivered to the escrow agent, 1,111,111 shares of the
  Series A-2 Preferred Stock (valued at $4.50 per share), which
  will be deemed earned by, and will be released to, the former
  shareholders of Questar if revenue goals over the earnout period
  of the three fiscal years ending October 31, 2007, 2008 and
  2009, are met.  The issuance and sale of the Series A-2
  Preferred Stock did not involve a public offering pursuant to
  the exemption from registration provided by Section 4(2) of the
  Act.  With respect to the 222,222 shares of Series A-2 Preferred
  Stock issued as part payment of the purchase price at closing,
  the Company has agreed to include such shares of Common Stock
  underlying the Series A-2 Preferred Stock in a registration
  statement if, and when, filed by the Company, upon demand of the
  Investors, at any time following one year after the issuance
  date of the Series A-1 Preferred Stock.  With respect to the
  escrowed shares, the Company has agreed to file a registration
  statement under the Act for the shares of Common Stock into
  which the Series A-2 Preferred Stock will be convertible, upon
  demand of the former shareholders of Questar following the
  release, if any, of the escrowed shares, or to include such
  shares of Common Stock in a registration statement if, and when,
  filed by the Company with respect to the shares of Common Stock
  beneficially owned by the Investors.
  
        The Company issued 1,666,667 shares of the Series A-1
  Preferred Stock to Camden III and Camden III-A, in a transaction
  not involving a public offering pursuant to the exemption from
  registration provided by Section 4(2) of the Act.  The Company
  has agreed to file a registration statement under the Act with
  respect to the shares of Common Stock underlying the Series A-1
  Preferred Stock, upon demand of the Investors, at any time
  following one year after the issuance date of the Series A-1
  Preferred Stock, in accordance with the Investor Rights
  Agreement.
  
        Initially, the shares of Series A-1 Preferred Stock and the
  Series A-2 Preferred Sock are convertible into shares of Common
  Stock on a one-for-one basis.  The conversion rate is subject to
  anti-dilution adjustments set forth in the Certificate of
  Designations, filed as Exhibit 3.1 to this Report.  For the
  first three years after the issuance, neither Series A-1
  Preferred Stock nor Series A-2 Preferred Stock will accrue
  dividends.  Thereafter, dividends will accrue at the rate of 8%
  per annum, payable in cash or additional shares of Series A
  Preferred Stock, at the election of the Company; provided,
  however, that no shares of Series A-2 Preferred Stock will
  accrue any dividends until, and after the time when, the Series
  A-2 Preferred Stock is released to the selling shareholders of
  Questar in accordance with the Escrow Agreement.
  
        Each share of Series A-1 Preferred Stock is entitled to
  cast one vote per each share of Common Stock into which such
  share of Series A-1 Preferred Stock is convertible as of the
  record date for a stockholder vote.  Each share of Series A-2
  Preferred Stock that has been issued to the selling shareholders
  of Questar on the closing date is entitled to cast one vote per
  each share of Common Stock into which such share of Series A-2
  Preferred Stock is convertible as of the record date for a
  stockholder vote.  The shares of Series A-2 Preferred Stock that
  are held in escrow pending release if the earnout hurdles are
  satisfied, will not be entitled to vote so long as such shares
  remain in escrow.  The shares of Series A-1 Preferred Stock and
  Series A-2 Preferred Stock which are entitled to vote shall vote
  together with the Common Stock as a single class.
  
        Upon closing of the transactions described in Item 1.01 of
  this Current Report, the Company issued to Signal Hill a five-
  year warrant to purchase up to 50,000 shares of the Company's
  Common Stock, at an exercise price of $4.50 per share.  The
  warrant was issued as part of the consideration paid to Signal
  Hill for its role as the Company's investment banker and
  financial advisor in the acquisition of Questar and the
  financing thereof.  Neither the warrant nor the underlying
  shares of Common Stock have been registered under the Act, in
  reliance upon the exemption from registration pursuant to
  Section 4(2) of the Act.  A copy of the warrant certificate
  issued to Signal Hill is filed as Exhibit 4.4 to this Report.
  
