##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 1-12014
 METRETEK TECHNOLOGIES, INC.
  Delaware
    
    84-1169358(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)1609 Heritage Commerce CourtWake Forest, North Carolina
    
    27587(Address of principal executive offices)
    
    (Zip code)
 
 th
 þ o
  o þ o
 o þ




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##### 



METRETEK TECHNOLOGIES, INC.
 FORM 10-Q
For the Quarterly Period Ended June 30, 2007
 TABLE OF CONTENTS
 PagePART I.
    
    FINANCIAL INFORMATIONItem 1.
    
    Financial StatementsUnaudited Consolidated Balance Sheets -
June 30, 2007 and December 31, 2006
    
    
    3Unaudited Consolidated Statements of Operations -
For the Three and Six Months Ended June 30, 2007 and
June 30, 2006
    
    
    5Unaudited Consolidated Statements of Cash Flows -
For the Six Months Ended June 30, 2007 and
June 30, 2006
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    20Item 3.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    43Item 4.
    
    Controls and Procedures
    
    
    43PART II.
    
    OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    
    45Item 1A.
    
    Risk Factors
    
    
    45Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    45Item 6.
    
    Exhibits
    
    
    46Signatures
    
    
    
    
    47EX-31.1EX-31.2EX-32.1EX-32.2
  2




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##### Table of Contents



PART I.
FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
 
 Consolidated Balance Sheets
 (unaudited)
 June 30,
    
    
    December 31,2007
    
    
    2006ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    6,824,247
    
    
    $
    15,916,460Trade receivables, net of allowance for doubtful accounts
of $195,672 and $225,004, respectively
    
    
    39,942,963
    
    
    
    40,255,372Other receivables
    
    
    189,762
    
    
    
    431,437Inventories
    
    
    14,703,034
    
    
    
    12,882,167Deferred income taxes
    
    
    231,990
    
    
    
    231,990Prepaid expenses and other current assets
    
    
    663,349
    
    
    
    818,583Total current assets
    
    
    62,555,345
    
    
    
    70,536,009PROPERTY, PLANT AND EQUIPMENT:Equipment
    
    
    6,839,709
    
    
    
    6,524,549Vehicles
    
    
    173,408
    
    
    
    166,894Furniture and fixtures
    
    
    540,942
    
    
    
    568,212Land, building and improvements
    
    
    1,101,931
    
    
    
    1,073,625Total property, plant and equipment, at cost
    
    
    8,655,990
    
    
    
    8,333,280Less accumulated depreciation and amortization
    
    
    4,116,756
    
    
    
    3,889,401Property, plant and equipment, net
    
    
    4,539,234
    
    
    
    4,443,879OTHER ASSETS:Goodwill
    
    
    9,146,409
    
    
    
    9,146,409Intangible rights and capitalized software costs, net of accumulated
amortization of $1,829,833 and $1,543,024, respectively
    
    
    1,722,287
    
    
    
    1,763,970Investment in unconsolidated affiliate
    
    
    3,390,292
    
    
    
    3,513,501Assets of discontinued operations
    
    
    
    
    
    
    144,490Other assets
    
    
    162,667
    
    
    
    151,177Total other assets
    
    
    14,421,655
    
    
    
    14,719,547TOTAL
    
    $
    81,516,234
    
    
    $
    89,699,435
 See accompanying notes to unaudited consolidated financial statements.
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##### Table of Contents



METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited)
 June 30,
    
    
    December 31,2007
    
    
    2006LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    4,808,982
    
    
    $
    15,090,540Accrued and other liabilities
    
    
    18,699,260
    
    
    
    16,026,867Restructuring charges payable
    
    
    7,950,213
    
    
    
    Current income taxes payable
    
    
    230,544
    
    
    
    570,217Current unrecognized tax benefit
    
    
    62,406
    
    
    
    Capital lease obligations
    
    
    2,442
    
    
    
    4,749Total current liabilities
    
    
    31,753,847
    
    
    
    31,692,373LONG-TERM NOTES PAYABLE
    
    
    
    
    
