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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ---------------------

                                  FORM 10-K/A
                                AMENDMENT NO. 2
                        (AMENDING ITEMS 5, 7, 8 AND 14)
(MARK ONE)

    [X]      AMENDMENT TO ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
             SECURITIES EXCHANGE ACT OF 1934

               FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000

                                       OR

    [  ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
              SECURITIES EXCHANGE ACT OF 1934

               FOR THE TRANSITION PERIOD FROM ________ TO ________

                         COMMISSION FILE NUMBER 1-11999

                            VERSO TECHNOLOGIES, INC.
             (Exact Name of Registrant as Specified in its Charter)

<Table>
<S>                                                 <C>
                    MINNESOTA                                    41-1484525
             (State of Incorporation)               (I.R.S. Employer Identification No.)

400 GALLERIA PARKWAY, SUITE 300, ATLANTA, GEORGIA                  30339
     (Address of Principal Executive Offices)                    (Zip Code)
</Table>

                (Registrant's Telephone Number)  (678) 589-3500

          Securities registered pursuant to Section 12(b) of the Act:

                                      NONE

          Securities registered pursuant to Section 12(g) of the Act:

                         COMMON STOCK, $0.01 PAR VALUE

     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]  No [ ]

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K.  [X]

     The aggregate market value of the voting stock held by non-affiliates of
the Registrant was $67,098,338 as of March 9, 2001. The number of outstanding
shares of the Registrant's Common Stock was 50,714,946 shares as of March 9,
2001.

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                                EXPLANATORY NOTE

     This Report on Form 10-K/A amends and restates in their entirety Items 5,
7, 8 and 14 of the Annual Report on Form 10-K of Verso Technologies, Inc., a
Minnesota corporation (the "Company"), for the fiscal year ended December 31,
2000.

                                    PART II

ITEM 5.  MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's common stock is traded on the Nasdaq National Market under
the symbol "VRSO." Prior to October 1, 2000, the Company's common stock was
traded on the Nasdaq National Market under the symbol "ELTX." The Company moved
from the Nasdaq Small Cap Market to the Nasdaq National Market on February 17,
2000. The following table sets forth the quarterly high and low sales prices for
the Company's common stock for the years ended December 31, 2000 and 1999, as
reported by Nasdaq. The prices set forth below do not include adjustments for
retail mark-ups, markdowns or commissions and represent inter-dealer and do not
necessarily represent actual transactions.

<Table>
<Caption>
                                                                HIGH          LOW
                                                              --------      -------
<S>                                                           <C>           <C>
YEAR ENDED DECEMBER 31, 2000:
  First Quarter.............................................  $19.7500      $7.6250
  Second Quarter............................................   13.7500       4.1250
  Third Quarter.............................................    6.5625       3.7500
  Fourth Quarter............................................    5.1250       1.0625
YEAR ENDED DECEMBER 31, 1999:
  First Quarter.............................................  $ 6.1250      $3.8125
  Second Quarter............................................    5.0000       3.3750
  Third Quarter.............................................    4.4375       3.1250
  Fourth Quarter............................................    9.5000       3.3750
</Table>

     As of December 31, 2000, there were approximately 3,560 shareholders of
record. The Company has never paid cash dividends on its common stock. The
Company currently intends to retain any earnings for use in its operations and
does not anticipate paying cash dividends in the foreseeable future. In
addition, the Company's current credit facility prohibits the payment of cash
dividends on its common stock.

     In connection with the Company's acquisition of MessageClick, Inc.
("MessageClick") in November 2000, the Company issued to the preferred
shareholders of MessageClick an aggregate of 1,191,341 shares of the Company's
common stock (248,139 shares of which are being held in escrow to satisfy
certain indemnification claims that the Company may make), and warrants to
purchase an aggregate of 181,901 shares of the Company's common stock, which
warrants may be exercised from time to time at any time after their issuance
until November 22, 2005 at an initial exercise price of $4.03 per share. The
common shareholders of MessageClick were not entitled to receive any merger
consideration in connection with this transaction. There was no general
solicitation or advertisement with respect to the MessageClick acquisition, and
the Company believed that each of the former preferred shareholders of
MessageClick was an "accredited investor" based on MessageClick's representation
relating thereto and the receipt by the Company of representations from
substantially all of the former preferred shareholders of MessageClick whereby
each such preferred shareholder represented that it (i) was either an
"accredited investor" or otherwise sophisticated in respect of financial
matters; (ii) was acquiring the securities for investment for its own account;
(iii) was aware of the restricted nature of the securities being acquired; and
(iv) had been furnished with or had access

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to information and representatives of the Company. In addition, the Company
issued 214,582 shares of its common stock to satisfy certain amounts owing by
MessageClick. These shares were issued to five sophisticated, financial
investors, each of whom was also a preferred shareholder of MessageClick, in
satisfaction of the bridge loans that such shareholders had made to
MessageClick. Each of these financial investors represented to the Company that
they were "accredited investors." The securities issued in connection with the
MessageClick acquisition were issued without registration under the Securities
Act of 1933, as amended (the "Securities Act"), in reliance upon the exemption
in Section 4(2) of the Securities Act.

     Also in November 2000 in connection with the acquisition of MessageClick,
the Company issued and sold to four investors the Company's 7.50% Convertible
Debentures in an aggregate principal amount of $4,500,000 due November 22, 2005
(the "Debentures") and warrants to purchase up to 1,000,000 shares of the
Company's common stock (the "Warrants") pursuant to that certain Convertible
Debenture and Warrant Purchase Agreement (the "Purchase Agreement") dated as of
October 31, 2000 between the Company and each of the four investors (each such
investor is a "Purchaser" and all such investors are, collectively, the
"Purchasers").

     The Debentures obligate the Company to pay the principal amount of
$4,500,000 by November 22, 2005, or at such earlier time as the Debentures are
required or permitted to be repaid pursuant to their terms, and interest on the
unpaid principal amount at a rate of 7.50% per annum, payable in arrears. The
Debentures may be converted, at the option of the holder of such Debenture or,
under certain circumstances, the Company into shares of its common stock at an
initial conversion price of $4.50, subject to adjustment according to the terms
of the Debentures.

     Each Purchaser also purchased a Warrant to purchase a number of shares of
Company common stock initially equal to the initial number of shares of common
stock into which such Purchaser's Debenture is convertible. Each Warrant is
immediately exercisable at an initial exercise price of $7.50 per share of
Company common stock (subject to adjustment according to the terms of the
Warrants) and terminates on November 22, 2005.

     In the Purchase Agreement, each of the Purchasers represented, among other
things, that such Purchaser (i) was an "accredited investor"; (ii) was acquiring
the securities for investment for its own account; (iii) was aware of the
restricted nature of the securities being acquired; and (iv) had been furnished
with or had access to information and representatives of the Company. In
addition, there was no general solicitation or advertising with respect to the
offer and sale of the Debentures and Warrants. The Warrants issued as part of
this transaction have terms, including, among other things, exercise price and
associated registration rights, that are materially different than the warrants
issued in connection with the acquisition of MessageClick. Based on the
foregoing, the Company believed that the offer and sale of the Debentures and
the Warrants satisfied the requirement of Rule 506 and, hence, filed a Form D
with the SEC on December 4, 2000. The securities issued pursuant to the Purchase
Agreement were issued without registration under the Securities Act in reliance
upon the exemption in Rule 506 of Regulation D promulgated pursuant to Section
4(2) of the Securities Act.

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

     The Company historically operated through two separate business units: the
Technology Services Group ("TSG") and the Hospitality Services Group ("HSG"). On
July 19, 2000, the Company's board of directors determined that TSG, while
sustaining losses, represented the greatest opportunity for the Company. HSG was
not generating profits and it was believed that the technology deployed through
this group had been reaching maturity. In order to fund the growth opportunities
believed to exist in TSG, the board of directors authorized the sale of HSG's
operating units. Accordingly, HSG is reported as a discontinued operation and
the consolidated financial statements have been reclassified to segregate the
net assets and operating results of this business segment. During the year ended
December 31, 2000, the Company recorded an estimated loss on disposal of
discontinued operations of approximately $11.0 million, which included an
estimate of future operating losses of $4.3 million, in connection with the
anticipated disposal of HSG.

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     In fiscal year 2000, the Company acquired two businesses in transactions
accounted for as purchases. On September 29, 2000, the Company acquired Cereus
Technology Partners, Inc. ("Cereus") in a merger transaction, and on November
22, 2000, the Company acquired MessageClick also in a merger transaction.
Accordingly, the results of operations of Cereus and MessageClick are included
in the Company's results of operations from their respective dates of
acquisition. The Company pursued the merger with Cereus so that the Company
would benefit from Cereus' financial resources and experienced management team.
The consideration given to the merits of Cereus' services offerings was
secondary in the transaction and the acquisition of those services did not alter
the portfolio of services that the Company had already been providing nor did it
change the target markets pursued by the Company. The merger with MessageClick
provided the Company with a proprietary unified communications application
focused on serving communication service providers, which the Company has
identified as a target market.

     The Company's focus beginning in the latter part of the fourth quarter of
1999 through the second quarter of 2000 had been to create the infrastructure
(establishing a headquarters, hiring additional personnel and implementing
systems) and take whatever other appropriate steps necessary to significantly
grow revenue and move the Company into the Application Services Provider ("ASP")
market. This focus resulted in the Company selling products (especially
hardware) at very low margins and hiring a significant number of consultants (91
from January 2000 through June 2000) as well as ASP support personnel (50 from
January 2000 through June 2000) in advance of the anticipated increase in
professional services and ASP revenue that did not materialize. Given the fact
that the revenues did not materialize, the Company decided to reduce its
workforce. In the second quarter of 2000, the Company announced a reorganization
and eliminated 100 positions held by employees. As a result of the
reorganization, the Company recorded reorganization costs of $1.5 million in the
second quarter of 2000. The Company expects the reduction in workforce, along
with other cost reduction initiatives implemented, will result in approximately
$12.0 million in annualized cash savings.

     In fiscal year 1999, the Company acquired Sulcus Hospitality Technologies
Corp. ("Sulcus") (included in discontinued operations) and Windward Technology
Group, Inc. in transactions accounted for as poolings-of-interests and relocated
their headquarters to Atlanta, Georgia. The operations of Sulcus have been
combined with other division's operations in the Company's Hospitality Services
Group since March of 1999. The operations of the Company's Hospitality Services
Group, including all of Sulcus, were subsequently reported as discontinued
operations for the reasons previously discussed.

     The Company believes that the foregoing events significantly affect the
comparability of the Company's results of operations from year to year. You
should read the following discussion of the Company's results of operations and
financial condition in conjunction with the Company's consolidated financial
statements and related notes thereto included in Item 14 of this Report.

RESULTS OF OPERATIONS FOR YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998

YEAR ENDED DECEMBER 31, 2000 COMPARED TO YEAR ENDED DECEMBER 31, 1999

     For the year ended December 31, 2000, the Company's net loss totaled $55.5
million, or $2.14 per share, compared with net loss of $9.8 million, or $.41 per
share, for 1999. The 2000 results included $11.5 million in goodwill
amortization and $608,000 in amortization of deferred compensation primarily
related to purchases during 2000, a loss on asset abandonment of $2.0 million,
$1.5 in reorganization costs and a loss from discontinued operations of $14.9
million. The 1999 results included $713,000 of merger-related transaction and
reorganization costs, $1.4 million in goodwill amortization and a $4.0 million
loss from discontinued operations.

  Continuing Operations

     For the year ended December 31, 2000, the Company's net loss from
continuing operations totaled $40.5 million, or $1.56 per share, compared with a
net loss of $5.9 million, or $.25 per share, for 1999. The 2000 results included
$11.5 million in goodwill amortization and $608,000 in amortization of deferred
compensation primarily related to purchases during 2000, $2.0 million in loss on
asset abandonment and $1.5 in non-

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recurring reorganization costs. The 1999 results included $713,000 of
merger-related transaction and reorganization costs and $1.4 million in goodwill
amortization.

     Total revenue was $65.9 million in the year ended December 31, 2000,
reflecting a 6.8% increase from 1999. Services revenue was $33.5 million in the
year ended December 31, 2000, reflecting a 37.9% increase from 1999. Of the $9.2
million increase in services revenue, $2.1 million was related to the increase
in the Customer Response Center services, and $7.1 million was attributed to an
increase in technology consulting services. Products revenue was $32.4 million
in the year ended December 31, 2000, reflecting a 13.4% decrease from 1999. Of
the $5.0 million net decline in product revenue, $24.5 million was attributable
to a decline in hardware revenue due primarily to management's decision in the
third quarter of 2000 to only resell hardware if the margins on the sales were
above 20%. This significantly reduced the volume of hardware sales and, thus,
hardware revenue. The decline in hardware revenue was offset by an increase in
software revenue of $19.5 million, attributable to sales of network performance
management systems, sales of which started in the latter half of 1999.

     Gross profit decreased by $1.4 million in the year ended December 31, 2000,
and was 19.8% percent of revenue, compared with 23.5% of revenue in 1999. The
decrease in the gross profit percentage in the year ended December 31, 2000, was
attributable to lower margins in both services and products. The Company's focus
beginning in the latter part of the fourth quarter of 1999 through the second
quarter of 2000 had been to create the infrastructure (establishing a
headquarters, hiring additional personnel and implementing systems) and take
other appropriate steps necessary to significantly grow revenue and move the
Company into the ASP market. This focus resulted in the Company selling products
(especially hardware) at very low margins and hiring a significant number of
consultants (91 from January 2000 through June 2000), as well as ASP support
personnel (50 from January 2000 through June 2000) in advance of the anticipated
increases in professional services and ASP revenue that did not materialize.
These increased costs, without the corresponding revenue increase, significantly
reduced gross margins.

     Total operating expenses incurred in continuing operations for the year
ended December 31, 2000, were $52.3 million, an increase of $32.0 million
compared to 1999. The increase is primarily attributable to the following items:
$17.1 million increase in sales, general and administrative expenses, $1.3
million increase in depreciation expense, $10.1 increase in goodwill
amortization, a loss on asset abandonment of $2.0 million, an increase in
reorganization costs of $1.0 million and amortization of deferred compensation
of $608,000. The increase in sales, general and administrative expenses resulted
primarily from increased personnel and related costs, including those incurred
in connection with the Company's investment in its ASP initiatives, and
increased costs for corporate functions, including marketing, finance, human
resources and facilities costs related to promoting and supporting the Company's
new strategy of delivering software and support services remotely to customers
as on ASP. The Company pursued this strategy because it believed that the demand
for remote delivery of software and support over the Internet represented a
substantial market opportunity for the Company, and the Company believed that it
already had key assets, including experience in remote management of networks,
market leading software and on-line support, to be successful in the emerging
ASP marketplace. The increase in depreciation expense is related to the purchase
of furniture and equipment of approximately $7.1 million during 2000 as well as
the increased depreciation related to the assets acquired in the Cereus and
MessageClick acquisitions. Approximately $9.6 million of the increase in
goodwill amortization and $608,000 in amortization of deferred compensation is
related to the Cereus merger. During 2000, the Company decided to replace
software used internally and recorded a loss on asset abandonment of $2.0
million.

     The Company's focus beginning in the latter part of the fourth quarter of
1999 through the second quarter of 2000 had been to create the infrastructure to
significantly grow revenue and move the Company into the ASP market. This focus
resulted in the Company hiring additional personnel and implementing systems in
advance of the anticipated increase in professional services and ASP revenue
that did not materialize. In the second quarter of 2000, as a result of the
lower than expected revenues associated with professional services and ASP, the
Company announced a reorganization of its operations and eliminated 100
positions held by employees to improve its operational efficiencies and
financial performance. Operational efficiencies were gained by better matching
the size of the professional services consulting staff to near-term expected
revenue
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from product implementation or consulting engagements and by reorganizing the
Company to eliminate duplicate resources that could be shared by more than one
business market. For example, in addition to the Company's corporate accounting
group, the ASP operation and the technology services group operations had their
own accounting groups. With the reorganization, these groups were merged,
duplicative functions were eliminated and fewer employees were required. As a
result of the reorganization, the Company recorded reorganization costs of $1.5
million, of which $556,000 were non-cash charges related to common stock issued
and the intrinsic value of options previously issued to employees with
accelerated vesting and extended exercise dates.

     In 1999, in connection with the Company's relocation of its headquarters to
Atlanta, Georgia, the Company recorded reorganization costs of $462,000 related
to recruiting and relocation of personnel. Also in 1999, the Company acquired
two businesses in transactions accounted for as poolings-of-interests and the
Company recorded merger-related transaction costs totaling $251,000 in
connection with these acquisitions. As a percent of revenue, operating expenses
from continuing operations were 55.7% during the year ended December 31, 2000
(excluding the goodwill amortization and amortization of deferred compensation
related to purchases during 2000, loss on asset abandonment and reorganization
costs), up from 31.8% in 1999 (excluding merger-related transaction and
reorganization costs).

