TouchStone and Standard Logic Plan to Merge

In a marriage of financial convenience, TouchStone Software Corp. of Huntington Beach has agreed to merge with Standard Logic Inc. of Anaheim, the companies said Tuesday.

TouchStone, a computer software company, and Standard Logic, an electronics hardware supplier, have dissimilar product lines. But officials at the two publicly held firms said the merger is designed to strengthen their financial situation and make it easier for investors to trade their securities.

Complete details of the transaction have not been worked out, but the companies said the deal involves a swap of Standard Logic stock for all the common stock of Touchstone. The agreement also provides for Standard Logic to pay TouchStone $400,000 for an unspecified percentage ownership in TouchStone.

Under the agreement, TouchStone shareholders would become the majority shareholders of Standard Logic, and Standard Logic’s management team may be required to rebuy certain assets of its company in the future. The combined entity would be operated under the TouchStone name.

TouchStone markets software that diagnoses technical glitches in personal computers, while Standard Logic makes electronic packaging assemblies and systems.

Larry Dingus, TouchStone’s chief executive, said a key advantage of the merger is that TouchStone’s stock, which is thinly traded on the so-called pink sheets, now will be traded on the over-the-counter market of the National Assn. of Securities Dealers Automated Quotations Systems.

Standard Logic’s stock is traded on NASDAQ’s computerized trading system, whose issues are generally more heavily traded and have more visibility in the investment community than pink sheet stocks.

“There will be better perceived credibility and better access to capital with the NASDAQ listing,” Dingus said.

Wes Baumgardner, chairman of Standard Logic, said NASDAQ was about to remove his company’s stock from its listings because it could not by itself meet the exchange’s new minimum capital requirements. As of Jan. 1, 1991, NASDAQ-listed companies must have $2 million in assets and $1 million in net worth, up from $750,000 in assets and $375,000 in new worth.

Combined with TouchStone, Standard Logic can meet the exchange’s requirements, Baumgardner said, and Standard Logic shareholders should enjoy greater ability to buy and sell their shares. Both companies will continue to operate autonomously.

“We feel we can work out a fair deal and have a definitive agreement within two weeks,” Baumgardner said.

Standard Logic reported a loss of $30,548 on sales of $211,882 for the third quarter ended July 28, in contrast with net income of $239,334 on revenue of $730,295 in the year-earlier period.

For its second quarter ended June 30, TouchStone earned $21,622 on revenue of $876,588, up from earnings of $10,078 on revenue of $351,780 in the year-earlier quarter. TouchStone moved in August from its headquarters in Seal Beach to a larger office at 2130 Main St., Huntington Beach.