##### Table of Contents



UNITED
    STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
    Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission File Number 0-22190
      Verso Technologies,
    Inc.
 (Exact Name of Registrant as
    Specified in Its Charter)
  Minnesota

41-1484525(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)   400 Galleria Parkway
    Suite 200
    Atlanta, GA 30339 (Address of Principal
    Executive Offices)
  678-589-3500 (Registrants Telephone
    Number, Including Area Code)
  Securities registered pursuant to Section 12(b) of the
    Act: common stock, $0.01 par value per share,
    registered on The Nasdaq Capital Market.
  Securities registered pursuant to Section 12(g) of the
    Act: None.
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. þ
  Rule 12b-2
 o o þ
  Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE:
  The information required by Part III of this Annual
    Report on
    Form 10-K
    is incorporated by reference to the registrants definitive
    proxy statement to be filed with the Securities and Exchange
    Commission pursuant to regulation 14A not later than
    120 days after the end of the fiscal year covered by this
    Annual Report on
    Form 10-K.




---



##### 



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  INDEX
  PagePart
    IItem 1.

Business


1Item 1A.

Risk
    Factors


17Item 2.

Properties


22Item 3.

Legal
    Proceedings


23Item 4.

Submission of
    Matters to a Vote of Security Holders


24Item 4.5

Executive Officers
    of the Registrant


25Part
    IIItem 5.

Market for
    Registrants Common Equity Related Stockholder Matters and
    Issuer Purchases of Equity Securities


27Item 6.

Selected Financial
    Data


30Item 7.

Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


31Item 7A.

Quantitative and
    Qualitative Disclosures About Market Risk


46Item 8.

Financial
    Statements and Supplementary Data


47Item 9.

Changes in and
    Disagreements with Accountants on Accounting and Financial
    Disclosure


48Item 9A.

Controls and
    Procedures


49Item 9B.

Other
    Information


49Part
    III

Items 10-14
    will be set forth in the Proxy Statement and are incorporated
    herein by reference


50Part IVItem 15.

Exhibits and
    Financial Statement Schedule


50Reports of
    Independent Registered Public Accounting Firms


F-2 and F-3Consolidated
    Balance Sheets as of December 31, 2006 and 2005


F-4Consolidated
    Statements of Operations for the years ended December 31,
    2006, 2005 and 2004


F-5Consolidated
    Statements of Stockholders Equity and Comprehensive Income
    for the years ended December 31, 2006, 2005 and
    2004


F-6Consolidated
    Statements of Cash Flows for the years ended December 31,
    2006, 2005 and 2004


F-7Notes to
    Consolidated Financial Statements


F-9Schedule II
    Valuation and Qualifying Accounts


F-42EX-10.3 FORM OF RESTRICTED STOCK AWARDEX-10.158 INTELLECTUAL PROPERTY ASSIGNMENTEX-10.159 EXCLUSIVE LICENSE AGREEMENTEX-21.1 Subsidiaries of the CompanyEX-23.1 Consent of Tauber & Balser, P.C.EX-23.2 Consent of Grant Thornton LLPEX-31.1 Cerfification of the Chief Executive OffierEX-31.2 Certification of the Chief Financial OfficerEX-32.1 Certification of the Chief Executive OfficerEX-32.2 SECTION 1350 CERTIFICATION OF THE CFO




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##### Table of Contents



PART I  Note Regarding
    Forward-Looking Statements
  Certain statements contained in this Annual Report on
    Form 10-K
    (this Annual Report), including, without limitation,
    in the sections herein titled Business and
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations, or incorporated
    herein by reference, that are not statements of historical facts
    are forward-looking statements within the meaning of
    the Private Securities Litigation Reform Act of 1995. The words
    believe, expect, anticipate,
    intend, will and similar expressions are
    examples of words that identify forward-looking statements.
    Forward-looking statements include, without limitation,
    statements regarding our future financial position, business
    strategy and expected cost savings. These forward-looking
    statements are based on our current beliefs, as well as
    assumptions we have made based upon information currently
    available to us.
  Each forward-looking statement reflects our current view of
    future events and is subject to risks, uncertainties and other
    factors that could cause actual results to differ materially
    from any results expressed or implied by our forward-looking
    statements. Important factors that could cause actual results to
    differ materially from the results expressed or implied by any
    forward-looking statements include: the volatility of the price
    of our common stock, par value $0.01 per share (the
    Common Stock); our ability to fund future growth;
    our ability to become profitable; our ability to maintain the
    listing of the Common Stock on The Nasdaq Capital Market; our
    ability to attract and retain qualified personnel; general
    economic conditions of the telecommunications market; market
    demand for and market acceptance of our products; legal claims
    against us, including, but not limited to, claims of patent
    infringement; our ability to protect our intellectual property;
    defects in our products; our obligations to indemnify our
    customers; our exposure to risks inherent in international
    operations; our dependence on contract manufacturers and
    suppliers; general economic and business conditions; other risks
    and uncertainties included in the section of this Annual Report
    titled Risk Factors; and other factors disclosed in
    our other filings made with the Securities and Exchange
    Commission (the SEC).
  All forward-looking statements relating to the matters
    described in this Annual Report and attributable to us or to
    persons acting on our behalf are expressly qualified in their
    entirety by such factors. We have no obligation to publicly
    update or revise these forward-looking statements to reflect new
    information, future events, or otherwise, except as required by
    applicable federal securities laws, and we caution you not to
    place undue reliance on these forward-looking statements.
  Item 1.
    Business  General
  core-to-edge
 1




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##### Table of Contents



(678) 589-3500.
    Technologies
    Group
  end-to-end,
  ®
   2




---



##### Table of Contents



Technologies
    Group: Market
  General
  IP-based
    IP-centric
   3




---



##### Table of Contents



Technologies
    Group: Products and Solutions
  Softswitch
    Solutions
  end-to-end
  Edge C5
    Softswitch Solution
    I-Master.
   4




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##### Table of Contents



PSTN C4
    Softswitch Solution
    I-Master.
  SIP-T.
  Access
    Compression Solutions
    NetPerformer®
    Integrated Access VoIP Routers
  ®
     5




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##### Table of Contents



SDM-9210
  Enhanced
    Services Solutions
    I-Master
    Pre-paid, Rating and Billing Platform
  ®
  dial-up,
   6




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##### Table of Contents



Integrated
    Access Devices
    Verso
    Verilink®
    Integrated Access Devices
  IP-based point-to-point
  Verso
    Verilink Products
    8000
    Series IAD Product Family
    WANsuite
    Product Family
  ® ease-of-use
 7




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##### Table of Contents



Shark
    Product Family
  ® 10/100
  iMarc®
    IP Service Units
  ® end-to-end
  Access
    System 2000
  tm
  PRISM
    Product Family
  ® 3030/3060 3111/3112
  Orion
    4000 Product Family
  ®
  The
    Access-T Family
  ®
 8




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##### Table of Contents



The Terra
    Family
  ® ® ® drop-and-insert
  Mega-T
    Family
  ®
  Professional
    Services
  turn-up
  Call
    Accounting, Content Management, and Web Filtering
    TeleMate®
    Call Accounting Software
  ® easy-to-use
  NetSpective®
    Content Management and Web Filtering Solution
  ® and/or peer-to-peer,
  ®
 9




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##### Table of Contents



NEBS-3/ETSI tm peer-to-peer
  Advanced
    Applications Services Group
    on-site
  Customers
          24/7
    Sales and
    Marketing
   10




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##### Table of Contents



Competition
  end-to-end
  Technologies
    Group
           11




---



##### Table of Contents



Advanced
    Application Services Group
    Intellectual
    Property Rights
             12




---



##### Table of Contents



Research
    and Development
               13




---



##### Table of Contents



SIP-T.
      SDM-9600 GPRS/EDGE
  I-Master
    Employees
   14




---



##### Table of Contents



Background
      end-to-end e-business business-to-business e-business
       15




---



##### Table of Contents



IP-based,
    1-for-5
   16




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##### Table of Contents



Item 1A.
    Risk
    Factors  The
    price of the Common Stock has been volatile.
        The
    Company may be unable to fund future growth.
    The
    Company has a history of losses and may not be profitable in the
    future.
   17




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The
    Common Stock may be delisted from The Nasdaq Capital
    Market.
      Over-the-Counter-Bulletin Board,
  The
    Companys growth could be limited if it is unable to
    attract and retain qualified personnel.
    The
    Company is exposed to the general condition of the
    telecommunications market.
    The
    Companys need to invest in research and development could
    harm the Companys operating results.
   18




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##### Table of Contents



The
    market for converged communications solutions is still in its
    infancy and rapidly evolving. If this market does not develop
    and grow as expected, then it could have a material adverse
    effect on the Companys business.
    Intellectual
    property infringement claims against the Company, even without
    merit, could require the Company to enter into costly licenses
    or deprive the Company of the technology it needs.
    Failure
    to protect the Companys intellectual property rights could
    have a material adverse effect on the Companys
    business.
        If the
    Companys products contain defects, then the Companys
    sales are likely to suffer, and the Company may be exposed to
    legal claims.
   19




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The
    Company may be obligated to indemnify customers who purchase
    equipment from the Company against claims of patent
    infringement.
    The
    Companys focus on emerging markets could make achievement
    of its sales goals more difficult.
    Sales
    to customers based outside the United States have accounted for
    a significant portion of the Companys revenues, which
    exposes the Company to risks inherent in international
    operations.
     20




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##### Table of Contents



The
    Companys dependence on contract manufacturers and
    suppliers could result in product delivery delays.
    The
    Company may be subject to litigation.
    The
    Company derives a substantial amount of its revenues from
    channel distribution partners and such revenues may decline
    significantly if any major partner cancels or delays a purchase
    of its products.
     21




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The
    Companys inability to develop and maintain relationships
    with key technology suppliers could harm its ability to sustain
    and grow its business.
    Compliance
    or the failure to comply with current and future environmental
    regulations could cause us significant expense.
    Item 2.
    Properties       22




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Item 3.
    Legal
    Proceedings    Form S-1
 23




---



##### Table of Contents



Item 4.
    Submission
    of Matters to a Vote of Security Holders   24




---



##### Table of Contents



Director Nominee

For


Withheld AuthorityMontgomery L. Bannerman


32,135,313



880,268Mark H. Dunaway


32,391,805



623,776Gary H. Heck


31,607,277



1,408,304James R. Kanely


32,354,642



660,939Amy L. Newmark


32,116,665



898,916Steven A. Odom


31,603,066



1,412,515James A. Verbrugge


32,474,525



541,056William J. West


32,474,948



540,633       Votes


Votes


BrokerProposal

Votes For


Against


Abstained


Non-VotesProposal 2


30,823,018



1,738,508



454,054



0Proposal 3


10,944,975



1,938,800



391,735



19,740,071Proposal 4


10,718,900



2,149,296



407,314



19,740,071Proposal 5


32,371,953



198,405



445,222



0    Item 4.5  Executive Officers of the Registrant  Form 10-K Regulation S-K
    Name

Age


PositionMontgomery L. Bannerman


51


Chief Executive OfficerSteven A. Odom


53


Executive Chairman of the BoardMartin D. Kidder


43


Chief Financial Officer and
    SecretaryYves Desmet


39


Senior Vice President, Worldwide
    SalesJames Nevelle


36


Senior Vice President, Operations  25




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##### Table of Contents



Montgomery L. Bannerman
  Steven A. Odom
  Martin D. Kidder
  Yves Desmet
  James Nevelle
   26




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##### Table of Contents



PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Market
    Information
  mark-ups,
    High


LowYear ended December 31,
    2006:First Quarter

$
1.89


$
.85Second Quarter


1.69



.89Third Quarter


1.15



.80Fourth Quarter


1.52



.85   High


LowYear ended December 31,
    2005:First Quarter

$
3.75


$
1.60Second Quarter


1.95



1.10Third Quarter


2.55



1.25Fourth Quarter


1.75



1.00        27




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Form 8-K
 28




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##### Table of Contents



Performance
    Graph
    
  Indexed ReturnsYears Ended December 31,Base PeriodDecember 31,Company Name/Index

2001


2002


2003


2004


2005


2006Verso Technologies Inc.


100.00



40.08



248.46



55.38



3.08



3.57NASDAQ Composite


100.00



69.66



99.71



113.79



114.47



124.20Peer Group


100.00



21.19



48.60



36.79



31.05



28.35   Form 10-K
 29




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##### Table of Contents



Item 6.
    Selected
    Financial Data    Years Ended December 31,2006(2)


2005(3)


2004(4)


2003(5)


2002(6)Statement of Operations
    Data(1):Revenue

$
42,530


$
32,873


$
32,263


$
38,139


$
18,479Loss from Continuing Operations


(17,776
)


(19,494
)


(18,770
)


(4,215
)


(4,716
)Loss from Continuing Operations
    per Common Share  basic and diluted


(0.51
)


(0.72
)


(0.70
)


(0.20
)


(0.30
)Balance Sheet Data:Total Assets(7)


36,849



28,098



33,429



63,252



39,835Long-term Liabilities, net of
    current portion

$
12,634


$
10,222


$
4,401


$
9,102


$
6,133     (1)
    
    Includes the continuing operations of assets acquired by the
    Company from Clarent Corporation since its acquisition on
    February 12, 2003, the continuing operations of
    substantially all the operating assets of WSECI beginning
    October 1, 2004 and the continuing operations of
    substantially all of the operations assets of Verilink
    Corporation since their acquisition on June 16, 2006.(2)
    
    The fiscal year 2006 loss from continuing operations includes
    $1.1 million of intangibles amortization and
    $3.9 million in non-cash interest related to the
    amortization of the discount on notes payable and convertible
    subordinated debentures and loan fees.(3)
    
    The fiscal year 2005 loss from continuing operations includes
    $809,000 of intangibles amortization, $7,000 in amortization of
    deferred compensation, $2.9 million in non-cash interest
    related to the amortization of the discount on notes payable and
    convertible subordinated debentures and loan fees and
    $2.6 million of reorganization costs  loss on
    sublease.(4)
    
    The fiscal year 2004 loss from continuing operations includes
    $514,000 of intangibles amortization, $435,000 in amortization
    of deferred compensation and $517,000 in non-cash interest
    related to the amortization of the discount on notes payable and
    convertible subordinated debentures and loan fees.(5)
    
    The fiscal year 2003 loss from continuing operations includes
    $407,000 of intangibles amortization, $780,000 in amortization
    of deferred compensation and $561,000 in non-cash interest
    related to the amortization of the discount on notes payable and
    convertible subordinated debentures and loan fees.(6)
    
    The fiscal year 2002 loss from continuing operations includes
    $1.2 million in amortization of deferred compensation and
    $601,000 in non-cash interest expense related to the
    amortization of the discount on convertible subordinated
    debentures and loan fees.(6)
    
    The fiscal year 2001 loss from continuing operations includes
    $1.3 million of intangibles amortization, $1.8 million
    in amortization of deferred compensation and $606,000 in
    non-cash interest expense related to the amortization of the
    discount on convertible subordinated debentures and loan fees,
    and a $1,640,000 loss on debt conversion.(7)
    
    Includes $2.1 million and $3.4 million of notes
    receivable as of December 31, 2006 and 2005, respectively
    related to the sale of assets of discontinued operations.
    Includes $9.0 million, $33.4 million and
    $27.4 million of assets of discontinued operations, as of
    December 31, 2004, 2003 and 2002, respectively. The assets
    of discontinued operations as of December 31, 2004 were
    reduced by the loss on disposal of discontinued operations
    totaling $14.8 million. 30




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Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Overview
  core-to-edge
         31




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##### Table of Contents



Results
    of Operations
  Fiscal
    Year 2006 Compared with Fiscal Year 2005
    Continuing
    Operations
     32