  Discontinued Operations of HSG

     Loss from discontinued operations was $14.9 million for the year ended
December 31, 2000, compared with a loss of $4.0 million for the same period in
1999. The 2000 loss included a loss from discontinued operations of $3.9 million
and an estimated loss on disposal of $11.0 million compared to a loss from
discontinued operations of $4.0 million for 1999. The estimated loss included a
reduction in asset values of approximately $6.7 million and a provision for
anticipated closing costs and operating losses until disposal of approximately
$4.3 million. The results of the six months ended December 31, 2000, were
included in the estimated loss on discontinued operations recorded during the
second quarter of 2000. In December 2000, the Company completed the sale of its
domestic lodging business and international hospitality business for aggregate
proceeds of $10.0 million. The Company sold its restaurant solutions business
for aggregate proceeds of $8.5 million in January 2001. Operating losses from
discontinued operations totaled approximately $8.2 million for the year ended
December 31, 2000. Loss on disposal of the assets of the discontinued operations
totaled approximately $6.7 million. There are no material contingencies related
to the disposal of the assets of the discontinued operations.

     Discontinued operations for 2000 and 1999 includes the operations of
Sulcus, which merged into the Company in 1999 in a pooling of interests, and the
operations of Encore Systems, Inc. and Five Star Systems, Inc., both of which
were acquired by the Company in 1998 to expand the Company's presence in the
hospitality software market. In 2000, the Company was experiencing substantial
operating losses in its domestic lodging, international hospitality and energy
management systems businesses and was faced with significant research and
development costs in its restaurant solutions business. Given these factors, the
Company decided that the hospitality software business was no longer part of its
strategic business direction and decided to dispose of HSG. The Company has
reclassified operations related to HSG to discontinued operations for all
periods presented.

YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998

     For the year ended December 31, 1999, the Company's net loss totaled $9.8
million, or $.41 per share, compared with a net loss of $6.5 million, or $.29
per share, for 1998. The 1999 results included $713,000 of merger-related
transaction and reorganization costs. These charges consisted primarily of costs
related to the recruitment and relocation of management and administrative
personnel to Atlanta, Georgia, and legal, accounting and other fees associated
with the merger with Windward Technology Group on March 31, 1999.

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  Continuing Operations

     For the year ended December 31, 1999, the Company's net loss from
continuing operations totaled $5.9 million, or $.25 per share, compared with
$1.8 million, or $.08 per share, for 1998. The 1999 results included $713,000 of
merger-related transaction and reorganization costs.

     Total revenue from continuing operations was $61.7 million in the year
ended December 31, 1999, reflecting a 17.3% increase from 1998. The
comparability of revenue was affected by the inclusion of Encore System's
operations beginning in September 1998. This favorable impact was offset by
reduced distribution sales, including the effect of the closure of the Company's
Datatech subsidiary and discontinuation of its distribution operations in the
first quarter of 1998. Gross profit increased by $1.4 million in the year ended
December 31, 1999, and was 23.5% percent of revenue, compared with 24.9% of
revenue in 1998. The decrease in the gross profit percentage in the year ended
December 31, 1999, was attributable to lower margins in both services and
products. The lower margin in services was due primarily to the
under-utilization of available consultants during the last half of the year. The
lower margin in products was due to a greater emphasis on revenue versus margin
in the last half of the year.

     Total operating expenses incurred in continuing operations for the year
ended December 31, 1999, were $20.4 million, an increase of $5.3 million
compared to 1998. Excluding merger-related transaction and reorganization costs
totaling $713,000 in 1999, total operating expenses from continuing operations,
excluding depreciation and amortization, increased $3.7 million compared to
1998. The increase resulted primarily from the inclusion of the customer care
operations of Encore Systems, Inc. for a full year, increased personnel and
related costs, including those incurred in connection with the Company's
investment in its ASP initiatives, and increased marketing, finance, human
resources and facilities costs related to promoting and supporting the Company's
new strategic direction. Depreciation and amortization expense during the year
ended December 31, 1999, also increased operating expenses by approximately
$900,000. The increase in depreciation and amortization expense is related to
the purchase of Encore Systems, Inc. in September 1998. As a percent of revenue,
operating expenses from continuing operations were 31.8% during the year ended
December 31, 1999 (excluding merger-related transaction and reorganization
costs), up from 28.6% in 1998.

  Discontinued Operations of HSG

     Loss from discontinued operations was $4.0 million for the year ended
December 31, 1999, compared to loss of $4.7 million for the same period in 1998.
The loss is due primarily to decreased sales of hardware and software products.

LIQUIDITY AND CAPITAL RESOURCES

  Summary

     Liquidity is the measurement of the Company's ability to have adequate cash
or access to cash at all times in order to meet financial obligations when due,
as well as to fund corporate expansion and other activities. Historically, the
Company has met its liquidity requirements through a combination of working
capital provided by operating activities, debt from third party lenders,
issuances of equity securities and sale of discontinued businesses.

     At December 31, 2000, the Company had a positive working capital position
(excess of current assets over current liabilities) of $12.6 million compared to
a positive working capital position of $13.8 million at December 31, 1999. The
Company's cash and cash equivalents totaled $11.0 million at December 31, 2000,
and zero at December 31, 1999. Total long-term debt including current portion,
net of discount was $9.5 million at December 31, 2000 and $54,000 at December
31, 1999. Borrowings under the Company's line of credit were zero at December
31, 2000 and $9.5 million at December 31, 1999.

  Cash Flow

     Cash used in the Company's continuing operations in the year ended December
31, 2000 totaled approximately $31.1 million compared with cash used in
continuing operations of $1.0 million in 1999. The

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Company's use of cash in continuing operations during 2000 resulted primarily
from a net loss of $40.5 million and was offset by non-cash charges totaling
$16.5 million (including depreciation and amortization of $14.5 million and a
loss on asset abandonment of $2.0 million) and cash used by changes in current
operating items of approximately $7.1 million.

     Cash used in the Company's discontinued operations in the year ended
December 31, 2000 totaled $5.5 million compared with cash provided by
discontinued operations of $445,000 in 1999. The use of cash in discontinued
operations during 2000 resulted primarily from a net loss from discontinued
operations of approximately $14.9 million, cash used in operating activities for
changes in current operating items of approximately $1.6 million and was offset
by an accrual for the estimated loss on the disposal of the discontinued
operations of $11.0 million.

     The Company used cash in investing activities for continuing operations in
the year ended December 31, 2000 of approximately $9.5 million, compared to $3.0
million in 1999. Of these amounts, the Company spent $7.1 million and $3.0
million on capital expenditures in 2000, and 1999, respectively. In 2000 the
Company used $2.3 million in cash related to the acquisition of MessageClick and
the merger with Cereus. Cash provided by discontinued operations from investing
activities totaled $6.2 million in 2000 compared with cash used by discontinued
operations for investing activities of $3.5 million in 1999. For discontinued
operations, the Company spent approximately $2.3 million and $2.1 million on
software development costs during 2000 and 1999, respectively, and approximately
$100,000 and $1.4 million on purchases of furniture and equipment during 2000
and 1999, respectively. During 2000, the Company received net proceeds from sale
of discontinued operations totaling $8.6 million for the sale of its lodging and
international businesses.

     Cash provided by financing activities from continuing operations totaled
approximately $29.2 million in 2000, compared to $559,000 million provided by
financing activities in 1999. Proceeds from issuance of convertible subordinated
debentures totaling $11.3 million, an advance from Cereus, prior to the merger,
of $10.2 million, and proceeds from the issuance of common stock totaling $17.7
million were offset by payments on the borrowing outstanding under the credit
facility line and long-term debt totaling $10.0 million. Borrowings on the
credit line and proceeds from the issuance of common stock in 1999 totaled $2.3
million and $381,000, respectively, and were offset by payments on long term
debt totaling $2.1 million.

     At December 31, 2000, the Company had no borrowings under its $10.0 million
credit facility with PNC Bank ("PNC Facility"). The PNC Facility is secured by
substantially all of the assets of the Company. The availability under the PNC
Facility at December 31, 2000 was approximately $6.0 million.

     For 2001, the Company expects that its primary sources of cash will be from
cash on hand, borrowings under the PNC Facility, proceeds from the sale of its
discontinued hospitality operations of approximately $8.5 million, and other
sources, including issuances of equity or debt securities. The Company believes
it will have sufficient liquidity from these sources to meet its current
financial obligations through 2001. However, the PNC Facility contains certain
financial covenants and limitations on the Company's ability to access funds
under the PNC Facility. If the Company is in violation of the PNC Facility, or
does not have sufficient eligible accounts receivable to support the level of
borrowings it may need, the Company may be unable to draw on the PNC Facility to
the extent necessary. To the extent the Company does not have borrowing
availability under the PNC Facility, the Company may be required to obtain
additional sources of capital, sell assets, obtain an amendment to the PNC
Facility or otherwise restructure its outstanding indebtedness. If the Company
is unable to obtain additional capital, sell assets, obtain an amendment to the
PNC Facility or otherwise restructure its outstanding indebtedness, the Company
may not be able to meet its obligations.

     The Company's short-term cash needs are to cover operating losses, which
are expected to continue until the end of 2001. The Company expects to use cash
on hand and borrowings under the PNC Facility for the Company's short-term cash
needs.

     The Company's long-term cash needs are related to the costs of growing its
current business as well as that of businesses that may be acquired in the
future, including capital expenditures and working capital. These cash needs
will primarily be met through borrowings under the PNC Facility and issuances of
debt of equity securities.

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  Goodwill

     The Company continually assesses the recoverability of its intangible
goodwill assets by determining whether the amortization of the goodwill balance
over its remaining life can be recovered through undiscounted future operating
cash flows of the acquired operations. The amount of goodwill impairment, if
any, is measured based on projected discounted future operating cash flows using
a discount rate reflecting the Company's average costs of funds. The assessment
of the recoverability of previously recorded goodwill related to the merger of
Cereus and the acquisition of MessageClick will be impacted based on the
Company's future strategic business direction and if estimated future operating
cash flows for previously acquired operations are not achieved.

RISK FACTORS

     You should carefully consider the following risk factors as well as other
information included in this Form 10-K/A. If any of the following risks or
uncertainties actually occur, our business, financial condition and results of
operations could be materially adversely affected. In that event, the trading
price of our common stock could decline.

  We may be unable to meet our future working capital requirements.

     Our business strategy calls for growth internally as well as through
acquisitions. This growth will require investment in personnel and
infrastructure, which in turn will require additional financing. Additional
financing may not be available to us on favorable terms or at all. If adequate
funds are not available on acceptable terms, we may not be able to continue to
expand our business operations. This in turn could harm our business, results of
operations and financial condition. In addition, if we raise additional funds
through the issuance of equity or convertible debt securities, the percentage of
ownership of our existing stockholders will be reduced and any new securities
could have rights, preferences and privileges senior to those of our common
stock. Furthermore, if we raise capital or acquire businesses by incurring
indebtedness, we will become subject to the risks associated with indebtedness
including interest rate fluctuations and any financial or other covenants that
our lender may require.

  We have a history of losses and may not be profitable in the future.

     We have a history of net losses, including a net loss of $55.5 million for
the 2000 fiscal year and a net loss of $9.8 million for the 1999 fiscal year.
Further, developing our new business strategy and expanding our services will
require significant additional capital and other expenditures. Accordingly, we
may continue to generate net losses in the future.

  Our success depends on the acceptance and increased use of our new products
  and services, and we cannot be sure that this will happen.

     Many of our products and services are based on new or improved technologies
that have not previously been available. We will have to overcome the
difficulties inherent in the introduction of new or improved technologies to the
market, including our ability to demonstrate to customers the technical
capabilities and the value of these new technologies, and there is no assurance
that we can do so successfully. Lack of market acceptance of our products and
services would adversely affect our business.

  We may not be able to deliver our services if third parties do not provide us
  with key components of our infrastructure.

     If any of our significant software vendors stop making their products
available to us or choose to compete against us, our business would be harmed.
Moreover, our success depends upon the continued popularity of the product
offerings of these vendors and on our ability to establish relationships with
new vendors in the future. If we are unable to obtain packaged applications from
these or comparable vendors or, if our vendors choose to compete with us or the
popularity of their products declines, our ability to customize, implement or
host packaged software applications may be adversely affected.
                                        8
<PAGE>   10

  If we are unable to efficiently integrate and operate acquired businesses, our
  business would be harmed.

     During the last few years, we have merged with or acquired numerous
companies. The rapid growth associated with these acquisitions and the
difficulties we have experienced in integrating these businesses has placed, and
will continue to place, a significant strain on our systems, controls and
managerial resources. Our management has expended, and expects to continue to
expend, significant time and effort in integrating the operations of recently
acquired businesses and businesses that we may acquire in the future and in
expanding our systems and controls to these acquired businesses. If we do not
accomplish these tasks, our results of operations and financial condition may be
materially and adversely affected.

  Our growth could be limited if we are unable to attract and retain qualified
  personnel.

     We believe that our success depends largely on our ability to attract and
retain highly skilled and qualified technical, managerial and marketing
personnel. Competition for this personnel in the information technology services
industry is intense. The workforce reductions during 2000 and early 2001 may
adversely affect both current employees and recruiting new employees. The
inability to hire or retain qualified personnel could hinder our ability to
implement our business strategy and harm our business.

  The markets we serve are highly competitive and many of our competitors have
  much greater resources.

     Competition in the information technology services industry is intense and
is expected to increase. Many of our competitors have substantially greater
financial, technical and marketing resources, larger customer bases, longer
operating histories, greater name recognition and more established relationships
in the industry than we do. Additionally, there are relatively few barriers to
entry in our business that would prevent new competitors from entering our
industry. We may not be able to compete effectively and, if we do not, our
financial condition and results of operations may be materially and adversely
affected. Also, although the trend is moving toward outsourcing, most of Verso's
current clients have internal information technology departments and could
choose to satisfy their network management needs through internal resources
rather than by outsourcing them to third-party service providers such as Verso.
The decision by clients or prospective clients to rely on their own information
technology departments could have a material adverse affect on Verso's business,
results of operations and financial position.

  Our success depends on our ability to keep up with rapid technological
  developments and evolving industry standards.

     Our future success will depend on our ability to adapt our services to
rapidly changing technologies and evolving industry standards, to continually
improve the performance, features and reliability of our services and to insure
the continued compatibility of our services with products, services and
architectures offered by various vendors or any prevailing standard. If we do
not keep up with those changes, our business may suffer.

  Intellectual property infringement claims against us, even without merit,
  could require us to enter into costly licenses or deprive us of technology we
  require.

     Our industry is technology intensive. As the number of software products in
our target markets increases and the functionality of these products further
overlap, third parties may claim that the technology we develop or license
infringes their proprietary rights. Any infringement claims, even without merit,
could require us to enter into costly royalty or licensing agreements to avoid
service implementation delays. If successful, a claim of product infringement
could deprive us of the technology we require altogether. Any of these outcomes
could harm our business.

  Our stock price has been volatile.

     The stock market in general, and the market for technology companies has
recently experienced extreme volatility that has often been unrelated to the
operating performance of particular companies. During the year ended December
31, 2000, the per share closing price of our common stock on the Nasdaq Stock
Market has fluctuated from a low of $1.06 to a high of $19.75. We believe that
the volatility of our stock price does not
                                        9
<PAGE>   11

necessarily relate to our performance and is broadly consistent with volatility
experienced in our industry. The price for our common stock is determined in the
marketplace and may be influenced by many factors including many factors that
are beyond our control, such as prevailing market conditions, changes in
earnings estimates by industry research analysts, and general economic, industry
and market conditions. In addition, in order to respond to competitive
developments, we may from time to time make pricing, service or marketing
decisions that could harm our business. Also, our operating results in one or
more future quarters may fall below the expectations of securities analysts and
investors. In either case, the trading price of our common stock would likely
decline.

  We have not paid any dividends in the past and do not expect to pay any
  dividends in the foreseeable future.

     We have never paid dividends on our common stock and do not anticipate
paying cash dividends in the foreseeable future. We intend to retain any
earnings to finance the development of our business and, consequently, may never
pay cash dividends. Our bank line of credit prohibits the payment of dividends.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The financial statements required to be filed with this Form 10-K/A are
filed under Item 14 below and are listed on the "Index to Consolidated Financial
Statements" on page F-1.