    
    NON-CURRENT CAPITAL LEASE OBLIGATIONS
    
    
    6,035
    
    
    
    7,431NON-CURRENT UNRECOGNIZED TAX BENEFIT
    
    
    285,117
    
    
    
    NON-CURRENT RESTRUCTURING CHARGES
    
    
    2,571,677
    
    
    
    COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS EQUITY:Preferred stock  undesignated, $.01 par value; 2,000,000 shares
authorized; none issued and outstandingPreferred stock  Series C, $.01 par value; 500,000 shares
authorized; none issued and outstandingCommon stock, $.01 par value; 25,000,000 shares
authorized; 16,004,107 and 15,808,634 shares issued
and outstanding, respectively
    
    
    160,041
    
    
    
    158,086Additional paid-in-capital
    
    
    103,154,886
    
    
    
    102,287,543Accumulated deficit
    
    
    (56,415,369
    )
    
    
    (44,445,998
    )Total stockholders equity
    
    
    46,899,558
    
    
    
    57,999,631TOTAL
    
    $
    81,516,234
    
    
    $
    89,699,435
 See accompanying notes to unaudited consolidated financial statements.
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METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Operations
 (unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006REVENUES:Sales and services
    
    $
    23,833,351
    
    
    $
    35,905,938
    
    
    $
    50,202,095
    
    
    $
    50,642,812Other
    
    
    232,459
    
    
    
    337,473
    
    
    
    842,944
    
    
    
    432,928Total revenues
    
    
    24,065,810
    
    
    
    36,243,411
    
    
    
    51,045,039
    
    
    
    51,075,740COSTS AND EXPENSES:Cost of sales and services
    
    
    17,477,336
    
    
    
    26,393,531
    
    
    
    35,894,569
    
    
    
    36,524,893General and administrative
    
    
    4,985,099
    
    
    
    4,502,431
    
    
    
    10,509,178
    
    
    
    7,937,780Selling, marketing and service
    
    
    1,010,352
    
    
    
    1,172,870
    
    
    
    1,874,635
    
    
    
    1,931,931Depreciation and amortization
    
    
    374,109
    
    
    
    203,898
    
    
    
    717,033
    
    
    
    376,304Research and development
    
    
    288,571
    
    
    
    195,058
    
    
    
    499,362
    
    
    
    372,684Restructuring charges
    
    
    14,139,216
    
    
    
    
    
    
    
    14,139,216
    
    
    
    Interest, finance charges and other
    
    
    8,436
    
    
    
    46,336
    
    
    
    15,756
    
    
    
    134,711Total costs and expenses
    
    
    38,283,119
    
    
    
    32,514,124
    
    
    
    63,649,749
    
    
    
    47,278,303Income (loss) from continuing operations
before minority interest, income taxes,
equity income and litigation settlements
    
    
    (14,217,309
    )
    
    
    3,729,287
    
    
    
    (12,604,710
    )
    
    
    3,797,437Equity in income of unconsolidated affiliate
    
    
    672,735
    
    
    
    520,974
    
    
    
    1,321,295
    
    
    
    1,251,442Income from litigation settlements, net
    
    
    
    
    
    
    
    
    
    
    278,334
    
    
    
    Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (72,464
    )Income taxes
    
    
    (170,140
    )
    
    
    (22,999
    )
    
    
    (476,277
    )
    
    
    (111,514
    )Income (loss) from continuing operations
    
    
    (13,714,714
    )
    
    
    4,227,262
    
    
    
    (11,481,358
    )
    
    
    4,864,901Loss from disposal of discontinued
operations
    
    
    (140,490
    )
    
    
    
    
    
    
    (140,490
    )
    
    
    Net income (loss)
    
    $
    (13,855,204
    )
    
    $
    4,227,262
    
    
    $
    (11,621,848
    )
    
    $
    4,864,901PER SHARE AMOUNTS (Note 1):Income (loss) from continuing operations:Basic
    
    $
    (0.86
    )
    
    $
    0.27
    
    
    $
    (0.72
    )
    
    $
    0.34Diluted
    
    $
    (0.86
    )
    