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33




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##### Table of Contents



Business
    Unit Performance
  AdvancedTechnologies


ApplicationsGroup


Services Group


ConsolidatedFor the Year Ended December 31,2006


2005


2006


2005


2006


2005(Dollars in thousands)Revenue

$
35,182


$
23,697


$
7,348


$
9,176


$
42,530


$
32,873Gross profit


16,023



12,148



1,144



2,541



17,167



14,689Gross margin


46
%


51
%


16
%


28
%


40
%


45
%General and administrative


3,107



2,376



452



517



3,559



2,893Sales and marketing


7,905



7,945



329



324



8,234



8,269Research and development


7,507



6,594











7,507



6,594(Loss) contribution before
    unallocated items

$
(2,496
)

$
(4,767
)

$
363


$
1,700



(2,133
)


(3,067
)Unallocated items:Corporate general and
    administrative


















7,094



6,935Corporate research and development


















298



238Depreciation and amortization


















1,930



2,270Reorganization costs


















674



2,550Reorganization costs 
    loss on sublease






















464Operating loss


















(12,129
)


(15,524
)Other


















(5,647
)


(3,970
)Loss from continuing operations
    before income taxes

















$
(17,776
)

$
(19,494
)   Technologies
    Group
     34




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##### Table of Contents



Advanced
    Applications Services Group
        Discontinued
    Operations
   35




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##### Table of Contents



For the Year EndedDecember 31,2006


2005Revenue

$



$
212Gross (loss) profit






(27
)Operating loss






(566
)Loss on disposal of discontinued
    operations






Loss from discontinued operations

$



$
(566
)     Fiscal
    Year 2005 Compared with Fiscal Year 2004
    Continuing
    Operations
           36




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37




---



##### Table of Contents



Business
    Unit Performance
  Advanced ApplicationsTechnologies Group


Services Group


ConsolidatedFor the Year Ended December 31,2005


2004


2005


2004


2005


2004(Dollars in thousands)Revenue

$
23,697


$
20,527


$
9,176


$
11,736


$
32,873


$
32,263Gross profit


12,148



10,965



2,541



3,985



14,689



14,950Gross margin


51
%


53
%


28
%


34
%


45
%


46
%General and administrative


2,376



2,206



517



716



2,893



2,922Sales and marketing


7,945



9,302



324



469



8,269



9,771Research and development


6,594



6,584











6,594



6,584Contribution before unallocated
    items

$
(4,767
)

$
(7,127
)

$
1,700


$
2,800


$
(3,067
)

$
(4,327
)Unallocated items: Corporate
    general and administrative


















6,935



8,958Corporate research and development


















238



379Depreciation and amortization


















2,270



2,953Reorganization costs 
    loss on sublease


















2,550



Reorganization costs


















464



1,414Operating loss


















(15,524
)


(18,031
)Other


















(3,970
)


(739
)Loss from continuing operations
    before income taxes

















$
(19,494
)

$
(18,770
)   Technologies
    Group
       38




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##### Table of Contents



Advanced
    Applications Services Group
        Discontinued
    Operations
      For the Year EndedDecember 31,2005


2004Revenue

$
212


$
18,889Gross (loss) profit


(27
)


8,074Operating loss


(566
)


(5,229
)Loss on disposal of discontinued
    operations






(14,788
)Loss from discontinued operations

$
(566
)

$
(20,017
)     Critical
    Accounting Policies
   39




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##### Table of Contents



Revenue
    Recognition
      00-21, No. 97-2, (SOP No. 97-2) SOP No. 98-9, (SOP No. 98-9).
  SOP No. 97-2
  SOP No. 98-9
      Allowance
    for Doubtful Accounts
   40




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##### Table of Contents



Inventory
    Obsolescence
    Liabilities
    of Discontinued Operations
    sub-leases.
    Deferred
    Tax Asset Valuation Allowance
    Litigation
    and Related Contingencies
   41




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Goodwill,
    Intangible Assets and Long-Lived Assets
      Liquidity
    and Capital Resources
  Summary
             42




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Cash
    Flow
   43




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##### Table of Contents



Contractual
    Obligations and Commercial Commitments
    Payments Due By PeriodLess Than








AfterContractual Obligations

Total


1 Year


1-3 Years


4-5 Years


5 YearsCredit Facility

$
7,883


$
3,945


$
3,938


$



$
Additional payments for the
    acquisition of Encore Group


50



50











Notes payable


3,000







3,000







Convertible subordinated debentures


















Senior unsecured convertible
    debentures


12,094



3,375



8,719







Operating Leases:Continuing operations


6,689



2,333



4,122



234



Discontinued operations


1,157



378



779







Contractual payments for
    acquisition of iMarc


1,500



1,500











Total contractual cash obligations

$
32,373


$
11,581


$
20,558


$
234


$
  44




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##### Table of Contents



Sources
    of Cash
    5-year
         45




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##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk  Market
    Risk
    Interest
    Rate Risks
    Foreign
    Currency Risks
   46




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##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  page F-1
  Quarterly
    Financial Data (Unaudited)
   47




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##### Table of Contents



First


Second


Third


FourthQuarter


Quarter(1)


Quarter


Quarter


Total Year(In thousands, except per share amounts)2006Revenue

$
6,788


$
8,381


$
13,352


$
14,009


$
42,530Gross profit


2,841



3,347



5,076



5,903



17,167General and administrative


2,433



2,211



2,743



3,266



10,653Sales and marketing


1,774



1,801



2,430



2,229



8,234Research and development


1,779



1,994



1,850



2,182



7,805Operating income (loss) from
    continuing operations


(3,608
)


(3,061
)


(2,481
)


(2,979
)


(12,129
)Income (loss) from continuing
    operations


(4,940
)


(4,359
)


(4,122
)


(4,355
)


(17,776
)Income (loss) from discontinued
    operations


















Net loss

$
(4,940
)

$
(4,359
)

$
(4,122
)

$
(4,355
)

$
(17,776
)Net loss per common
    share  basic and diluted:(2)Loss from continuing operations

$
(0.17
)

$
(0.13
)

$
(0.11
)

$
(0.10
)

$
(0.51
)Loss from discontinued operations


















Net loss per common share

$
(0.17
)

$
(0.13
)

$
(0.11
)

$
(0.10
)

$
(0.51
)2005Revenue

$
6,606


$
8,513


$
8,281


$
9,473


$
32,873Gross profit


2,820



3,712



3,676



4,481



14,689General and administrative


2,478



2,366



2,490



2,494



9,828Sales and marketing


2,211



2,109



2,008



1,941



8,269Research and development


1,684



1,737



1,655



1,756



6,832Operating income (loss) from
    continuing operations


(4,337
)


(5,630
)


(3,344
)


(2,213
)


(15,524
)Income (loss) from continuing
    operations


(4,934
)


(6,400
)


(4,599
)


(3,561
)


(19,494
)Income (loss) from discontinued
    operations


(566
)














(566
)Net loss

$
(5,500
)

$
(6,400
)

$
(4,599
)

$
(3,561
)

$
(20,060
)Net loss per common
    share  basic and diluted:(2)Loss from continuing operations

$
(0.18
)

$
(0.24
)

$
(0.17
)

$
(0.13
)

$
(0.72
)Loss from discontinued operations


(0.02
)














(0.02
)Net loss per common share

$
(0.20
)

$
(0.24
)

$
(0.17
)

$
(0.13
)

$
(0.74
)     (1)
    
    Second quarter 2005 net loss included reorganization
    costs  loss on sublease totaling $2.6 million
    included in loss from continuing operations.(2)
    
    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.  Item 9.
    Changes
    in and Disagreements With Accountants on Accounting and
    Financial Disclosure   48




---



##### Table of Contents



Item 9A.
    Controls
    and Procedures  Rules 13a-15(e) 15d-15(e) Rules 13a-15 15d-15
  Rules 13a-15 15d-15
   Item 9B.
    Other
    Information           49




---



##### Table of Contents



PART III  Item 10.
    Directors,
    Executive Officers and Corporate Governance  Form 10-K
  Item 11.
    Executive
    Compensation  Form 10-K
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Form 10-K
  Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence  Form 10-K
  Item 14.
    Principal
    Accountant Fees and Services  Form 10-K
  Item 15.
    Exhibits
    and Financial Statement Schedules    page F-1.
  page F-1
  Regulation S-K
 50




---



##### Table of Contents



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS AND RELATED REPORTS
    PageReport of Independent Registered
    Public Accounting Firm


F-2Consolidated Balance Sheets as of
    December 31, 2006 and 2005


F-4Consolidated Statements of
    Operations for the years ended December 31, 2006, 2005 and
    2004


F-5Consolidated Statements of
    Shareholders Equity for the years ended December 31,
    2006, 2005 and 2004


F-6Consolidated Statements of Cash
    Flows for the years ended December 31, 2006, 2005 and 2004


F-7Notes to Consolidated Financial
    Statements


F-9Schedule II 
    Valuation and Qualifying Accounts


F-42  F-1




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm             Tauber &
    Balser, P.C.
    F-2




---



##### Table of Contents



REPORT
    OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             Grant
    Thornton LLP
    F-3




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES



CONSOLIDATED
    BALANCE SHEETS  December 31,


December 31,2006


2005(In thousands,except share data)ASSETS:Current assets:Cash and cash equivalents

$
1,134


$
1,079Restricted cash


1,041



1,656Accounts receivable, net of
    allowance for doubtful accounts of $1,266 and $742, respectively


10,058



7,336Inventories


7,184



4,259Other current assets


1,757



1,939Current portion of note receivable


324



655Total current assets


21,498



16,924Property and equipment, net of
    accumulated depreciation and amortization of $5,025 and $6,785,
    respectively


1,807



2,305Loan issuance costs, net


2,697



15Investment


745



745Note receivable, net of current
    portion


1,810



2,736Other intangibles, net of
    accumulated amortization of $2,821 and $1,729, respectively


5,068



2,859Goodwill


3,224



2,514Total assets

$
36,849


$
28,098LIABILITIES AND
    SHAREHOLDERS EQUITY:Current liabilities:Credit facility

$
3,945


$
1,269Accounts payable


2,665



2,309Accrued compensation


2,268



1,111Accrued expenses


3,592



2,231Purchase price payable for
    acquisition


1,500



Current portion of accrued loss on
    sublease


465



543Current portion of liabilities of
    discontinued operations


1,081



1,921Current portion of convertible
    debentures


3,375



3,262Unearned revenue and customer
    deposits


2,645



2,391Total current liabilities


21,536



15,037Accrued loss on sublease, net of
    current portion


773



1,150Credit facility, net of current
    portion


3,938



Liabilities of discontinued
    operations, net of current portion


361



610Other long-term liabilities






50Notes payable


2,862



2,785Convertible debentures, net of
    current portion


4,700



5,627Total liabilities


34,170



25,259Commitments and ContingenciesShareholders equity:Preferred stock, no par value,
    210,000 shares authorized and undesignated
    164,766 shares issued and none outstanding






Common stock, $.01 par value,
    authorized shares of 120,000,000 and 60,000,000; 41,691,911 and
    27,310,524 shares issued and outstanding


417



273Additional paid-in capital


352,303



334,650Stock payable






67Accumulated deficit


(349,767
)


(331,991
)Accumulated other comprehensive
    loss  foreign currency translation


(274
)


(160
)Total shareholders equity


2,679



2,839Total liabilities and
    shareholders equity

$
36,849


$
28,098    F-4




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  For the Years Ended December 31,2006


2005


2004(In thousands, except share data)Revenue:Products

$
27,880


$
18,272


$
15,527Services


14,650



14,601



16,736Total revenue


42,530



32,873



32,263Cost of revenue:Products:Product costs


14,367



8,414



7,013Amortization of intangibles


677



568



274Total cost of products


15,044



8,982



7,287Services


10,319



9,202



10,026Total cost of revenue


25,363



18,184



17,313Gross profit:Products


12,836



9,290



8,240Services


4,331



5,399



6,710Total gross profit


17,167



14,689



14,950Operating expenses:General and administrative


10,653



9,828



11,880Sales and marketing


8,234



8,269



9,771Research and development


7,805



6,832



6,963Depreciation and amortization


1,930



2,263



2,518Amortization of deferred stock
    compensation, relating to general and administrative






7



435Reorganization costs


674



464



1,414Reorganization costs 
    loss on sublease






2,550



Total operating expenses


29,296



30,213



32,981Operating loss from continuing
    operations


(12,129
)


(15,524
)


(18,031
)Other (expense) income,
    net:Other (expense) income


(22
)


(58
)


259Equity in income (loss) of
    investment


(1
)


17



56Interest expense, net, including
    $3,897, $2,940, and $517 of amortization of loan fees and
    discount on convertible debentures in each period, respectively


(5,624
)


(3,929
)


(1,054
)Other (expense) income, net


(5,647
)


(3,970
)


(739
)Loss from continuing operations
    before income taxes


(17,776
)


(19,494
)


(18,770
)Income taxes










Loss from continuing operations


(17,776
)


(19,494
)


(18,770
)Discontinued
    operations:Loss from discontinued operations






(566
)


(5,229
)Loss on disposal of discontinued
    operations










(14,788
)Total loss from discontinued
    operations






(566
)


(20,017
)Net loss

$
(17,776
)

$
(20,060
)

$
(38,787
)Net loss per common
    share  basic and diluted:Loss from continuing operations

$
(0.51
)

$
(0.72
)

$
(0.71
)Loss from discontinued operations






(0.02
)


(0.20
)Loss on disposal of discontinued
    operations










(0.56
)Net loss per common
    share  basic and diluted

$
(0.51
)

$
(0.74
)

$
(1.47
)Weighted average shares
    outstanding  basic and diluted


35,092,598



26,964,227



26,304,773    F-5




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF SHAREHOLDERS EQUITY
 FOR THE
    YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
  NotesAdditional





Receivable








ForeignPreferred Stock


Common Stock


Paid-in


Stock


from


Accumulated


Deferred


CurrencyShares


Amount


Shares


Amount


Capital


Payable


Shareholders


Deficit


Compensation


Translation


Total(In thousands, except share data)BALANCES,December 31, 2003





$




24,556,223


$
245


$
307,276


$
130


$



$
(273,144
)

$
(1,012
)

$
98


$
33,593Comprehensive loss:Net loss






























(38,787
)










(38,787
)Foreign currency translation
    adjustment






































49



49Comprehensive loss










































(38,738
)Amortization of deferred
    compensation


































435







435Exercise of stock options and
    warrants










80,942



1



12























13Reduction of deferred compensation
    due to reorganization


































570







570Shares issued in employee stock
    purchase plan










35,468







162























162Shares issued in exchange for
    services










9,988







133



(133
)


















Issuance of shares and warrants in
    private placement, net of associated fees










1,966,020



20



16,454























16,474Stock payable for consulting
    services






















131



















131BALANCES,December 31, 2004





$




26,648,641


$
266


$
324,037


$
128


$



$
(311,931
)

$
(7
)

$
147


$
12,640Comprehensive loss:Net loss






























(20,060
)










(20,060
)Foreign currency translation
    adjustment






































(307
)


(307
)Comprehensive loss










































(20,367
)Amortization of deferred
    compensation


































7







7Exercise of stock options and
    warrants










25,160







21























21Issuance of shares in WSECI
    acquisition










467,099



5



722























727Warrants issued in conjunction with
    convertible debentures


















5,084























5,084Beneficial conversion on
    convertible debentures


















3,590























3,590Warrants issued in conjunction with
    convertible debenture restructuring


















877























877Shares issued in employee stock
    purchase plan










50,103



1



43























44Shares issued in exchange for
    services










119,521



1



276



(133
)


















144Stock payable for consulting
    services






















72



















72BALANCES,December 31, 2005





$




27,310,524


$
273


$
334,650


$
67


$



$
(331,991
)

$



$
(160
)

$
2,839Comprehensive loss:Net loss






























(17,776
)










(17,776
)Foreign currency translation
    adjustment






































(114
)