  ITEM 3.03.   MATERIAL MODIFICATION TO RIGHTS OF SECURITY HOLDERS.
               ---------------------------------------------------
  
        See the discussions in Item 1.01 and Item 3.02 of this
  Current Report, which are incorporated herein by reference.
  
        In connection with the acquisition of Questar, the Company
  authorized the issuance of a new class of preferred stock (the
  "Series A Preferred Stock") pursuant to the Certificate of
  Designations filed with the Secretary of State of Delaware.  The
  Series A Preferred Stock consists of 5,000,000 authorized
  shares, and may, at the discretion of the Board, be issued in
  sub-series, designated as "Series A-1 Convertible Preferred
  Stock" and "Series A-2 Convertible Preferred Stock".  The Series
  A-1 Convertible Preferred Stock and the Series A-2 Convertible
  Preferred Stock rank senior to the Company's Common Stock and to
  any future issuances of preferred stock with respect to dividend
  payments and the distribution of assets.
  
        For a period of three (3) years following the date of
  issuance of the shares of Series A Preferred Stock, the holders
  of outstanding shares of Series A Preferred Stock shall not be
  entitled to receive any dividends, and no dividends shall accrue
  with respect to shares of Series A Preferred Stock, during such
  period.  Commencing on the first day of the fourth (4th) year
  following the date of issuance of the shares of Series A
  Preferred Stock, the holders of the outstanding shares of Series
  A Preferred Stock (except as discussed below) shall be entitled
  to receive dividends at the rate of eight percent (8.0%) per
  annum of the face value ($4.50 per share) of the Series A
  Preferred Stock.  Such dividends shall accrue on a quarterly
  basis.  Whether the dividends on the Series A Preferred Stock
  are to be paid in cash or in-kind shall be at the sole election
  of the Company at the end of each fiscal quarter of the Company,
  but such election shall be applicable to all holders at the time
  of such election.
  
        The shares of Series A-2 Preferred Stock held in escrow,
  pending the achievement of the earnout goals, will not be
  entitled to voting rights and will not accrue dividends until
  such time as the shares have been delivered, if at all, out of
  escrow in payment of the earnout.  Any shares held in escrow
  that are not paid as part of the earnout will be returned to the
  Company and cancelled.
  
  ITEM 5.02.   DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS;
               ---------------------------------------------
               ELECTION OF DIRECTORS; APPOINTMENT OF PRINCIPAL
               -----------------------------------------------
               OFFICERS.
               --------
  
        (d)    In connection with the acquisition of Questar, the
  Company adopted resolutions to expand its Board of Directors
  from eight to ten members.  Theodore Naegeli has been elected to
  fill the newly-created vacancy on the Company's Board of
  Directors as of June 1, 2006.  Mr. Naegeli, a former principal
  shareholder and former Chief Executive Officer of Questar, was
  asked by the Company to join the Board.  Mr. Naegeli acquired
  43,488 shares of Series A-2 Preferred Stock and $2,935,500 as
  consideration paid on the closing date for the sale of his
  shares in Questar to the Company.  Mr. Naegeli also has a 19.57%
  interest in the contingent earnout payment under the Stock
  Purchase Agreement.  Mr. Naegeli has served as Chief Executive
  Officer of Questar since 2000 and as President and Chief
  Executive Officer of Questar Data Systems, Inc. since 1991.
  
        In conjunction with the financing between the Company and
  the Investors, the Investors have been granted the right to
  nominate up to three members of the Company's Board of
  Directors.  Two such members nominated by the Investors, Donald
  W. Hughes and David L. Warnock, are incumbent members of the
  Board, and had been previously nominated by CW and SA.  When the
  Investors nominate an additional director, the final vacancy
  created by Board expansion will be filled.  The Company, certain
  management stockholders of the Company, CW and SA have agreed to
  endorse the nominees of the Investors at each annual meeting of
  stockholders of the Company, in accordance with the Voting
  Agreement.
  