     The following is a schedule of quarterly financial data for the years ended
December 31, 2000 and 1999:

                      QUARTERLY FINANCIAL DATA (UNAUDITED)

<Table>
<Caption>
                                                 FIRST     SECOND     THIRD      FOURTH      TOTAL
                                                QUARTER   QUARTER    QUARTER   QUARTER(A)     YEAR
                                                -------   --------   -------   ----------   --------
                                                      (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                             <C>       <C>        <C>       <C>          <C>
2000
  Revenue.....................................  $18,069   $ 17,729   $16,075    $ 13,995    $ 65,868
  Gross profit................................    4,624      1,677     3,355       3,394      13,050
  Operating loss from continuing operations...   (3,944)   (12,894)   (6,099)    (16,358)    (39,295)
  Loss from continuing operations.............   (4,038)   (13,088)   (6,644)    (16,765)    (40,535)
                                                -------   --------   -------    --------    --------
          Net loss............................  $(5,238)  $(26,335)  $(6,645)   $(17,265)   $(55,483)
                                                =======   ========   =======    ========    ========
  Net loss per common share -- basic and
     diluted:(1)
     Loss from continuing operations..........  $ (0.17)  $  (0.51)  $ (0.25)   $  (0.34)   $  (1.56)
     Loss from discontinued operations........    (0.05)     (0.11)       --          --       (0.15)
     Loss on disposal of discontinued
       operations.............................       --      (0.41)       --       (0.01)      (0.43)
                                                -------   --------   -------    --------    --------
          Net (loss) income per common
            share.............................  $ (0.22)  $  (1.03)  $ (0.25)   $  (0.35)   $  (2.14)
                                                =======   ========   =======    ========    ========
1999
  Revenue.....................................  $13,644   $ 15,363   $16,460    $ 16,217    $ 61,684
  Gross profit................................    3,738      4,125     3,465       3,169      14,497
  Operating income (loss) from continuing
     operations...............................      233     (1,310)   (1,886)     (2,894)     (5,857)
  Income (Loss) from continuing operations....      373     (1,328)   (1,966)     (2,963)     (5,884)
                                                -------   --------   -------    --------    --------
          Net (loss) income...................  $(6,111)  $    244   $(2,316)   $ (1,655)   $ (9,838)
                                                =======   ========   =======    ========    ========
</Table>

                                        10
<PAGE>   12

<Table>
<Caption>
                                                 FIRST     SECOND     THIRD      FOURTH      TOTAL
                                                QUARTER   QUARTER    QUARTER   QUARTER(A)     YEAR
                                                -------   --------   -------   ----------   --------
                                                      (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                             <C>       <C>        <C>       <C>          <C>
  Net (loss) income per common share -- basic
     and diluted:(1)
     Loss from continuing operations..........  $  0.02   $  (0.06)  $ (0.08)   $  (0.12)   $  (0.25)
     Loss from discontinued operations........    (0.27)      0.07     (0.02)       0.05       (0.16)
                                                -------   --------   -------    --------    --------
          Net (loss) income per common
            share.............................  $ (0.25)  $   0.01   $ (0.10)   $  (0.07)   $  (0.41)
                                                =======   ========   =======    ========    ========
</Table>

---------------

(a) Fourth quarter 2000 net loss includes $9.6 million in goodwill amortization
    and $608,000 in amortization of deferred compensation related to the Cereus
    purchase, $760,000 of loss on asset abandonment and an estimated loss on
    disposal of discontinued operations of $500,000.
(1) Per common share amounts for the quarters and full years have been
    calculated separately. Accordingly, quarterly amounts may not add to the
    annual amounts because of differences in the average common shares
    outstanding during each period.

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a) The following documents are filed herewith as part of this Form 10-K/A:

          (1) A list of the financial statements required to be filed as a part
     of this Form 10-K is shown in the "Index to Consolidated Financial
     Statements" on page F-1.

          (2) The financial statement schedules required to be filed as a part
     of this Form 10-K, other than Schedule II -- Valuation and Qualifying
     Accounts, which is filed herewith, are omitted as the required information
     is either not applicable or is included in the Consolidated Financial
     Statements or the notes thereto.

          (3) A list of the exhibits required by Item 601 of Regulation S-K to
     be filed as a part of this Form 10-K is shown on the "Exhibit Index" filed
     herewith.

     (b) Reports on Form 8-K.  The Registrant has filed no reports on Form 8-K
during the quarter ended December 31, 2000, other than the following:

          (1) Form 8-K dated October 2, 2000 in which the Registrant reported
     under Item 2 the completion of its merger with Cereus;

          (2) Form 8-K dated October 12, 2000 in which the Registrant reported
     under Item 4 the change in the Registrant's independent accountants;

          (3) Form 8-K dated December 6, 2000 in which the Registrant reported
     under Item 2 the acquisition of MessageClick and under Item 5 the sale of
     certain unregistered convertible subordinated debentures and warrants to
     purchase common stock; and

          (4) Form 8-K dated December 29, 2000 in which the Registrant reported
     under Item 2 the sale of certain of its assets.

                                        11
<PAGE>   13

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Verso Technologies, Inc.:

     Under date of February 23, 2001, except as to Note 5, which is as of March
26, 2001, we reported on the consolidated balance sheet of Verso Technologies,
Inc. and subsidiaries as of December 31, 2000 and the related consolidated
statements of operations, shareholders' equity, and cash flows for the year
ended December 31, 2000 as contained in the Verso Technologies, Inc. 2000 Annual
Report on Form 10-K. In connection with our audit of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedule as listed in the accompanying index. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audit.

     In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.

KPMG LLP
Atlanta, Georgia
February 23, 2001
<PAGE>   14

                            VERSO TECHNOLOGIES, INC.

                 SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS

<Table>
<Caption>
                                                ADDITIONS
                                 ----------------------------------------
                                  BALANCE AT     CHARGED TO                               BALANCE AT
                                  BEGINNING      COSTS AND     ALLOWANCES                   END OF
DESCRIPTION                       OF PERIOD       EXPENSES      ACQUIRED    DEDUCTIONS      PERIOD
-----------                      ------------   ------------   ----------   ----------   ------------
<S>                              <C>            <C>            <C>          <C>          <C>
Allowances for doubtful
  accounts:
  2000.........................  $ (1,043,000)  $ (2,464,000)  $(632,000)   $2,473,000   $ (1,666,000)
  1999.........................    (2,914,000)    (3,568,000)         --     5,439,000     (1,043,000)
  1998.........................    (2,888,000)    (1,639,000)   (150,000)    1,763,000     (2,914,000)
Inventory valuation reserve:
  2000.........................  $         --   $   (800,000)  $      --    $       --   $   (800,000)
Deferred tax valuation
  allowance:
  2000.........................  $(17,125,000)  $(29,277,000)  $      --    $       --   $(46,402,000)
  1999.........................  $(15,240,000)  $ (1,885,000)  $      --    $       --   $(17,125,000)
</Table>
<PAGE>   15

                            VERSO TECHNOLOGIES, INC.

                                 EXHIBIT INDEX
                                   FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 2000

<Table>
<Caption>
ITEM NO.                    ITEM                                 METHOD OF FILING
--------                    ----                                 ----------------
<C>       <S>                                        <C>
  2.1     Second Amended and Restated Agreement and  Incorporated by reference to Appendix A
          Plan of Merger dated as of July 27, 2000   to the Registrant's Registration
          among the Registrant, Solemn Acquisition   Statement on Form S-4 filed August 7,
          Corporation and Cereus Technology          2000 (File No. 333-43224).
          Partners, Inc. ("Cereus").
  2.2     Agreement and Plan of Merger dated as of   Incorporated by reference to Exhibit 2.1
          August 31, 1998 among the Registrant,      to the Registrant's Current Report on
          Encore Acquiring Corporation, Encore       Form 8-K filed September 10, 1998.
          Systems, Inc., Global Systems and
          Support, Inc., Five Star Systems, Inc.,
          Penelope A. Sellers, and Joseph T. Dyer.
  2.3     Agreement and Plan of Merger dated as of   Incorporated by reference to Exhibit 2.1
          November 11, 1998 among the Registrant,    to the Registrant's Registration
          Sulcus Hospitality Technologies Corp. and  Statement on Form S-4 filed February 16,
          Sulcus Acquiring Corporation.              1999 (File No. 333-68699).
  2.4     Stock Purchase Agreement dated as of       Incorporated by reference to Exhibit
          October 26, 2000 between Squirrel          10.15 to the Registrant's Quarterly
          Systems, Inc., a wholly owned subsidiary   Report on Form 10-Q for the period ending
          of the Registrant, Squirrel Systems of     September 30, 2000.
          Canada Ltd., and SQS Acquisitions Inc.
  2.5     Agreement and Plan of Merger dated         Incorporated by reference to Exhibit 2.1
          October 31, 2000 between the Registrant,   to the Registrant's Current Report on
          MessageClick, Inc. and MCLICK Acquisition  Form 8-K filed December 6, 2000.
          Corporation (the "MessageClick Merger
          Agreement").
  2.6     First Amendment to the Agreement and Plan  Incorporated by reference to Exhibit 2.2
          of Merger dated November 9, 2000 between   to the Registrant's Current Report on
          the Registrant, MCLICK Acquisition         Form 8-K filed December 6, 2000.
          Corporation and MessageClick, Inc.
  2.7     Second Amendment to the Agreement and      Incorporated by reference to Exhibit 2.3
          Plan of Merger dated November 10, 2000     to the Registrant's Current Report on
          between the Registrant, MCLICK             Form 8-K filed December 6, 2000.
          Acquisition Corporation and MessageClick,
          Inc.
  2.8     Agreement for the Purchase and Sale of     Incorporated by reference to Exhibit 2.1
          Assets between AmerisSoft Corporation      to the Registrant's current Report on
          ("AmerisSoft"), the Registrant and Eltrax  Form 8-K filed December 29, 2000.
          Hospitality Group, Inc. dated as of
          September 28, 2000 (the "AmerisSoft
          Agreement").
  2.9     Letter amending the AmerisSoft Agreement   Incorporated by reference to Exhibit 2.2
          dated October 18, 2000.                    to the Registrant's Current Report on
                                                     Form 8-K filed December 29, 2000.
</Table>

                                        1
<PAGE>   16

<Table>
<Caption>
ITEM NO.                    ITEM                                 METHOD OF FILING
--------                    ----                                 ----------------
<C>       <S>                                        <C>
  2.10    Letter amending the AmerisSoft Agreement   Incorporated by reference to Exhibit 2.3
          dated November 22, 2000.                   to the Registrant's Current Report on
                                                     Form 8-K filed December 29, 2000.
  2.11    Form of Agreement between AmerisSoft       Incorporated by reference to Exhibit 2.4
          Norway AS and Eltrax System Scandinavia    to the Registrant's Current Report on
          AS.                                        Form 8-K filed December 29, 2000.
  2.12    Form of Agreement between AmerisSoft,      Incorporated by reference to Exhibit 2.5
          AmerisSoft Hospitality (Switzerland)       to the Registrant's Current Report on
          GmbH, the Registrant, Eltrax AG, and       Form 8-K filed December 29, 2000.
          Eltrax Holdings AG.
  2.13    Form of Agreement between AmerisSoft,      Incorporated by reference to Exhibit 2.6
          AmerisSoft Australia Pty Limited, the      to the Registrant's Current Report on
          Registrant, Eltrax Systems Pty Ltd, and    Form 8-K filed December 29, 2000.
          Eltrax International Group, Inc.
  2.14    Form of Agreement between AmerisSoft,      Incorporated by reference to Exhibit 2.7
          AmerisSoft Hospitality (UK) Limited, the   to the Registrant's Current Report on
          Registrant, and Eltrax Hospitality UK      Form 8-K filed December 29, 2000.
          Ltd.
  2.15    Form of Agreement between AmerisSoft,      Incorporated by reference to Exhibit 2.8
          Impact Level (M) Sdn. Bhd., the            to the Registrant's Current Report on
          Registrant, Eltrax Systems Sdn. Bhd., and  Form 8-K filed December 29, 2000.
          Eltrax International Inc.
  2.16    Form of Agreement between AmerisSoft       Incorporated by reference to Exhibit 2.9
          Hospitality Group (US), Inc, the           to the Registrant's Current Report on
          Registrant, and Eltrax Group, Inc.         Form 8-K filed December 29, 2000.
  2.17    Form of Agreement between AmerisSoft,      Incorporated by reference to Exhibit 2.10
          AmerisSoft (HK) Corporation Limited, the   to the Registrant's Current Report on
          Registrant, Eltrax Systems Pty Limited,    Form 8-K filed December 29, 2000.
          and Eltrax International Inc.
  2.18    Form of Agreement between AmerisSoft,      Incorporated by reference to Exhibit 2.11
          Latin America One Pte Ltd, the             to the Registrant's Current Report on
          Registrant, and Eltrax Systems Pte Ltd.    Form 8-K filed December 29, 2000.
  3.1     Amended and Restated Articles of           Incorporated by reference to Exhibit 3.1
          Incorporation of the Registrant, as        to the Registrant's Registration
          amended.                                   Statement on Form S-18 (File No.
                                                     33-51456).
  3.2     Amendment to Articles of Incorporation of  Incorporated by reference to Exhibit 3.1
          the Registrant.                            to the Registrant's Current Report on
                                                     Form 8-K filed October 2, 2000
  3.3     Bylaws of the Registrant, as amended.      Incorporated by reference to Exhibit 3.2
                                                     to the Registrant's Registration
                                                     Statement on Form S-4 filed August 7,
                                                     2000 (File No. 333-43224).
  4.1     Specimen form of the Registrant's common   Incorporated by reference to Exhibit 4.1
          stock certificate.                         to the Registrant's Registration
                                                     Statement on Form S-18 (File No.
                                                     33-51456).
  4.2     Warrant, dated as of October 31, 1996, to  Incorporated by reference to Exhibit 10.4
          purchase 106,250 shares of the             to the Registrant's Current Report on
          Registrant's common stock granted to       Form 8-K filed November 12, 1996.
          Walter C. Lovett.
</Table>

                                        2
<PAGE>   17

<Table>
<Caption>
ITEM NO.                    ITEM                                 METHOD OF FILING
--------                    ----                                 ----------------
<C>       <S>                                        <C>
  4.3     Warrant, dated as of October 31, 1996, to  Incorporated by reference to Exhibit 10.5
          purchase 106,250 shares of the             to the Registrant's Current Report on
          Registrant's common stock granted to       Form 8-K filed November 12, 1996.
          Douglas L. Roberson.
  4.4     Warrant dated as of September 23, 1997 to  Incorporated by reference to Exhibit 4.5
          purchase 240,000 shares of the             to the Registrant's Annual Report the
          Registrant's common stock granted to       year ended December 31, 1997.
          Morgan Q. Payne.
  4.5     Convertible Debenture dated July 27, 2000  Incorporated by reference to Exhibit 4.5
          executed by the Registrant in favor of     to the Registrant's Registration
          Strong River Investments, Inc.             Statement on Form S-4 filed August 7,
                                                     2000 (File No. 333-43224).
  4.6     Convertible Debenture dated July 27, 2000  Incorporated by reference to Exhibit 4.6
          executed by the Registrant in favor of     to the Registrant's Registration
          Bay Harbor Investments, Inc.               Statement on Form S-4 filed August 7,
                                                     2000 (File No. 333-43224).
  4.7     Registration Rights Agreement dated July   Incorporated by reference to Exhibit 4.7
          27, 2000, among the Registrant, Strong     to the Registrant's Registration
          River Investments, Inc. and Bay Harbor     Statement on Form S-4 filed August 7,
          Investments, Inc.                          2000 (File No. 333-43224).
  4.8     Registration Rights Agreement dated June   Incorporated by reference to Exhibit 4.8
          29, 2000 between the Registrant and        to the Registrant's Registration
          E.piphany, Inc.                            Statement on Form S-4 filed August 7,
                                                     2000 (File No. 333-43224).
  4.9     Warrant dated as of July 27, 2000 to       Incorporated by reference to Exhibit 4.10
          purchase 104,168 shares of the             to the Registrant's Registration
          Registrant's common stock granted to       Statement on Form S-4 filed August 7,
          Strong River Investments, Inc.             2000 (File No. 333-43224).
  4.10    Warrant dated as of July 27, 2000 to       Incorporated by reference to Exhibit 4.11
          purchase 104,168 shares of the             to the Registrant's Registration
          Registrant's common stock granted to Bay   Statement on Form S-4 filed August 7,
          Harbor Investments, Inc.                   2000 (File No. 333-43224).
  4.11    Warrant dated as of July 27, 2000 to       Incorporated by reference to Exhibit 4.12
          purchase 26,041 shares of the              to the Registrant's Registration
          Registrant's common stock granted to       Statement on Form S-4 filed August 7,
          Strong River Investments, Inc.             2000 (File No. 333-43224).
  4.12    Warrant dated as of July 27, 2000 to       Incorporated by reference to Exhibit 4.13
          purchase 26,041 shares of the              to the Registrant's Registration
          Registrant's common stock granted to Bay   Statement on Form S-4 filed August 7,
          Harbor Investments, Inc.                   2000 (File No. 333-43224).
  4.13    Warrant dated as of July 27, 2000 to       Incorporated by reference to Exhibit 4.14
          purchase 52,083 shares of the              to the Registrant's Registration
          Registrant's common stock granted to       Statement on Form S-4 filed August 7,
          Strong River Investments, Inc.             2000 (File No. 333-43224).
  4.14    Warrant dated as of July 27, 2000 to       Incorporated by reference to Exhibit 4.15
          purchase 52,083 shares of the              to the Registrant's Registration
          Registrant's common stock granted to Bay   Statement on Form S-4 filed August 7,
          Harbor Investments, Inc.                   2000 (File No. 333-43224).
</Table>