(114
)Comprehensive loss










































(17,890
)Issuance of shares in connection
    with acquisition of Verilink


8,766



2,784



2,900,000



29



2,755























5,568Exercise of stock options and
    warrants










4,060







5























5Issuance of shares in WSECI
    acquisition










113,997



1



142























143Shares issued in private placement










5,441,154



55



6,833























6,888Stock compensation expense










486,936



5



726























731Warrants issued in conjunction with
    credit facility










5,000







2,121























2,121Shares issued in employee stock
    purchase plan










17,916







18























18Conversion of preferred shares to
    common


(8,766
)


(2,784
)


2,900,000



29



2,755























Shares issued in lieu of
    interest & principal










2,326,139



23



2,059























2,082Shares issued in exchange for
    services










186,185



2



239



(67
)


















174BALANCES,December 31, 2006





$




41,691,911


$
417


$
352,303


$



$



$
(349,767
)

$



$
(274
)

$
2,679    F-6




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS
  For the Years Ended December 31,2006


2005


2004(In thousands, except share data)Operating Activities:Continuing operations:Net loss from continuing operations

$
(17,776
)

$
(19,494
)

$
(18,770
)Adjustments to reconcile net loss
    from continuing operations to net cash used in continuing
    operating activities:Equity in income of investment






(16
)


(56
)Stock based compensation


930







Non-cash interest expense


675







Stock issued for services


174







Depreciation and amortization


2,607



2,839



3,227Provision for doubtful accounts


513



463



494Amortization of loan fees and
    discount on convertible subordinated debentures


3,897



2,940



517Reorganization costs 
    loss on sublease






2,550



Reorganization costs 
    stock related










570Other


(98
)


(29
)


119Changes in current operating assets
    and liabilities, net of effects of acquisitions:Accounts receivable


(3,127
)


(3,745
)


511Inventories


1,521



1,103



(1,212
)Other current assets


32



39



(940
)Accounts payable


244



214



(735
)Accrued compensation


734



(245
)


535Accrued expenses


668



(792
)


(445
)Unearned revenue and customer
    deposits


4



(766
)


(651
)Net cash used in continuing
    operating activities


(9,002
)


(14,939
)


(16,836
)Discontinued operations:Loss from discontinued operations






(566
)


(20,017
)Estimated loss on disposal of
    discontinued operations










14,788Adjustment to reconcile loss from
    discontinued operations to net cash (used in) provided by
    discontinued operating activities, rental payments


(1,252
)


(1,042
)


6,638Net cash (used in) provided by
    discontinued operating activities


(1,252
)


(1,608
)


1,409Net cash used in operating
    activities


(10,254
)


(16,547
)


(15,427
)Investing Activities:Continuing operations:Net cash provided by (used in)
    investing activities for continuing operations 
    (Increase) decrease in restricted cash


615



(1,656
)


2,290Purchases of property and equipment


(351
)


(820
)


(2,021
)Purchase of Verilink


(338
)






Purchase of iMarc


(1,036
)






Purchase of WSECI






(273
)


Net cash (used in) provided by
    investing activities for continuing operations


(1,110
)


(2,749
)


269Discontinued operations:Proceeds from notes receivable


1,420



300



Proceeds from sale of discontinued
    operations






4,015



Purchases of property and equipment










(321
)Acquisition of MCK Communications,
    Inc., net of cash acquired










(4,263
)Net cash provided by (used in)
    investing activities for discontinued operations


1,420



4,315



(4,584
)Net cash provided by (used in)
    investing activities


310



1,566



(4,315
)Net cash used in operating and
    investing activities, carried forward


(9,944
)


(14,981
)


(19,742
)    F-7




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF CASH FLOWS 
    (Continued)
  For the Years Ended December 31,2006


2005


2004(In thousands, except share data)Net cash used in operating and
    investing activities, carried forward


(9,944
)


(14,981
)


(19,742
)Financing Activities:Net borrowings on line of credit


6,614



1,269



Payments of notes payable










(350
)Payments of convertible debentures


(2,250
)


(2,250
)


Proceeds from convertible
    debentures, net






12,757



Proceeds from private placement, net


6,688







16,474Debt issue costs


(1,089
)






Proceeds from issuances of common
    stock in connection with the exercise of options and warrants,
    net


24



65



175Net cash provided by financing
    activities


9,987



11,841



16,299Effect of exchange rate changes
    on cash


12



(15
)


23Increase (decrease) in cash and
    cash equivalents


55



(3,155
)


(3,420
)Cash and cash equivalents at
    beginning of year


1,079



4,234



7,654Cash and cash equivalents at end
    of year

$
1,134


$
1,079


$
4,234Supplemental disclosure of cash
    flow information:Cash payments during the years
    for:Interest

$
756


$
1,269


$
468Income taxes

$
6


$
(14
)

$
67Non-cash investing and financing
    activitiesCommon stock consideration for
    acquisitions:WSECI  issuance of
    113,997 and 467,099 shares of common stock, respectively

$
143


$
727


$
Verilink- issuance of
    5,800,000 shares of common stock


5,568







Issuance of note receivable in
    disposition of MCK






3,500



Common stock and compensatory
    options issued in reorganization










570Issuance of warrants in conjunction
    with credit facility


2,121







Issuance of warrants in conjunction
    with convertible debentures






8,113



Issuance of warrants in
    subordinated debenture restructuring






877



Issuance of common stock and
    warrants in exchange for services






838



133Issuance of common stock in lieu of
    principal


1,407







Assets acquired and liabilities
    assumed in conjunction with business acquisitions:Fair value of assets acquired,
    excluding cash and restricted cash


5,434



1,509



Goodwill and other intangibles


3,868







Liabilities assumed


(821
)






Equity issued


(5,568
)






Payable issued


(1,539
)






    F-8




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES
    TO CONSOLIDATED FINANCIAL STATEMENTS
  1.  Business
    and Basis of Presentation
  core-to-edge
         F-9




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   1.  Business
    and Basis of Presentation  (Continued)
    1-for-5 Form 10-K.
      2.  Summary
    of Significant Accounting Policies and Practices
  Principles
    of Consolidation
    Use of
    Estimates
    Revenue
    Recognition
      00-21, No. 97-2, (SOP No. 97-2) SOP No. 98-9, (SOP No. 98-9).
  SOP No. 97-2
 F-10




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   2.  Summary
    of Significant Accounting Policies and Practices
     (Continued)
    SOP No. 98-9
    Cash
    Equivalents
      Accounts
    Receivable and Allowance for Doubtful Accounts
    Credit,
    Customer and Vendor Concentrations
       F-11




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   2.  Summary
    of Significant Accounting Policies and Practices
     (Continued)
    Inventories
      December 31,2006


2005Raw materials

$
5,157


$
3,026Work in process


78



5Finished goods


1,949



1,228Total inventories

$
7,184


$
4,259           Property
    and Equipment
   F-12




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   2.  Summary
    of Significant Accounting Policies and Practices
     (Continued)
    December 31,2006


2005Computers and equipment

$
4,985


$
5,511Purchased software


1,263



1,844Furniture and fixtures


270



386Leasehold improvements


314



1,3496,832



9,090Less accumulated depreciation and
    amortization


(5,025
)


(6,785
)Net property and equipment

$
1,807


$
2,305       Goodwill
    and Other Intangibles
   F-13




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   2.  Summary
    of Significant Accounting Policies and Practices
     (Continued)
    Amortization


December 31,Period in Months


2006


2005Intangibles subject to
    amortization:Current technology


36 months


$
2,328


$
2,185Customer relationship


36-120 months



5,561



2,403Weighted average months


76 months



7,889



4,588Accumulated amortization:Current technology






(1,685
)


(1,008
)Customer relationship






(1,136
)


(721
)Net intangibles subject to
    amortization






5,068



2,859Goodwill






3,224



2,514Total goodwill and other
    intangibles





$
8,292


$
5,373         Amortization2007


1,7982008


1,1562009


9172010


7152011


241Thereafter


241$
5,068   Impairment
    of Long-Lived Assets
     F-14




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##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   2.  Summary
    of Significant Accounting Policies and Practices
     (Continued)
      Warranties
      2006


2005


2004Balance beginning of year

$
268


$
282


$
265Warranty liability from
    acquisitions


546







Provision for warranty costs


138



199



168Warranty expenditures


(300
)


(213
)


(151
)Balance end of year

$
652


$
268


$
282   Fair
    Value of Financial Instruments
        Research
    and development costs
   F-15




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##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   2.  Summary
    of Significant Accounting Policies and Practices
     (Continued)
   Legal
    costs
    Stock-Based
    Compensation Plan
          
    Expected Dividend Yield  because we do not currently
    pay dividends, our expected dividend yield is zero.
    Expected Volatility in Stock Price  reflects the
    historical change in our stock price over the expected term of
    the stock option.
    Risk-free Interest Rate  reflects the average rate on
    a United States Treasury bond with maturity equal to the
    expected term of the option.
    Expected Life of Stock Option  reflects the
    simplified method to calculate an expected life based on the
    midpoint between the vesting date and the end of the contractual
    term of the stock award.    Year Ended December 31,

2006


2005


2004Expected Dividend Yield


0.00
%


0.00
%


0.00
%Expected Volatility in Stock Price


112.00
%


105.00
%


112.00
%Risk-Free Interest Rate


4.43
%


4.30
%


3.00
%Expected Life of Stock
    Option  Years


9.8



4



4Weighted Average Fair Value at
    Grant Date

$
1.07


$
1.25


$
4.40    F-16




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##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   2.  Summary
    of Significant Accounting Policies and Practices
     (Continued)
    Year Ended December 31,2005


2004Net loss, as reported

$
(20,060
)

$
(38,787
)Add: Stock-based compensation
    expense included in net loss


7



435Less: Total stock-based employee
    compensation expense determined under fair value based method
    for all awards


(708
)


(2,615
)Pro forma net loss

$
(20,761
)

$
(40,967
)Net loss per common shareAs reported

$
(0.74
)

$
(1.47
)Pro forma


(0.77
)


(1.56
)   Income
    Taxes
    Net
    Loss Per Share
    2006


2005


2004Shares issuable under conversion
    of preferred stock


1,152,055







Shares issuable under stock options


3,488



51,704



581,276Shares issuable pursuant to
    warrants to purchase common stock


253,831



6,421



7,4491,409,374



58,125



588,725     Comprehensive
    Income (Loss)
   F-17




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##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   2.  Summary
    of Significant Accounting Policies and Practices
     (Continued)
   Segment
    and Geographic Information
    Recent
    Accounting Pronouncements
      3.
    Mergers
    and Acquisitions  Acquisition
    of iMarc product line business
   F-18




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##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   3.
    Mergers
    and Acquisitions  (Continued)    ®
             F-19




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   3.
    Mergers
    and Acquisitions  (Continued)        Cash paid and due to be paid by
    June 29, 2007

$
2,500Direct transaction costs


75Total purchase consideration

$
2,575     PurchasePriceAllocationTangible assets:Property & equipment, net

$
180Other assets


15Goodwill


710Other Intangible Assets- customer
    relationship


1,900Liabilities assumed


(230
)Total estimated purchase price
    allocation

$
2,575   Acquisition
    of Business Assets of Verilink
   F-20




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##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   3.
    Mergers
    and Acquisitions  (Continued)      Value of common stock issued

$
2,784Value of Series C preferred
    stock issued


2,784Direct transaction costs


338Total purchase consideration

$
5,906     PurchasePriceAllocationTangible assets:Inventories

$
4,446Property & equipment, net


499Other assets


294Other Intangible Assets


1,258Liabilities assumed


(591
)Total estimated purchase price
    allocation

$
5,906   WSECI,
    Inc.
   F-21




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##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   3.
    Mergers
    and Acquisitions  (Continued)    18-month
    WSECIProperty and equipment

$
52Accounts receivable


93Other intangibles


1,507Cost of acquisition

$
1,652   in thousands, except
    per share amounts
  2006


2005Revenues

$
61,933


$
90,250Loss from continuing operations


(21,946
)


(19,457
)Net Loss


(21,946
)


(20,023
)Loss from continuing operations
    per common share  basic and diluted


(0.60
)


(0.65
)Netloss per common
    share  basic and diluted

$
(0.60
)

$
(0.67
)Weighted average shares
    outstanding  basic and diluted


36,391



29,864  F-22




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##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
  4.
    Unconsolidated
    Affiliates  Shanghai
    BeTrue Infotech Co., Ltd.
        2006


2005


2004Operating results:Revenues

$
3,558


$
2,224


$
2,713Operating (loss) income

$
196


$
28


$
93Net income (loss)

$
(2
)

$
33


$
110   5.
    Discontinued
    Operations     F-23




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##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   5.
    Discontinued
    Operations  (Continued)     2006


2005


2004Revenue

$



$
212


$
18,889Gross (loss) profit






(27
)


8,074Operating loss






(566
)


(5,229
)Loss on disposal of discontinued
    operations










(14,788
)Loss from discontinued operations

$



$
(566
)

$
(20,017
)         December 31,2006


2005Assets of discontinued operations:Notes receivable

$
2,134


$
3,391Liabilities of discontinued
    operations:Accrued rent, net of prepaid rent

$
792


$
1,707Other liabilities


650



824Liabilities of discontinued
    operations

$
1,442


$
2,531      F-24




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##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   5.
    Discontinued
    Operations  (Continued)    sub-leased
      2006


2005


2004Balance beginning of year

$
2,531


$
3,029


$
4,579Lease payments, net of sublease
    receipts


(914
)


(677
)


(780
)Other payments


(56
)


(358
)


(770
)Estimated costs of disposal of
    discontinued operations






1,000



Legal and other costs of disposal


(119
)


(463
)


Balance end of year

$
1,442


$
2,531


$
3,029    6.
    Financing
    Arrangements       F-25




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##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   6.
    Financing
    Arrangements  (Continued)              F-26




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##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   6.
    Financing
    Arrangements  (Continued)         7.
    Convertible
    Debentures  Senior
    Unsecured Convertible Debentures
       F-27




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   7.
    Convertible
    Debentures  (Continued)   Convertible
    Subordinated Debentures
      8.
    Notes Payable  ;
  9.
    Reorganization
    Costs         F-28




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##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   10.
    Shareholders
    Equity  Preferred
    Stock
      Private
    Placement
      Stock
    Warrants
       F-29




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   10.
    Shareholders
    Equity  (Continued)                 F-30




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   10.
    Shareholders
    Equity  (Continued)     WeightedNumber of


AverageOutstanding


ExerciseExercise Price

Warrants


Price


Expiration Date$0.01-$1.25


2,594,347


$
0.67


September 2011 and beyond$1.56


5,614,692


$
1.56


August 2011$2.01-$2.67


3,262,400


$
2.51


July 2007 - February 20106.13


491,505


$
6.13


February 2011Total


11,962,944


$
1.81       11.
    Stock
    Incentive Plan         F-31




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##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   11.
    Stock
    Incentive Plan  (Continued)      Shares of


Average


Shares of


Average


Shares of


AverageUnderlying


Exercise


Underlying


Exercise


Underlying


ExerciseOptions


Prices


Options


Prices


Options


PricesOutstanding at beginning of the
    year


3,201,096


$
8.23



3,242,185


$
10.18



2,945,553


$
10.65Granted


2,360,000



1.26



987,050



1.80



502,546



5.75Exercised


4,584



1.40



22,652



0.97



80,942



2.65Forfeited


902,669



10.45



1,005,487



8.41



124,972



7.70Outstanding at end of year


4,653,843



4.27



3,201,096



8.23



3,242,185



10.18Exercisable at end of year


2,231,093



7.48



2,953,971



8.72



2,440,301



11.25Weighted-average remaining
    contractual life of outstanding options (in years)






7.86







6.58







6.41   in-the-money in-the-
    Nonvested shares at
    January 1, 2006


237,128Granted


2,360,000Vested


(174,375
)Forfeited


Nonvested shares at
    December 31, 2006


2,422,753  F-32




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   11.
    Stock
    Incentive Plan  (Continued)    AverageNumber


Remaining


Weighted


Number


WeightedOutstanding


Contractual


Average


Exercisable


AverageRange of Exercise Prices

at
    12/31/06


Life (In years)