    $
    0.25
    
    
    $
    (0.72
    )
    
    $
    0.30Net income (loss):Basic
    
    $
    (0.87
    )
    
    $
    0.27
    
    
    $
    (0.73
    )
    
    $
    0.34Diluted
    
    $
    (0.87
    )
    
    $
    0.25
    
    
    $
    (0.73
    )
    
    $
    0.30WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:Basic
    
    
    15,935,336
    
    
    
    15,513,274
    
    
    
    15,883,210
    
    
    
    14,354,964Diluted
    
    
    15,935,336
    
    
    
    17,071,389
    
    
    
    15,883,210
    
    
    
    16,065,350
 See accompanying notes to unaudited consolidated financial statements.
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METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 (unaudited)
 Six Months EndedJune 30,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    (11,621,848
    )
    
    $
    4,864,901Adjustments to reconcile net income (loss) to net cash
used in operating activities:Loss on disposal of discontinued operations
    
    
    140,490
    
    
    
    Restructuring charges
    
    
    14,139,216
    
    
    
    Depreciation and amortization
    
    
    717,033
    
    
    
    376,304Minority interest in subsidiary
    
    
    
    
    
    
    72,464Loss on disposal of property, plant and equipment
    
    
    72,999
    
    
    
    4,759Equity in income of unconsolidated affiliate
    
    
    (1,321,295
    )
    
    
    (1,251,442
    )Distributions from unconsolidated affiliate
    
    
    1,414,254
    
    
    
    361,302Stock compensation expense
    
    
    467,976
    
    
    
    373,628Changes in other assets and liabilities:Trade receivables, net
    
    
    312,409
    
    
    
    (19,597,931
    )Inventories
    
    
    (1,820,867
    )
    
    
    (4,858,071
    )Other current assets
    
    
    398,909
    
    
    
    (15,073
    )Other noncurrent assets
    
    
    (11,490
    )
    
    
    (123,617
    )Accounts payable
    
    
    (10,281,558
    )
    
    
    12,205,669Accrued restructuring charges
    
    
    (3,618,695
    )
    
    
    Income taxes payable
    
    
    (339,673
    )
    
    
    Accrued and other liabilities
    
    
    2,892,579
    
    
    
    4,327,940Net cash used in continuing operations
    
    
    (8,459,561
    )
    
    
    (3,259,167
    )Net cash provided by discontinued operations of MCM
    
    
    2,000
    
    
    
    40,372Net cash used in operating activities
    
    
    (8,457,561
    )
    
    
    (3,218,795
    )CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property, plant and equipment
    
    
    (557,421
    )
    
    
    (826,986
    )Additions to patents and software development
    
    
    (254,664
    )
    
    
    (75,562
    )Investment in unconsolidated affiliate
    
    
    
    
    
    
    (1,246,359
    )Proceeds from sale of property, plant and equipment
    
    
    
    
    
    
    16,375Net cash used in investing activities
    
    
    (812,085
    )
    
    
    (2,132,532
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from private placement, net
    
    
    
    
    
    
    26,223,364Proceeds from stock warrant and option exercises
    
    
    401,322
    
    
    
    2,688,144Net borrowings (payments) on line of credit
    
    
    
    
    
    
    (1,314,200
    )Principal payments on long-term notes payable
    
    
    
    
    
    
    (3,375,494
    )Cash distributions to minority interests
    
    
    
    
    
    
    (381
    )Payments on preferred stock redemptions
    
    
    (220,186
    )
    
    
    (74,863
    )Payments on capital lease obligations
    
    
    (3,703
    )
    
    
    (1,888
    )Net cash provided by financing activities
    
    
    177,433
    
    
    
    24,144,682NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (9,092,213
    )
    
    
    18,793,355CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD
    
    
    15,916,460
    
    
    
    2,188,310CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    6,824,247
    
    
    $
    20,981,665
 See accompanying notes to unaudited consolidated financial statements.
 6




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METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
 
 Notes to Unaudited Consolidated Financial Statements
   1. Summary of Significant Accounting Policies
 Organization
   Basic and Diluted Earnings (Loss) Per Share 
 7




