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VERSO TECHNOLOGIES, INC.

VERSO TECHNOLOGIES, INC.

400 GALLERIA PARKWAY

SUITE 300

ATLANTA, GEORGIA 30339

October 21, 2005

VIA EDGAR AND FACSIMILE

Securities and Exchange Commission

Division of Corporation Finance

100 F Street

Washington, D.C. 20549

Attention: Kathleen Collins

    Re:

    Verso Technologies, Inc.

Form 10-K for Fiscal Year Ended December 31, 2004

Forms 10-Q for Fiscal Quarters Ended March 31, 2005
and June 30, 2005

Forms 8-K dated April 25, 2005 and July 25, 2005

File No. 000-22190

Ladies and Gentlemen:

     On behalf of Verso Technologies, Inc. (the “Company”), the undersigned hereby responds to the
comments of the Staff contained in the letter from Kathleen Collins to Steven Odom dated September
22, 2005. For the Staff’s convenience, the numbered paragraphs below correspond to the paragraph
numbers in the Staff’s September 22, 2005 comment letter.

Form 10-K for Fiscal Year Ended December 31, 2004

Critical Accounting Policies

     1. The Company did not discuss revenue recognition in its critical accounting policies
included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 (the
“Annual Report”) because, in light of the lack of subjectivity in the application of the Company’s
revenue recognition policy, management does not believe that revenue recognition is a critical
accounting policy. In addition, management believes that proper revenue recognition for the
Company’s revenue streams is well developed in the accounting literature and it does not require
management to make estimates or assumptions, unlike those accounting policies which management
deems to be critical. The significant accounting policies included in the notes to the financial
statements included in the Annual Report indicates the guidance that was followed by the Company
relating to revenue recognition, and the Company believes that

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October 21, 2005

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this disclosure was adequate. The Company will include disclosure of its revenue recognition
policy in the critical accounting policies section of its future filings on Form 10-K.

Note 2. Summary of Significant Account Policies and Practices, page F-9

Revenue Recognition, page F-10

     2. Set forth below is a discussion of each of the Company’s revenue streams, arranged by
product line, and the revenue recognition policy for each revenue source. The accounting
literature that supports the Company’s accounting is set forth in the parentheticals.

Netspective (Statement of Position 97-2)

     Revenue sources for the Company’s Netspective product line are primarily from the sale of
hardware with imbedded software intended to limit access to web sites. This product has support
included for the first year after purchase. This support includes updates to the software for
additional objectionable web sites that may be filtered and is sent as a download to the purchaser.
This is considered a sale which follows software rules because of the significance of the software
that is included and the fact that software revenue recognition upgrades are provided throughout
the first year for no additional charge. The customer may elect to continue the support after the
first year for a price equal to 20% of the original list price (50% for the P2P product, which the
Company first offered in 2003). All initial sales of this product are considered to be
multi-element sales. The hardware and software product are not sold separately, so the Company is
unable to establish separate vendor specific objection evidence (“VSOE”) for the hardware and
software component. VSOE is established, however, for the undelivered support because the second
year for all customers is either 20% or 50% of the original list price depending on the product
sold. Since the Company is unable to establish VSOE on all elements of the transaction, the
Company uses the residual method for recognizing revenue. This is applied as follows: for the
first year following a sale, an amount equal to the second year renewal is set aside from the
purchase price and amortized over a one-year period. The balance of the purchase price (in some
cases a very small amount, depending on the discount given) is allocated to the hardware and
software (product) and is immediately recognized. In some cases installation is provided, although
customers typically do not require installation because the product is “plug and play.” If
installation is sold, revenue recognition for the product is deferred until the installation is
performed. Training was sold once in the past 6 months, and the training was provided prior to the
billing and sale of the device.

