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SEC CORRESPONDENCE LETTER

VERSO TECHNOLOGIES, INC.

400 GALLERIA PARKWAY

SUITE 200

ATLANTA, GEORGIA 30339

December 14, 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

    June 30, 2005 and September 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 November
30, 2005. For the Staff’s convenience, the numbered paragraphs below correspond to the paragraph
numbers in the Staff’s November 30, 2005 comment letter.

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

Prior Comment no. 2

    1.

    The value-added resellers (“VARs”) to which the Company sells its Softswitch product function
as integrators rather than as stocking distributors. In most cases, the Company has worked
with these VARs for many years. These VARs generally only order product from the Company
after the VARs have already sold the product to an end-user. Consequently, these VARs rely on
the Company to deliver the product to them in a timely manner in order so that the VARs can
meet their obligations to the end-users. The Company’s salespeople work directly with the
VARs to arrange the sale of the product to the end-user. The Company’s standard terms and
conditions of sale do not allow for returns. In the event that a customer wants to include
right-of return language in its contract with the Company, the Company would not recognize the
revenue associated

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December 14, 2005

Page 2

    with the sale until the right-of-return period or condition had expired or lapsed. For a
discussion of how the Company’s revenue recognition policy with respect to its Softswitch
product complies with SAB 104, see paragraph 2 below.

    2.

    The four criteria for revenue recognition under SAB 104 are as follows: persuasive evidence
of an agreement exists, delivery has occurred or services have been rendered, the seller’s
price to the buyer is fixed or determinable, and collectibility is reasonably assured. Set
forth below is a discussion of how the Company’s revenue recognition policy with respect to
its Netspective, Telemate Voice and Softswitch products and its Advanced Application Services
complies with SAB 104.

    Netspective, Telemate Voice and Softswitch

    For the Netspective, Telemate Voice and Softswitch products, either a signed contract or an
executed purchase order is received by the Company to document the existence of an
agreement. In addition, the Company obtains a certification from the salesperson for
certain sales to indicate that no side deal exists with respect to such sale.

    The Company reviews each sale to determine which elements of the contract have not been
delivered. For the elements that have not been delivered, the Company determines if it has
vendor specific objective evidence (“VSOE”) for the undelivered items and, if so, defers the
amount related to the undelivered items. To determine if the Company has VSOE, the Company
reviews all sales of an undelivered item that were sold on a stand-alone basis. If 80% of
all stand-alone sales of that item are within a range between 15% greater than the median
value of the stand-alone sales and 15% less than the median value of the stand-alone sales,
then the Company believes that it has established VSOE for that undelivered item in
accordance with the provisions of SOP 97-2. See Appendix A attached hereto for a
discussion of the mechanics of this calculation. If the Company does not have VSOE for the
undelivered items, then the Company defers all the revenue therefrom until all items are
delivered. If customer acceptance of an item is required, then the revenue for such item is
deferred until the customer indicates acceptance.

    The selling price is determined and documented in the contract or the purchase order for all
sales. The contracts or purchase orders do not provide for contingent payments.

    All sales are reviewed for collectibility by the Company’s credit department and, if it is
determined that the customer is not creditworthy, then revenue recognition is delayed until
payment is received.

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December 14, 2005

Page 3

    Advanced Application Services

    For the Advanced Application Services division, contracts must be executed before services
may be provided, an agreed-upon price is established in the contract, the same credit review
that is performed for the SOP 97-2 customers is performed for customers of the Advanced
Application Services division, and revenue is recognized as the service is performed. The
Advanced Application Services division realizes revenue from the operation of a call center
which provides phone support for a variety of customers. This division bills and recognizes
revenue in two ways: (i) billing in arrears at the end of a period of service based on call
volumes or, in the case of an agreed monthly billing amount, at the end of each month; and
(ii) billing in advance for service to be provided over a period of time at the same rate
during such period, which is recognized ratably over the period the service is provided.
Billing in advance can be provided for periods as short as a month or as long as a year.
The Company records amounts billed in advance and payment received in advance of the service
period as deferred revenue in its financial statements.

Prior Comment no. 3

    3.