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Income (loss) from continuing operations
    
    $
    (13,714,714
    )
    
    $
    4,227,262
    
    
    $
    (11,481,358
    )
    
    $
    4,864,901Loss from discontinued operations
    
    
    (140,490
    )
    
    
    
    
    
    
    (140,490
    )
    
    
    Net income (loss)
    
    $
    (13,855,204
    )
    
    $
    4,227,262
    
    
    $
    (11,621,848
    )
    
    $
    4,864,901Basic weighted-average common
shares outstanding in period
    
    
    15,935,336
    
    
    
    15,513,274
    
    
    
    15,883,210
    
    
    
    14,354,964Add dilutive effects of stock options
and warrants
    
    
    
    
    
    
    1,558,115
    
    
    
    
    
    
    
    1,710,386Diluted weighted-average common
shares outstanding in period
    
    
    15,935,336
    
    
    
    17,071,389
    
    
    
    15,883,210
    
    
    
    16,065,350Basic earnings (loss) per common share:Income from continuing operations
    
    $
    (0.86
    )
    
    $
    0.27
    
    
    $
    (0.72
    )
    
    $
    0.34Loss from discontinued operations
    
    
    (0.01
    )
    
    
    
    
    
    
    (0.01
    )
    
    
    Basic earnings per common share
    
    $
    (0.87
    )
    
    $
    0.27
    
    
    $
    (0.73
    )
    
    $
    0.34Diluted earnings (loss) per common share:Income from continuing operations
    
    $
    (0.86
    )
    
    $
    0.25
    
    
    $
    (0.72
    )
    
    $
    0.30Loss from discontinued operations
    
    
    (0.01
    )
    
    
    
    
    
    
    (0.01
    )
    
    
    Diluted earnings per common share
    
    $
    (0.87
    )
    
    $
    0.25
    
    
    $
    (0.73
    )
    
    $
    0.30
 Statement of Cash Flows 
 Minority Interest
 Financial Instruments
 8




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Fair Value Measurements
 Reclassification
 2. Investment in Unconsolidated Affiliate
   June 30,
    
    
    December 31,2007
    
    
    2006Total current assets
    
    $
    2,480,480
    
    
    $
    2,816,175Property, plant and equipment, net
    
    
    5,565,689
    
    
    
    5,828,718Total other assets
    
    
    9,166
    
    
    
    9,833Total assets
    
    $
    8,055,335
    
    
    $
    8,654,726Total current liabilities
    
    $
    1,036,258
    
    
    $
    1,081,382Long-term note payable
    
    
    43,223
    
    
    
    341,142Total shareholders equity
    
    
    6,975,854
    
    
    
    7,232,202Total liabilities and shareholders equity
    
    $
    8,055,335
    
    
    $
    8,654,726
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Total revenues
    
    $
    3,157,694
    
    
    $
    2,560,603
    
    
    $
    6,303,143
    
    
    $
    5,490,776Total costs and expenses
    
    
    1,302,534
    
    
    
    1,118,669
    
    
    
    2,659,491
    
    
    
    2,236,809Net income
    
    $
    1,855,160
    
    
    $
    1,441,934
    
    
    $
    3,643,652
    
    
    $
    3,253,967
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3. Restructuring Charges
     10




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11




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4. Discontinued Operations
  5. Income Taxes
  6. Share-Based Compensation
   12




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WeightedAverageWeighted
    
    
    Remaining
    
    
    AggregateAverage
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    Term (years)
    
    
    ValueBalance, December 31, 2006
    
    
    2,085,344
    
    
    $
    4.61Granted
    
    
    22,500
    
    
    
    13.02Exercised
    
    
    (200,066
    )
    
    
    2.25Canceled
    
    
    
    
    
    
    Forfeited
    
    
    (2,500
    )
    
    
    3.06Balance, June 30, 2007
    
    
    1,905,278
    
    
    $
    4.96
    
    
    
    6.31
    
    
    $
    10.48Exercisable, June 30, 2007
    
    
    1,496,278
    
    
    $
    3.65
    
    
    
