TOUCHSTONE APPLIED SCIENCE ASSOCIATES REPORTS 212% REVENUE GROWTH FOR Q1 FISCAL 2007

• Revenue Growth from both Core Operations and Questar Acquisition
• Year-Over-Year Q1 Pro Forma Revenue Grows 16%
• Posts EBITDA of $442,000 or Nine Cents Per Diluted Share
• Amortization Expense Affects Bottom Line
• Company to be Renamed Questar Assessment, Inc.

 

Brewster, New York, March 19, 2007

Touchstone Applied Science Associates, Inc. (OTCBB: TASA) today reported strong increases in revenue for the first quarter of fiscal 2007. The increase came from both the impact of Questar Educational Systems, acquired on May 31, 2006 and from core operations (revenue sources previous to the Questar acquisition). Revenues in the first quarter ended January 31, 2007 increased 212% to $9.6 million from $3.1 million in the first quarter of 2006.

“We achieved a solid first quarter performance” said Andrew L. Simon, President and CEO. “Questar added $5.9 million in revenue to the first quarter. Equally significant, we experienced 20% growth in revenues excluding the contribution from Questar. The growth came from the addition of new projects along with performing incremental scope work within our existing contracts”

Simon noted that first quarter revenue and net income were both in line with management’s expectations. “Typically the first quarter is when we see our client project workload begin to accelerate. Our fiscal second and third quarters are typically when we realize a majority of our revenue and earnings.” The Company’s second quarter ends April 30, 2007. Simon added that “We have a full plate of projects to complete over the next few months. Given our anticipated workload, we felt it was important to complete our re-branding and staff realignment as early as possible. That allows us to focus our attention on serving our customers, project performance and business development.” The Company has announced that, effective March 16, 2007, it will be renamed “Questar Assessment, Inc.”

Simon further stated “We recorded a net loss of $455,000, or $.09 per share, in the first quarter. However, we believe our net cash generated or EBITDA * (earnings before interest, taxes, depreciation and amortization) is a good indicator of our financial performance. Our EBITDA in the first quarter was approximately $442,000.”

* - EBITDA is not a measure of financial performance under accounting principles generally accepted in the U.S. or GAAP, and should not be considered an alternative to net income, or any other measure of performance under GAAP, or to cash flows from operating, investing or financing activities as an indicator of cash flows or a measure of liquidity.

As previously announced, the company recorded amortization expense associated with the intangible assets acquired from Questar. This non-cash expense was approximately $650,000 during the first quarter. This amounted to a $.08 per share reduction in earnings.

PRO FORMA RESULTS

On a comparative pro forma basis, after giving effect to the Questar acquisition as of May 31, 2006, EBITDA increased to $442,000 in the current quarter from approximately $260,000 in the first quarter of last year. Comparative pro forma revenues increased to $9.6 million this period from $8.3 million in the first quarter a year ago. EBITDA per share for the first quarter fiscal 2007 was $.09 versus a pro forma $.05 for the first quarter a year earlier.

GROSS MARGINS / OVERHEAD COSTS

“Gross margin in the first quarter was 46%,” Simon stated. “This was in line with our expectations and up from 36% in the first quarter of fiscal 2006. The increased gross margin was attributable to both the inclusion of the Questar projects in the current quarter as well as an increase in the gross margin experienced on projects undertaken previous to the Questar acquisition. Although margins will vary from period to period as our project mix changes, we are beginning to achieve greater efficiency in our overall business due to the streamlining of certain cost structures. We have also been able to leverage our existing capacity over a larger project and revenue base.”

MANAGEMENT COMMENTS

“Our combined operations are working well together. The first several months after any major acquisition are filled with challenges but I am pleased with the progress we have achieved to date. We expect our new identity as Questar Assessment, Inc. to complete the melding of what had been two distinct organizations into a single, more vibrant entity. It will also be an important tool in our business development efforts. Although our new identity will be formally rolled out today, you will note we have begun using our new name at the end of this news release,” Simon stated.

“We still have work to do in terms of securing additional projects that will allow us to make optimal use of our assets. We are also accelerating our business development activities to ensure that customers are fully aware of the scope of our capabilities and to realize our full potential. The market for assessment services is robust. Although we must still compete for new business, our new identity, combined with the breadth of our product offerings the depth of our management expertise and our tradition of outstanding service provide us with greater ability to compete for – and win – new contracts.”

CONFERENCE CALL Monday March 19, 2007 at 10:00 a.m. EDT

Management will host a conference call this morning to discuss first quarter fiscal 2007 results. The call is scheduled to begin at10:00 a.m. EDT. Participants may dial: 1-201-689-8470 for the live call. The call will also be web cast live and archived for three months. The web cast can be accessed at:

http://viavid.net/dce.aspx?sid=00003BF5

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ABOUT QUESTAR ASSESSMENT, INC. (formerly TASA)

Questar Assessment, Inc., headquartered in Brewster, N.Y., offers a comprehensive suite of educational assessment solutions to states, schools, school districts and to third parties. As one of the nation’s leading providers, Questar provides products and services that range from test design, development, calibration, and psychometric services through print production, distribution, scanning, scoring, reporting, and data analysis services, as well as readability analysis of written materials. To meet the requirements in electronic assessment, Questar offers on-line testing services to schools and educational entities in the K-12 market as well as customized assessment engines for curriculum providers. For more information, visit the company’s website at www.tasa.com

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At Questar Assessment, Inc.
(formerly TASA), contact:
Andrew L. Simon, President & CEO
845-277-8100
asimon@tasa.com

At The Investor Relations Company, contact:
Mike Arneth or Tad Gage
(312) 245-2700

 Statements contained in this release that are not historical facts are “forward-looking” statements as contemplated by the Private Securities Litigation Reform Act of 1995, as amended. Such forward-looking statements are subject to risks and uncertainties, which are enumerated in the company’s reports filed with The Securities and Exchange Commission. These risks and uncertainties could cause actual results to differ materially from those projected or implied in the forward-looking statements.

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