                                        3
<PAGE>   18

<Table>
<Caption>
ITEM NO.                    ITEM                                 METHOD OF FILING
--------                    ----                                 ----------------
<C>       <S>                                        <C>
  4.15    Warrant to purchase 1,750,000 shares of    Incorporated by reference to Exhibit 10.7
          Common Stock of the Registrant dated       to the Registrant's Quarterly Report on
          September 29, 2000, issued to Steven A.    Form 10-Q for the period ending September
          Odom. Represents an executive              30, 2000.
          compensation plan or arrangement.
  4.16    Warrant to purchase 875,000 shares of      Incorporated by reference to Exhibit 10.8
          Common Stock of the Registrant dated       to the Registrant's Quarterly Report on
          September 29, 2000, issued to James M.     Form 10-Q for the period ending September
          Logsdon. Represents an executive           30, 2000.
          compensation plan or arrangement.
  4.17    Warrant to purchase 665,000 shares of      Incorporated by reference to Exhibit 10.9
          Common Stock of the Registrant dated       to the Registrant's Quarterly Report on
          September 29, 2000, issued to Juliet M.    Form 10-Q for the period ending September
          Reising. Represents an executive           30, 2000.
          compensation plan or arrangement.
  4.18    Warrant to purchase 300,000 shares of      Incorporated by reference to Exhibit
          Common Stock of Cereus dated August 21,    10.10 to the Registrant's Quarterly
          2000, issued to Steven A. Odom.            Report on Form 10-Q for the period ending
          Represents an executive compensation plan  September 30, 2000.
          or arrangement.
  4.19    Warrant to purchase 100,000 shares of      Incorporated by reference to Exhibit
          Common Stock of Cereus dated August 21,    10.11 to the Registrant's Quarterly
          2000, issued to James M. Logsdon.          Report on Form 10-Q for the period ending
          Represents an executive compensation plan  September 30, 2000.
          or arrangement.
  4.20    Warrant to purchase 350,000 shares of      Incorporated by reference to Exhibit
          Common Stock of Cereus dated August 21,    10.12 to the Registrant's Quarterly
          2000 issued to Juliet M. Reising.          Report on Form 10-Q for the period ending
          Represents an executive compensation plan  September 30, 2000.
          or arrangement.
  4.21    Warrant to purchase 250,000 shares of      Incorporated by reference to Exhibit
          Common Stock of Cereus dated August 21,    10.13 to the Registrant's Quarterly
          2000, issued to Juliet M. Reising.         Report on Form 10-Q for the period ending
          Represents an executive compensation plan  September 30, 2000.
          or arrangement.
  4.22    Warrant to purchase 50,000 shares of       Incorporated by reference to Exhibit
          Common Stock of Cereus dated August 21,    10.14 to the Registrant's Quarterly
          2000, issued to Peter Pamplin. Represents  Report on Form 10-Q for the period ending
          an executive compensation plan or          September 30, 2000.
          arrangement.
  4.23    Form of Warrant issued in connection with  Incorporated by reference to Exhibit 4.1
          the Merger Agreement between the           to the Registrant's Current Report on
          Registrant, MessageClick, Inc. and MCLICK  Form 8-K filed December 6, 2000.
          Acquisition Corporation.
  4.24    Form of Registration Rights Agreement      Incorporated by reference to Exhibit 4.2
          entered into in connection with the        to the Registrant's Current Report on
          MessageClick Merger Agreement.             Form 8-K filed December 6, 2000.
</Table>

                                        4
<PAGE>   19

<Table>
<Caption>
ITEM NO.                    ITEM                                 METHOD OF FILING
--------                    ----                                 ----------------
<C>       <S>                                        <C>
  4.27    Form of 7.5% Convertible Debenture issued  Incorporated by reference to Exhibit 4.5
          in connection with the Convertible         to the Registrant's Current Report on
          Debenture and Warrant Purchase Agreement   Form 8-K filed December 6, 2000.
          between the Registrant and the Purchasers
          named therein (the "Debenture Purchase
          Agreement).
  4.28    Form of Warrant issued in connection with  Incorporated by reference to Exhibit 4.6
          the Debenture Purchase Agreement.          to the Registrant's Current Report on
                                                     Form 8-K filed December 6, 2000.
  4.29    Form of Registration Rights Agreement      Incorporated by reference to Exhibit 4.7
          entered into in connection with the        to the Registrant's Current Report on
          Purchase Agreement.                        Form 8-K filed December 6, 2000.
  4.30    Registration Rights Agreement by and       Incorporated by reference to Exhibit 4(e)
          among Cereus Technology Partners, Inc.     to Cereus Technology Partners, Inc.'s
          and the stockholders named therein, dated  Annual Report on Form 10-KSB for the
          February 8, 2000.                          period ended December 31, 1999.
  4.31    Registration Rights Agreement by and       Incorporated by reference to Exhibit 4.31
          among Cereus Technology Partners, Inc.     to the Registrant's Annual Report on Form
          and the stockholders a party thereto,      10-K for the year ended December 31,
          dated August 18, 2000.                     2000, filed March 30, 2001.
  4.32    Registration Rights Agreement by and       Incorporated by reference to Exhibit 4.32
          among Cereus Technology Partners, Inc.     to the Registrant's Annual Report on Form
          and the stockholders a party thereto,      10-K for the year ended December 31, 2000
          dated September 15, 2000.                  filed March 30, 2001.
  4.33    Registration Rights Agreement by and       Incorporated by reference to Exhibit 4.33
          among Cereus Technology Partners, Inc.     to the Registrant's Annual Report on Form
          and the stockholders a party thereto,      10-K for the year ended December 31, 2000
          dated September 27, 2000.                  filed March 30, 2001.
 10.1     Form of Incentive Stock Option Agreement.  Incorporated by reference to Exhibit 10.6
                                                     to the Registrant's Registration
                                                     Statement on Form S-18 (File 33-51456).
 10.2     Form of Non-Statutory Option Agreement.    Incorporated by reference to Exhibit 10.7
                                                     to the Registrant's Registration
                                                     Statement on Form S-18 (File 33-51456).
 10.3     Form of Non-Employee Director Stock        Incorporated by reference to Exhibit
          Option Agreement.                          10.10 to the Registrant's Annual Report
                                                     on Form 10-KSB for the year ended March
                                                     31, 1993.
 10.4     1992 Stock Incentive Plan.                 Incorporated by reference to Exhibit 10.4
                                                     to the Registrant's Registration
                                                     Statement on Form S-18 (File No.
                                                     33-51456).
 10.5     1995 Stock Incentive Plan.                 Incorporated by reference to Exhibit
                                                     10.12 to the Registrant's Annual Report
                                                     on Form 10-KSB for the year ended March
                                                     31, 1995.
 10.6     1997 Stock Incentive Plan.                 Incorporated by reference to the
                                                     Registrant's Proxy Statement for its 1997
                                                     Annual Meeting of Stockholders.
</Table>

                                        5
<PAGE>   20

<Table>
<Caption>
ITEM NO.                    ITEM                                 METHOD OF FILING
--------                    ----                                 ----------------
<C>       <S>                                        <C>
 10.7     1998 Stock Incentive Plan.                 Incorporated by reference to Exhibit
                                                     10.27 to the Registrant's Registration
                                                     Statement on Form S-4 filed February 16,
                                                     1999 (File No. 333-68699).
 10.8     1999 Stock Incentive Plan.                 Incorporated by reference to Exhibit 4.4
                                                     to the Registrant's Registration
                                                     Statement on Form S-8 filed August 13,
                                                     1999.
 10.9     First Amendment to the 1999 Stock          Incorporated by reference to Exhibit 10.9
          Incentive Plan.                            to the Registrant's Registration
                                                     Statement on Form S-4 filed August 7,
                                                     2000 (File No. 333-43224).
 10.10    1999 Employee Stock Purchase Plan.         Incorporated by reference to Exhibit 10.1
                                                     to the Registrant's Registration
                                                     Statement on Form S-8 filed December 8,
                                                     1999 (File No. 333-92337).
 10.11    Employment and Noncompetition Agreement    Incorporated by reference to Exhibit 10.2
          dated as of May 14, 1997 between the       to the Registrant's Current Report on
          Registrant and Edward J. Gorlitz.          Form 8-K filed May 15, 1997.
 10.12    Employment and Noncompetition Agreement    Incorporated by reference to Exhibit 10.2
          dated as of July 1, 1997 between the       to the Registrant's Current Report on
          Registrant and Joel J. Blickenstaff.       Form 8-K filed July 1, 1997.
 10.13    Employment and Noncompetition Agreement    Incorporated by reference to Exhibit 10.1
          dated as of July 1, 1997 between the       to the Registrant's Current Report on
          Registrant and Robert A. Hughes.           Form 8-K filed July 1, 1997.
 10.14    Employment and Noncompetition Agreement    Incorporated by reference to Exhibit 10.1
          dated as of August 15, 1997 between the    to the Registrant's Current Report on
          Registrant and Edward C. Barrett.          Form 8-K filed August 15, 1997.
 10.15    Employment and Noncompetition Agreement    Incorporated by reference to Exhibit 10.1
          dated as of August 15, 1997 between the    to the Registrant's Current Report on
          Registrant and Daniel M. Christy.          Form 8-K filed August 15, 1997.
 10.16    Employment and Noncompetition Agreement    Incorporated by reference to Exhibit 10.3
          dated as of August 15, 1997 between the    to the Registrant's Current Report on
          Registrant and David R. Hurlbrink.         Form 8-K filed August 15, 1997.
 10.17    Consulting Agreement dated as of April 1,  Incorporated by reference to Exhibit
          1999 between the Registrant and Montana    10.18 to the Registrant's Annual Report
          Corp.                                      on Form 10-K filed March 27, 2000.
 10.18    Consulting Agreement dated as of April 1,  Incorporated by reference to Exhibit
          1999 between the Registrant and CRL        10.19 to the Registrant's Annual Report
          Enterprises.                               on Form 10-K filed March 27, 2000.
 10.19    Real Estate Lease dated June 1, 1996       Incorporated by reference to Exhibit
          between Walt Lovett, Doug and Lisa         10.11 to the Registrant's Annual Report
          Roberson and Atlantic Network Systems,     on Form 10-KSB for the nine month
          Inc.                                       transition period ended December 31,
                                                     1996.
 10.20    Lease Agreement between Burgoe/Wyomissing  Incorporated by reference to Exhibit
          Partners and Hi-Tech Connections, Inc.     10.30 to the Registrant's Annual Report
          dated September 15, 1996.                  on Form 10-KSB for the year ended
                                                     December 31, 1997.
</Table>

                                        6
<PAGE>   21

<Table>
<Caption>
ITEM NO.                    ITEM                                 METHOD OF FILING
--------                    ----                                 ----------------
<C>       <S>                                        <C>
 10.21    Lease Agreement between JMG Development    Incorporated by reference to Exhibit
          Co. Ltd and DataComm Associates, Inc.      10.31 to the Registrant's Annual Report
          dated December 1, 1996.                    on Form 10-KSB for the year ended
                                                     December 31, 1997.
 10.22    Amended and Restated Preferred Vendor      Incorporated by reference to Exhibit
          Arrangement, dated as of May 15, 1992      10.29 to the Registrant's Registration
          between Holiday Hospitality Corporation    Statement on Form S-4 filed February 16,
          and Encore Systems, Inc.                   1999 (File No. 333-68699).
 10.23    Revolving Credit and Security Agreement    Incorporated by reference to Exhibit
          among PNC Bank, National Association and   10.32 to the Registrant's Annual Report
          the Registrant and certain of its          on Form 10-K filed March 27, 2000.
          subsidiaries dated March 14, 2000.
 10.24    First Amendment to Revolving Credit and    Incorporated by reference to Exhibit
          Security Agreement by and among PNC Bank   10.37 to the Registrant's Registration
          and the Registrant and certain of its      Statement on Form S-4 filed August 7,
          subsidiaries dated May 15, 2000.           2000 (File No. 333-43224).
 10.25    Second Amendment to Revolving Credit and   Incorporated by reference to Exhibit
          Security Agreement by and among PNC Bank   10.38 to the Registrant's Registration
          and the Registrant and certain of its      Statement on Form S-4 filed August 7,
          subsidiaries dated June 23, 2000.          2000 (File No. 333-43224).
 10.26    Consent of PNC Bank, National              Incorporated by reference to Exhibit
          Association, dated July 27, 2000 with      10.39 to the Registrant's Registration
          respect to Revolving Credit and Security   Statement on Form S-4 filed August 7,
          Agreement dated March 14, 2000, as         2000 (File No. 333-43224).
          amended.
 10.27    Stock Pledge Agreement dated June 14,      Incorporated by reference to Exhibit
          2000 by and between the Registrant and     10.50 to the Registrant's Registration
          PNC Bank.                                  Statement on Form S-4 filed August 7,
                                                     2000 (File No. 333-43224).
 10.28    Office Lease Agreement between the         Incorporated by reference to Exhibit
          Registrant and Galleria 400 LLC, dated     10.51 to the Registrant's Registration
          September 20, 1999.                        Statement on Form S-4 filed August 7,
                                                     2000 (File No. 333-43224).
 10.29    First Amendment to Office Lease Agreement  Incorporated by reference to Exhibit
          between the Registrant and Galleria 400    10.52 to the Registrant's Registration
          LLC, dated March 31, 2000.                 Statement on Form S-4 filed August 7,
                                                     2000 (File No. 333-43224).
 10.30    Convertible Debenture Purchase Agreement   Incorporated by reference to Exhibit
          dated July 27, 2000 among the Registrant,  10.53 to the Registrant's Registration
          Strong River Investments, Inc. and Bay     Statement on Form S-4 filed August 7,
          Harbor Investments, Inc.                   2000 (File No. 333-43224).
 10.31    Subscription Agreement dated June 29,      Incorporated by reference to Exhibit
          2000 between the Registrant and            10.54 to the Registrant's Registration
          E.piphany, Inc. June 12, 2000 among        Statement on Form S-4 filed August 7,
          Cereus and the Registrant's directors.     2000 (File No. 333-43224).
 10.32    Subordination Agreement dated July 27,     Incorporated by reference to Exhibit
          2000 among the Registrant, Cereus, Strong  10.57 to the Registrant's Registration
          River Investments, Inc. and Bay Harbor     Statement on Form S-4 filed August 7,
          Investments, Inc.                          2000 (File No. 333-43224).
</Table>

                                        7
<PAGE>   22

<Table>
<Caption>
ITEM NO.                    ITEM                                 METHOD OF FILING
--------                    ----                                 ----------------
<C>       <S>                                        <C>
 10.33    Executive Employment Agreement dated as    Incorporated by reference to Exhibit 10.4
          of September 29, 2000 between the          to the Registrant's Quarterly Report on
          Registrant and Steven A. Odom. Represents  Form 10-Q for the period ending September
          an executive compensation plan or          30, 2000.
          arrangement.
 10.34    Executive Employment Agreement dated as    Incorporated by reference to Exhibit 10.5
          of September 29, 2000 between the          to the Registrant's Quarterly Report on
          Registrant and James M. Logsdon.           Form 10-Q for the period ending September
          Represents an executive compensation plan  30, 2000.
          or arrangement.
 10.35    Executive Employment Agreement dated as    Incorporated by reference to Exhibit 10.6
          of September 29, 2000 between the          to the Registrant's Quarterly Report on
          Registrant and Juliet M. Reising.          Form 10-Q for the period ending September
          Represents an executive compensation plan  30, 2000.
          or arrangement.
 10.36    Form of Escrow Agreement entered into in   Incorporated by reference to Exhibit 4.3
          connection with the MessageClick Merger    to the Registrant's Current Report on
          Agreement.                                 Form 8-K filed December 6, 2000.
 10.37    Convertible Debenture and Warrant          Incorporated by reference to Exhibit 4.4
          Purchase Agreement dated October 31, 2000  to the Registrant's Current Report on
          between the Registrant and the             Form 8-K filed December 6, 2000.
          Purchasers.
 10.38    Cereus Technology Partners, Inc.           Incorporated by reference to Exhibit
          Directors' Warrant Incentive Plan.         10(cc) to Cereus Technology Partners,
          Represents an executive compensation plan  Inc.'s Annual Report on Form 10-KSB40 for
          or arrangement.                            the period ending December 31, 1999.
 10.39    Cereus Technology Partners, Inc. Outside   Incorporated by reference to Exhibit
          Directors' Warrant Plan. Represents an     10(dd) to Cereus Technology Partners,
          executive compensation plan or             Inc.'s Annual Report on Form 10-KSB40 for
          arrangement.                               the period ending December 31, 1999.
 10.40    Assignment and Assumption Agreement        Incorporated by reference to Exhibit
          between Cereus Technology Partners, Inc.   10.40 to the Registrant's Annual Report
          and the Registrant dated as of September   on Form 10-K for the year ended December
          29, 2000, assigning rights under the       31, 2000 filed March 30, 2001.
          Registration Rights Agreements dated
          February 8, 2000, August 18, 2000,
          September 15, 2000 and September 27,
          2000.
 10.41    Cereus Technology Partners, Inc. 1997      Incorporated by reference to Exhibit
          Stock Option Plan, as amended.             10(k) to Cereus Technology Partners,
                                                     Inc.'s 10-12G filed December 21, 1999.
 11       Statement of Computation of Net Loss Per   Incorporated by reference to Exhibit 11
          Common Share.                              to the Registrant's Annual Report on Form
                                                     10-K for the year ended December 31, 2000
                                                     filed March 30, 2001.
 21.1     Subsidiaries of the Registrant.            Incorporated by reference to Exhibit 21.1
                                                     to the Registrant's Annual Report on Form
                                                     10-K for the year ended December 31, 2000
                                                     filed March 30, 2001.
 23.1     Consent of KPMG LLP.                       Filed herewith.
 23.2     Consent of PricewaterhouseCoopers LLP.     Filed herewith.
 23.3     Consent of Crowe, Chizek and Company LLP.  Filed herewith.
 23.4     Consent of PricewaterhouseCoopers LLP.     Filed herewith.
</Table>

                                        8
<PAGE>   23

                         INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Verso Technologies, Inc.:
  Reports of Independent Auditors'..........................   F-2
  Consolidated Balance Sheets as of December 31, 2000 and
     1999...................................................   F-5
  Consolidated Statements of Operations for the Years Ended
     December 31, 2000, 1999 and 1998.......................   F-6
  Consolidated Statements of Shareholders' Equity for the
     Years Ended December 31, 2000, 1999 and 1998...........   F-7
  Consolidated Statements of Cash Flows for the Years Ended
     December 31, 2000, 1999 and 1998.......................   F-8
  Notes to Consolidated Financial Statements for the Years
     Ended December 31, 2000, 1999 and 1998.................  F-10
</Table>

                                       F-1
<PAGE>   24

                          INDEPENDENT AUDITORS' REPORT

The Board of Directors and Shareholders
Verso Technologies, Inc. and subsidiaries:

     We have audited the consolidated balance sheet of Verso Technologies, Inc.
and subsidiaries (the "Company") as of December 31, 2000, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.

