There are basically two distinctly different types of "public" shell companies being used to do reverse mergers: "Trading and Reporting" corporations and "Virgin" corporations.
  "Trading and Reporting" shell corporations once held an active business. For any number of reasons the business has either ceased to exist or is in a dormant state. It had filed a FORM 10 with the S.E.C and usually completed an IPO. At its peak, the company's stock was traded on the OTCBB or the Nasdaq National Market.
  The perception is that these shell corporations can be used to circumvent the S.E.C reporting requirements and enable the new owners to immediately begin offering and trading their stock on the open market. Unless the shell is bought in bankruptcy, all issued shares acquired through a merger are restricted under Rule 144. To initiate a registered secondary offering, the company is required to submit a complete FORM S-4 disclosure of all business activities to bring the S.E.C. information up to date, regardless of the implied trading status of the shell's stock.
  Another area to examine closely is the actual condition of the corporation. Why are they out of business? Are there any hidden problems? Angry employees, upset investors, product litigation, even inconsistencies in prior financial reporting can cause serious legal or SEC problems when they arise later.
  "Virgin" shell corporations are created through a standard reorganization process. They are not "spin-off" corporations. When acquired they have no assets and no liabilities. "Virgin" corporations are inactive and non-reporting. They qualify as widely held public corporations because they have a bona fide shareholder pool of over 300 individuals and a public float of over 500,000 shares.
  A properly created "Virgin" shell corporation provides a wide variety of options that the "Trading and Reporting" shells can't. Only non-reporting corporations can raise capital under any of the SEC Regulation D offerings. They can also be used by foreign companies to raise capital offshore under the Regulation S offering. They can be listed on the National Quotation Bureau - Pink Sheets without becoming a reporting company. This requires the services of a market maker who will file a FORM 211 with the NASD OTC Compliance Unit. This OTC service is Internet assessable at www.pinksheets.com
  A full registered secondary offering can also be done using a "Virgin" shell corporation by filing a FORM 10SB with the SEC and creating a Stock Offering Memorandum. As you can see, the work required to fully utilize either type of shell corporation is essentially the same. The "Virgin" shell is more flexible, often cleaner and definitely a less expensive way to take your company public.