A Reverse Merger is a transaction where the private company shareholders purchase control of a public company and merge it with their private company. The private company shareholders receive a substantial majority of the shares of the public company and control of its board of directors. The transaction can be accomplished within weeks, resulting in the private company becoming a public company. The transaction does not go through a review process with state and federal regulators because the public company has already completed the process. The transaction involves the private and shell company exchanging information on each other, negotiating the merger terms, and signing a share exchange agreement. At the closing the shell company issues a substantial majority of its shares and board control to the shareholders of the private company. The private company shareholders pay for the shell and contribute their private company shares to the shell company they now control and the private company is now public.

Upon completion of the reverse merger, the name of the shell company is usually changed to the name of the private company. If the shell company has a trading symbol it is changed to reflect the name change. An information statement, called an 8-K, must be filed within 15 days of the closing. The 8-K describes the newly combined company, stock issued, information of new officers and directors, and financial information. The SEC does not review reverse mergers and no regulatory consents are necessary.

If the shell company is listed on the Bulletin Board, the shares can begin trading immediately. The company can do a private placement immediately. To offer new shares to the public the newly combined company must first register the shares with the SEC. This process takes three to four months.

If the shell company does not have a symbol, an application for a symbol is usually made to the NASDAQ Bulletin Board. The Bulletin Board has no financial requirements. A listing will be granted if the affairs of the company are in order and the company answers the questions posed by NASDAQ. The usual procedure is to process the registration of new shares at the same time the company goes through the listing process.