Exercise Price


at
    12/31/06


Exercise Price$1.00 to $ 1.45


2,729,448



9.58


$
1.19



447,948


$
1.40$1.46 to $ 2.50


668,975



6.42


$
2.22



605,725


$
2.23$2.51 to $ 5.30


109,858



7.23


$
3.23



81,858


$
3.15$5.31 to $ 7.50


118,292



6.46


$
6.58



68,292


$
6.83$7.51 to $90.00


1,027,270



2.96


$
13.62



1,027,270


$
13.62$1.00 to $90.00


4,653,843



7.53


$
4.27



2,231,093


$
7.48   12.
    Stock
    Option Exchange Program  12-month
     F-33




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   13.
    Income
    Taxes    Years Ended December 31,2006


2005


2004Domestic

$
(12,781
)

$
(14,460
)

$
(13,875
)Foreign


(4,995
)


(5,034
)


(4,895
)$
(17,776
)

$
(19,494
)

$
(18,770
)     Years Ended December 31,2006


2005


2004Statutory U.S. rate


(34.0
)%


(34.0
)%


(34.0
)%State income taxes, net of federal
    benefit


(2.9
)


(3.0
)


(4.0
)Non-deductible charges for
    intangibles


2.0



0.0



2.3Effect of valuation allowance


34.9



34.5



35.7Effect of expiring net operating
    loss


0.0



2.5



0.0Total income tax expense (benefit)


0.0
%


0.0
%


0.0
%     December 31,2006


2005Deferred tax assets:Net operating loss carryforwards

$
64,149


$
74,795Capital loss carryforwards






269Research and development credits


1,248



1,248Foreign research and development
    expenses


1,601



1,532Foreign investment tax credits


729



750Unearned revenue


691



746Reserves


2,006



1,604Compensation accruals


66



4Intangible assets


2,335



2,054Depreciable assets


1,782



1,753Other


66



Valuation allowance


(74,673
)


(84,755
)Net deferred tax asset

$



$
    F-34




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   13.
    Income
    Taxes  (Continued)       14.
    Savings
    and Retirement Plan    15.
    Employee
    Stock Purchase Plan    16.
    Other
    Commitments and Contingencies  Leases
   F-35




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   16.
    Other
    Commitments and
    Contingencies  (Continued)     Continuing Operations


Discontinued Operations(See Note 9)


(See Note 5)Leases


Subleases


Leases


Subleases2007


2,333



(403
)


378



(359
)2008


2,223



(411
)


386



(236
)2009


1,899



(419
)


394



(241
)2010


234











Total

$
6,689


$
(1,233
)

$
1,158


$
(836
)     Canadian
    Tax Audit
        17.
    Segment
    Information   F-36




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   17.
    Segment
    Information  (Continued)    Technologies Group:

The Technologies Group includes
    the Companys softswitching,
    I-Master,
    and NetPerformer divisions, the Companys Telemate.Net
    Software, Inc. subsidiary (Telemate.Net), and the
    Companys Verso Verilink, LLC subsidiary (Verso
    Verilink). The Technologies Group includes domestic and
    international sales of hardware and software, integration,
    applications and technical training and support. The
    Technologies Group offers software-based solutions (which
    include hardware) for companies seeking to build private,
    converged packet-based voice and data networks. In addition, the
    Technologies Group offers software-based solutions for Internet
    access and usage management that include call accounting and
    usage reporting for Internet protocol network devices. In 2006,
    the Technologies Group added the product suites from the
    Verilink Acquisition and the iMarc Acquisition. These products
    provide access, multiplexing and transport of voice and data
    services.Advanced Applications Services
    Group:

The Companys Advanced
    Applications Services Group, consists of the Companys
    technical applications support group which was previously
    included as part of the Enterprise Solutions Group, and includes
    outsourced technical application services and application
    installation and training services to both customers of the
    Technologies Group and outside customers.     AdvancedTechnologies


ApplicationGroup


Services Group


TotalFor the Years Ended
    December 31,2006Revenue

$
35,182


$
7,348


$
42,530(Loss) contribution before
    unallocated items


(2,496
)


363



(2,133
)Goodwill


1,771



1,453



3,224Total assets


23,168



3,864



27,0322005Revenue

$
23,697


$
9,176


$
32,873(Loss) contribution before
    unallocated items


(4,767
)


1,700



(3,067
)Goodwill


1,061



1,453



2,514Total assets


14,437



3,655



18,0922004Revenue

$
20,527


$
11,736


$
32,263Contribution before unallocated
    items


(7,127
)


2,800



(4,327
)Goodwill


1,061



1,453



2,514Total assets


11,104



4,027



15,131  F-37




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   17.
    Segment
    Information  (Continued)    Years Ended December 31,2006


2005


2004Loss before unallocated items, per
    above

$
(2,133
)

$
(3,067
)

$
(4,327
)Corporate and administrative
    expenses


(7,094
)


(6,935
)


(8,958
)Corporate research and development


(298
)


(238
)


(379
)Depreciation and amortization


(1,930
)


(2,270
)


(2,953
)Reorganization costs 
    loss on sublease






(2,550
)


Reorganization costs


(674
)


(464
)


(1,414
)Other (expense) income


(22
)


(58
)


259Equity in income (loss) of
    investment


(1
)


17



56Interest expense, net


(5,624
)


(3,929
)


(1,054
)Loss from continuing operations

$
(17,776
)

$
(19,494
)

$
(18,770
)     Years EndedDecember 31,2006


2005Total assets before unallocated
    items, per above

$
27,032


$
18,092Corporate assets:Cash and cash equivalents


1,134



706Restricted cash


1,041



1,656Current portion of notes receivable


324



655Other current assets


3,821



1,594Property and equipment, net


942



1,914Investment


745



745Notes receivable, net of current
    portion


1,810



2,736$
36,849


$
28,098  F-38




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   17.
    Segment
    Information  (Continued)    Canada


United States


TotalFor the Year Ended
    December 31,2006Revenue

$



$
42,530


$
42,530(Loss) contribution before
    unallocated items


(5,014
)


2,881



(2,133
)Total Assets


551



36,298



36,849For the Year Ended
    December 31,2005Revenue

$



$
32,873


$
32,873(Loss) contribution before
    unallocated items


(4,684
)


1,617



(3,067
)Total Assets


715



27,383



28,098For the Year Ended
    December 31,2004Revenue

$



$
32,263


$
32,263Loss before unallocated items


(3,670
)


(657
)


(4,327
)Total Assets


704



32,725



33,429   18.
    Litigation    Form S-1
   F-39




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   18.
    Litigation  (Continued)              F-40




---



##### Table of Contents



VERSO
    TECHNOLOGIES, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
     (Continued)
   18.
    Litigation  (Continued)    19.
    Subsequent
    Events    5-year
   F-41




---



##### Table of Contents



SCHEDULE II 
    VALUATION AND QUALIFYING ACCOUNTS  AdditionsBalance at


Charges toBeginning


Costs and


Allowances


(Recoveries)


Balance at EndDescription

of Period


Expenses


Acquired


Deductions


of PeriodAllowance for doubtful accounts:2006

$
(744,000
)

$
(513,000
)

$



$
(9,000
)

$
(1,266,000
)2005

$
(255,000
)

$
(463,000
)

$



$
(26,000
)

$
(744,000
)2004

$
(489,000
)

$
(494,000
)

$



$
728,000


$
(255,000
)Deferred tax valuation allowance:2006

$
(84,755,000
)

$



$



$
10,082,000


$
(74,673,000
)2005

$
(82,319,000
)

$
(2,436,000
)

$



$



$
(84,755,000
)2004

$
(70,900,000
)

$
(11,419,000
)

$



$



$
(82,319,000
)Inventory obsolescence reserve2006

$
(1,170,000
)

$
(789,000
)

$



$
281,000


$
(1,678,000
)2005

$
(2,684,000
)

$
(354,000
)

$



$
1,868,000


$
(1,170,000
)2004

$
(3,318,000
)

$
836,000


$



$
(202,000
)

$
(2,684,000
)  F-42




---



##### Table of Contents



SIGNATURES
    Verso Technologies,
    Inc.
  By:
    /s/ Steven A.
    Odom   Executive Chairman of the Board
      Name

Title

Date/s/ Steven A.
    OdomSteven
    A. Odom

Executive Chairman of the Board

April 2, 2007/s/ Montgomery L.
    BannermanMontgomery
    L. Bannerman

Chief Executive Officer
    (Principal
    Executive Officer) and Director

April 2, 2007/s/ Martin D.
    KidderMartin
    D. Kidder

Chief Financial Officer (Principal
    Financial Officer and Principal Accounting Officer)

April 2, 2007/s/ Mark H.
    DunawayMark
    H. Dunaway

Director

April 2, 2007/s/ Gary H.
    HeckGary
    H. Heck

Director

April 2, 2007/s/ James R.
    KanelyJames
    R. Kanely

Director

April 2, 2007/s/ Amy L.
    NewmarkAmy
    L. Newmark

Director

April 2, 2007/s/ James A.
    VerbruggeJames
    A. Verbrugge

Director

April 2, 2007/s/ William J.
    WestWilliam
    J. West

Director

April 2, 2007  F-43




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##### Table of Contents



EXHIBIT INDEX
  Exhibit No.

Exhibit

Method of Filing2
.1

Agreement and Plan of Merger dated
    October 31, 2000, among the Registrant, MessageClick, Inc.
    and MCLICK Acquisition Corporation (the MessageClick
    Merger Agreement).

Incorporated by reference to
    Exhibit 2.1 to the Registrants Current Report on
    Form 8-K
    filed December 6, 2000.2
.2

First Amendment to the Agreement
    and Plan of Merger dated as of November 9, 2000, among the
    Registrant, MessageClick, Inc. and MCLICK Acquisition
    Corporation.

Incorporated by reference to
    Exhibit 2.2 to the Registrants Current Report on
    Form 8-K
    filed December 6, 2000.2
.3

Second Amendment to the Agreement
    and Plan of Merger dated as of November 10, 2000, among the
    Registrant, MessageClick, Inc. and MCLICK Acquisition
    Corporation.

Incorporated by reference to
    Exhibit 2.3 to the Registrants Current Report on
    Form 8-K
    filed December 6, 2000.2
.4

Agreement and Plan of Merger dated
    as of May 4, 2001, among the Registrant, Telemate.Net
    Software, Inc. and Titan Acquiring Sub, Inc. (the
    Telemate.Net Merger Agreement).

Incorporated by reference to
    Exhibit 2.1 to the Registrants Current Report on
    Form 8-K
    filed May 16, 2001.2
.5

First Amendment to the
    Telemate.Net Merger Agreement dated as of June 1, 2001.

Incorporated by reference to
    Exhibit 2.2 to Amendment No. 1 to the
    Registrants Current Report on
    Form 8-K/A
    filed June 5, 2001.2
.6

Stock Purchase Agreement dated as
    of May 4, 2001, between the Registrant and WA Telcom
    Products Co., Inc.

Incorporated by reference to
    Exhibit 2.1 to the Registrants Current Report on
    Form 8-K
    filed June 5, 2001.2
.7

Series B Preferred Stock
    Purchase Agreement dated as of May 4, 2001, between the
    Registrant and Telemate.Net Software, Inc. (the
    Series B Stock Purchase Agreement).

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed May 16, 2001.2
.8

First Amendment to the
    Series B Stock Purchase Agreement dated as of June 1,
    2001, between the Registrant and Telemate.Net Software, Inc.

Incorporated by reference to
    Exhibit 99.2 to Amendment No 1 to the Registrants
    Current Report on
    Form 8-K/A
    filed June 5, 2001.2
.9

Second Amendment to the
    Series B Stock Purchase Agreement dated as of July 27,
    2001, between the Registrant and Telemate.Net Software, Inc.

Incorporated by reference to
    Exhibit 99.3 to the Registrants Current Report on
    Form 8-K
    filed August 10, 2001.2
.10

Asset Purchase Agreement dated as
    of December 13, 2002, between the Registrant and Clarent
    Corporation.

Incorporated by reference to
    Exhibit 2.1 to the Registrants Current Report on
    Form 8-K
    filed December 17, 2002.2
.11

First Amendment to the Asset
    Purchase Agreement dated as of February 4, 2003, between
    the Registrant and Clarent Corporation.

Incorporated by reference to
    Exhibit 2.2 to the Registrants Current Report on
    Form 8-K
    filed February 13, 2003.2
.12

Agreement and Plan of Merger dated
    as of April 21, 2003, among the Registrant, Mickey
    Acquiring Sub, Inc. and MCK Communications, Inc. (The schedules
    to the Agreement and Plan of Merger have been omitted from this
    Report pursuant to Item 601(b)(2) of
    Regulation S-K,
    and the Registrant agrees to furnish copies of such omitted
    schedules supplementally to the SEC upon request.)

Incorporated by reference to
    Exhibit 2.1 to the Registrants Current Report on
    Form 8-K
    filed on April 23, 2003. E-1




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing2
.13

First Amendment to the Agreement
    and Plan of Merger dated as of April 21, 2003, among the
    Registrant, Mickey Acquiring Sub, Inc. and MCK Communications,
    Inc.

Incorporated by reference to
    Exhibit 2.2 to the Registrants Current Report on
    Form 8-K
    filed on April 23, 2003.2
.14

Second Amendment to the Agreement
    and Plan of Merger dated as of June 13, 2003, among the
    Registrant, Mickey Acquiring Sub, Inc. and MCK Communications,
    Inc.

Incorporated by reference to
    Exhibit 2.3 to the Registrants Current Report on
    Form 8-K
    filed on June 17, 2003.2
.15

Securities Purchase Agreement
    dated as of February 20, 2004, among the Registrant and
    each of the Investors signatory thereto. (The schedules to the
    Securities Purchase Agreement have been omitted from this Report
    pursuant to Item 601(b)(2) of
    Regulation S-K,
    and the Registrant agrees to furnish copies of such omitted
    schedules supplementally to the SEC upon request.)

Incorporated by reference to
    Exhibit 2.1 to the Registrants Current Report on
    Form 8-K
    filed on February 26, 2004.2
.16

Asset Purchase Agreement dated as
    of January 21, 2005 with respect to the Registrants
    disposition of its MCK business. (The schedules to the Asset
    Purchase Agreement have been omitted from this Report pursuant
    to Item 601(b)(2) of
    Regulation S-K,
    and the Registrant agrees to furnish copies of such omitted
    schedules supplementally to the SEC upon request.)

Incorporated by reference to
    Exhibit 2.1 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.2
.17

Asset Purchase Agreement dated as
    of January 21, 2005 with respect to the Registrants
    disposition of its NACT business. (The schedules to the Asset
    Purchase Agreement have been omitted from this Report pursuant
    to Item 601(b)(2) of
    Regulation S-K,
    and the Registrant agrees to furnish copies of such omitted
    schedules supplementally to the SEC upon request.)

Incorporated by reference to
    Exhibit 2.2 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.2
.18

Securities Purchase Agreement
    dated as of February 4, 2005, among the Registrant and each
    of the Investors signatory thereto. (The schedules to the
    Securities Purchase Agreement have been omitted from this Report
    pursuant to Item 601(b)(2) of
    Regulation S-K,
    and the Registrant agrees to furnish copies of such omitted
    schedules supplementally to the SEC upon request.)

Incorporated by reference to
    Exhibit 2.1 to the Registrants Current Report on
    Form 8-K
    filed on February 8, 2005.2
.19

Asset Purchase Agreement dated as
    of February 23, 2005 by and among the Registrant, WSECI,
    Inc. and the shareholders of WSECI, Inc. (The schedules to the
    Asset Purchase Agreement have been omitted from this Report
    pursuant to Item 601(b)(2) of
    Regulation S-K,
    and the Registrant agrees to furnish copies of such omitted
    schedules supplementally to the SEC upon request.)