     We conducted our audit in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Verso
Technologies, Inc. and subsidiaries as of December 31, 2000, and the results of
their operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

KPMG LLP
Atlanta, Georgia
February 23, 2001, except as to Note 5,
which is as of March 26, 2001

                                       F-2
<PAGE>   25

                       REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors
of Verso Technologies, Inc.:

     In our opinion, based on our audits and the report of other auditors as
referred to below, the financial statements listed in the accompanying index
present fairly, in all material respects, the financial position of Verso
Technologies, Inc. (formerly Eltrax Systems, Inc.) and its subsidiaries at
December 31, 1999, and the results of their operations and their cash flows for
each of the two years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. The consolidated financial statements give retroactive effect to the
merger of Sulcus Hospitality Technologies Corp. ("Sulcus") consummated on March
26, 1999 in a transaction accounted for as a pooling of interest, as described
in Note 1 to the consolidated financial statements. We did not audit the
financial statements of Sulcus, which reflected total revenues of $60,393,000
for the year ended December 31, 1998. Those statements were audited by other
auditors whose report thereon has been furnished to us, and our opinion
expressed herein, insofar as it relates to the amounts included for Sulcus, is
based on the report of the other auditors. We conducted out audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits and the report of other auditors provide a reasonable basis for the
opinion expressed above.

PricewaterhouseCoopers LLP
Detroit, Michigan
February 28, 2000, except for discontinued operations
reclassifications and revisions, the date for which is July 19, 2000

                                       F-3
<PAGE>   26

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Shareholders of
Sulcus Hospitality Technologies Corp.

     We have audited the consolidated statements of operations, stockholders'
equity and cash flows of Sulcus Hospitality Technologies Corp. for the year
ended December 31, 1998 (not presented separately herein). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

     We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
(not presented separately herein) present fairly, in all material respects, the
results of operations of Sulcus Hospitality Technologies Corp. and its cash
flows for the year ended December 31, 1998, in conformity with generally
accepted accounting principles.

     We have not audited the consolidated financial statements of Sulcus
Hospitality Technologies Corp. for any period subsequent to December 31, 1998.

Crowe, Chizek and Company LLP

Columbus, Ohio
March 26, 1999

                                       F-4
<PAGE>   27

                            VERSO TECHNOLOGIES, INC.

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                              DECEMBER 31,     DECEMBER 31,
                                                                  2000             1999
                                                              -------------    ------------
<S>                                                           <C>              <C>
                                          ASSETS:
Current assets:
  Cash and cash equivalents.................................  $  10,958,815    $         --
  Accounts receivable, net of allowance for doubtful
     accounts of $1,666,000 and $1,043,000 at December 31,
     2000 and 1999, respectively............................     15,203,759      18,053,692
  Inventories, principally finished goods, net..............      1,162,178         933,497
  Other current assets......................................      2,886,583         952,291
  Net assets of discontinued operations.....................      7,066,273      22,954,595
                                                              -------------    ------------
          Total current assets..............................     37,277,608      42,894,075
Property and equipment, net of accumulated depreciation and
  amortization of $2,631,000 and $1,885,000 at December 31,
  2000 and 1999, respectively...............................      9,044,959       3,991,653
Intangibles, net of accumulated amortization of $13,795,000
  and $2,247,000 at December 31, 2000 and 1999,
  respectively..............................................    120,540,845       9,168,385
                                                              -------------    ------------
          Total assets......................................  $ 166,863,412    $ 56,054,113
                                                              =============    ============

                           LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
  Line of credit............................................  $          --    $  9,468,882
  Current portion of convertible subordinated debentures,
     net of discount........................................      6,348,236              --
  Accounts payable..........................................      6,557,173       9,360,813
  Accrued compensation......................................      2,829,283       1,880,876
  Accrued expenses..........................................      5,216,625       3,733,730
  Unearned revenue and customer deposits....................      3,716,110       4,283,039
  Current portion of long-term debt.........................             --         389,587
                                                              -------------    ------------
          Total current liabilities.........................     24,667,427      29,116,927
Convertible subordinated debentures, net of current portion
  and discount..............................................      3,152,940              --
Long-term debt, net of current portion......................             --          54,068
                                                              -------------    ------------
          Total liabilities.................................     27,820,367      29,170,995
                                                              -------------    ------------
Commitments and Contingencies (Note 13 )
Shareholders' equity:
  Common stock, $.01 par value, 100,000,000 shares
     authorized; 49,615,133 and 23,808,415 shares issued and
     outstanding at December 31, 2000 and 1999,
     respectively...........................................        496,152         238,086
  Additional paid-in capital................................    249,339,879      75,678,836
  Accumulated deficit.......................................   (104,516,038)    (49,033,804)
  Deferred compensation.....................................     (6,276,948)             --
                                                              -------------    ------------
          Total shareholders' equity........................    139,043,045      26,883,118
                                                              -------------    ------------
          Total liabilities and shareholders' equity........  $ 166,863,412    $ 56,054,113
                                                              =============    ============
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       F-5
<PAGE>   28

                            VERSO TECHNOLOGIES, INC.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
                                                             FOR THE YEAR ENDED DECEMBER 31,
                                                         ----------------------------------------
                                                             2000          1999          1998
                                                         ------------   -----------   -----------
<S>                                                      <C>            <C>           <C>
Revenue:
  Services.............................................  $ 33,457,245   $24,256,843   $10,315,258
  Products.............................................    32,410,773    37,427,809    42,289,457
                                                         ------------   -----------   -----------
          Total revenue................................    65,868,018    61,684,652    52,604,715
Cost of revenue:
  Services.............................................    25,194,167    16,819,410     6,409,692
  Products.............................................    27,623,839    30,368,617    33,071,074
                                                         ------------   -----------   -----------
          Total cost of revenue........................    52,818,006    47,188,027    39,480,766
Gross profit:
  Services.............................................     8,263,078     7,437,433     3,905,566
  Products.............................................     4,786,934     7,059,192     9,218,383
                                                         ------------   -----------   -----------
          Total gross profit...........................    13,050,012    14,496,625    13,123,949
Operating expenses:
  Sales, general and administrative....................    34,836,607    17,663,556    13,990,254
  Depreciation.........................................     1,872,891       572,283       431,100
  Amortization of intangibles..........................    11,549,144     1,403,766       647,327
  Loss on asset abandonment............................     1,978,402            --            --
  Reorganization costs.................................     1,500,000       462,000            --
  Transaction costs....................................            --       251,078            --
  Deferred compensation................................       608,061            --            --
                                                         ------------   -----------   -----------
          Total operating expenses.....................    52,345,105    20,352,683    15,068,681
                                                         ------------   -----------   -----------
Operating loss from continuing operations..............   (39,295,093)   (5,856,058)   (1,944,732)
  Interest expense, net, including $1,042,000, $0 and
     $0 of amortization of loan fees and discount on
     convertible subordinated debentures in 2000, 1999
     and 1998, respectively............................    (1,239,528)     (183,172)      360,010
                                                         ------------   -----------   -----------
  Loss from continuing operations before income tax
     benefit (expense).................................   (40,534,621)   (6,039,230)   (1,584,722)
Income tax benefit (expense)...........................            --       154,773      (179,770)
                                                         ------------   -----------   -----------
  Loss from continuing operations......................   (40,534,621)   (5,884,457)   (1,764,492)
                                                         ------------   -----------   -----------
Discontinued operations:
  Loss from discontinued operations, net of income
     taxes.............................................    (3,947,613)   (3,953,642)   (4,718,958)
  Estimated loss on disposal of discontinued
     operations, net of income taxes...................   (11,000,000)           --            --
                                                         ------------   -----------   -----------
          Total discontinued operations, net of income
            taxes......................................   (14,947,613)   (3,953,642)   (4,718,958)
                                                         ------------   -----------   -----------
          Net loss.....................................  $(55,482,234)  $(9,838,099)  $(6,483,450)
                                                         ============   ===========   ===========
Net loss per common share -- basic and diluted:
  Loss from continuing operations......................  $      (1.56)  $     (0.25)  $     (0.08)
  Loss from discontinued operations....................         (0.15)        (0.16)        (0.21)
  Loss on disposal of discontinued operations..........         (0.43)           --            --
                                                         ------------   -----------   -----------
  Net loss per common share -- basic and diluted.......  $      (2.14)  $     (0.41)  $     (0.29)
                                                         ============   ===========   ===========
Weighted average shares outstanding -- basic and
  diluted..............................................    25,903,431    23,728,262    22,730,944
                                                         ============   ===========   ===========
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       F-6
<PAGE>   29

                            VERSO TECHNOLOGIES, INC.

                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
              FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
<Table>
<Caption>
                                          COMMON STOCK         ADDITIONAL       TREASURY STOCK
                                      ---------------------     PAID-IN      --------------------    ACCUMULATED      DEFERRED
                                        SHARES      AMOUNT      CAPITAL       SHARES     AMOUNT        DEFICIT      COMPENSATION
                                      ----------   --------   ------------   --------   ---------   -------------   ------------
<S>                                   <C>          <C>        <C>            <C>        <C>         <C>             <C>
BALANCES, DECEMBER 31, 1997.........  20,229,155   $202,293   $ 65,986,222         --   $      --   $ (32,712,255)  $        --
Net loss............................          --         --             --         --          --      (6,483,450)           --
Exercise of stock warrants..........   1,716,667     17,167      7,357,833         --          --              --            --
Warrants issued in exchange for
 services...........................          --         --         30,000         --          --              --            --
Issuance of stock...................   1,423,614     14,235        158,788         --          --              --            --
Treasury stock purchases............          --         --             --   (144,273)   (387,221)             --            --
Issuance of common stock in Encore
 acquisition........................     465,000      4,650      2,134,350         --          --              --            --
                                      ----------   --------   ------------   --------   ---------   -------------   -----------
BALANCES, DECEMBER 31, 1998.........  23,834,436   $238,345   $ 75,667,193   (144,273)  $(387,221)  $ (39,195,705)  $        --
Net loss............................          --         --             --         --          --      (9,838,099)           --
Issuance of stock...................     119,829      1,200        380,305         --          --              --            --
Retirement of treasury stock........    (144,273)    (1,443)      (385,778)   144,273     387,221              --            --
Warrants issued in exchange for
 services...........................          --         --         24,000         --          --              --            --
Payment in lieu of issuance of
 fractional shares..................      (1,577)       (16)        (6,884)        --          --              --            --
                                      ----------   --------   ------------   --------   ---------   -------------   -----------
BALANCES, DECEMBER 31, 1999.........  23,808,415   $238,086   $ 75,678,836         --   $      --   $ (49,033,804)  $        --
Net loss............................          --         --             --         --          --     (55,482,234)           --
Issuance of common stock and
 replacement awards of common stock
 warrants and options in Cereus
 acquisition........................  21,866,600    218,666    149,102,643         --          --              --    (6,885,009)
Issuance of common stock and common
 stock warrants in MessageClick
 acquisition........................   1,405,923     14,059      3,529,735         --          --              --            --
Amortization of deferred
 compensation.......................          --         --             --         --          --              --       608,061
Exercise of stock options...........   1,005,596     10,055      3,391,625         --          --              --            --
Issuance of stock through Employee
 Stock Purchase Plan................      60,355        604        297,586         --          --              --            --
Issuance of shares in private
 placement, net of associated
 fees...............................   1,374,532     13,745     13,990,669         --          --              --            --
Warrants issued in conjunction with
 convertible debentures.............          --         --      2,378,212         --          --              --            --
Shares issued in exchange for
 services...........................      88,712        887        349,113         --          --              --            --
Warrants issued in exchange for
 services...........................          --         --         65,283         --          --              --            --
Issuance of common stock and
 compensatory options in
 reorganization.....................       5,000         50        556,177         --          --              --            --
                                      ----------   --------   ------------   --------   ---------   -------------   -----------
BALANCES, DECEMBER 31, 2000.........  49,615,133   $496,152   $249,339,879         --   $      --   $(104,516,038)  $(6,276,948)
                                      ==========   ========   ============   ========   =========   =============   ===========

<Caption>

                                         TOTAL
                                      ------------
<S>                                   <C>
BALANCES, DECEMBER 31, 1997.........  $ 33,476,260
Net loss............................    (6,483,450)
Exercise of stock warrants..........     7,375,000
Warrants issued in exchange for
 services...........................        30,000
Issuance of stock...................       173,023
Treasury stock purchases............      (387,221)
Issuance of common stock in Encore
 acquisition........................     2,139,000
                                      ------------
BALANCES, DECEMBER 31, 1998.........  $ 36,322,612
Net loss............................    (9,838,099)
Issuance of stock...................       381,505
Retirement of treasury stock........            --
Warrants issued in exchange for
 services...........................        24,000
Payment in lieu of issuance of
 fractional shares..................        (6,900)
                                      ------------
BALANCES, DECEMBER 31, 1999.........    26,883,118
Net loss............................   (55,482,234)
Issuance of common stock and
 replacement awards of common stock
 warrants and options in Cereus
 acquisition........................   142,436,300
Issuance of common stock and common
 stock warrants in MessageClick
 acquisition........................     3,543,794
Amortization of deferred
 compensation.......................       608,061
Exercise of stock options...........     3,401,680
Issuance of stock through Employee
 Stock Purchase Plan................       298,190
Issuance of shares in private
 placement, net of associated
 fees...............................    14,004,414
Warrants issued in conjunction with
 convertible debentures.............     2,378,212
Shares issued in exchange for
 services...........................       350,000
Warrants issued in exchange for
 services...........................        65,283
Issuance of common stock and
 compensatory options in
 reorganization.....................       556,227
                                      ------------
BALANCES, DECEMBER 31, 2000.........  $139,043,045
                                      ============
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       F-7
<PAGE>   30

                            VERSO TECHNOLOGIES, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                   FOR THE YEAR ENDED DECEMBER 31,
                                                              -----------------------------------------
                                                                  2000          1999           1998
                                                              ------------   -----------   ------------
<S>                                                           <C>            <C>           <C>
OPERATING ACTIVITIES:
Continuing operations:
  Net loss from continuing operations.......................  $(40,534,621)  $(5,884,457)  $ (1,764,492)
  Adjustments to reconcile net loss from continuing
    operations to net cash used in continuing operating
    activities:
    Amortization of intangibles.............................    11,549,144     1,403,766        647,327
    Depreciation............................................     1,872,891       572,283        431,100
    Loss on asset abandonment...............................     1,978,402            --             --
    Amortization of deferred compensation...................       608,061            --             --
    Deferred tax provision..................................            --            --      2,100,000
    Provision for doubtful accounts.........................     2,464,000     3,568,000      1,639,000
    Inventory valuation reserve.............................       800,000            --             --
    Amortization of loan fees and discount on convertible
      subordinated debentures...............................       537,542            --             --
    Other...................................................            --        24,000         20,721
    Changes in current operating items:.....................            --            --             --
      Accounts receivable, net..............................     1,967,381   (13,752,780)       822,982
      Inventories, net......................................    (1,028,681)      830,194      2,408,616
      Other current assets..................................      (350,989)      439,495       (169,262)
      Accounts payable......................................    (9,172,199)    5,717,082     (2,788,796)
      Accrued compensation..................................       878,705     1,474,740       (519,322)
      Accrued expenses......................................    (2,059,299)    1,536,898     (1,628,681)
      Unearned revenue and customer deposits................      (608,910)    3,046,066     (1,201,308)
                                                              ------------   -----------   ------------
         Net cash used in continuing operating activities...   (31,098,573)   (1,024,713)        (2,115)
                                                              ------------   -----------   ------------
Discontinued operations:
  Loss from discontinued operations.........................   (14,947,613)   (3,953,642)    (4,718,958)
  Estimated loss on disposal of discontinued operations.....    11,000,000            --             --
  Adjustment to reconcile loss from discontinued operations
    to net cash (used in) provided by discontinued operating
    activities..............................................    (1,591,333)    4,398,491      6,523,087
                                                              ------------   -----------   ------------
         Net cash (used in) provided by discontinued
           operating activities.............................    (5,538,946)      444,849      1,804,129
                                                              ------------   -----------   ------------
         Net cash (used in) provided by operating
           activities.......................................   (36,637,519)     (579,864)     1,802,014
                                                              ------------   -----------   ------------
INVESTING ACTIVITIES:
Continuing operations:
  Net cash used in investing activities for continuing
    operations --
  Purchases of property and equipment, net..................    (7,143,443)   (2,968,273)      (599,818)
  Purchase of Encore Systems................................            --            --     (8,266,021)
  Purchase of Cereus Technology Partners, Inc...............    (1,888,309)           --             --
  Advance to MessageClick, Inc. prior to purchase...........      (300,000)           --             --
  Purchase of MessageClick, Inc.............................      (137,406)           --             --
                                                              ------------   -----------   ------------
         Net cash used in investing activities for
           continuing operations............................    (9,469,158)   (2,968,273)    (8,865,839)
Discontinued operations:
  Software development costs capitalized, net...............    (2,296,746)   (2,078,734)    (1,741,848)
  Purchases of property and equipment, net..................       (87,011)   (1,379,180)    (1,540,819)
  Net proceeds from sale of discontinued operations.........     8,566,079            --             --
                                                              ------------   -----------   ------------
         Net cash provided by (used in) investing activities
           for discontinued operations......................     6,182,322    (3,457,914)    (3,282,667)
                                                              ------------   -----------   ------------
         Net cash used in investing activities..............    (3,286,836)   (6,426,187)   (12,148,506)
                                                              ------------   -----------   ------------
         Net cash used in operating and investing
           activities, carried forward......................   (39,924,355)   (7,006,051)   (10,346,492)
                                                              ------------   -----------   ------------
</Table>

                                       F-8
<PAGE>   31
                            VERSO TECHNOLOGIES, INC.

              CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)

<Table>
<Caption>
                                                                   FOR THE YEAR ENDED DECEMBER 31,
                                                              -----------------------------------------
                                                                  2000          1999           1998
                                                              ------------   -----------   ------------
<S>                                                           <C>            <C>           <C>
Net cash used in operating and investing activities, carried
  forward...................................................   (39,924,355)   (7,006,051)   (10,346,492)
FINANCING ACTIVITIES:
Continuing operations:
  Payments on long-term debt................................      (373,158)   (2,140,115)      (608,218)
  (Payments) borrowings on credit line, net.................    (9,654,106)    2,324,725     (2,046,326)
  Proceeds from term loan...................................            --            --      4,000,000
  Proceeds from issuance of convertible subordinated
    debenture, net..........................................    11,345,643            --             --
  Advance from Cereus Technology Partners, Inc. prior to
    merger..................................................    10,170,421            --             --
  Proceeds from issuances of common stock, net..............    17,704,284       381,505      7,548,023
  Retirement of treasury stock..............................            --            --       (387,221)
  Payments issued in lieu of fractional shares..............            --        (6,900)            --
                                                              ------------   -----------   ------------
         Net cash provided by financing activities for
           continuing operations............................    29,193,084       559,215      8,506,258
                                                              ------------   -----------   ------------
Discontinued operations:
  Net cash used in financing activities for discontinued
    operations --
    Payments on long-term debt..............................      (120,000)     (180,000)      (180,000)
                                                              ------------   -----------   ------------
    Net cash provided by financing activities...............    29,073,084       379,215      8,326,258
                                                              ------------   -----------   ------------
    Decrease in cash and cash equivalents...................   (10,851,271)   (6,626,836)    (2,020,234)
CASH AND CASH EQUIVALENTS:
Beginning of period.........................................       613,294     7,240,130      9,260,364
Cash acquired in purchase of Cereus Technology Partners,
  Inc.......................................................    21,215,184            --             --
Cash acquired in purchase of MessageClick, Inc..............       177,570            --             --
                                                              ------------   -----------   ------------
End of period...............................................  $ 11,154,777   $   613,294   $  7,240,130
                                                              ============   ===========   ============
CASH AND CASH EQUIVALENTS:
  Continuing operations.....................................  $ 10,958,815   $        --   $  6,082,438
  Discontinued operations...................................       195,962       613,294      1,157,692
                                                              ------------   -----------   ------------
         Total cash and cash equivalents....................  $ 11,154,777   $   613,294   $  7,240,130
                                                              ============   ===========   ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments during the year for:
  Interest..................................................  $  1,108,223   $   743,035   $    541,137
                                                              ============   ===========   ============
  Income taxes..............................................  $    289,396   $   463,685   $    307,703
                                                              ============   ===========   ============
NON-CASH INVESTING AND FINANCING ACTIVITIES:
  Common stock consideration for acquisitions:
    MessageClick, Inc. -- issuance of 1,405,923 shares and
      181,901 common stock warrants.........................  $  3,543,794   $        --   $         --
    Cereus Technology Partners, Inc. -- issuance of
      21,866,600 shares and assumption of 19,571,192 common
      stock warrants and 1,376,708 stock options............   142,436,300            --             --
    Encore Systems -- issuance of 465,000 shares............            --            --      2,139,000
  Common stock and compensatory options issued in
    reorganization..........................................       556,227            --             --
  Issuance of warrants in exchange for services.............        65,283        24,000         30,000
  Issuance of common stock in exchange for services.........       350,000         4,965         26,000
  Assets acquired and liabilities assumed in conjunction
    with business acquisitions:
    Fair value of assets acquired, excluding cash...........  $  8,828,275   $        --   $ 14,709,090
    Consideration paid......................................     2,025,715            --     11,005,013
                                                              ------------   -----------   ------------
         Liabilities assumed................................  $  6,802,560   $        --   $  3,704,077
                                                              ============   ===========   ============
</Table>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       F-9
<PAGE>   32

                            VERSO TECHNOLOGIES, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 2000

1. ORGANIZATION AND BASIS OF PRESENTATION

     Verso Technologies, Inc., formerly known as Eltrax Systems, Inc. (the
"Company"), is a leading provider of technology infrastructure solutions that
power complex business environments. The Company historically operated through
two separate business units: the Technology Services Group and the Hospitality
Services Group ("HSG"). On July 19, 2000, the Company's Board of Directors
authorized the disposition of HSG. HSG is reported as a discontinued operation
and the consolidated financial statements have been reclassified to segregate
the net assets and operating results of this business segment. Technology
Services Group and corporate operations are reflected in continuing operations.

     In its continuing operations, the Company is engaged in delivering software
and services that ensure the reliability, scalability and availability of
complex business environments. The Company's solutions include enterprise
management services, enterprise application integration, business applications,
customer response center services and unified communications services, each
designed to integrate the people, processes and platforms that enable businesses
to operate more efficiently.

     The consolidated financial statements include the accounts of Verso
Technologies, Inc. and its wholly-owned subsidiaries, including Cereus
Technology Partners, Inc. ("Cereus") and its subsidiaries, which merged with the
Company on September 29, 2000, and MessageClick, Inc. ("MessageClick"), which
merged with the Company on November 22, 2000, each in transactions accounted for
as purchases (see Note 3) and including Sulcus Hospitality Technologies Corp.
("Sulcus") (included in discontinued operations) and Windward Technology Group,
Inc. ("Windward"), which merged with the Company in the first quarter of 1999 in
transactions accounted for as poolings-of-interests (see Note 3). Prior
financial statements have been restated to include the results of Sulcus and
Windward for all periods presented.

     Certain prior year amounts in the consolidated financial statements have
been reclassified to conform with the current year presentation. These
reclassifications had no effect on previously reported net loss or shareholders'
equity.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

  Principles of Consolidation

     The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated.

  Use of Estimates

     The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management of the Company to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.

  Cash Equivalents

     The Company considers all investments purchased with an original maturity
of three months or less to be cash equivalents. Cash equivalents at December 31,
2000 totaling $10,164,922 consist primarily of money market investments, which
are recorded at cost, which approximates market.

                                       F-10
<PAGE>   33
                            VERSO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Credit, Customer and Vendor Concentrations

     The Company's accounts receivable potentially subjects the Company to
credit risk, as collateral is generally not required. As of December 31, 2000,
one customer accounted for more than 10%, totaling $2.1 million, of the gross
accounts receivable. During the year ended December 31, 2000, one customer
accounted for more than 10%, totaling $8.6 million, of total revenue and one
vendor accounted for more than 10%, totaling $10.9 million, of total cost of
revenue.

  Inventories

     Inventories consist primarily of purchased software licenses held for sale
and are stated at the lower of cost or market. Cost is determined by using the
first-in, first-out method.

  Property and Equipment

     Property and equipment, substantially consisting of furniture and
equipment, are stated at cost or fair value if acquired through a business
acquisition. Depreciation is computed using the straight-line method over
estimated useful lives, ranging from three to ten years. Upon retirement or
disposal of furniture and equipment, the cost and accumulated depreciation are
removed from the accounts, and any gain or loss is included in income.
Maintenance and repairs are charged to expense as incurred.

     Property and equipment are summarized as follows (in thousands):

<Table>
<Caption>
                                                                DECEMBER 31,
                                                              ----------------
                                                               2000      1999
                                                              -------   ------
<S>                                                           <C>       <C>
Computers and equipment.....................................  $ 7,203   $3,741
Purchased software..........................................    1,211    1,801
Furniture and fixtures......................................      923      231
Leasehold improvements......................................    2,339      104
                                                              -------   ------
                                                               11,676    5,877
Less accumulated depreciation and amortization..............    2,631    1,885
                                                              -------   ------
          Net property and equipment........................  $ 9,045   $3,992
                                                              =======   ======
</Table>

     Purchased software represents the cost of purchased integration software
tools and the cost of internal use software acquired in connection with business
combinations. It also includes the cost of licenses to use, embed and sell
software tools developed by others. These costs are being amortized ratably
based on the projected revenue associated with these purchased or licensed tools
and products or the straight-line method over three years, whichever method
results in a higher level of annual amortization. Amortization expense related
to purchased software amounted to approximately $550,000, $7,000 and $0 in 2000,
1999 and 1998, respectively. During 2000, the Company decided to replace certain
internal use software and recorded a loss on asset abandonment of approximately
$2.0 million. Accumulated amortization related to purchased software totaled
approximately $148,000 and $7,000 at December 31, 2000 and 1999, respectively.

  Capitalized Software

     The Company is a software reseller and its capitalized software is
primarily purchased software for internal use which is included in property and
equipment. Any software development costs incurred prior to or after
establishing technological feasibility are immaterial and are charged to
operations as research and development costs.

                                       F-11
<PAGE>   34
                            VERSO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Long-Lived Assets and Long-Lived Assets to be Disposed Of

     The Company accounts for long-lived assets in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of." This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.

  Intangibles

     Intangible assets represent the excess of cost over the fair value of net
tangible assets acquired and purchased customer lists. These assets are
generally being amortized on a straight-line basis over estimated useful lives
of three years. Intangibles are evaluated for potential impairment of value
whenever events or changes in circumstances indicate that full asset
recoverability is questionable. The determinates used for this evaluation of
potential impairment include management's estimate of the asset's continuing
ability to generate positive income from current operations, anticipated future
operating results measured on the basis of undiscounted cash flows, as well as
the strategic significance of the intangible to the Company's business
objectives. The amount of intangible impairment, if any, is measured based on
projected discounted future operating cash flows using a discount rate
reflecting the Company's average costs of funds.

     Intangible assets consist of the following (in thousands):

<Table>
<Caption>
                                                         AMORTIZATION
                                                        PERIOD (YEARS)     2000      1999
                                                        --------------   --------   -------
<S>                                                     <C>              <C>        <C>
Goodwill..............................................        3          $132,336   $ 9,415
Installed customer base...............................        3             2,000     2,000
                                                                         --------   -------
                                                                          134,336    11,415
Accumulated amortization..............................                    (13,795)   (2,247)
                                                                         --------   -------
                                                                         $120,541   $ 9,168
                                                                         ========   =======
</Table>

  Product Returns and Warranties

     The Company provides warranties for its resold products, after the software
is purchased, for the period in which the customer purchases maintenance
coverage through the Company. The Company's warranty is governed by and does not
exceed the manufacturer's warranty. The Company generally supports only current
releases and the immediately prior releases of its resold products. The
Company's license agreements do not permit product returns by its customers. The
Company has not experienced significant warranty claims to date. Accordingly,
the Company has not provided a reserve for warranty costs at December 31, 2000,
1999, and 1998.

  Fair Value of Financial Instruments

     Estimates of fair value are made at a specific point in time, based on
relevant market prices and information about the financial instrument. The
estimated fair values of financial instruments are not necessarily indicative of
the amounts the Company might realize in actual market transactions. The
following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments:

                                       F-12
<PAGE>   35
                            VERSO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     Cash and cash equivalents, accounts receivable, inventories, accrued
expenses, deferred revenues: The carrying amounts reported in the balance sheet
approximates their fair value.

     Short- and long-term debt: The carrying amount of the Company's borrowings
under floating rate debt approximates its fair value. The carrying amount of
convertible subordinated debentures approximates their fair value. The
convertible debentures were issued in a private placement and, therefore, no
market is readily available; however, they were issued recently in arm's-length
transactions which approximates the fair value.

     At December 31, 2000 and 1999, the carrying amounts of all financial
instruments approximate their fair values.

  Revenue

     The Company recognizes revenue from two primary sources, product sales
(hardware and software licenses) and services. Revenue from software licensing
and support fees is recognized in accordance with Statement of Position ("SOP")
97-2, "Software Revenue Recognition and SOP 98-9, Software Revenue Recognition
with Respect to Certain Transactions." Accordingly, the Company recognizes
software license revenue when: (1) persuasive evidence of an arrangement exists;
(2) delivery has occurred; (3) the fee is fixed or determinable; and (4)
collectibility is probable.

     SOP No. 97-2 generally requires revenue earned on software arrangements
involving multiple elements to be allocated to each element based on the
relative fair values of the elements. The fair value of an element must be based
on the evidence that is specific to the vendor. License revenue allocated to
software products generally is recognized upon delivery of the products or
deferred and recognized in future periods to the extent that an arrangement
includes one or more elements to be delivered at a future date and for which
fair values have not been established. Revenue allocated to maintenance is
recognized ratably over the maintenance term, which is typically 12 months, and
revenue allocated to training and other service elements, such as implementation
and training, are recognized as the services are performed.

     Under SOP No. 98-9, if evidence of fair value does not exist for all
elements of a license agreement and post-contract customer support is the only
undelivered element, then all revenue for the license arrangement is recognized
ratably over the term of the agreement as license revenue. If evidence of fair
value of all undelivered elements exists but evidence does not exist for one or
more delivered elements, then revenue is recognized using the residual method.
Under the residual method, the fair value of the undelivered elements is
deferred and the remaining portion of the arrangement fee is recognized as
revenue. Revenue from hosted software agreements are recognized ratably over the
term of the hosting arrangements, which is typically 12 months.

     Amounts that have been received in cash or billed but that do not yet
qualify for revenue recognition are reflected as deferred revenues.

  Stock-Based Compensation Plan

     The Company accounts for its stock option plans in accordance with the
provisions of Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees," and related interpretations. As such,
compensation expense to be recognized over the related vesting period is
generally determined on the date of grant only if the current market price of
the underlying stock exceeds the exercise price. SFAS 123, "Accounting for
Stock-Based Compensation," permits entities to recognize as expense over the
vesting period the fair value of all stock-based awards on the date of grant.
Alternatively, SFAS 123 allows entities to continue to apply the provisions of
APB Opinion No. 25 and provide pro forma net income (loss) and pro forma income
(loss) per share disclosures for employee stock option grants as if the
fair-value-based method defined in SFAS 123 had been applied. The Company has
elected to continue to apply the provisions of APB Opinion No. 25 and provide
the pro forma disclosures required by SFAS 123.
                                       F-13
<PAGE>   36
                            VERSO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Income Taxes

     Income taxes are computed using an asset and liability approach, which
requires the recognition of taxes payable or refundable for the current year and
deferred tax assets and liabilities for the future tax consequences of events
that have been recognized in the Company's consolidated financial statements or
tax returns. The measurement of current and deferred tax assets and liabilities
are based on provisions of the enacted tax law; the effects of future changes in
tax laws or rates are not anticipated. The measurement of deferred tax assets is
reduced, if necessary, by the amount of any tax benefits that, based on
available evidence, are not expected to be realized.

