NASDAQ has clarified its rule for companies who are trying to gain listing via a reverse merger into a NASDAQ shell. Companies will now have to submit an application BEFORE the transaction is completed. I have included the exact verbiage as disclosed by the SEC.

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SECURITIES AND EXCHANGE COMMISSION
(Release No. 34-54825; File No. SR-NASDAQ-2006-047)
November 28, 2006
Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change to Clarify the Process Surrounding a Reverse Merger
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (“Act”)1 and Rule 19b-4 thereunder,2 notice is hereby given that on November 13, 2006, The NASDAQ Stock Market LLC (“Nasdaq”) filed with the Securities and Exchange Commission (“Commission”) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by Nasdaq. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.
I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change
Nasdaq proposes to clarify the process an issuer must follow when applying for initial listing in connection with a transaction that is a reverse merger. Nasdaq would implement the proposed rule immediately upon approval. The text of the proposed rule change is below. Proposed new language is underlined; proposed deletions are in [brackets].3
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4340. Application for Re-Listing by Listed Issuers
(a) Reverse Mergers. An issuer must apply for initial listing [following] in connection with a transaction whereby the issuer combines with a non-Nasdaq entity, resulting in a change of control of the issuer and potentially allowing the non-Nasdaq entity to obtain a Nasdaq Listing
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b-4.
3 Changes are marked to the rule text that appears in the electronic manual of Nasdaq found at www.complinet.com/nasdaq .

(for purposes of this rule, such a transaction is referred to as a “Reverse Merger”). In determining whether a Reverse Merger has occurred, Nasdaq shall consider all relevant factors including, but not limited to, changes in the management, board of directors, voting power, ownership, and financial structure of the issuer. Nasdaq shall also consider the nature of the businesses and the relative size of the Nasdaq issuer and non-Nasdaq entity. The issuer must submit an application for the post-transaction entity with sufficient time to allow Nasdaq to complete its review before the transaction is completed. If the issuer’s application for initial listing has not been approved prior to consummation of the transaction, Nasdaq will issue a Staff Determination Letter as set forth in Rule 4804 and begin delisting proceedings pursuant to the Rule 4800 Series.
(b) No change.
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IM-4350-1. Interpretive Material Regarding Future Priced Securities
Summary
No change.
How the Rules Apply
Shareholder Approval
No change.
Voting Rights
No change.
The Bid Price Requirement
No change.

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