    5.74
    
    
    $
    11.79
  13




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WeightedAverageWeighted
    
    
    Remaining
    
    
    AggregateAverage
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    Term (years)
    
    
    ValueBalance, December 31, 2005
    
    
    2,289,143
    
    
    $
    2.98Granted
    
    
    268,500
    
    
    
    12.93Exercised
    
    
    (412,419
    )
    
    
    2.21Canceled
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Balance, June 30, 2006
    
    
    2,145,224
    
    
    $
    4.37
    
    
    
    6.96
    
    
    $
    15.69Exercisable, June 30, 2006
    
    
    1,560,891
    
    
    $
    3.06
    
    
    
    6.13
    
    
    $
    18.08
  June 30,
    
    June 30,2007
    
    2006Expected stock price volatilility
    
    
    75.7
    %
    
    
    88.0
    %Risk Free interest rate
    
    
    5.09
    %
    
    
    4.65
    %Annual dividends
    
    $
    
    
    
    $
    Expected life  employees
    
    na
    
    4 yearsExpected life  directors
    
    5 years
    
    6 years
     14




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7. Commitments and Contingencies and Income from Litigation Settlements
 Income from Litigation Settlements
    Other Matters 
 15




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Preferred Stock Redemption 
 8. Segment Information
  Natural Gas Measurement Services
 Distributed Generation
 16




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Automated Energy Data Collection and Telemetry TM
  17




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18




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Summarized Segment Financial Information(all amounts reported in thousands)Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Revenues:Southern Flow
    
    $
    3,978
    
    
    $
    3,974
    
    
    $
    7,878
    
    
    $
    8,314PowerSecure
    
    
    18,614
    
    
    
    31,080
    
    
    
    40,129
    
    
    
    40,744Metretek Florida
    
    
    1,242
    
    
    
    851
    
    
    
    2,195
    
    
    
    1,585Other
    
    
    232
    
    
    
    338
    
    
    
    843
    
    
    
    433Total
    
    $
    24,066
    
    
    $
    36,243
    
    
    $
    51,045
    
    
    $
    51,076Segment profit (loss):Southern Flow
    
    $
    721
    
    
    $
    805
    
    
    $
    1,361
    
    
    $
    1,485PowerSecure
    
    
    (517
    )
    
    
    3,540
    
    
    
    773
    
    
    
    3,796Metretek Florida
    
    
    142
    
    
    
    (85
    )
    
    
    193
    
    
    
    (129
    )Other
    
    
    (14,563
    )
    
    
    (531
    )
    
    
    (14,932
    )
    
    
    (1,355
    )Total
    
    $
    (14,217
    )
    
    $
    3,729
    
    
    $
    (12,605
    )
    
    $
    3,797Capital expenditures:Southern Flow
    
    $
    40
    
    
    $
    13
    
    
    $
    207
    
    
    $
    46PowerSecure
    
    
    215
    
    
    
    460
    
    
    
    551
    
    
    
    828Metretek Florida
    
    
    35
    
    
    
    
    
    
    
    54
    
    
    
    1Other
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    28Total
    
    $
    290
    
    
    $
    475
    
    
    $
    812
    
    
    $
    903Depreciation and amortization:Southern Flow
    
    $
    35
    
    
    $
    30
    
    
    $
    67
    
    
    $
    60PowerSecure
    
    
    313
    
    
    
    125
    
    
    
    595
    
    
    
    217Metretek Florida
    
    
    9
    
    
    
    30
    
    
    
    19
    
    
    
    61Other
    
    
    17
    
    
    
    19
    
    
    
    36
    
    
    
    38Total
    
    $
    374
    
    
    $
    204
    
    
    $
    717
    
    
    $
    376
 June 30,2007
    
    
    2006Total assets:Southern Flow
    
    $
    11,804
    
    
    $
    10,828PowerSecure
    
    
    57,367
    
    
    
    41,395Metretek Florida
    
    
    4,705
    
    
    
    3,870Other
    
    
    7,640
    
    
    
    22,821Total
    
    $
    81,516
    
    
    $
    78,914
 19




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
 Introduction
  Overview
  
    
    PowerSecure, which designs, sells and manages distributed generation systems;
    
    Southern Flow, which provides natural gas measurement services; and
    
    Metretek Florida, which designs, manufactures and sells data collection and energy
measurement monitoring systems.
    20




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21




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
    
    Delays in scheduled work due to a slow permitting process in Florida. The process for
obtaining permits in certain jurisdictions in Florida has been slower than anticipated
resulting in unexpected delays in the completion schedule of projects in those
jurisdictions.
    