  Net Loss Per Share

     Basic and diluted net loss per share was computed in accordance with SFAS
No. 128, "Earnings Per Share," using the weighted average number of common
shares outstanding. The diluted net loss per share for the twelve month periods
ended December 31, 2000, 1999 and 1998 does not include the effect of the common
stock equivalents, calculated by the treasury stock method, as their impact
would be antidilutive. Using the weighted average number of common shares,
excluded common stock equivalents are as follows:

<Table>
<Caption>
                                                             2000       1999      1998
                                                           ---------   -------   -------
<S>                                                        <C>         <C>       <C>
Shares issuable under stock options......................  1,827,356   635,193   942,149
Shares issuable pursuant to warrants to purchase common
  stock..................................................  3,016,212        --    25,096
Shares issuable under convertible subordinated
  debentures.............................................  1,664,351        --        --
                                                           ---------   -------   -------
          Total..........................................  6,507,919   635,193   967,245
                                                           =========   =======   =======
</Table>

  Comprehensive Income (Loss)

     SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
reporting and presentation of comprehensive income (loss) and its components in
a full set of financial statements. The statement requires only additional
disclosures in the consolidated financial statements; it does not affect the
Company's financial position or results of operations. No statement of
comprehensive loss has been included in the accompanying financial statements
for the three year period ended December 31, 2000 since comprehensive loss and
net loss presented in the accompanying statement of operations would be the
same.

  Segment and Geographic Information

     In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
This Statement establishes standards for the way companies report information
about operating segments in annual financial statements. It also establishes
standards for related disclosures about products and services, geographic areas
and major customers. In accordance with the provisions of SFAS No. 131, the
Company has determined that it does not have separately reportable operating
segments. The Company operates in one principal business segment across domestic
and international markets. All of the Company's continuing operating results and
identifiable assets are in the United States.

  New Accounting Pronouncements

     In September 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement was amended in September
2000 by Statement No. 138, "Accounting for Certain Derivative Instruments and
Certain Hedging Activities." Statement No. 138 is effective for the Company
beginning January 2001. The new Statement requires all derivatives to be
recorded on the balance sheet at fair value and establishes accounting treatment
for three types of hedges: hedges of changes in the fair

                                       F-14
<PAGE>   37
                            VERSO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

value of assets, liabilities or firm commitments: hedges of the variable cash
flows of forecasted transactions; and hedges of foreign currency exposures of
net investments in foreign operations. To date, the Company has not invested in
derivative instruments nor participated in hedging activities and, therefore,
there will be no impact on the results of operations or financial position from
Statements No. 133 or No. 138.

     In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"), and amended it in March and June 2000. The Company adopted the
provisions of SAB 101 in the fourth quarter of 2000 which did not have a
significant impact on its consolidated financial statements.

3. MERGERS AND ACQUISITIONS

  MessageClick, Inc.

     On November 22, 2000, the Company acquired MessageClick, Inc. The purchase
consideration was approximately $4.2 million, consisting of 1,405,923 shares of
the Company's common stock with a fair value of $3.2 million, warrants to
acquire 181,901 shares of the Company's common stock with an exercise price of
$4.03 per share (estimated fair value of $301,000 using the Black-Scholes option
pricing model based on the following weighted-average assumptions: expected
volatility -- 88%; expected life -- five years; risk-free interest rate -- 5.5%;
and expected dividend yield -- 0%), cash of $5,000 and acquisition costs of
approximately $637,000, of which $132,000 were paid at year end.

     The acquisition was treated as a purchase for accounting purposes, and,
accordingly, the assets and liabilities were recorded at their fair value at the
date of the acquisition. The excess of the purchase price over the estimated
fair value of net liabilities acquired totaled approximately $9.8 million and
was allocated to goodwill. The goodwill is being amortized over three years.

     In addition, the former preferred stockholders of MessageClick may be
entitled to receive an additional $3,000,000 payable in the Company's common
stock if the MessageClick business achieves certain revenue levels for the year
ending December 31, 2001. As it is not possible to estimate what, if any,
payment would be due, no such amounts have been recognized. However, if amounts
are paid, this additional purchase price will be recorded as additional purchase
consideration and amortized over the remaining estimated life of the original
goodwill recorded.

     Prior to the Company's mergers with Cereus (as described below) and
MessageClick, Cereus purchased 3,000,000 shares of MessageClick's Series E
Preferred Stock for an aggregate purchase price of $1,500,000. In addition, in
November 2000, the Company loaned MessageClick $300,000 pursuant to a 90-day
promissory note.

  Cereus Technology Partners, Inc.

     On September 29, 2000, the Company acquired all of the outstanding capital
stock of Cereus. The purchase consideration was approximately $134.1 million,
consisting of 21,866,600 shares of the Company's common stock with a fair value
of $106.6 million, assumed options and warrants to acquire 20,947,900 shares of
the Company's common stock with exercise prices ranging from $.51 to $10.14 per
share (estimated fair value of $35.8 million, net of $6.9 million of deferred
compensation discussed in Note 9, using the Black-Scholes option pricing model
based on the following weighted-average assumptions: expected volatility -- 88%;
expected life -- five years; risk-free interest rate -- 5.5%; and expected
dividend yield -- 0%) and acquisition costs of approximately $1.9 million,
reduced by a $10.2 million bridge facility advanced to the Company by Cereus
prior to closing. The bridge facility accrued interest at 2% over prime and the
Company recorded interest expense, prior to the closing of the transaction, of
approximately $261,000 during the year ended December 31, 2000.

                                       F-15
<PAGE>   38
                            VERSO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The acquisition was treated as a purchase for accounting purposes, and,
accordingly, the assets and liabilities were recorded at their fair value at the
date of the acquisition. The excess of the purchase price over the estimated
fair value of net assets acquired totaled approximately $113.0 million and was
allocated to goodwill. The goodwill is being amortized over three years.

  Allocation of MessageClick and Cereus Purchase Price

<Table>
<Caption>
                                                              MESSAGECLICK     CEREUS
                                                              ------------   -----------
<S>                                                           <C>            <C>
Cash........................................................      177,570     21,215,184
Other current assets........................................      192,405      3,935,702
Furniture and fixtures......................................    1,272,992        445,172
Intangibles.................................................    9,874,069    113,046,450
Current liabilities.........................................   (7,330,833)    (4,511,047)
                                                               ----------    -----------
Purchase consideration......................................    4,186,203    134,131,461
                                                               ==========    ===========
</Table>

  Pro Forma Effect of MessageClick and Cereus Purchases

     The following unaudited pro forma information presents the results of
continuing operations of the Company as if the acquisitions above had taken
place on January 1, 1999, excluding loss on asset abandonment of $2.0 million in
2000, reorganization costs of $1.5 million and $462,000, in 2000 and 1999
respectively, and transaction costs of $251,000 in 1999 (in thousands, except
per share amounts):

<Table>
<Caption>
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Revenues....................................................  $ 72,638   $ 64,968
Net loss from continuing operations.........................  $(95,560)  $(57,691)
Net loss from continuing operations per common
  share -- basic and diluted................................  $  (1.94)  $  (1.23)
Weighted average shares outstanding -- basic and diluted....    49,176     47,001
</Table>

  Windward Technology Group

     On March 31, 1999, the Company issued 1,375,000 unregistered shares of its
common stock in exchange for all of the outstanding common stock of Windward.
Windward focuses on the application development service market, with added
networking and network management solutions. The merger with Windward was
accounted for as a pooling-of-interests and, accordingly, the Company's
consolidated financial statements have been restated to include the accounts and
operations of Windward for all periods prior to the merger.

  Encore Systems, Inc.

     Effective September 1, 1998, the Company acquired Encore Systems, Inc.,
Global Systems and Support, Inc., and Five Star Systems, Inc. (collectively,
"Encore"). Encore provides software and services primarily to the hospitality
industry. The Company paid the shareholders of Encore cash of $8.5 million and
issued to them 465,000 unregistered shares of the Company's common stock. The
total consideration paid was approximately $11.0 million including transaction
costs. The common stock was valued at $4.60 a share, representing the market
value of the shares upon announcement of the transaction.

     The transaction was accounted for as a purchase for accounting purposes,
and, accordingly, the assets and liabilities were recorded at their fair value
at the date of the acquisition. Intangibles resulting from the transaction were
approximately $12.3 million, allocated as follows: $4.0 million to software
products acquired, $2.0 million to the installed customer base and workforce
with the remainder of $6.3 million to goodwill.

     During 2000, the Company disposed of all but the ongoing maintenance
services of Encore and reclassified the net assets and operating results of the
software portion of Encore as discontinued operations.
                                       F-16
<PAGE>   39
                            VERSO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. DISCONTINUED OPERATIONS

     On July 19, 2000, the Company's board of directors formally determined to
dispose of HSG. In December 2000, the Company completed the sale of its domestic
lodging business and international hospitality business for aggregate proceeds
of $10.0 million. The Company sold its restaurant solutions business for
aggregate proceeds of $8.5 million in January 2001. HSG is reported as a
discontinued operation, and the consolidated financial statements have been
reclassified to segregate the net assets and operating results of the business
segment.

     The estimated loss recorded during the year ended December 31, 2000, on the
sale of HSG was $11.0 million, which included a reduction in asset values of
approximately $4.3 million and a provision for anticipated closing costs and
operating losses until disposal of approximately $6.7 million.

     Summary operating results of the discontinued operations (in thousands) are
as follows:

<Table>
<Caption>
                                                           FOR THE YEAR ENDED DECEMBER 31,
                                                           -------------------------------
                                                             2000        1999       1998
                                                           ---------   --------   --------
<S>                                                        <C>         <C>        <C>
Revenue..................................................  $ 43,064    $67,628    $62,139
Gross profit.............................................    16,439     32,654     30,608
Operating loss...........................................    (7,288)    (3,316)    (2,259)
Interest expense.........................................      (785)      (459)      (359)
Loss on disposal of assets...............................    (6,704)        --         --
Income tax expense.......................................      (171)      (179)    (2,101)
                                                           --------    -------    -------
Loss from discontinued operations........................  $(14,948)   $(3,954)   $(4,719)
                                                           ========    =======    =======
</Table>

     Net assets held for sale (in thousands) are as follows:

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                              ------------------
                                                               2000       1999
                                                              -------   --------
<S>                                                           <C>       <C>
Cash and cash equivalents...................................  $   196   $    613
Other current assets........................................    9,543     20,691
Furniture and equipment, net................................      685      2,714
Capitalized software, net...................................    4,532      8,370
Intangibles, net............................................    1,387      7,533
Current liabilities.........................................   (3,694)   (17,602)
Reserve for loss on sale and operating losses...............   (5,784)        --
Accumulated other comprehensive loss........................      201        636
                                                              -------   --------
                                                              $ 7,066   $ 22,955
                                                              =======   ========
</Table>

5. FINANCING ARRANGEMENTS

     In March 2000, the Company obtained a $20.0 million revolving credit
agreement (the "Credit Agreement") with PNC Bank, National Association (the
"Bank"). The Credit Agreement is secured by substantially all of the assets of
the Company. The Credit Agreement was amended in March 2001, in connection with
the sale of HSG, to reduce the availability of funds to $10.0 million and adjust
certain covenants. Interest is computed at .5% above the Bank's Base Rate (10%
at December 31, 2000). As amended, the Credit Agreement provides for up to
$3,000,000 in letters of credit. Advances are limited by a formula based on
eligible receivables, certain cash balances, outstanding letters of credit and
certain subjective limitations. Interest payments are due monthly, and the
Credit Agreement, as amended, expires March 2003. The Credit Agreement, as
amended, includes fees of 3% on outstanding letters of credit and .25% on unused
available borrowings. The Company paid certain loan fees and attorney's fees
totaling approximately $185,000

                                       F-17
<PAGE>   40
                            VERSO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

in connection with the Credit Agreement, which fees are being amortized to
interest expense over the term of the Credit Agreement, as amended.

     The Company had no borrowings under the Credit Agreement, as amended, as of
December 31, 2000. The availability under the Credit Agreement, as amended, at
December 31, 2000, was approximately $6.0 million. Under the terms of the Credit
Agreement, as amended, the Company is required to meet increasing quarterly cash
flow requirements, cannot declare dividends or incur any additional indebtedness
and has annual capital expenditure limits. The Company was in compliance with
these covenants as of December 31, 2000.

6. CONVERTIBLE SUBORDINATED DEBENTURES

     In connection with the purchase of MessageClick, Inc., the Company issued
to certain investors of MessageClick $4.5 million of its 7.5% convertible
subordinated debentures. The debentures carry warrants to purchase 1,000,000
shares of the Company's common stock at an exercise price of $7.50 per share.
The debentures are convertible into the Company's common stock at a conversion
price of $4.50. The convertible subordinated debentures are due November 22,
2005. The debentures have been discounted to reflect the fair value of the
warrants issued, totaling approximately $1.4 million, using the Black-Scholes
option pricing method based on the following weighted-average assumptions:
expected volatility -- 88%; expected life -- five years; risk-free interest
rate -- 5.5%; and expected dividend yield -- 0%. The unamortized discount
totaled approximately $1.3 million at December 31, 2000. In addition, the
Company paid certain private placement fees and attorney's fees in connection
with the sale of the debentures totaling $50,000. The fees are being amortized
to interest expense over the term of the debentures.

     The Company issued $7.0 million of its 5% convertible subordinated
debentures during the year ended December 31, 2000. The convertible subordinated
debentures were issued with warrants to purchase 364,584 shares of the Company's
common stock at an exercise price of $5.03 per share. The debentures have been
discounted to reflect the fair value of the warrants issued, totaling
approximately $1.0 million, using the Black-Scholes option pricing method based
on the following weighted-average assumptions: expected volatility -- 88%;
expected life -- five years; risk-free interest rate -- 5.5%; and expected
dividend yield -- 0%. The unamortized discount totaled approximately $652,000 at
December 31, 2000. In addition, the Company paid certain private placement fees
(including 88,712 shares of the Company's common stock with a fair value at the
date of issuance totaling $350,000) and attorney's fees in connection with the
sale of the debentures totaling $454,000. The fees are being amortized to
interest expense over the term of the debentures.

     In January 2001, the Company modified the terms of its 5% convertible
subordinated debentures. According to the modified terms of the agreement, the
Company repurchased $4.5 million of the outstanding $7.0 million of its 5%
convertible subordinated debentures. Of the remaining $2.5 million in
outstanding 5% convertible subordinated debentures, $1.5 million were converted
by the investors into the Company's common stock at a price of $1.40 per share.
The remaining balance of $1.0 million is convertible at $1.19 per share. The
Company may re-borrow up to $3.5 million at its option, subject to the
satisfaction of certain conditions, through the issuance of new 5% convertible
debentures, which will have a fixed conversion price determined at the time of
issuance. In connection with this modification, the Company issued warrants to
purchase 945,000 shares of the Company's common stock at an exercise price of
$2.00 per share. The fair value of the warrants issued, totaled approximately
$977,000, using the Black-Scholes option pricing method based on the following
weighted-average assumptions: expected volatility -- 88%; expected life -- five
years; risk-free interest rate -- 5.5%; and expected dividend yield -- 0%. The
total cost of conversion, including the warrants issued, totaled $1.6 million.
The remaining debentures are due on October 5, 2001.

                                       F-18
<PAGE>   41
                            VERSO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The cost of conversion consisted of the following:

<Table>
<S>                                                           <C>
Fair value of warrants issued...............................  $  976,666
Write off of related discount...............................     365,307
Write off of related loan fees..............................     165,390
Beneficial conversion.......................................     107,485
Legal and other costs.......................................      25,000
                                                              ----------
                                                              $1,639,848
                                                              ==========
</Table>

7. REORGANIZATION COSTS

     In the second quarter 2000, the Company announced a reorganization as a
part of its effort to improve operational efficiencies and financial performance
and eliminated approximately 100 positions held by employees. As a result of the
reorganization, the Company recorded reorganization costs of approximately $1.5
million during the year ended December 31, 2000. These charges were based upon
management's plans established in the second quarter of 2000 and consist of the
following items (in thousands):

<Table>
<Caption>
                                                         REORGANIZATION   AMOUNTS ACCRUED AT
                                                             COSTS        DECEMBER 31, 2000
                                                         --------------   ------------------
<S>                                                      <C>              <C>
Severance and related costs............................      $  977            $     67
Facility costs.........................................         258                 158
Other employee related costs...........................         265                 180
                                                             ------            --------
                                                             $1,500            $    405
                                                             ======            ========
</Table>

     The severance and related costs are attributable to approximately 100
employees who have been terminated by the Company. The costs include the fair
value of 5,000 shares of the Company's common stock issued to an employee and
the intrinsic value of accelerated vesting and extended exercise dates on
options previously issued to employees totaling approximately $556,000.

     The facility costs represent the costs for leased facilities that will not
be utilized for their full terms. The Company intends to utilize the remaining
amounts accrued for reorganization costs during 2001.

     In connection with the Company's relocation of its headquarters to Atlanta,
Georgia the Company recorded reorganization costs in 1999 totaling approximately
$462,000 related to recruiting and relocation of personnel.

