A merger with public shell companies. It is the merger of a private operating company into a public shell company which has few or no assets. In other words, reverse mergers (or shell mergers) are typically effected with a publicly held company that has no business plans other than to locate a private company to acquire. A private company could also merge with a public company using a reverse merger structure so that the surviving company, after the merger transaction, is the public company. Companies that go public through reverse mergers don’t file a form 10 or form 10-SB, and the merged company does not have to file audited financial statements until it files an Exchange Act annual report.

Upon closing, the private company shareholders receive, in return for their shares in their company, shares of the public company. Once the merger transaction is completed, the private company shareholders will collectively hold a substantial majority of the outstanding securities of the merged company, and the business of the private company becomes the business of the public company.