  ITEM 5.03.   AMENDMENTS TO ARTICLES OF INCORPORATION OR BY-LAWS;
               ---------------------------------------------------
               CHANGE IN FISCAL YEAR.
               ----------------------
  
        See discussion in Item 3.03 of this Current Report which is
  incorporated herein by reference.
  
  ITEM 9.01.   FINANCIAL STATEMENTS AND EXHIBITS.
               ----------------------------------
  
          (a)  FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
  
        The Company will file the financial statements required by
  Rule 3-05(b) of Regulation S-X by amendment to this Current
  Report on Form 8-K not later than 71 calendar days following the
  date on which this Current Report was required to be filed.
  
          (b)  PRO FORMA FINANCIAL INFORMATION.
  
        The Company will file the pro forma financial statements
  required by Article 11 of Regulation S-X by amendment to this
  Current Report on Form 8-K not later than 71 calendar days
  following the date on which this Current Report was required to
  be filed.
  
          (d)  EXHIBITS.
  
        The following Exhibits are filed as part of this Report:
  
        3.1    Amended Certificate of Designations of
               Series A Convertible Preferred Stock filed
               with the Secretary of State of Delaware on
               May 25, 2006.
  
        4.1    Voting Agreement, dated as of May 31, 2006,
               by and among Camden Partners Strategic Fund
               III, L.P., Camden Partners Strategic Fund
               III-A, L.P. and Touchstone Applied Science
               Associates, Inc.
  
        4.2    Investor Rights Agreement, dated as of May
               31, 2006, by and among Camden Partners
               Strategic Fund III, L.P., Camden Partners
               Strategic Fund III-A, L.P. and Touchstone
               Applied Science Associates, Inc.
  
        4.3    Questar Investor Rights Agreement, dated as
               of May 31, 2006, by and among John Adams,
               David Ihle, Theodore Naegeli, Terry
               Appleman, Mark Budde, MaJeana Hallstrom,
               Greg Lindstrom and Susan Trent, and
               Touchstone Applied Science Associates, Inc.
  
        4.4    Warrant Certificate issued to Signal Hill
               Capital Group, LLC dated May 31, 2006.
  
       10.1    Stock Purchase Agreement, dated as of May
               31, 2006, by and among John Adams, David
               Ihle, Theodore Naegeli, Terry Appleman,
               Mark Budde, MaJeana Hallstrom, Greg
               Lindstrom and Susan Trent, and Touchstone
               Applied Science Associates, Inc.
  
       10.2    Subordinated Note, dated May 31, 2006,
               issued by Touchstone Applied Science
               Associates, Inc. to Questar Data Systems,
               Inc., as paying agent for the selling
               shareholders of Questar Educational
               Systems, Inc.
  
       10.3    Escrow Agreement, dated as of May 31, 2006,
               by and among John Adams, David Ihle,
               Theodore Naegeli, Terry Appleman, Mark
               Budde, MaJeana Hallstrom, Greg Lindstrom,
               Susan Trent, and Rider, Weiner & Frankel,
               P.C. and Touchstone Applied Science
               Associates, Inc.
  
       10.4    Loan Agreement, dated as of May 31, 2006,
               by and among Touchstone Applied Science
               Associates, Inc., Questar Educational
               Systems, Inc. and TD Banknorth, N.A.
  
       10.5    Security Agreement, dated as of May 31,
               2006, between Touchstone Applied Science
               Associates, Inc. and TD Banknorth, N.A.
  
       10.6    Security Agreement, dated as of May 31,
               2006, between Questar Educational Systems,
               Inc. and TD Banknorth, N.A.
  