    In calculating the maximum penalty under the Registration Rights Agreement (the “Registration
Rights Agreement”) entered into by the Company in connection with the Company’s private
placement in February 2005 (the “February 2005 Private Placement”) of Senior Unsecured
Convertible Debentures in aggregate principal amount of $13.5 million (the “February 2005
Debentures”), together with detachable warrants to purchase shares of the Company’s common
stock (the “February 2005 Warrants”), the Company did not have to determine that all of the
February 2005 Warrants will be exercised on a cashless basis. The maximum penalty under the
Registration Rights Agreement is calculated by multiplying the penalty rate times the maximum
period of time during which the Company may incur penalties under the Registration Rights
Agreement for its failure to fulfill its obligations thereunder.

    Pursuant to the Registration Rights Agreement, the Company must (i) file a registration
statement by a designated date (the “File Date”), (ii) cause the registration statement to
be declared effective by a designated date, (iii) maintain the effectiveness of the
registration statement for a designated period of time, and (iv) amend or supplement the
registration statement, or file a new registration statement, in accordance with the terms
of the Registration Rights Agreement. If the Company fails to do any of the foregoing, then
the Company must make cash payments to the holders of the February 2005 Warrants equal to 1%
of their invested amount for each 30 day period in which one of these failures exists. The
Company is only obligated to satisfy the foregoing requirements, and may only incur
penalties under the Registration Rights Agreement, during the period which commences on the
date the February 2005 Warrants are issued (the “Issue Date”) and

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Page 4

    ends upon the earlier to occur of (a) the date on which all of the registrable securities
have been sold pursuant to a registration statement or Rule 144 or (b) the date on which all
of registrable securities may be sold pursuant to Rule 144(k), regardless of whether
any such sales are made.

    Pursuant to Rule 144(k), the shares underlying the February 2005 Warrants may be resold 24
months after the Issue Date thereof (the “Issue Date”), provided such shares are issued as a
result of a cashless exercise of the February 2005 Warrants. The February 2005 Warrants
permit cashless exercise if an effective registration statement is not available for the
resale of the underlying shares. Therefore, any time after the date which is 24 months
after the Issue Date, the Company can no longer incur penalties under the Registration
Rights Agreement because on such date either (i) a registration statement covering the
resale of the registrable securities is not effective, and the holders of the February 2005
Warrants may exercise such warrants on a cashless basis and sell the underlying shares under
Rule 144(k); or (ii) a registration statement covering the resale of the registrable
securities is effective, and the Company is not in default of its obligations under the
Registration Rights Agreement. Accordingly, (a) the maximum period of time during which the
Company may incur penalties under the Registration Rights Agreement is 23 months because the
first day such penalties could be incurred is the Filing Date, which is 30 days after the
Issue Date, and (b) the maximum penalty the Company could be required to pay under the
Registration Rights Agreement is 23% of the amount invested in the February 2005 Private
Placement. Upon further review of EITF 00-19, the Company has concluded that the maximum
penalty under the Registration Rights Agreement is 23% (and not 21% as previously stated in
the Company’s letter to the Staff dated October 21, 2005 (the “Prior Company Letter”))
because the Registration Rights Agreement requires the Company to file (and imposes a
penalty for the failure to file) the registration statement by the 30th day
following the Issue Date and, according to EITF 00-19, that event is not within the control
of the Company.

    4.

    The Company determined that the maximum penalty under the Registration Rights Agreement is
representative of the fair value difference between registered and unregistered shares because
the maximum penalty is within the range of discounts at which unregistered shares have been
sold by the Company and other issuers. These discounts are the result of negotiations between
the issuers and the buyers of securities. The discounts in private placement transactions
recently effected by the Company have ranged from 20% (February 2004) to 79% (October 2002).
Studies of private placement transactions of numerous issuers suggest that the mean discount
for transactions prior to 1990 ranges from 26% to 45% and that the mean discount for
transactions after 1990 ranges from 13% to 27%. Accordingly, the Company believes that the
23% penalty at issue here represents the fair value difference between the registered and
unregistered shares in light of the Company’s experience and other data. Calculations of the
discounts

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December 14, 2005

Page 5

    in the Company’s October 2002 and February 2004 private placement transactions are set forth
on Appendix B attached hereto.