    PowerSecure recognizes revenues based on the percentage of completion methodology. The
project phases that were completed during the second quarter 2007 on new projects
(primarily design work) do not have a high percentage of the revenues associated with
those phases.
     22




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Critical Accounting Policies
  23




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Results of Operations
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006(all amounts reported in thousands)Revenues:Southern Flow
    
    $
    3,978
    
    
    $
    3,974
    
    
    $
    7,878
    
    
    $
    8,314PowerSecure
    
    
    18,614
    
    
    
    31,080
    
    
    
    40,129
    
    
    
    40,744Metretek Florida
    
    
    1,242
    
    
    
    851
    
    
    
    2,195
    
    
    
    1,585Other
    
    
    232
    
    
    
    338
    
    
    
    843
    
    
    
    433Total
    
    $
    24,066
    
    
    $
    36,243
    
    
    $
    51,045
    
    
    $
    51,076Gross Profit:Southern Flow
    
    $
    1,138
    
    
    $
    1,168
    
    
    $
    2,190
    
    
    $
    2,285PowerSecure
    
    
    4,478
    
    
    
    7,848
    
    
    
    10,795
    
    
    
    10,868Metretek Florida
    
    
    740
    
    
    
    496
    
    
    
    1,323
    
    
    
    965Total
    
    $
    6,356
    
    
    $
    9,512
    
    
    $
    14,308
    
    
    $
    14,118Segment Profit (Loss):Southern Flow
    
    $
    721
    
    
    $
    805
    
    
    $
    1,361
    
    
    $
    1,485PowerSecure
    
    
    (517
    )
    
    
    3,540
    
    
    
    773
    
    
    
    3,796Metretek Florida
    
    
    142
    
    
    
    (85
    )
    
    
    193
    
    
    
    (129
    )Other
    
    
    (14,563
    )
    
    
    (531
    )
    
    
    (14,932
    )
    
    
    (1,355
    )Total
    
    $
    (14,217
    )
    
    $
    3,729
    
    
    $
    (12,605
    )
    
    $
    3,797
  24




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25




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®
  Second Quarter 2007 Compared to Second Quarter 2006
 Revenues.
   26




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Costs and Expenses.
 Quarter-over-QuarterQuarter Ended June 30,
    
    
    Difference2007
    
    
    2006
    
    
    $
    
    
    %(In thousands)Costs and Expenses:Costs of Sales and ServicesSouthern Flow
    
    $
    2,839
    
    
    $
    2,806
    
    
    $
    33
    
    
    
    1
    %PowerSecure
    
    
    14,135
    
    
    
    23,232
    
    
    
    (9,097
    )
    
    
    -39
    %Metretek Florida
    
    
    503
    
    
    
    355
    
    
    
    148
    
    
    
    42
    %Total
    
    
    17,477
    
    
    
    26,393
    
    
    
    (8,916
    )
    
    
    -34
    %General and administrative
    
    
    4,985
    
    
    
    4,502
    
    
    
    483
    
    
    
    11
    %Selling, marketing and service
    
    
    1,010
    
    
    
    1,173
    
    
    
    (163
    )
    
    
    -14
    %Depreciation and amortization
    
    
    374
    
    
    
    204
    
    
    
    170
    
    
    
    83
    %Research and development
    
    
    289
    
    
    
    195
    
    
    
    94
    
    
    
    48
    %Restructuring charges
    
    
    14,139
    
    
    
    
    
    
    
    14,139
    
    
    naInterest, finance charges and other
    
    
    8
    
    
    
    46
    
    
    
    (38
    )
    