Incorporated by reference to
    Exhibit 2.1 to the Registrants Current Report on
    Form 8-K
    filed on March 1, 2005. E-2




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing2
.20

Securities Purchase Agreement
    dated as of June 15, 2006 among the Registrant, Winslow
    Asset Group, LLC and Winslow Asset Holdings, LLC. (The schedules
    to the Securities Purchase Agreement have been omitted from this
    Quarterly Report pursuant to Item 601(b)(2) of
    Regulation S-K,
    and the Registrant agrees to furnish copies of such omitted
    schedules supplementally to the Securities and Exchange
    Commission upon request.

Incorporated by reference to
    Exhibit 2.1 to the Registrants Current Report on
    Form 8-K
    filed on June 21, 2006.3
.1

Amended and Restated Articles of
    Incorporation of the Registrant.

Incorporated by reference to
    Exhibit 3.1 to the Registrants Registration Statement
    on
    Form S-18
    (File No.
    33-51456).3
.2

Amendment to the Amended and
    Restated Articles of Incorporation of the Registrant, as amended.

Incorporated by reference to
    Exhibit 3.1 to the Registrants Current Report on
    Form 8-K
    filed October 2, 2000.3
.3

Amendment to the Amended and
    Restated Articles of Incorporation of the Registrant, as amended.

Incorporated by reference to
    Exhibit 4.1 to the Registrants Current Report on
    Form 8-K
    filed November 19, 2001.3
.4

Amendment to the Amended and
    Restated Articles of Incorporation of the Registrant, amended.

Incorporated by reference to
    Exhibit 3.4 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2005.3
.5

Amendment to Amended and Restated
    Articles of Incorporation, effective as of October 11, 2005.

Incorporated by reference to
    Exhibit 3.1 to the Registrants Current Report on
    Form 8-K
    filed on October 7, 2005.3
.6

The Registrants Amended and
    Restated Bylaws, adopted October 24, 2005.

Incorporated by reference to
    Exhibit 3.1 to the Registrants Current Report on
    Form 8-K
    filed October 7, 2005.3
.7

Amendment to Amended and Restated
    Articles of Incorporation, amended.

Incorporated by reference to
    Exhibit 3.4 to the Registrants Quarterly Report on
    Form 10-Q
    filed on June 30, 2005.3
.8

Statement of Rights of
    Series C Preferred Stock of the Registrant effective
    June 16, 2005.

Incorporated by reference to
    Exhibit 3.1 to the Registrants Current Report on
    Form 8-K
    filed on June 21, 2006.3
.9

Articles of Amendment to the
    Registrants Articles of Incorporation, effective as of
    November 7, 2006.

Incorporated by reference to
    Exhibit 3.1 to the Registrants Current Report on
    Form 8-K
    filed November 13, 2006.4
.1

Warrant dated October 31,
    1996, to purchase 106,250 shares of the Registrants
    common stock granted to Walter C. Lovett.

Incorporated by reference to
    Exhibit 10.4 to the Registrants Current Report on
    Form 8-K
    filed November 12, 1996.4
.2

Warrant dated October 31,
    1996, to purchase 106,250 shares of the Registrants
    common stock granted to Douglas L. Roberson.

Incorporated by reference to
    Exhibit 10.5 to the Registrants Current Report on
    Form 8-K
    filed November 12, 1996.4
.3

Registration Rights Agreement
    dated as of July 27, 2000, among the Registrant, Strong
    River Investments, Inc. and Bay Harbor Investments, Inc.

Incorporated by reference to
    Exhibit 4.7 to the Registrants Registration Statement
    on
    Form S-4
    filed August 7, 2000 (File
    No. 333-
    43224).4
.4

Warrant dated as of July 27,
    2000, to purchase 104,168 shares of the Registrants
    common stock granted to Strong River Investments, Inc.

Incorporated by reference to
    Exhibit 4.10 to the Registrants Registration
    Statement on
    Form S-4
    filed August 7, 2000 (File No.
    333-43224). E-3




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing4
.5

Warrant dated as of July 27,
    2000, to purchase 104,168 shares of the Registrants
    common stock granted to Bay Harbor Investments, Inc.

Incorporated by reference to
    Exhibit 4.11 to the Registrants Registration
    Statement on
    Form S-4
    filed August 7, 2000 (File No.
    333-43224).4
.6

Warrant dated as of July 27,
    2000, to purchase 26,041 shares of the Registrants
    common stock granted to Strong River Investments, Inc.

Incorporated by reference to
    Exhibit 4.12 to the Registrants Registration
    Statement on
    Form S-4
    filed August 7, 2000 (File No.
    333-43224).4
.7

Warrant dated as of July 27,
    2000, to purchase 26,041 shares of the Registrants
    common stock granted to Bay Harbor Investments, Inc.

Incorporated by reference to
    Exhibit 4.13 to the Registrants Registration
    Statement on
    Form S-4
    filed August 7, 2000 (File No.
    333-43224).4
.8

Warrant dated as of July 27,
    2000, to purchase 52,083 shares of the Registrants
    common stock granted to Strong River Investments, Inc.

Incorporated by reference to
    Exhibit 4.14 to the Registrants Registration
    Statement on
    Form S-4
    filed August 7, 2000 (File No.
    333-43224).4
.9

Warrant dated as of July 27,
    2000, to purchase 52,083 shares of the Registrants
    common stock granted to Bay Harbor Investments, Inc.

Incorporated by reference to
    Exhibit 4.15 to the Registrants Registration
    Statement on
    Form S-4
    filed August 7, 2000 (File No.
    333-43224).4
.10

Warrant dated as of
    September 29, 2000, to purchase 1,750,000 shares of
    the Registrants common stock granted to Steven A. Odom.
    Represents an executive compensation plan or arrangement.

Incorporated by reference to
    Exhibit 10.7 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2000.4
.11

Warrant dated as of
    September 29, 2000, to purchase 875,000 shares of the
    Registrants common stock granted to James M. Logsdon.
    Represents an executive compensation plan or arrangement.

Incorporated by reference to
    Exhibit 10.8 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2000.4
.12

Warrant dated as of
    September 29, 2000, to purchase 665,000 shares of the
    Registrants common stock granted to Juliet M. Reising.
    Represents an executive compensation plan or arrangement.

Incorporated by reference to
    Exhibit 10.9 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2000.4
.13

Warrant dated as of
    August 21, 2000, to purchase 300,000 shares of Cereus
    Technology Partners, Inc.s common stock granted to Steven
    A. Odom. Represents an executive compensation plan or
    arrangement.

Incorporated by reference to
    Exhibit 10.10 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2000.4
.14

Warrant dated as of
    August 21, 2000, to purchase 100,000 shares of Cereus
    Technology Partners, Inc.s common stock granted to James
    M. Logsdon. Represents an executive compensation plan or
    arrangement.

Incorporated by reference to
    Exhibit 10.11 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2000.4
.15

Warrant dated as of
    August 21, 2000, to purchase 350,000 shares of Cereus
    Technology Partners, Inc.s common stock granted to Juliet
    M. Reising. Represents an executive compensation plan or
    arrangement.

Incorporated by reference to
    Exhibit 10.12 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2000.4
.16

Warrant dated as of
    August 21, 2000, to purchase 250,000 shares of Cereus
    Technology Partners, Inc.s common stock granted to Juliet
    M. Reising. Represents an executive compensation plan or
    arrangement.

Incorporated by reference to
    Exhibit 10.13 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2000. E-4




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing4
.17

Warrant dated as of
    August 21, 2000, to purchase 50,000 shares of Cereus
    Technology Partners, Inc.s common stock granted to Peter
    Pamplin. Represents an executive compensation plan or
    arrangement.

Incorporated by reference to
    Exhibit 10.14 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2000.4
.18

Warrant dated as of
    January 30, 2001, to purchase 83,334 shares of the
    Registrants common stock granted to PNC Bank, National
    Association.

Incorporated by reference to
    Exhibit 4.1 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2001.4
.19

Warrant dated as of
    January 30, 2001, to purchase 472,689 shares of the
    Registrants common stock granted to Strong River
    Investments, Inc.

Incorporated by reference to
    Exhibit 4.2 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2001.4
.20

Warrant dated as of
    January 30, 2001, to purchase 472,689 shares of the
    Registrants common stock granted to Bay Harbor
    Investments, Inc.

Incorporated by reference to
    Exhibit 4.3 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2001.4
.21

Form of 7.5% Convertible
    Debenture issued in connection with the Convertible Debenture
    and Warrant Purchase Agreement between the Registrant and the
    Purchasers named therein (the Debenture Purchase
    Agreement).

Incorporated by reference to
    Exhibit 4.5 to the Registrants Current Report on
    Form 8-K
    filed December 6, 2000.4
.22

Purchase Agreement dated as of
    January 18, 2001, among the Registrant, Strong River
    Investments, Inc. and Bay Harbor Investments, Inc. (the
    Strong River Debenture Purchase Agreement).

Incorporated by reference to
    Exhibit 10.2 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2001.4
.23

Amendment dated as of
    January 23, 2001, to the Strong River Debenture Purchase
    Agreement.

Incorporated by reference to
    Exhibit 10.4 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2001.4
.24

Amendment dated as of
    January 25, 2001, to the Strong River Debenture Purchase
    Agreement.

Incorporated by reference to
    Exhibit 10.5 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2001.4
.25

Registration Rights Agreement
    dated as of January 30, 2001, among the Registrant, Strong
    River Investments, Inc. and Bay Harbor Investments, Inc.

Incorporated by reference to
    Exhibit 10.3 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2001.4
.26

Form of Warrant issued in
    connection with the Registrants acquisition of
    Telemate.Net Software, Inc.

Incorporated by reference to
    Exhibit 4.42 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2001.4
.27

Registration Rights Agreement
    dated May 15, 2002, between the Registrant and Silicon
    Valley Bank.

Incorporated by reference to
    Exhibit 4.4 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2002.4
.28

Registration Rights Agreement
    dated as of February 12, 2003, between the Registrant and
    Silicon Valley Bank.

Incorporated by reference to
    Exhibit 4.2 to the Registrants Current Report on
    Form 8-K
    filed February 13, 2003.4
.29

Form of Warrant issued in
    connection with the Registrants October 2002 private
    placement offering.

Incorporated by reference to
    Exhibit 4.45 to the Registrants Annual Report on
    Form 10-K
    for the period ending December 31, 2002. E-5




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing4
.30

Form of Registration Rights
    Agreement entered into in connection with the Registrants
    October 2002 private placement offering.

Incorporated by reference to
    Exhibit 4.46 to the Registrants Annual Report on
    Form 10-K
    for the period ending December 31, 2002.4
.31

Warrant Agreement dated as of
    August 17, 1999 to purchase 35,250 shares of AIM
    Group, Inc.s stock granted to Randall P. Stern.

Incorporated by reference to
    Exhibit 4.10 to the Registrants Registration
    Statement on
    Form S-1
    filed September 8, 2003 (File No.
    333-108613).4
.32

Warrant Agreement dated as of
    October 29, 1999 to purchase 11,750 share of AIM
    Group, Inc.s common stock granted to Randall P. Stern.

Incorporated by reference to
    Exhibit 4.11 to the Registrants Registration
    Statement on
    Form S-1
    filed September 8, 2003 (File No.
    333-108613).4
.33

Warrant Agreement dated as of
    February 8, 2000 to purchase 85,500 shares of Cereus
    Technology Partners, Inc.s common stock granted to Randall
    P. Stern.

Incorporated by reference to
    Exhibit 4.12 to the Registrants Registration
    Statement on
    Form S-1
    filed September 8, 2003 (File No.
    333-108613).4
.34

Warrant Agreement dated as of
    August 17, 1999 to purchase 35,250 shares of AIM
    Group, Inc.s stock granted to Burnham Securities, Inc.

Incorporated by reference to
    Exhibit 4.13 to the Registrants Registration
    Statement on
    Form S-1
    filed September 8, 2003 (File
    No. 333-108613).4
.35

Warrant Agreement dated as of
    October 29, 1999 to purchase 11,750 shares of AIM
    Group, Inc.s common stock granted to Burnham Securities,
    Inc.

Incorporated by reference to
    Exhibit 4.14 to the Registrants Registration
    Statement on
    Form S-1
    filed September 8, 2003 (File No.
    333-108613).4
.36

Warrant Agreement dated as of
    February 8, 2000 to purchase 85,500 shares of Cereus
    Technology Partners, Inc.s common stock granted to Burnham
    Securities, Inc.

Incorporated by reference to
    Exhibit 4.15 to the Registrants Registration
    Statement on
    Form S-1
    filed September 8, 2003 (File No.
    333-108613).4
.37

Warrant Agreement dated as of
    February 8, 2000 to purchase 5,250 shares of Cereus
    Technology Partners, Inc.s common stock granted to Burnham
    Securities, Inc.

Incorporated by reference to
    Exhibit 4.16 to the Registrants Registration
    Statement on
    Form S-1
    filed September 8, 2003 (File No.
    333-108613).4
.38

Warrant Agreement dated as of
    February 8, 2000 to purchase 5,000 shares of Cereus
    Technology Partners, Inc.s common stock granted to Jon M.
    Burnham.

Incorporated by reference to
    Exhibit 4.17 to the Registrants Registration
    Statement on
    Form S-1/A
    filed October 21, 2003 (File No.
    333-108613).4
.39

Warrant Agreement dated as of
    February 8, 2000 to purchase 7,750 shares of Cereus
    Technology Partners, Inc.s common stock granted Randall P.
    Stern.

Incorporated by reference to
    Exhibit 4.18 to the Registrants Registration
    Statement on
    Form S-1/A
    filed October 21, 2003 (File No.
    333-108613).4
.40

Form of Warrant issued by the
    Registrant to each Investor in connection with the
    Registrants February 2004 private placement.

Incorporated by reference to
    Exhibit 4.1 to the Registrants Current Report on
    Form 8-K
    filed on February 26, 2004.4
.41

Form of Registration Rights
    Agreement among the Registrant and the Investors entered into in
    connection with the Registrants February 2004 private.

Incorporated by reference to
    Exhibit 4.2 to the Registrants Current Report on
    Form 8-K
    filed on February 26, 2004.4
.42

Form of 6% Senior Unsecured
    Convertible Debenture dated February 4, 2005 issued in
    connection with the Registrants February 2005 private
    placement.

Incorporated by reference to
    Exhibit 4.1 to the Registrants Current Report on
    Form 8-K
    filed on February 8, 2005. E-6




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing4
.43

Form of Series A Warrant
    dated February 4, 2005 to purchase shares of the
    Registrants common stock issued in connection with the
    Registrants February 2005 private placement.

Incorporated by reference to
    Exhibit 4.2 to the Registrants Current Report on
    Form 8-K
    filed on February 8, 2005.4
.44

Form of Registration Rights
    Agreement among the Registrant and the Investors signatory
    thereto entered into in connection with the Registrants
    February 2005 private placement.

Incorporated by reference to
    Exhibit 4.4 to the Registrants Current Report on
    Form 8-K
    filed on February 8, 2005.4
.45

Form of warrant to purchase the
    Registrants common stock issued to certain placement
    agents in connection with the Registrants February 2005
    private placement.

Incorporated by reference to
    Exhibit 4.62 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2004.4
.46

Form of Registration Rights
    Agreement to be executed in connection with the closing of the
    transactions contemplated by the Asset Purchase Agreement dated
    as of February 23, 2005 by and among the Registrant, WSECI,
    Inc. and the shareholders of WSECI, Inc.

Incorporated by reference to
    Exhibit 4.1 to the Registrants Current Report on
    Form 8-K
    filed on March 1, 20054
.47

Warrant issued July 25, 2005
    to Mainfield Enterprises Inc. to purchase 1,500,000 shares
    of the Registrants common stock.

Incorporated by reference to
    Exhibit 4.1 to the Registrants Current Report on
    Form 8-K
    filed on July 29, 2005.4
.48

Warrant issued July 25, 2005
    to Heimdall Investments, Ltd. to purchase 1,500,000 shares
    of the Registrants common stock.

Incorporated by reference to
    Exhibit 4.2 to the Registrants Current Report on
    Form 8-K
    filed on July 29, 2005.4
.49

Warrant issued July 25, 2005
    to Mainfield Enterprises Inc. to purchase 500,000 shares of
    the Registrants common stock.