Telemate Voice (Statement of Position 97-2)

     Revenue sources for the Company’s Telemate Voice product line primarily relates to the Post
Contract Support (“PCS”) of a legacy device that monitors and reports call activity for businesses.
In addition, the Company continues to sell the device that tracks the calls; however,

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this portion of the business is on the decline. When the Company sells a device which
includes the hardware, software and the support (which includes the software upgrades which are
part of the support) for the first year, the Company has a multi-element sale and follows guidance
for software accounting. The Company follows guidance for software because the value of the
product is in the software. Approximately 70% of the revenue for the Telemate Voice product comes
from the renewals of PCS related to previous sales of this product. The PCS is sold on an annual
basis and provides support on Tariff and Area code updates which are shared electronically. The
support is elected by the customer annually and updates are only provided if paid in advance or a
purchase order is provided to support the customer’s intention to purchase the renewal. The fee is
amortized over the one-year term of the agreement. PCS is recognized ratably after the fee is
ordered through a purchase order and or paid by the customer. When a new unit is sold, support for
the first year is included so the Company must allocate a portion of the sales price to the
support. The renewal rate for all customers is 20% of the current list price of the unit, and VSOE
has been established at that rate. The residual method is used to recognize revenue since the
device is not sold separately, and VSOE is known only for the undelivered item (the support) in the
transaction. The VSOE for support (20% of the current list) is deferred and amortized over the
first year, and the balance of the sale is recognized as product revenue when shipped. If
installation is sold with the product, then product revenue is recognized after installation is
completed. Installation and training are sold at a set rate for in house and on site installation
or training. Training is sold as an add-on service and at the same rate to all customers. VSOE
for training and installation have been established for use in the event of a multi-element sale.
The sale of the product is usually made to end-users.

Advanced Application Services (Staff Accounting Bulletin 104)

     The primary revenue sources for the Company’s Advanced Application Services group are annual
support related to the performance of advanced application support services in the call center in
Atlanta and consulting services. On a monthly basis, the Company receives a large payment from the
Intercontinental Hotels Group for the next month’s service (billing is prepared by Intercontinental
and is based on number of rooms that are under service). This amount is deferred until it is
earned the following month. This large revenue source is moving to a volume-based billing over the
next several years as the Intercontinental Hotels Group switches out its software to another
vendor. The Company will continue to provide the call center support but it will be usage based
(number of calls answered and minutes involved) and billed in arrears after the service is
delivered. The division also bills individual hotels (many in the Intercontinental Hotels Group)
for annual call center support for certain interfaces. This is an amount established annually and
is billed and paid in advance. The billing is sent in advance of the renewal and in most cases is
received prior to the beginning of the period of service. The amount received is amortized over
the life of the agreement, which is one year. The call center also receives revenue from providing
monthly service to ISP’s, broadband service providers and others that require application support
services. These amounts are billed on a fixed monthly charge and/or on a calls-received basis and
are billed after the completion of the service. The

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Advance Applications Services group also provides consulting services primarily in the form of
installation support to the hospitality industry. The consultation services are billings based on
time and expense and billed after the services are performed or the costs are incurred. The
billings for expense reimbursements are included in revenue as required by Emerging Issues Task
Force (“EITF”) 01-14.

Netperformer (Emerging Issues Task Force — 00-21, Staff Accounting Bulletin 104)

     The primary source of revenue from the Company’s Netperformer product line is from the sale of
hardware with imbedded software for the purpose of providing customers with their own local
network. The software is not a significant focus of the marketing efforts of the product as a
whole; there is no PCS with upgrades and enhancements; there are no significant development costs
related to the software component of the product; the software component of the product can not be
substituted for software provided by another vender; and the product is not being distributed with
other software products. The software is integral to the hardware and only works on the device
with which it is sold. The software is considered to be incidental to the device and revenue is
recognized in accordance with Staff Accounting Bulletin 104. The product is a “plug and play”
device that requires no installation by the Company. There is no PCS sold with the device. There
is a one-year warranty on parts. The warranty covers the replacement of the box if there is a
mechanical issue. The warranty experience based on actual warranty expense for the last year is
approximately 1% of the revenue and is accrued at the time of sale for the potential defective
products. Revenue is recognized at the time of shipment. In the rare event that consultation
services are provided to the customers, the service is provided on a time and materials basis and
billed and recognized after the completion of the work.