    
    -83
    %Income taxes
    
    
    170
    
    
    
    23
    
    
    
    147
    
    
    
    639
    %
   27




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28




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Equity in Income of Unconsolidated Affiliate.
 Six Month Period 2007 Compared to Six Month Period 2006
 Revenues.
  29




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Costs and Expenses.
 30




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Quarter-over-QuarterSix Months Ended June 30,
    
    
    Difference2007
    
    
    2006
    
    
    $
    
    
    %(In thousands)Costs and Expenses:Costs of Sales and ServicesSouthern Flow
    
    $
    5,688
    
    
    $
    6,029
    
    
    $
    (341
    )
    
    
    -6
    %PowerSecure
    
    
    29,334
    
    
    
    29,875
    
    
    
    (541
    )
    
    
    -2
    %Metretek Florida
    
    
    872
    
    
    
    621
    
    
    
    251
    
    
    
    40
    %Total
    
    
    35,894
    
    
    
    36,525
    
    
    
    (631
    )
    
    
    -2
    %General and administrative
    
    
    10,509
    
    
    
    7,938
    
    
    
    2,571
    
    
    
    32
    %Selling, marketing and service
    
    
    1,875
    
    
    
    1,932
    
    
    
    (57
    )
    
    
    -3
    %Depreciation and amortization
    
    
    717
    
    
    
    376
    
    
    
    341
    
    
    
    91
    %Research and development
    
    
    499
    
    
    
    373
    
    
    
    126
    
    
    
    34
    %Restructuring charges
    
    
    14,139
    
    
    
    
    
    
    
    14,139
    
    
    naInterest, finance charges and other
    
    
    16
    
    
    
    135
    
    
    
    (119
    )
    
    
    -88
    %Income taxes
    
    
    476
    
    
    
    112
    
    
    
    364
    
    
    
    325
    %
       31




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Equity in Income of Unconsolidated Affiliate.
 Income from Litigation Settlements
 32




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##### Table of Contents



Quarterly Fluctuations
  
    
    the size, timing and terms of sales and orders, including large customer
orders, such as the recent significant orders at PowerSecure, as well as the effects of
customers delaying, deferring or canceling purchase orders or making smaller purchases
than expected;
    
    the effects of severe weather conditions, such as hurricanes, on the demand
requirements of our customers;
    
    our ability to obtain adequate supplies of key components and materials for
our products on a timely and cost-effective basis;
    
    our ability to implement our business plans and strategies and the timing of
such implementation;
    
    the pace of development of our new businesses, including PowerSecures new
businesses, and the growth of their markets;
    
    the timing, pricing and market acceptance of our new products and services;
    
    changes in our pricing policies and those of our competitors;
    
    variations in the length of our product and service implementation process;
    
    changes in the mix of products and services having differing margins;
    
    changes in the mix of international and domestic revenues;
    
    the life cycles of our products and services;
    
    budgeting cycles of utilities and other major customers;
    
    general economic and political conditions;
    
    the effects of litigation, claims and other proceedings;
    
    the effects of governmental regulations and regulatory changes in our markets;
    
    economic conditions in the energy industry, especially in the natural gas and
electricity sectors including the effect of cyclical changes in energy prices;
    
    changes in the prices charged by our suppliers;
    
    our ability to make and obtain the expected benefits from acquisitions of
technology or businesses, and the costs related to such acquisitions;
    
    changes in our operating expenses; and
    
    the development and maintenance of business relationships with strategic partners.
 33




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34




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##### Table of Contents



Liquidity and Capital Resources
 Capital Requirements.
 
    
    operations;
    
    inventory;
    
    accounts receivable;
    
    research and development efforts;
    
    property and equipment acquisitions, including investments in shared savings
projects;
    
    software development;
    
    debt service requirements;
    
    severance and incentive compensation obligations under separation agreements
with our prior President and Chief Financial Officer; and
    
    business and technology acquisitions and other growth transactions.
 Cash Flow.
   35




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Restructuring Obligations.
 36




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Equipment Line of Credit
  37




---



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Working Capital Credit Facility.
    38