Incorporated by reference to
    Exhibit 4.3 to the Registrants Current Report on
    Form 8-K
    filed on July 29, 2005.4
.50

Warrant issued July 25, 2005
    to Heimdall Investments, Ltd. to purchase 500,000 shares of
    the Registrants common stock.

Incorporated by reference to
    Exhibit 4.4 to the Registrants Current Report on
    Form 8-K
    filed on July 29, 2005.4
.51

Registration Rights Agreement
    dated as of July 25, 2005, among the Registrant and the
    investors signatory thereto.

Incorporated by reference to
    Exhibit 4.5 to the Registrants Current Report on
    Form 8-K
    filed on July 29, 2005.4
.52

Registration Rights Agreement
    dated March 20, 2006, between the Registrant and Joseph
    Noel.

Incorporated by reference to
    Exhibit 4.4 to the Registrants Registration Statement
    on
    Form S-3
    (No.
    333-1333373).4
.53

Registration Rights Agreement
    dated March 20, 2006, between the Registrant and J.P.
    Turner & Company, L.L.C.

Incorporated by reference to
    Exhibit 4.5 to the Registrants Registration Statement
    on
    Form S-3
    (No.
    333-1333373).4
.54

Registration Rights Agreement
    dated March 20, 2006, between the Registrant and
    Croft & Bender.

Incorporated by reference to
    Exhibit 4.6 to the Registrants Registration Statement
    on
    Form S-3
    (No.
    333-1333373).4
.55

Form of Warrant issued in the
    Registrants February 2006 Private Placement.

Incorporated by reference to
    Exhibit 4.53 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2005.4
.56

Form of Registration Rights
    Agreement entered into in connection with the Registrants
    February 2006 Private Placement.

Incorporated by reference to
    Exhibit 4.54 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2005. E-7




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing4
.57

Registration Rights Agreement
    dated as of June 16, 2006 between the Registrant and
    Winslow Asset Group, LLC.

Incorporated by reference to
    Exhibit 4.1 to the Registrants Current Report on
    Form 8-K
    filed on June 21, 2006.4
.58

Secured Non-Convertible
    Tranche A Revolving Note issued by the Registrant to Laurus
    Master Fund, Ltd. on September 20, 2006.

Incorporated by reference to
    Exhibit 4.1 to the Registrants Registration Statement
    on
    Form S-3
    filed on November 11, 2006 (No.
    333-138429).4
.59

Secured Non-Convertible
    Tranche B Revolving Note issued by the Registrant to Laurus
    Master Fund, Ltd. on September 20, 2006.

Incorporated by reference to
    Exhibit 4.2 to the Registrants Registration Statement
    on
    Form S-3
    filed on November 11, 2006 (No.
    333-138429).4
.60

Common Stock Purchase Warrant to
    purchase 1,321,877 shares of the Registrants common
    stock issued to Laurus Master Fund, Ltd. dated
    September 20, 2006.

Incorporated by reference to
    Exhibit 4.3 to the Registrants Registration Statement
    on
    Form S-3
    filed on November 11, 2006 (No.
    333-138429).4
.61

Common Stock Purchase Warrant to
    purchase 600,000 shares of the Registrants common
    stock issued to Laurus Master Fund, Ltd. dated
    September 20, 2006.

Incorporated by reference to
    Exhibit 4.4 to the Registrants Registration Statement
    on
    Form S-3
    filed on November 11, 2006 (No.
    333-138429).4
.62

Registration Rights Agreement
    between the Registrant and Laurus Master Fund, Ltd. dated
    September 20, 2006.

Incorporated by reference to
    Exhibit 4.5 to the Registrants Registration Statement
    on
    Form S-3
    filed on November 11, 2006 (No.
    333-138429).4
.63

Warrant to purchase
    192,000 shares of the Registrants common stock issued
    to J. P. Turner Partners, LP dated September 20, 2006.

Incorporated by reference to
    Exhibit 4.6 to the Registrants Registration Statement
    on
    Form S-3
    filed on November 11, 2006 (No.
    333-138429).4
.64

Form of Registration Rights
    Agreement dated as of March 31, 2005 among the Registrant,
    WSECI, Inc. and the shareholders thereof.

Incorporated by reference to
    Exhibit 4.1 to the Registrants Current Report on
    Form 8-K
    filed on March 1, 2005.4
.65

Form of Registration Rights
    Agreement executed in connection with the Registrants
    acquisition of the assets of WSECI, Inc.

Incorporated by reference to
    Exhibit 4.1 to the Registrants Current Report on
    Form 8-K
    filed on March 1, 2005.4
.66

Form of Warrant to purchase shares
    of the Registrants common stock dated January 31,
    2007 pursuant to the Securities Purchase Agreement dated
    January 30, 2007 among the Registrant and the purchasers
    signatory thereto.

Incorporated by reference to
    Exhibit 4.1 to the Registrants Current Report on
    Form 8-K
    filed January 31, 2007.4
.67

Form of Registration Rights
    Agreement dated as of January 30, 2007 entered into
    pursuant to the Securities Purchase Agreement dated
    January 30, 2007 among the Registrant and the purchasers
    signatory thereto.

Incorporated by reference to
    Exhibit 99.2 to the Registrants Current Report on
    Form 8-K
    filed January 31, 2007.4
.68

Form of Warrant to purchase shares
    of the Registrants common stock dated February 5,
    2007 pursuant to the Securities Purchase Agreement among the
    Registrant and the purchasers signatory thereto dated as of
    February 2, 2007.

Incorporated by reference to
    Exhibit 4.1 to the Registrants Current Report on
    Form 8-K
    filed February 6, 2007.4
.69

Form of Warrant to purchase shares
    of the Registrants common stock dated February 6,
    2007 pursuant to the Securities Purchase Agreement among the
    Registrant and the purchasers signatory thereto dated as of
    February 5, 2007.

Incorporated by reference to
    Exhibit 4.2 to the Registrants Current Report on
    Form 8-K
    filed February 6, 2007. E-8




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing4
.70

Form of Registration Rights
    Agreement dated as of February 2, 2007 entered into
    pursuant to the Securities Purchase Agreement among the
    Registrant and the purchasers signatory thereto dated as of
    February 2, 2007.

Incorporated by reference to
    Exhibit 99.2 to the Registrants Current Report on
    Form 8-K
    filed February 6, 2007.4
.71

Form of Registration Rights
    Agreement dated as of February 5, 2007 entered into
    pursuant to the Securities Purchase Agreement among the
    Registrant and the purchasers signatory thereto dated as of
    February 5, 2007.

Incorporated by reference to
    Exhibit 99.4 to the Registrants Current Report on
    Form 8-K
    filed February 6, 2007.4
.72

Form of Warrant to purchase shares
    of the Registrants common stock dated February 9,
    2007 pursuant to the Securities Purchase Agreement among the
    Registrant and the purchaser signatory thereto dated as of
    February 9, 2007.

Incorporated by reference to
    Exhibit 4.1 to the Registrants Current Report on
    Form 8-K
    filed February 12, 2007.4
.73

Form of Registration Rights
    Agreement dated as of February 9, 2007 entered into
    pursuant to the Securities Purchase Agreement among the
    Registrant and the purchaser signatory thereto dated as of
    February 9, 2007.

Incorporated by reference to
    Exhibit 99.2 to the Registrants Current Report on
    Form 8-K
    filed February 12, 2007.10
.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 Restricted Stock Award
    Agreement.

Filed herewith.10
.4

Form of Non-Employee Director
    Stock Option Agreement.

Incorporated by reference to
    Exhibit 10.10 to the Registrants Annual Report on
    Form 10-KSB
    for the year ended March 31, 1993.10
.5

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
.6

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
.7

1997 Stock Incentive Plan.

Incorporated by reference to the
    Registrants Proxy Statement for its 1997 Annual Meeting of
    Stockholders.10
.8

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
.9

1999 Stock Incentive Plan.

Incorporated by reference to
    Appendix A to the Registrants Proxy Statement dated
    October 4, 2006.10
.10

1999 Employee Stock Purchase Plan.

Incorporated by reference to
    Exhibit 10.9 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2004. E-9




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing10
.11

Office Lease Agreement dated as of
    September 20, 1999, between the Registrant and Galleria 400
    LLC.

Incorporated by reference to
    Exhibit 10.51 to the Registrants Registration
    Statement on
    Form S-4
    filed August 7, 2000 (File No.
    333-43224).10
.12

First Amendment to Office Lease
    Agreement dated as of March 31, 2000, between the
    Registrant and Galleria 400 LLC.

Incorporated by reference to
    Exhibit 10.52 to the Registrants Registration
    Statement on
    Form S-4
    filed August 7, 2000 (File No.
    333-43224).10
.13

Convertible Debenture Purchase
    Agreement dated as of July 27, 2000, among the Registrant,
    Strong River Investments, Inc.

Incorporated by reference to
    Exhibit 10.53 to the Registrants Registration
    Statement on
    Form S-4
    filed August 7, 2000 (File No.
    333-43224).10
.14

Executive Employment Agreement
    dated as of September 29, 2000, between the Registrant and
    Steven A. Odom. Represents an executive compensation plan or
    arrangement.

Incorporated by reference to
    Exhibit 10.4 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2000.10
.15

Executive Employment Agreement
    dated as of September 29, 2000, between the Registrant and
    James M. Logsdon. Represents an executive compensation plan or
    arrangement.

Incorporated by reference to
    Exhibit 10.5 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2000.10
.16

Executive Employment Agreement
    dated as of September 29, 2000, between the Registrant and
    Juliet M. Reising. Represents an executive compensation plan or
    arrangement.

Incorporated by reference to
    Exhibit 10.6 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended September 30, 2000.10
.17

Form of Escrow Agreement entered
    into in connection with the MessageClick Merger Agreement.

Incorporated by reference to
    Exhibit 4.3 to the Registrants Current Report on
    Form 8-K
    filed December 6, 2000.10
.18

Convertible Debenture and Warrant
    Purchase Agreement dated as of October 31, 2000, between
    the Registrant and the purchasers signatory thereto.

Incorporated by reference to
    Exhibit 4.4 to the Registrants Current Report on
    Form 8-K
    filed December 6, 2000.10
.19

Cereus Technology Partners, Inc.
    Directors Warrant Incentive Plan. Represents an executive
    compensation plan or arrangement.

Incorporated by reference to
    Exhibit 10(cc) to Cereus Technology Partners, Inc.s
    Annual Report on
    Form 10-KSB40
    for the year ended December 31, 1999.10
.20

Cereus Technology Partners, Inc.
    Outside Directors Warrant Plan. Represents an executive
    compensation plan or arrangement.

Incorporated by reference to
    Exhibit 10(dd) to Cereus Technology Partners, Inc.s
    Annual Report on
    Form 10-KSB40
    for the year ended December 31, 1999.10
.21

Loan and Security Agreement dated
    December 14, 2001, among the Registrant, NACT
    Telecommunications, Inc., Telemate.Net Software, Inc. and
    Silicon Valley Bank, Commercial Finance Division.

Incorporated by reference to
    Exhibit 10.35 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2001.10
.22

Lease Agreement dated as of
    December 30, 1999, between NACT Telecommunications, Inc.
    and Boggess-Riverwoods Company, L.L.C.

Incorporated by reference to
    Exhibit 10.39 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2001.10
.23

Instrument of Assumption and
    Substitution of Guarantor of Lease dated as of July 27,
    2001, among the Registrant, World Access, Inc., Boggess
    Holdings, L.L.C. and NACT Telecommunications, Inc.

Incorporated by reference to
    Exhibit 10.40 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2001. E-10




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing10
.24

Intellectual Property Security
    Agreement dated as of December 14, 2001, between the
    Registrant and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 10.41 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2001.10
.25

Intellectual Property Security
    Agreement dated as of December 14, 2001, between NACT
    Telecommunications, Inc. and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 10.42 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2001.10
.26

Intellectual Property Security
    Agreement dated as of December 14, 2001, between
    Telemate.Net Software, Inc. and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 10.43 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2001.10
.27

Telemate.Net Software, Inc. 1999
    Stock Incentive Plan.

Incorporated by reference to
    Exhibit 10.13 to Telemate.Net Software, Inc.s
    Registration Statement on
    Form S-1
    filed June 24, 1999 (File No.
    333-81443).10
.28

Amendment to the Telemate.Net 1999
    Software, Inc. Stock Incentive Plan.

Incorporated by reference to
    Exhibit 10.18 to Telemate.Net Software, Inc.s
    Registration Statement on
    Form S-1
    filed June 24, 1999 (File No.
    333-81443).10
.29

Telemate Stock Incentive Plan.

Incorporated by reference to
    Exhibit 10.10 to Telemate.Net Software, Inc.s
    Registration Statement on
    Form S-1
    filed June 24, 1999 (File No.
    333-81443).10
.30

Amendment to Telemate Stock
    Incentive Plan.

Incorporated by reference to
    Exhibit 10.14 to Telemate.Net Software, Inc.s
    Registration Statement on
    Form S-1
    filed June 24, 1999 (File No.
    333-81443).10
.31

Form of Indemnification Agreement
    entered into as of October 12, 2001, between the Registrant
    and each of its directors and non-director officers at the level
    of Vice-President and above.

Incorporated by reference to
    Appendix F-1 to the Registrants Registration Statement on
    Form S-4/A
    filed October 12, 2001 (File No.
    333-62262).10
.32

Interest Purchase Agreement dated
    as of June 4, 2002, between the Registrant and NeTrue
    Communications, Inc.

Incorporated by reference to
    Exhibit 10.9 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2002.10
.33

Subordination Agreement dated
    April 25, 2002, among the Registrant, Telemate.Net
    Software, Inc., NACT Telecommunications, Inc. and Silicon Valley
    Bank.

Incorporated by reference to
    Exhibit 99.6 to the Registrants Current Report on
    Form 8-K
    filed May 1, 2002.10
.34

Amendment to Loan Documents dated
    February 12, 2003, among the Registrant, Telemate.Net
    Software, Inc., NACT Telecommunications, Inc. and Silicon Valley
    Bank.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed February 13, 2003.10
.35

Loan and Security Agreement (Exim
    Program) dated February 12, 2003, among the Registrant,
    Telemate.Net Software, Inc., NACT Telecommunications, Inc. and
    Silicon Valley Bank.

Incorporated by reference to
    Exhibit 99.2 to the Registrants Current Report on
    Form 8-K
    filed February 13, 2003.10
.36

Borrower Agreement dated
    February 12, 2003, among the Registrant, Telemate.Net
    Software, Inc., NACT Telecommunications, Inc. and Silicon Valley
    Bank.

Incorporated by reference to
    Exhibit 99.3 to the Registrants Current Report on
    Form 8-K
    filed February 13, 2003. E-11




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing10
.37

Secured Promissory Note dated
    February 12, 2003, in principal amount of
    $4.0 million, made by the Registrant in favor of Silicon
    Valley Bank.

Incorporated by reference to
    Exhibit 99.4 to the Registrants Current Report on
    Form 8-K
    filed February 13, 2003.10
.38

Subordination Agreement dated
    February 12, 2003, among the Registrant, Clarent
    Corporation and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 99.5 to the Registrants Current Report on
    Form 8-K
    filed February 13, 2003.10
.39

Loan and Security Agreement dated
    as of February 12, 2003, between the Registrant and Clarent
    Corporation.

Incorporated by reference to
    Exhibit 99.6 to the Registrants Current Report on
    Form 8-K
    filed February 13, 2003.10
.40

Secured Subordinated Promissory
    Note dated February 12, 2003, in principal amount of
    $5.0 million, made by the Registrant in favor of Clarent
    Corporation.

Incorporated by reference to
    Exhibit 99.7 to the Registrants Current Report on
    Form 8-K
    filed February 13, 2003.10
.41

Secured Subordinated Promissory
    Note dated February 12, 2003, in principal amount of
    $3.0 million, made by the Registrant in favor of Clarent
    Corporation.