8. SHAREHOLDERS' EQUITY

  Preferred Stock

     The Company originally authorized 1,000,000 shares of Preferred Stock,
30,000 of which were designated as Series A Convertible Preferred Stock (the
"Preferred" Stock). All 30,000 shares of the Preferred Stock have been converted
into 300,000 shares of the Company's common stock. There were no outstanding
shares of the Preferred Stock at December 31, 2000 and 1999. Currently, there
are 970,000 shares of undesignated Preferred Stock which are authorized but
unissued.

  Private Placements

     On March 29, 2000, the Company sold 1,194,532 shares of its common stock to
accredited investors in a private placement for aggregate proceeds of
approximately $13.3 million less issuance costs of $240,000.

     On June 29, 2000, the Company sold 180,000 shares of its common stock to an
accredited investor in a private placement for aggregate proceeds of $990,000.

                                       F-19
<PAGE>   42
                            VERSO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

  Stock Warrants

     In connection with various financing and acquisition transactions, and
related services provided to the Company, the Company has issued warrants to
purchase the Company's common stock. During 2000, the Company issued 364,584
warrants in connection with its 5% convertible subordinated debentures and
1,000,000 in connection with its 7.5% convertible subordinated debentures. In
addition, warrants issued by Cereus to purchase Cereus common stock were assumed
by the Company and converted at a rate of 1.75 shares of the Company's common
stock per share of Cereus common stock at the time of the Company's merger with
Cereus. These warrants, after conversion, totaled 13,131,192 and were issued to
employees and non-employees related to financing transactions of Cereus. The
fair value of these warrants at the time of merger, estimated to be $17.5
million using the Black-Scholes option pricing model based on the following
weighted-average assumptions: expected volatility -- 88%; expected life -- five
years; risk-free interest rate -- 5.5%; and expected dividend yield -- 0%, is
included in the cost of the acquisition. A summary of warrants outstanding at
December 31, 2000, is as follows:

<Table>
<Caption>
                              NUMBER OF       EXERCISE
        YEAR ISSUED            WARRANTS        PRICE                 EXPIRATION DATE
        -----------           ----------   --------------   ----------------------------------
<S>                           <C>          <C>              <C>
Year ended December 31,          275,000   $5.25 --  6.00   September 2001 -- October 2006
  1996......................
Year ended December 31,          265,000   $5.00 --  6.00   January 2002 -- September 2002
  1997......................
Year ended December 31,          142,625   $2.14 --  2.37   December 2001 -- November 2004
  1999......................
Year ended December 31,       14,549,584   $0.01 -- 10.14   April 2002 -- September 2005
  2000......................
                              ----------
                              15,232,209
                              ==========
</Table>

     As of December 31, 2000, all of the warrants are vested.

     In 1998, warrants for 1,716,667 shares were exercised, including 1,050,000
shares related to a Private Placement. The proceeds in 1998 from warrant
exercises were $7.4 million.

9. STOCK OPTION PLAN

     The Company has a stock option plan for employees, consultants, and other
individual contributors to the Company which enables the Company to grant up to
approximately 10,000,000 qualified and nonqualified incentive stock options (the
"1999 Plan"). The Company adopted the 1999 Plan in the second quarter of 1999
and aggregated the Company's prior plans. The qualified options are to be
granted at an exercise price not less than the fair market value at the date of
grant. The nonqualified options are to be granted at an exercise price of not
less than 85% of the fair market value at the date of grant. The aggregate
number of shares of common stock that may be granted through awards under the
1999 Plan to any employee in any calendar year may not exceed 300,000 shares.
The Company's compensation committee determines the period within which options
may be exercised, but no option may be exercised more than ten years from the
date of grant. The compensation committee also determines the period over which
the options vest. Options are generally exercisable for ten years from the grant
date and generally vest over a four year period from the date of grant.

     The 1999 Plan also provides for stock purchase authorizations and stock
bonus awards. As of December 31, 2000, stock bonus awards totaling 5,000 have
been granted under the 1999 Plan.

     Upon the acquisition of Cereus in September 2000, the Company assumed the
Cereus Technology Partners, Inc. 1997 Stock Option Plan (the "Cereus Plan"), and
the options outstanding. The options outstanding under the Cereus Plan were
converted at a rate of 1.75 shares of the Company's common stock per share of
Cereus common stock at the time of the merger and totaled 1,376,708. These
options, at the time of merger, had an estimated fair value of $2.8 million
using the Black-Scholes option pricing model based on the following
weighted-average assumptions: expected volatility -- 88%; expected life -- five
years; risk-free interest rate -- 5.5%; and expected dividend yield -- 0%, and
are included in goodwill. Total options available

                                       F-20
<PAGE>   43
                            VERSO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

for grant under the Cereus Plan as of December 31, 2000, were 4,001,220. The
Company does not plan to issue any additional shares under the Cereus Plan.

     Total options available for grant under the 1999 Plan as of December 31,
2000, were 1,335,150.

     In connection with the merger with Cereus, the Company recorded deferred
compensation of approximately $6.9 million for the aforementioned options
granted by Cereus prior to the merger which were exchanged for the Company's
options ("Replacement Awards"). The deferred compensation represents the
unvested intrinsic value of the Replacement Awards and is accounted for in
accordance with FASB Statement No. 44 "Accounting for Certain Transactions
Involving Stock Compensation -- an Interpretation of APB 25." The Company
amortizes deferred compensation over four years, the vesting period of the
options. The Company amortized to noncash compensation expense approximately
$608,000 of the deferred compensation related to these option grants for the
year ended December 31, 2000.

     Prior to the merger, Cereus granted stock warrants totaling 3,680,000 in
2000 to certain employees and directors outside of its stock option plan in
addition to the warrants discussed in Note 8. These stock warrants have
contractual terms of 10 years. The majority of these warrants have an exercise
price equal to the fair market value of Cereus's stock at the grant date. The
warrants granted in 2000 vest over various terms not to exceed 5 years,
beginning on the date of the grant. These warrants were assumed by the Company
and converted based on the merger agreement to 6,440,000 warrants at the time of
the merger with Cereus. The fair value of these warrants at the time of merger,
estimated to be $15.5 million using the Black-Scholes option pricing model based
on the following weighted-average assumptions: expected volatility -- 88%;
expected life -- five years; risk-free interest rate -- 5.5%; and expected
dividend yield -- 0%, is included in the cost of the acquisition.

     During 2000, the Company accelerated vesting and extended exercise dates on
options for certain terminated individuals. The Company recorded a non-cash
charge of approximately $532,000 for the year ended December 31, 2000,
representing the value of the accelerated vesting and extended exercise dates
for certain terminated employees. The expense is included in reorganization
costs.

     A summary of the status of the Company's stock options granted to
employees, and the above warrants granted by Cereus, prior to the merger, as of
December 31, 2000, December 31, 1999, and December 31, 1998 and the changes
during the year ended on these dates is presented below:

  Employee Stock Options

<Table>
<Caption>
                                        2000                    1999                    1998
                                ---------------------   ---------------------   ---------------------
                                NUMBER OF    WEIGHTED   NUMBER OF    WEIGHTED   NUMBER OF    WEIGHTED
                                SHARES OF    AVERAGE    SHARES OF    AVERAGE    SHARES OF    AVERAGE
                                UNDERLYING   EXERCISE   UNDERLYING   EXERCISE   UNDERLYING   EXERCISE
                                 OPTIONS      PRICES     OPTIONS      PRICES     OPTIONS      PRICES
                                ----------   --------   ----------   --------   ----------   --------
<S>                             <C>          <C>        <C>          <C>        <C>          <C>
Outstanding at beginning of
  the year....................   4,058,207    $4.05     3,356,637     $ 4.17    2,533,046     $4.04
Granted.......................  12,665,797     4.35     1,834,500       4.00    1,588,953      4.54
Exercised.....................   1,005,596     3.41       116,268       3.24       14,232      3.09
Forfeited.....................   1,119,038     6.25     1,010,910       4.39      751,130      4.61
Expired.......................          --       --         5,752      17.39           --        --
                                ----------              ---------               ---------
Outstanding at end of year....  14,599,370     4.19     4,058,207       3.07    3,356,637      4.17
                                ==========              =========               =========
Exercisable at end of year....   5,670,100     3.92     2,314,801       3.43    2,148,559      4.17
                                ==========              =========               =========
Weighted-average fair value of
  all options granted.........                 4.19                     2.47                   3.14
</Table>

                                       F-21
<PAGE>   44
                            VERSO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     The fair value of each stock option granted is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions:

<Table>
<Caption>
                     ASSUMPTION                       2000     1999         1998
                     ----------                       -----    -----    ------------
<S>                                                   <C>      <C>      <C>
Expected Term.......................................   4.00     5.00        5.00
Expected Volatility.................................  91.00%   69.16%    30% -- 60%
Expected Dividend Yield.............................   0.00%    0.00%      0.00%
Risk-Free Interest Rate.............................   5.50%    5.53%   5.3% to 6.0%
</Table>

     The following table summarizes information about employee stock options
outstanding at December 31, 2000:

<Table>
<Caption>
                    OPTIONS OUTSTANDING                      OPTIONS EXERCISABLE
                  ------------------------                 ------------------------
                    NUMBER      WGTD. AVG.   WGTD. AVG.      NUMBER      WGTD. AVG.
   RANGE OF       OUTSTANDING    EXERCISE     REMAINING    EXERCISABLE    EXERCISE
EXERCISE PRICES   AT 12/31/00     PRICE      CONTR. LIFE   AT 12/31/00     PRICE
---------------   -----------   ----------   -----------   -----------   ----------
<S>               <C>           <C>          <C>           <C>           <C>
$0.38 to   2.14    4,533,975      $ 2.12        9.56        2,482,311      $ 2.11
 2.14 to   3.75    3,390,765        3.02        7.27          904,766        3.00
 3.81 to   4.14    2,061,788        4.05        8.87          409,665        3.86
 4.15 to   8.81    3,522,342        6.00        7.61        1,691,166        6.14
 8.81 to  18.00    1,090,500       10.83        9.52          182,192       12.72
---------------   ----------      ------        ----        ---------      ------
$0.38 to $18.00   14,599,370      $ 4.19        8.46        5,670,100      $ 3.92
===============   ==========      ======        ====        =========      ======
</Table>

     Had the Company used the fair value-based method of accounting for its
stock option and incentive plans and charged compensation cost against income,
over the vesting period, based on the fair value of options at the date of
grant, the net loss and net loss per common share would have been increased to
the following pro forma amounts (in thousands, except for per share amounts):

<Table>
<Caption>
                                                         YEARS ENDED DECEMBER 31,
                                                      -------------------------------
                                                        2000        1999       1998
                                                      --------    --------    -------
<S>                                                   <C>         <C>         <C>
Net Loss:
  As reported.......................................  $(55,482)   $ (9,838)   $(6,483)
  Pro forma.........................................   (59,466)    (11,139)    (9,389)
Net Loss per Common Share:
  As reported.......................................  $  (2.14)   $  (0.41)   $ (0.29)
  Pro forma.........................................     (2.30)      (0.47)     (0.41)
</Table>

10. INCOME TAXES

     The significant components of income taxes, for continuing operations are
as follows (in thousands):

<Table>
<Caption>
                                                              YEARS ENDED DECEMBER 31,
                                                              ------------------------
                                                              2000      1999     1998
                                                              -----    ------    -----
<S>                                                           <C>      <C>       <C>
Income Taxes:
  Currently Payable.........................................   $--     $(155)    $180
  Deferred..................................................   --         --       --
                                                               --      -----     ----
          Income Tax Expense................................   $--     $(155)    $180
                                                               ==      =====     ====
</Table>

                                       F-22
<PAGE>   45
                            VERSO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

     A reconciliation of the statutory U.S. federal income tax rate to the
Company's effective tax was as follows:

<Table>
<Caption>
                                                              YEARS ENDED DECEMBER 31,
                                                              ------------------------
                                                               2000     1999     1998
                                                              ------   ------   ------
<S>                                                           <C>      <C>      <C>
Statutory U.S. rate.........................................  (34.0)%  (34.0)%  (34.0)%
State income taxes, net of federal benefit..................   (3.8)    (3.4)    (4.0)
Non-deductible goodwill.....................................    7.1      4.5      8.9
Non-deductible merger costs.................................     --      8.7       --
Effect of acquisitions......................................  (22.1)      --       --
Effect of valuation allowance...............................   52.8     21.6     40.4
                                                              -----    -----    -----
                                                                0.0%    (2.6)%   11.3%
                                                              =====    =====    =====
</Table>

     Deferred income taxes are recognized to reflect the net tax effects of
temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's net deferred tax assets are as follows
(in thousands):

<Table>
<Caption>
                                                                 DECEMBER 31,
                                                              -------------------
                                                                2000       1999
                                                              --------   --------
<S>                                                           <C>        <C>
Deferred tax assets and (liabilities):
  Net operating loss carryforwards..........................  $ 35,241   $  2,569
  Capital loss carryforwards................................       269        230
  Research and development credits..........................     1,248         15
  Unearned revenue..........................................     1,412      1,092
  Reserves..................................................     2,272      1,013
  Compensation accruals.....................................     1,335        637
  Discontinued Operations...................................     4,625     11,569
  Valuation allowance.......................................   (46,402)   (17,125)
                                                              --------   --------
          Net deferred tax asset............................  $     --   $     --
                                                              ========   ========
</Table>

     The valuation allowance for deferred tax assets as of December 31, 2000,
was approximately $46.4 million. The change of $29.3 million and $1.9 million in
the total valuation allowance for 2000 and 1999, respectively, resulted
primarily from increases in the above described temporary differences on which a
valuation allowance was provided. Based on the level of historical taxable
income and projections for future taxable income over the periods in which the
deferred tax assets are deductible, Company management believes it is more
likely than not the Company will realize the benefits of the deferred tax
assets, net of existing valuation allowances at December 31, 2000.

     At December 31, 2000, the Company had net operating loss ("NOL")
carry-forwards of approximately $68.2 million, a portion of which are subject to
certain limitations under the Internal Revenue Code Section 382, and other
business tax credits of approximately $1.2 million. If not utilized, the NOLs
will begin expiring in years 2001 through 2019.

11. SAVINGS AND RETIREMENT PLAN

     The Company sponsors a 401(k) savings and retirement plan which is
available to all eligible employees. Under the plan, the Company may make a
discretionary matching contribution. Discretionary matching contributions were
approximately $151,000, $99,000 and $101,000 for the years ended December 31,
2000, 1999 and 1998, respectively.

                                       F-23
<PAGE>   46
                            VERSO TECHNOLOGIES, INC.

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

12. EMPLOYEE STOCK PURCHASE PLAN

     On November 16, 1999, the Company adopted the Verso Technologies, Inc. 1999
Employee Stock Purchase Plan (the "Plan") which offers employees the right to
purchase shares of the Company's common stock at 85% of the market price, as
defined. Under the Plan, full-time or part-time employees, except persons owning
5% or more of the Company's stock, who have worked for the Company for at least
15 consecutive days before the beginning of the offering period are eligible to
participate in the Plan. Employees may elect to have withheld up to 10% of their
annual salary up to a maximum of $25,000 per year to be applied to the purchase
of the Company's unissued common stock. The purchase price is generally the
lesser of the market price on the beginning or ending date of the offering
periods under the Plan. A maximum of 1,000,000 shares of common stock may be
purchased under the Plan. During year ended December 31, 2000, shares issued
under the Plan were 60,355.

13. COMMITMENTS AND CONTINGENCIES

  Leases

     The Company leases office space and certain equipment under operating
leases which expire at various dates through 2010 with some leases containing
options for renewal. Rent expense under these leases was $2.9 million, $1.5
million and $602,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.

     As of December 31, 2000, approximate future commitments under operating
leases in excess of one year are as follows (in thousands):

<Table>
<S>                                                           <C>
2001........................................................  $ 2,726
2002........................................................    2,482
2003........................................................    2,294
2004........................................................    2,083
2005........................................................    1,495
Thereafter..................................................    5,963
                                                              -------
          Total.............................................  $17,043
                                                              =======
</Table>

  Purchase Commitment

     The preferred stockholders of MessageClick may be entitled to receive an
additional $3,000,000 payable in the Company's common stock if the MessageClick
business achieves certain revenue levels for the year ending December 31, 2001.
As it is not possible to estimate what, if any, payment would be due, no such
amounts have been recognized. However, if amounts are paid, this additional
purchase price will be recorded as an intangible asset and amortized over the
remaining estimated life of the original goodwill recorded.

                                       F-24
<PAGE>   47

                                   SIGNATURE

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Company has duly caused this Amendment to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                                 VERSO TECHNOLOGIES, INC.

                                          By:     /s/ JULIET M. REISING
                                            ------------------------------------
                                                     Juliet M. Reising
                                                Executive Vice President and
                                                  Chief Financial Officer
                                                 (duly authorized signatory
                                                  and Principal Financial
                                                  and Accounting Officer)

Dated: October 11, 2001

                                       F-25