Softswitch (Statement of Position 97-2)

     The primary source of the revenue from the Company’s Softswitch product line is from the sale
of a software product that is usually loaded on non-proprietary hardware (currently, servers from
another vendor) and sold as a hardware switching solution. The primary functionality is in the
software, it is not incidental. The Company follows software rules for revenue recognition. The
Company does not install the product, and it is usually sold to value added resellers (“VAR”) or
other integrators. A one-year warranty is given on the hardware. This warranty experience runs
less than 2% of revenue, and an accrual is recorded at the time of the sale related to this
warranty and is reflected as a cost of sales. The warranty covers the cost of replacement parts.
The Company sells support for 24 x 7 phone and e-mail support on the Softswitch product. The
service is an optional service to the customer since most sales are through a VAR or integrator
that provides the service in the first year. If the customer is direct and the customer opts for
the support service, then the cost of first year service is 5% of list for the first year of
service. The support is amortized over the period of the contract. The cost of support in the
second year of service is based on the same percentage calculation. Since the first year support
can be bundled with the sale of the hardware and software, the Company must

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determine when all elements are delivered. In the case of the support, it is an undelivered
portion of the sale and the Company has determined that it has VSOE on the support portion of the
sale. This was determined by analyzing stand alone sales of support. For multi-element sales, the
Company has deferred the required portion for support based on the established VSOE and has
recognized the sale of the hardware and software at the time of shipment. The Company also sells
on-site and in-house training. Training is a set amount per session and is performed prior to
billing, so the amount is earned by the time it is billed. If the training is sold related to a
sale of hardware and software and the item is undelivered, then the Company has determined that it
has VSOE for the undelivered portion. This division also sells consulting services and charges for
those services at an hourly rate. The rate charged for these services is consistently applied and
for multi-element sales the Company has established VSOE and would defer the revenue until the
service is performed.

Note 7. Convertible Preferred Debentures, page F-22 and Note 17. Subsequent Events, page F-33 — Sale of Debenture, page F-34

     3. In response to the Staff’s comments, set forth below is a discussion of the convertible
debentures and warrants issued by the Company in November 2000 and February 2005.

November 2000 Instruments

     As noted by the Staff, in November 2000, the Company issued in a private placement Convertible
Debentures in an aggregate principal amount of $4.5 million with a conversion price of $4.50 per
share (the “November 2000 Debentures”) together with detachable warrants to purchase shares of the
Company’s stock (the “November 2000 Warrants” and, together with the November 2000 Debentures, the
“November 2000 Instruments”). In applying EITF 00-27 to the November 2000 Instruments, the Company
compared their relative fair value and concluded that the relative fair value of the November 2000
Warrants (computed using the Black-Scholes option pricing method as disclosed in the footnotes to
the Company’s financial statements) was 31% of the total $4.5 million issuance proceeds and, hence,
the relative fair value of the November 2000 Debentures was 69% of such total. Accordingly, the
Company allocated $1,395,000 to the November 2000 Warrants and $3,105,000 to the November 2000
Debentures.

     In applying EITF 98-5 to the November 2000 Instruments, the Company concluded that the
effective conversion price of the November 2000 Debentures was $3.12 per share and the fair market
value of the Company’s common stock was $2.56 per share. Therefore, under EITF 98-5, the November
2000 Debentures do not include a beneficial conversion feature.

     Finally, the Company believes that it properly classified the November 2000 Warrants as
permanent equity in accordance with EITF 00-19 (and Topic No. D-98) because such warrants may only
be settled in shares. In connection with the issuance of the November 2000

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Instruments, the Company also entered into a Registration Rights Agreement with the holders of
the November 2000 Instruments pursuant to which the Company granted to such holders “piggy-back”
registration rights that provided to such holder the right to include the shares underlying the
November 2000 Instruments in certain registration statements filed by the Company to register such
shares underlying the November 2000 Instruments for resale by such holders.

February 2005 Instruments

     As