Incorporated by reference to
    Exhibit 99.8 to the Registrants Current Report on
    Form 8-K
    filed February 13, 2003.10
.42

Unsecured Subordinated Promissory
    Note, dated February 12, 2003, in principal amount of
    $1.8 million, made by the Registrant in favor of Clarent
    Corporation.

Incorporated by reference to
    Exhibit 99.9 to the Registrants Current Report on
    Form 8-K
    filed February 13, 2003.10
.43

Bill of Sale, Assignment and
    Assumption Agreement, dated as of February 12, 2003,
    between the Registrant and Clarent Corporation.

Incorporated by reference to
    Exhibit 99.10 to the Registrants Current Report on
    Form 8-K
    filed February 13, 2003.10
.44

Assignment of Patent Rights dated
    as of February 7, 2003, made by Clarent Corporation to the
    Registrant.

Incorporated by reference to
    Exhibit 99.11 to the Registrants Current Report on
    Form 8-K
    filed February 13, 2003.10
.45

Assignment of Trademarks dated as
    of February 12, 2003, between the Registrant and Clarent
    Corporation.

Incorporated by reference to
    Exhibit 99.12 to the Registrants Current Report on
    Form 8-K
    filed February 13, 2003.10
.46

Intellectual Property and Security
    Agreement dated as of February 12, 2003, between the
    Registrant and Clarent Corporation.

Incorporated by reference to
    Exhibit 99.13 to the Registrants Current Report on
    Form 8-K
    filed February 13, 2003.10
.47

Settlement Agreement dated
    November 6, 2002, between the Registrant and WA Telcom
    Products Co., Inc.

Incorporated by reference to
    Exhibit 10.65 to the Registrants Annual Report on
    Form 10-K
    for the period ended December 31, 2002.10
.48

Assignment and Collection
    Agreement dated December 5, 2002,  between the Registrant
    and WA Telcom Products Co., Inc.

Incorporated by reference to
    Exhibit 10.66 to the Registrants Annual Report on
    Form 10-K
    for the period ended December 31, 2002.10
.49

Cross-Corporate Continuing
    Guaranty dated as of February 12, 2003, among the
    Registrant, Telemate.Net Software, Inc., NACT
    Telecommunications, Inc. and Clarent Canada Ltd.

Incorporated by reference to
    Exhibit 10.67 to the Registrants Annual Report on
    Form 10-K
    for the period ended December 31, 2002. E-12




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing10
.50

Lease for 1221 West Mineral
    Avenue, dated as of February 11, 2003, between the
    Registrant and A.S. Burger Investments, LLC.

Incorporated by reference to
    Exhibit 10.68 to the Registrants Annual Report on
    Form 10-K
    for the period ended December 31, 2002.10
.51

Movable Hypothec dated as of
    February 20, 2003, between the Registrant and Silicon
    Valley Bank.

Incorporated by reference to
    Exhibit 10.69 to the Registrants Annual Report on
    Form 10-K
    for the period ended December 31, 2002.10
.52

Movable Hypothec dated as of
    February 20, 2003, between the Clarent Canada Ltd. and
    Silicon Valley Bank.

Incorporated by reference to
    Exhibit 10.70 to the Registrants Annual Report on
    Form 10-K
    for the period ended December 31, 2002.10
.53

Settlement Agreement and Full
    Release of Claims dated as of February 12, 2003, between
    the Registrant and John M. Good.

Incorporated by reference to
    Exhibit 10.71 to the Registrants Annual Report on
    Form 10-K
    for the period ended December 31, 2002.10
.54

Arbitration Award Agreement dated
    February 3, 2002, and among the Registrant, Clunet R. Lewis
    and CLR Enterprises, Inc.

Incorporated by reference to
    Exhibit 10.72 to the Registrants Annual Report on
    Form 10-K
    for the period ended December 31, 2002.10
.55

Arbitration Award Agreement dated
    February 3, 2002, among the Registrant, William P.
    OReilly and Montana Corporation.

Incorporated by reference to
    Exhibit 10.73 to the Registrants Annual Report on
    Form 10-K
    for the period ended December 31, 2002.10
.56

Consulting Agreement dated as of
    March 14, 2003, between the Registrant and William P.
    OReilly.

Incorporated by reference to
    Exhibit 10.74 to the Registrants Annual Report on
    Form 10-K
    for the period ended December 31, 2002.10
.57

Consulting Agreement dated as of
    March 14, 2003, between the Registrant and Clunet R. Lewis.

Incorporated by reference to
    Exhibit 10.75 to the Registrants Annual Report on
    Form 10-K
    for the period ended December 31, 2002.10
.58

Amendment to Loan Documents dated
    April 7, 2003, among the Registrant, Telemate.Net Software,
    Inc., NACT Telecommunications, Inc. and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 10.76 to the Registrants Annual Report on
    Form 10-K
    for the period ended December 31, 2002.10
.59

Amendment to Loan Documents (Exim
    Program) dated April 7, 2003, among the Registrant,
    Telemate.Net Software, Inc., NACT Telecommunications, Inc. and
    Silicon Valley Bank.

Incorporated by reference to
    Exhibit 10.77 to the Registrants Annual Report on
    Form 10-K
    for the period ended December 31, 2002.10
.60

Assignment and Assumption
    Agreement dated January 21, 2005 entered into in connection
    with the Registrants disposition of its MCK business with
    respect to the U.K. assets.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.61

Assignment and Assumption
    Agreement dated January 21, 2005 entered into in connection
    with the Registrants disposition of its MCK business with
    respect to the U.S. assets.

Incorporated by reference to
    Exhibit 99.2 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.62

Assignment and Assumption
    Agreement dated January 21, 2005 entered into in connection
    with the Registrants disposition of its MCK business with
    respect to the Canadian assets.

Incorporated by reference to
    Exhibit 99.3 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005. E-13




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing10
.63

Bill of Sale dated
    January 21, 2005 entered into in connection with the
    Registrants disposition of its MCK business with respect
    to the U.K. assets.

Incorporated by reference to
    Exhibit 99.4 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.64

Bill of Sale dated
    January 21, 2005 entered into in connection with the
    Registrants disposition of its MCK business with respect
    to the U.S. assets.

Incorporated by reference to
    Exhibit 99.5 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.65

Bill of Sale dated
    January 21, 2005 entered into in connection with the
    Registrants disposition of its MCK business with respect
    to the Canadian assets.

Incorporated by reference to
    Exhibit 99.6 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.66

Secured Convertible Promissory
    dated January 21, 2005 issued to the Registrant in
    principal amount of $3.5 million in connection with the
    Registrants disposition of its MCK business.

Incorporated by reference to
    Exhibit 99.7 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.67

Security Agreement dated
    January 21, 2005 entered into in connection with the
    Registrants disposition of its MCK business.

Incorporated by reference to
    Exhibit 99.8 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.68

Copyright Assignment Agreement
    dated January 21, 2005 entered into in connection with the
    Registrants disposition of its MCK business.

Incorporated by reference to
    Exhibit 99.9 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.69

Domain Name Assignment Agreement
    dated January 21, 2005 entered into in connection with the
    Registrants disposition of its MCK business.

Incorporated by reference to
    Exhibit 99.10 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.70

Patent Assignment Agreement dated
    January 21, 2005 entered into in connection with the
    Registrants disposition of its MCK business.

Incorporated by reference to
    Exhibit 99.11 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.71

Trademark Assignment Agreement
    dated January 21, 2005 entered into in connection with the
    Registrants disposition of its MCK business.

Incorporated by reference to
    Exhibit 99.12 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.72

Bill of Sale dated
    January 21, 2005 entered into in connection with the
    Registrants disposition of its NACT business.

Incorporated by reference to
    Exhibit 99.13 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.73

Copyright Assignment Agreement
    dated January 21, 2005 entered into in connection with the
    Registrants disposition of its NACT business.

Incorporated by reference to
    Exhibit 99.14 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.74

Trademark Assignment Agreement
    dated January 21, 2005 entered into in connection with the
    Registrants disposition of its NACT business.

Incorporated by reference to
    Exhibit 99.15 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.75

Patent Assignment Agreement dated
    January 21, 2005 entered into in connection with the
    Registrants disposition of its NACT business.

Incorporated by reference to
    Exhibit 99.16 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.76

License Agreement dated
    January 21, 2005 entered into in connection with the
    Registrants disposition of its NACT business.

Incorporated by reference to
    Exhibit 99.17 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005. E-14




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing10
.77

Reciprocal Reseller Agreement
    dated January 21, 2005 entered into in connection with the
    Registrants disposition of its NACT business.

Incorporated by reference to
    Exhibit 99.18 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.78

Call Center Services Agreement
    dated January 21, 2005 entered into in connection with the
    Registrants disposition of its NACT business.

Incorporated by reference to
    Exhibit 99.19 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 200510
.79

Instrument of Assignment,
    Agreement and Consent dated January 21, 2005 entered into
    in connection with the Registrants disposition of its NACT
    business.

Incorporated by reference to
    Exhibit 99.20 to the Registrants Current Report on
    Form 8-K
    filed on January 27, 2005.10
.80

Cash Collateral Agreement dated as
    of February 4, 2005 between the Registrant, the Investors
    signatory thereto and Wachovia Bank, National Association.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed on February 8, 2005.10
.81

Form of Seller Non-Competition
    Agreement to be executed in connection with the closing of the
    transactions contemplated by the Asset Purchase Agreement dated
    as of February 23, 2005 by and among the Registrant, WSECI,
    Inc. and the shareholders of WSECI, Inc.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed on March 1, 2005.10
.82

Form of Bill of Sale, Assignment
    and Assumption Agreement Seller to be executed in connection
    with the closing of the transactions contemplated by the Asset
    Purchase Agreement dated as of February 23, 2005 by and
    among the Registrant, WSECI, Inc. and the shareholders of WSECI,
    Inc.

Incorporated by reference to
    Exhibit 99.2 to the Registrants Current Report on
    Form 8-K
    filed on March 1, 2005.10
.83

Non-qualified Stock Option entered
    into March 15, 2005 and effective November 3, 2004 to
    purchase 500,000 shares of the Registrants common
    stock granted to Lewis Jaffe. Represents an executive
    compensation plan or arrangement.

Incorporated by reference to
    Exhibit 99.5 to the Registrants Current Report filed
    on March 21, 2005 and amended on April 28, 2005.10
.84

Non-qualified Stock Option entered
    into March 15, 2005 and effective November 3, 2004 to
    purchase 250,000 shares of the Registrants common
    stock granted to Lewis Jaffe. Represents an executive
    compensation plan or arrangement.

Incorporated by reference to
    Exhibit 99.6 to the Registrants Current Report filed
    on March 21, 2005 and amended on April 28, 2005.10
.85

Non-qualified Stock Option entered
    into March 15, 2005 and effective November 3, 2004 to
    purchase 250,000 shares of the Registrants common
    stock granted to Lewis Jaffe. Represents an executive
    compensation plan or arrangement.

Incorporated by reference to
    Exhibit 99.7 to the Registrants Current Report filed
    on March 21, 2005 and amended on April 28, 2005.10
.86

Non-qualified Stock Option entered
    into March 15, 2005 and effective November 19, 2004 to
    purchase 250,000 shares of the Registrants common
    stock granted to Montgomery Bannerman. Represents an executive
    compensation plan or arrangement.

Incorporated by reference to
    Exhibit 99.8 to the Registrants Current Report on
    Form 8-K
    filed on March 21, 2005 and amended on April 28, 2005.10
.87

Amendment to Loan Documents dated
    March 15, 2005, among the Registrant, Provo Prepaid
    (Delaware) Corp., Telemate.Net Software, Inc., Needham
    (Delaware) Corp. and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed on March 21, 2005 and amended on April 28, 2005. E-15




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing10
.88

Amendment to Loan Documents (Exim
    Program) dated March 15, 2005, among the Registrant, Provo
    Prepaid (Delaware) Corp., Telemate.Net Software, Inc. and
    Silicon Valley Bank.

Incorporated by reference to
    Exhibit 99.2 to the Registrants Current Report on
    Form 8-K
    filed on March 21, 2005 and amended on April 28, 2005.10
.89

Borrower Agreement dated
    March 15, 2005, among the Registrant, Provo Prepaid
    (Delaware) Corp., Telemate.Net Software, Inc. and Silicon Valley
    Bank.

Incorporated by reference to
    Exhibit 99.3 to the Registrants Current Report on
    Form 8-K
    filed on March 21, 2005 and amended on April 28, 2005.10
.90

Amended and Restated Secured
    Promissory Note dated March 15, 2005, in principal amount
    of $10.0 million, made by the Registrant, Provo Prepaid
    (Delaware) Corp. and Telemate.Net Software, Inc. in favor of
    Silicon Valley Bank.

Incorporated by reference to
    Exhibit 99.4 to the Registrants Current Report on
    Form 8-K
    filed on March 21, 2005 and amended on April 28, 2005.10
.91

Assumption Agreement dated
    April 14, 2005, among the Registrant, Needham (Delaware)
    Corp., Provo Prepaid (Delaware) Corp., Telemate.Net Software,
    Inc. and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 10.32 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2005.10
.92

Borrower Agreement dated
    April 14, 2005, among the Registrant, Needham (Delaware)
    Corp., Provo Prepaid (Delaware) Corp., Telemate.Net Software,
    Inc. and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 10.33 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2005.10
.93

Amended and Restated Secured
    Promissory Note dated April 14, 2005, in principal amount
    of $10.0 million, made by the Registrant, Needham
    (Delaware) Corp., Provo Prepaid (Delaware) Corp. and
    Telemate.Net Software, Inc. in favor of Silicon Valley Bank

Incorporated by reference to
    Exhibit 10.34 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2005.10
.94

Assumption Agreement dated
    April 14, 2005, among the Registrant, Needham (Delaware)
    Corp., Provo Prepaid (Delaware) Corp., Telemate.Net Software,
    Inc. and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 10.32 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2005.10
.95

Borrower Agreement dated
    April 14, 2005, among the Registrant, Needham (Delaware)
    Corp., Provo Prepaid (Delaware) Corp., Telemate.Net Software,
    Inc. and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 10.33 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2005.10
.96

Amended and Restated Secured
    Promissory Note dated April 14, 2005, in principal amount
    of $10.0 million, made by the Registrant, Needham
    (Delaware) Corp., Provo Prepaid (Delaware) Corp. and
    Telemate.Net Software, Inc. in favor of Silicon Valley Bank.

Incorporated by reference to
    Exhibit 10.34 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended March 31, 2005.10
.97

Sublease dated July 1, 2005,
    between the Registrant and Digital Insurance, Inc.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed on July 8, 2005.10
.98

Bill of Sale dated July 1,
    2005, executed by the Registrant in favor of Digital Insurance,
    Inc.

Incorporated by reference to
    Exhibit 99.2 to the Registrants Current Report on
    Form 8-K
    filed on July 8, 2005.10
.99

Security Agreement entered into on
    July 1, 2005, between the Registrant and Digital Insurance,
    Inc.

Incorporated by reference to
    Exhibit 99.3 to the Registrants Current Report on
    Form 8-K
    filed on July 8, 2005. E-16




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing10
.100

Amendment to the
    7.5% Convertible Debentures dated as of July 25, 2005
    among the Registrant, Mainfield Enterprises Inc. and Heimdall
    Investments, Ltd.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed on July 29, 2005.10
.101

Limited Waiver and Amendment to
    Loan Documents dated July 25, 2005 between the Registrant
    and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 99.2 to the Registrants Current Report on
    Form 8-K
    filed on July 29, 2005.10
.102

Limited Waiver and Amendment to
    Loan Documents (Exim Program) dated July 25, 2005 between
    the Registrant and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 99.3 to the Registrants Current Report on
    Form 8-K
    filed on July 29, 2005.10
.103

Security Agreement entered into on
    July 1, 2005, between the Registrant and Digital Insurance,
    Inc.