---



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Preferred Stock Redemption
 Contractual Obligations and Commercial Commitments.
 39




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##### Table of Contents



Payments Due by Period (1)Remainder of
    
    
    Years
    
    
    Years
    
    
    AfterTotal
    
    
    2007
    
    
    2008-2009
    
    
    2010-2011
    
    
    2011Contractual ObligationsCredit Facility (2)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Restructuring Obligations
    
    
    10,522,000
    
    
    
    4,872,000
    
    
    
    5,295,000
    
    
    
    355,000
    
    
    
    Capital Lease Obligations
    
    
    10,000
    
    
    
    2,000
    
    
    
    4,000
    
    
    
    4,000
    
    
    
    Operating Leases
    
    
    4,091,000
    
    
    
    471,000
    
    
    
    1,451,000
    
    
    
    753,000
    
    
    
    1,416,000Series B Preferred Stock
    
    
    104,000
    
    
    
    104,000
    
    
    
    
    
    
    
    
    
    
    
    Caterpillar Equipment Line (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    14,727,000
    
    
    $
    5,449,000
    
    
    $
    6,750,000
    
    
    $
    1,112,000
    
    
    $
    1,416,000
 
 (1)
    
    Does not include interest that may become due and payable on such obligations in any
future period.(2)
    
    Total repayments are based upon borrowings outstanding as of June 30, 2007, not projected
borrowings. Off-Balance Sheet Arrangements
 Liquidity.
 Recent Accounting Pronouncements
  40




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Cautionary Note Regarding Forward-Looking Statements
  41




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##### Table of Contents




    
    our prospects, including our future revenues, expenses, net income, margins,
profitability, cash flow, liquidity, financial condition and results of operations;
    
    our products and services and our markets, including market position, market share,
market demand and benefits to customers;
    
    our ability to successfully develop, operate and grow our operations and businesses;
    
    our business plans, strategies, goals and objectives;
    
    the sufficiency of our capital resources, including our cash and cash equivalents, funds
generated from operations, available borrowings under our credit arrangements and other
capital resources, to meet our future working capital, capital expenditure, debt service
and business growth needs;
    
    industry trends and customer preferences;
    
    the nature and intensity of our competition, and our ability to successfully compete in
our markets;
    
    business acquisitions, combinations, sales, alliances, ventures and other similar
business transactions and relationships;
    
    the effects on our business, financial condition and results of operations of litigation
and other claims and proceedings that arise from time to time; and
    
    future economic, business, market and regulatory conditions.
   42




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Item 3. Quantitative and Qualitative Disclosures about Market Risk
      
 Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  43




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Changes in Internal Control over Financial Reporting
  Limitations in Control Systems
  44




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PART II
OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 4. Submission of Matters to a Vote of Security Holders
  Proposal 1:
    
    To elect two directors for a three-year term and until his successor is duly
elected and qualified.
 For
    
    WithheldBasil M. Briggs
    
    
    12,245,743
    
    
    
    973,583Sidney Hinton
    
    
    13,136,743
    
    
    
    82,583
 Proposal 2:
    
    To ratify the appointment of Hein & Associates LLP as the Companys independent
registered public accounting firm for the fiscal year ending December 31, 2007.
 For
    
    Against
    
    Abstain13,118,019
    
    
    
    10,238
    
    
    
    91,069
 45




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##### Table of Contents



Item 6. Exhibits
 31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith.)31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)
or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith.)32.1
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350 and Rule 13a-14(b) or 15d-14(b) under the Securities Exchange Act of
1934, as amended, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (Filed herewith.)32.2
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350 and Rule 13a-14(b) or 15d-14(b) under the Securities Exchange Act of
1934, as amended, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (Filed herewith.)
 46




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SIGNATURES
  METRETEK TECHNOLOGIES, INC.Date: August 8, 2007
    
    By:
    
    /s/ Sidney HintonSidney HintonPresident and Chief Executive OfficerDate: August 8, 2007
    
    By:
    
    /s/ Gary Zuiderveen

Gary ZuiderveenVice President and
Chief Financial Officer
 47