    5.

    Paragraph 3 of the Prior Company Letter should have stated that the relative fair value of
the February 2005 Debentures should be reduced by an “additional” $3.6 million due to the
beneficial conversion feature. The total discount on the February 2005 Debentures is $8.1
million, which is equal to the sum of (i) $4.5 million, the fair value of the February 2005
Warrants, and (ii) $3.6 million, the value of the beneficial conversion feature of the
February 2005 Debentures. In the Company’s Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2005 and June 30, 2005, the Company disclosed that the February 2005 Warrants
had a total value of $5.1 million on the Issue Date. This total is equal to the sum of (a)
$4.5 million, the fair value of the February 2005 Warrants, and (b) $561,000, the value of the
warrants to purchase shares of the Company’s common stock issued to brokers as placement fees
in the February 2005 Private Placement (the “Broker Warrants”). The Company has recorded the
value of the Broker Warrants and other cash payments totaling $1.6 million as prepaid loan
origination fees and is amortizing such amounts to interest expense over the term of the
February 2005 Debentures. The following table represents the fair value of the February 2005
Warrants:

    March 31,

    June 30,

    September 30,

    2005

    2005

    2005

    (in thousands)

    Fair value of February 2005 Warrants

    $
    4,523

    $
    4,523

    $
    4,523

    Beneficial conversion feature

    —

    —

    3,590

    Total discount on February 2005 Debentures

    $
    4,523

    $
    4,523

    $
    8,113

    Fair value of Broker Warrants

    561

    561

    561

    Cash fees paid to brokers, accountants and attorneys

    993

    993

    993

    Total loan origination fees

    $
    1,554

    $
    1,554

    $
    1,554

    Fair value of all warrants issued in February 2005 Private
Placement

    $
    5,084

    $
    5,084

    $
    5,084

    6.

    The Company has prepared pro forma balance sheets as of March 31, 2005 and June 30, 2005
which reflect the changes related to the beneficial conversion feature on the February 2005
Debentures, and these pro forma balance sheets are attached hereto as Appendix C and
Appendix D, respectfully. Although the Company agrees that the

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December 14, 2005

Page 6

    changes related to the
beneficial conversion are not immaterial to the classifications of convertible debentures,
total liabilities and total equity, the Company believes that the balance sheets as of March
31, 2005 and June 30, 2005 are no longer relevant to the readers of the Company’s financial
statements due to the issuance of the Company’s Quarterly Report on Form 10-Q for the quarter
ended September 30, 2005 and the disclosure contained therein with respect to the beneficial
conversion feature of the February 2005 Debentures. SAB 99 suggests that qualitative factors
determine whether an error is material and would be misleading to a reader of financial
statements. With respect to the Company’s failure to record the beneficial conversion feature
of the February 2005 Debentures in the Company’s balance sheets as of March 31, 2005 and June
30, 2005, the Company would consider the impact of such failure on the Company’s investors and
lender. In order to assess the Company’s liquidity, the investors likely would consider the
face amount of the February 2005 Debentures ($13.5 million) as the amount of debt to be repaid
by the Company rather than the discounted amount of the debt. In addition, the Company’s
lender requires that the Company maintain a certain tangible net worth in accordance with the
covenants set forth in the credit agreement between the Company and the lender. The
calculation of the tangible net worth requires that the Company combine equity and convertible
debentures for the calculation of the covenant and, therefore, whether the February 2005
Debentures are classified as debt or equity does not affect such calculation. Based on the
foregoing, the Company believes that its failure to record the beneficial conversion feature
of the February 2005 Debentures in the Company’s balance sheets as of March 31, 2005 and June
30, 2005 was not misleading to the Company’s investors or lender. The Company intends to
provide in the notes to the Company’s financial statements for the year ended December 31,
2005 additional disclosure with respect to the effect of the beneficial conversion feature of
the February 2005 Debentures for the quarters ended March 31, 2005 and June 30, 2005.

Prior Comment no. 4

    7.

    The securities lawsuit filed in Decembe