Incorporated by reference to
    Exhibit 99.3 to the Registrants Current Report on
    Form 8-K
    filed July 8, 2005.10
.104

Amendment to the
    7.5% Convertible Debentures dated as of July 25, 2005
    among the Registrant, Mainfield Enterprises Inc. and Heimdall
    Investments, Ltd.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed July 29, 2005.10
.105

Limited Waiver and Amendment to
    Loan Documents dated July 25, 2005 between the Registrant
    and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 99.2 to the Registrants Current Report on
    Form 8-K
    filed July 29, 2005.10
.106

Limited Waiver and Amendment to
    Loan Documents (Exim Program) dated July 25, 2005 between
    the Registrant and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 99.3 to the Registrants Current Report on
    Form 8-K
    filed July 29, 2005.10
.107

Separation Agreement between the
    Registrant and Lewis Jaffe entered into on August 16, 2005.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed August 22, 2005.10
.108

Verso Technologies, Inc. 1999
    Stock Incentive Plan, as amended September 22, 2005.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed September 28, 2005.10
.109

Amendment #1 to Secured
    Convertible Promissory Note among the Registrant, CITEL
    Technologies Limited and CITEL Technologies, Inc. entered into
    on September 23, 2005.

Incorporated by reference to
    Exhibit 99.2 to the Registrants Current Report on
    Form 8-K
    filed September 28, 2005.10
.110

Subordination Agreement dated as
    of September 23, 2005, between the Registrant and Bridge
    Bank, National Association.

Incorporated by reference to
    Exhibit 99.3 to the Registrants Current Report on
    Form 8-K
    filed September 28, 2005.10
.111

Executive Employment Agreement
    executed on October 24, 2005, but effective as of
    October 1, 2005 between the Registrant and Montgomery
    Bannerman. (Represents an executive compensatory plan or
    arrangement.)

Incorporated by reference to
    Exhibit 99.2 to the Registrants Amendment No. 1
    to Current Report on
    Form 8-K
    filed October 27, 2005.10
.112

Amended and Restated Executive
    Employment Agreement executed on October 24, 2005, but
    effective as of October 1, 2005 between the Registrant and
    Steven A. Odom. (Represents an executive compensatory plan or
    arrangement.)

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed October 27, 2005.10
.113

Amended and Restated Executive
    Employment Agreement executed on October 24, 2005, but
    effective as of October 1, 2005 between the Registrant and
    Juliet M. Reising. (Represents an executive compensatory plan or
    arrangement.)

Incorporated by reference to
    Exhibit 99.2 to the Registrants Current Report on
    Form 8-K
    filed October 27, 2005. E-17




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing10
.114

Amended and Restated Promissory
    Note made by the Registrant, Provo Prepaid (Delaware) Corp.,
    Telemate.Net Software, Inc. and Needham (Delaware) Corp. dated
    March 24, 2006.

Incorporated by reference to
    Exhibit 10.113 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2005.10
.115

Export-Import Bank of the United
    States Working Capital Guarantee Program Borrower Agreement
    dated as of March 24, 2006 among the Registrant, Provo
    Prepaid (Delaware) Corp., Telemate.Net Software, Inc. Needham
    (Delaware) Corp. and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 10.114 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2005.10
.116

Amendment to Loan Documents dated
    January 27, 2006 among the Registrant, Provo Prepaid
    (Delaware) Corp., Telemate.Net Software, Inc. Needham (Delaware)
    Corp. and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 10.115 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2005.10
.117

Amendment to Loan Documents (EXIM
    Program) dated as of March 24, 2006 among the Registrant,
    Provo Prepaid (Delaware) Corp., Telemate.Net Software, Inc.
    Needham (Delaware) Corp. and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 10.116 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2005.10
.118

Amendment to Loan Documents dated
    as of March 24, 2006 among the Registrant, Provo Prepaid
    (Delaware) Corp., Telemate.Net Software, Inc. Needham (Delaware)
    Corp. and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 10.117 to the Registrants Annual Report on
    Form 10-K
    for the year ended December 31, 2005.10
.119

Agreement of Software Development
    dated as of May 10, 2006, between the Registrant and
    Elitecore Technologies Limited.

Incorporated by reference to
    Exhibit 10.1 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006.10
.120

Amendment to Loan Documents dated
    as of June 27, 2006 among the Registrant, certain of its
    subsidiaries and Silicon Valley Bank.

Incorporated by reference to
    Exhibit 10.2 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006.10
.121

Contract entered into on
    July 17, 2006, among the Registrant, Verso Verilink, LLC
    and CM Solutions, Inc.

Incorporated by reference to
    Exhibit 10.3 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006.10
.122

Manufacturing Agreement dated as
    of July 12, 2006 between the Registrant and CM Solutions
    Corporation.

Incorporated by reference to
    Exhibit 10.4 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006.10
.123

Amendment to Note dated as of
    June 30, 2006 among the Registrant, CITEL Technologies,
    Inc. and CITEL Technologies Limited.

Incorporated by reference to
    Exhibit 10.5 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006.10
.124

Agreement dated as of
    June 19, 2003 between Telesector Resources Group, Inc.,
    d/b/a Verizon Services Group and XEL Communications, Inc., which
    amendment has been assumed by Verso Verilink, LLC.

Incorporated by reference to
    Exhibit 10.6 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006.10
.125

Amendment No. 1 to Agreement
    dated as of August 25, 2003 between Telesector Resources
    Group, Inc., d/b/a Verizon Services Group and XEL
    Communications, Inc., which amendment has been assumed by Verso
    Verilink, LLC.

Incorporated by reference to
    Exhibit 10.7 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006. E-18




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing10
.126

Amendment No. 2 to Product
    Purchase Agreement dated as of December 12, 2003 between
    Telesector Resources Group, Inc., d/b/a Verizon Services Group
    and XEL Communications, Inc., which amendment has been assumed
    by Verso Verilink, Inc.

Incorporated by reference to
    Exhibit 10.8 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006.10
.127

Amendment No. 3 to Product
    Purchase Agreement dated as of February 18, 2004 between
    Telesector Resources Group, Inc., d/b/a Verizon Services Group
    and XEL Communications, Inc., which amendment has been assumed
    by Verso Verilink, Inc.

Incorporated by reference to
    Exhibit 10.9 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006.10
.128

Amendment No. 4 to Contract
    No. C0302362 dated as of November 10, 2004 between
    Telesector Resources Group, Inc., d/b/a Verizon Services Group,
    and Verilink Corporation, which amendment has been assumed by
    Verso Verilink, Inc.

Incorporated by reference to
    Exhibit 10.10 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006.10
.129

Amendment No. 5 to Product
    Purchase Agreement dated as of March 5, 2005 between
    Telesector Resources Group, Inc., d/b/a Verizon Services Group
    and Verilink Corporation, which amendment has been assumed by
    Verso Verilink, Inc.

Incorporated by reference to
    Exhibit 10.11 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006.10
.130

Amendment No. 6 to Product
    Purchase Agreement dated as of July 27, 2006, between Verso
    Verilink, LLC and Verizon Services Corp.

Incorporated by reference to
    Exhibit 10.12 to the Registrants Quarterly Report on
    Form 10-Q
    for the quarter ended June 30, 2006.10
.131

Amendment No. 2 to Product
    Purchase Agreement dated as of December 12, 2003 between
    Telesector Resources Group, Inc., d/b/a Verizon Services Group
    and XEL Communications, Inc., which amendment has been assumed
    by Verso Verilink, Inc. (Portions of this Exhibit 10.8 have
    been omitted pursuant to a request for confidential treatment
    filed with the Securities and Exchange Commission.)

Incorporated by reference to
    Exhibit 10.8 to the Registrants Quarterly Report on
    Form 10-Q/A
    for the quarter ended June 30, 2006.10
.132

Amendment No. 5 to Product
    Purchase Agreement dated as of March 5, 2005 between
    Telesector Resources Group, Inc., d/b/a Verizon Services Group
    and Verilink Corporation, which amendment has been assumed by
    Verso Verilink, Inc. (Portions of this Exhibit 10.11 have
    been omitted pursuant to a request for confidential treatment
    filed with the Securities and Exchange Commission.)

Incorporated by reference to
    Exhibit 10.11 to the Registrants Quarterly Report on
    Form 10-Q/A
    for the quarter ended June 30, 2006.10
.133

Security Agreement between the
    Registrant, certain of its subsidiaries and Laurus Master Fund
    dated September 20, 2006.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Registration
    Statement on
    Form S-3
    filed on November 11, 2006 (No.
    333-138429).10
.134

Intellectual Property Security
    Agreement between the Registrant, certain of its subsidiaries
    and Laurus Master Fund, Ltd. dated September 20, 2006.

Incorporated by reference to
    Exhibit 99.2 to the Registrants Registration
    Statement on
    Form S-3
    filed on November 11, 2006 (No.
    333-138429).10
.135

Stock Pledge Agreement between the
    Registrant, certain of its subsidiaries and Laurus Master Fund,
    Ltd. dated September 20, 2006.

Incorporated by reference to
    Exhibit 99.3 to the Registrants Registration
    Statement on
    Form S-3
    filed on November 11, 2006 (No.
    333-138429). E-19




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing10
.136

Hypothecation of Movables between
    the Registrant, and Laurus Master Fund, Ltd. dated
    September 20, 2006.

Incorporated by reference to
    Exhibit 99.4 to the Registrants Registration
    Statement on
    Form S-3
    filed on November 11, 2006 (No.
    333-138429).10
.137

Letter Agreement between the
    Registrant and Laurus Master Fund, Ltd. dated September 20,
    2006.

Incorporated by reference to
    Exhibit 99.5 to the Registrants Registration
    Statement on
    Form S-3
    filed on November 11, 2006 (No.
    333-138429).10
.138

Verso Technologies, Inc. 1999
    Stock Incentive Plan, as amended November 7, 2006.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed November 13, 2006.10
.139

Consulting and Separation
    Agreement between the Registrant and Juliet M. Reising dated
    October 13, 2006.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed October 18, 2006.10
.140

Agreement between the Registrant
    and Martin D. Kidder dated October 5, 2006.

Incorporated by reference to
    Exhibit 99.2 to the Registrants Current Report on
    Form 8-K
    filed October 18, 2006.10
.141

Asset Purchase Agreement, dated as
    of December 29, 2006, among the Registrant, Paradyne
    Networks, Inc., and, for certain limited purposes, Zhone
    Technologies, Inc.

Incorporated by reference to
    Exhibit 2.1 to the Registrants Current Report on
    Form 8-K
    filed January 8, 2007.10
.142

Common Stock Purchase Warrant to
    purchase 150,000 shares of the Registrants common
    stock issued to Laurus Master Fund, Ltd., dated
    December 29, 2006.

Incorporated by reference to
    Exhibit 4.1 to the Registrants Current Report on
    Form 8-K
    filed January 8, 2007.10
.143

Common Stock Purchase Warrant to
    purchase 330,470 shares of the Registrants common
    stock issued to Laurus Master Fund, Ltd., dated
    December 29, 2006.

Incorporated by reference to
    Exhibit 4.2 to the Registrants Current Report on
    Form 8-K
    filed January 8, 2007.10
.144

License Agreement, dated as of
    December 29, 2006, between the Registrant and Paradyne
    Networks, Inc.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed January 8, 2007.10
.145

Adaptation of Reseller Agreement,
    dated as of December 29, 2006, between the Registrant and
    Paradyne Networks, Inc.

Incorporated by reference to
    Exhibit 99.2 to the Registrants Current Report on
    Form 8-K
    filed January 8, 2007.10
.146

Amendment No. 1 to Asset
    Purchase Agreement, dated as of January 25, 2007, among the
    Registrant, Paradyne Networks, Inc. and Zhone Technologies, Inc.

Incorporated by reference to
    Exhibit 2.1 to the Registrants Current Report on
    Form 8-K
    filed January 31, 2007.10
.147

Securities Purchase Agreement
    dated as of January 30, 2007 among the Registrant and the
    purchasers signatory thereto.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed January 31, 2007.10
.148

Securities Purchase Agreement
    dated as of February 2, 2007 among the Registrant and the
    purchasers signatory thereto.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed February 6, 2007.10
.149

Securities Purchase Agreement
    dated as of February 5, 2007 among the Registrant and the
    purchasers signatory thereto.

Incorporated by reference to
    Exhibit 99.3 to the Registrants Current Report on
    Form 8-K
    filed February 6, 2007.10
.150

Amendment No. 2 to Asset
    Purchase Agreement, dated as of February 7, 2007, among the
    Registrant, Paradyne Networks, Inc. and Zhone Technologies, Inc.

Incorporated by reference to
    Exhibit 2.1 to the Registrants Current Report on
    Form 8-K
    filed February 12, 2007. E-20




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##### Table of Contents



Exhibit No.

Exhibit

Method of Filing10
.151

Securities Purchase Agreement
    dated as of February 9, 2007 among the Registrant and the
    purchaser signatory thereto.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed February 12, 2007.10
.152

Security Agreement between the
    Registrant, certain of its subsidiaries and Laurus Master Fund
    Ltd. dated September 20, 2006.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Registration
    Statement on
    Form S-3
    (No.
    333-138429).10
.153

Intellectual Property Security
    Agreement between the Registrant, certain of its subsidiaries
    and Laurus Master Fund, Ltd. dated September 20, 2006.

Incorporated by reference to
    Exhibit 99.2 to the Registrants Registration
    Statement on
    Form S-3
    (No.
    333-138429).10
.154

Stock Pledge Agreement between the
    Registrant, certain of its subsidiaries and Laurus Master Fund,
    Ltd. dated September 20, 2006.

Incorporated by reference to
    Exhibit 99.3 to the Registrants Registration
    Statement on
    Form S-3
    (No.
    333-138429).10
.155

Hypothecation of Movables between
    the Registrant and Laurus Master Fund, Ltd. dated
    September 20, 2006.

Incorporated by reference to
    Exhibit 99.4 to the Registrants Registration
    Statement on
    Form S-3
    (No.
    333-138429).10
.156

Letter Agreement between the
    Registrant and Laurus Master Fund, Ltd. dated September 20,
    2006.

Incorporated by reference to
    Exhibit 99.5 to the Registrants Registration
    Statement on
    Form S-3
    (No.
    333-138429).10
.157

Form of Sellers
    Non-Competition Agreement entered into in connection with the
    Registrants acquisition of the assets of WSECI, Inc.

Incorporated by reference to
    Exhibit 99.1 to the Registrants Current Report on
    Form 8-K
    filed March 1, 2005.10
.158

Intellectual Property Assignment
    dated as of March 26, 2007, among the Registrant, Paradyne
    Networks, Inc. and Paradyne Corporation.

Filed herewith.10
.159

Exclusive License Agreement dated
    as of March 23, 2007, between the Registrant and Arcadia
    Patent Acquisition Corporation.

Filed herewith.16
.1

Letter from Grant Thornton LLP
    dated April 16, 2006.

Incorporated by reference to
    Exhibit 16.1 to the Registrants Current Report on
    Form 8-K
    filed April 14, 2006.16
.2

Letter from Grant Thornton LLP
    dated June 16, 2006.

Incorporated by reference to
    Exhibit 16.1 to the Registrants Current Report on
    Form 8-K
    filed June 16, 2006.21
.1

Subsidiaries of the Registrant.

Filed herewith.23
.1

Consent of Tauber &
    Balser, P.C.

Filed herewith.23
.2

Consent of Grant Thornton LLP

Filed herewith.31
.1

Rule 13a-14(a)/15d-14(a)
    Certification by the Registrants Chief Executive Officer.

Filed herewith.31
.2

Rule 13a-14(a)/15d-14(a)
    Certification by the Registrants Chief Financial Officer.

Filed herewith.32
.1

Section 1350 Certification by
    the Registrants Chief Executive Officer.

Filed herewith.32
.2

Section 1350 Certification by
    the Registrants Chief Financial Officer.

Filed herewith.  E-21