       10.7    Series A Convertible Preferred Stock
               Purchase Agreement, dated as of May 31,
               2006, by and among Camden Partners
               Strategic Fund III, L.P., Camden Partners
               Strategic Fund III-A, L.P. and Touchstone
               Applied Science Associates, Inc.
  
       21      Subsidiaries of the Company (filed herewith).
  
       99.1    Press Release dated June 1, 2006
               (incorporated by reference from Current
               Report on Form 8-K, dated June 1, 2006).
  SIGNATURES
  
        Pursuant to the requirements of the Securities Exchange Act
  of 1934, the Registrant has duly caused this report to be signed
  on its behalf by the undersigned hereunto duly authorized.
  
                                            TOUCHSTONE APPLIED SCIENCE
                                            ASSOCIATES, INC.
  
                                            By: ANDREW L. SIMON
                                                ----------------------
                                                Andrew L. Simon
  Date:   June 6, 2006                          President and Chief
                                                Executive Officer and
                                                Chief Financial Officer
  EXHIBIT INDEX
  
   3.1   Amended Certificate of Designations of Series A Convertible
         Preferred Stock filed with the Secretary of State of Delaware
         on May 25, 2006.
  
   4.1   Voting Agreement, dated as of May 31, 2006, by and among
         Camden Partners Strategic Fund III, L.P., Camden Partners
         Strategic Fund III-A, L.P. and Touchstone Applied Science
         Associates, Inc.
  
   4.2   Investor Rights Agreement, dated as of May 31, 2006, by and
         among Camden Partners Strategic Fund III, L.P., Camden
         Partners Strategic Fund III-A, L.P. and Touchstone Applied
         Science Associates, Inc.
  
   4.3   Questar Investor Rights Agreement, dated as of May 31, 2006,
         by and among John Adams, David Ihle, Theodore Naegeli, Terry
         Appleman, Mark Budde, MaJeana Hallstrom, Greg Lindstrom and
         Susan Trent, and Touchstone Applied Science Associates, Inc.
  
   4.4   Warrant Certificate issued to Signal Hill Capital Group, LLC
         dated May 31, 2006.
  
  10.1   Stock Purchase Agreement, dated as of May 31, 2006, by and
         among John Adams, David Ihle, Theodore Naegeli, Terry
         Appleman, Mark Budde, MaJeana Hallstrom, Greg Lindstrom and
         Susan Trent, and Touchstone Applied Science Associates, Inc.
  
  10.2   Subordinated Note, dated May 31, 2006, issued by Touchstone
         Applied Science Associates, Inc. to Questar Data Systems,
         Inc., as paying agent for the selling shareholders of Questar
         Educational Systems, Inc.
  
  10.3   Escrow Agreement, dated as of May 31, 2006, by and among John
         Adams, David Ihle, Theodore Naegeli, Terry Appleman, Mark
         Budde, MaJeana Hallstrom, Greg Lindstrom, Susan Trent, and
         Rider, Weiner & Frankel, P.C. and Touchstone Applied Science
         Associates, Inc.
  
  10.4   Loan Agreement, dated as of May 31, 2006, by and among
         Touchstone Applied Science Associates, Inc., Questar
         Educational Systems, Inc. and TD Banknorth, N.A.
  
  10.5   Security Agreement, dated as of May 31, 2006, between
         Touchstone Applied Science Associates, Inc. and TD Banknorth, N.A.
  
  10.6   Security Agreement, dated as of May 31, 2006, between Questar
         Educational Systems, Inc. and TD Banknorth, N.A.
  
  10.7   Series A Convertible Preferred Stock Purchase Agreement,
         dated as of May 31, 2006, by and among Camden Partners
         Strategic Fund III, L.P., Camden Partners Strategic Fund III-A, L.P.
         and Touchstone Applied Science Associates, Inc.
  
  21     Subsidiaries of the Company (filed herewith).
  
  99.1   Press Release dated June 1, 2006 (incorporated by reference
         from Current Report on Form 8-K, dated June 1, 2006).