##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2006
 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 0-19793
 METRETEK TECHNOLOGIES, INC.
  Delaware
(State or other jurisdiction of
incorporation or organization)
    
    84-1169358
(I.R.S. Employer
Identification No.)303 East Seventeenth Avenue, Suite 660
Denver, Colorado
(Address of principal executive offices)
    
    80203
(Zip code)
 
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
 o þ




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##### 



METRETEK TECHNOLOGIES, INC.
 FORM 10-Q
For the Quarterly Period Ended March 31, 2006
 TABLE OF CONTENTS
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial StatementsUnaudited Consolidated Balance Sheets -
March 31, 2006 and December 31, 2005
    
    
    3Unaudited Consolidated Statements of Operations -
For the Three Months Ended March 31, 2006 and
March 31, 2005
    
    
    5Unaudited Consolidated Statements of Cash Flows -
For the Three Months Ended March 31, 2006 and
March 31, 2005
    
    
    6Notes to Unaudited Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    18Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    34Item 4. Controls and Procedures
    
    
    35PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    37Item 1A. Risk Factors
    
    
    37Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    37Item 6. Exhibits
    
    
    39Signatures
    
    
    41EX-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)
 March 31,
    
    
    December 31,2006
    
    
    2005ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    876,711
    
    
    $
    2,188,310Trade receivables, net of allowance for doubtful accounts
of $97,057 and $95,144, respectively
    
    
    17,641,106
    
    
    
    12,031,539Other receivables
    
    
    237,790
    
    
    
    36,669Inventories
    
    
    6,186,025
    
    
    
    3,450,267Prepaid expenses and other current assets
    
    
    367,459
    
    
    
    527,269Total current assets
    
    
    25,309,091
    
    
    
    18,234,054PROPERTY, PLANT AND EQUIPMENT:Equipment
    
    
    5,867,946
    
    
    
    5,669,788Vehicles
    
    
    156,785
    
    
    
    132,988Furniture and fixtures
    
    
    586,651
    
    
    
    550,863Land, building and improvements
    
    
    575,653
    
    
    
    517,511Total property, plant and equipment, at cost
    
    
    7,187,035
    
    
    
    6,871,150Less accumulated depreciation and amortization
    
    
    3,703,084
    
    
    
    3,657,856Property, plant and equipment, net
    
    
    3,483,951
    
    
    
    3,213,294OTHER ASSETS:Goodwill
    
    
    8,840,148
    
    
    
    8,840,148Patents and capitalized software costs, net of accumulated
amortization of $1,326,544 and $1,280,019 respectively
    
    
    460,614
    
    
    
    479,221Investment in unconsolidated affiliate
    
    
    4,259,883
    
    
    
    2,299,218Assets of discontinued operations
    
    
    160,599
    
    
    
    192,821Other assets
    
    
    109,639
    
    
    
    60,170Total other assets
    
    
    13,830,883
    
    
    
    11,871,578TOTAL
    
    $
    42,623,925
    
    
    $
    33,318,926
 See accompanying notes to unaudited consolidated financial
statements.
 3




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##### Table of Contents



METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited)
 March 31,
    
    
    December 31,2006
    
    
    2005LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    4,862,683
    
    
    $
    3,283,898Accrued and other liabilities
    
    
    12,999,634
    
    
    
    8,786,830Notes payable
    
    
    1,255,556
    
    
    
    1,248,286Capital lease obligations
    
    
    3,993
    
    
    
    3,884Total current liabilities
    
    
    19,121,866
    
    
    
    13,322,898LONG-TERM NOTES PAYABLE
    
    
    3,960,507
    
    
    
    3,593,523NON-CURRENT CAPITAL LEASE OBLIGATIONS
    
    
    2,170
    
    
    
    3,210COMMITMENTS AND CONTINGENCIESMINORITY INTEREST IN SUBSIDIARY
    
    
    242,219
    
    
    
    169,755STOCKHOLDERS 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; 13,525,405 and 12,577,530 shares issued
and outstanding, respectively
    
    
    135,254
    
    
    
    125,775Additional paid-in-capital
    
    
    74,725,104
    
    
    
    72,321,099Deferred compensation
    
    
    (49,500
    )
    
    
    (66,000
    )Accumulated deficit
    
    
    (55,513,695
    )
    
    
    (56,151,334
    )Total stockholders equity
    
    
    19,297,163
    
    
    
    16,229,540TOTAL
    
    $
    42,623,925
    
    
    $
    33,318,926
 See accompanying notes to unaudited consolidated financial
statements.
 4




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##### Table of Contents



METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Operations
 (unaudited)
 Three Months EndedMarch 31,2006
    
    
    2005REVENUES:Sales and services
    
    $
    14,736,874
    
    
    $
    7,698,340Other
    
    
    95,455
    
    
    
    112,297Total revenues
    
    
    14,832,329
    
    
    
    7,810,637COSTS AND EXPENSES:Cost of sales and services
    
    
    10,131,362
    
    
    
    5,438,033General and administrative
    
    
    3,435,349
    
    
    
    1,816,483Selling, marketing and service
    
    
    759,061
    
    
    
    573,613Depreciation and amortization
    
    
    172,406
    
    
    
    124,441Research and development
    
    
    177,626
    
    
    
    161,804Interest, finance charges and other
    
    
    88,375
    
    
    
    147,198Total costs and expenses
    
    
    14,764,179
    
    
    
    8,261,572Income (loss) from continuing operations before
minority interest, income taxes, and equity income
    
    
    68,150
    
    
    
    (450,935
    )Equity in income of unconsolidated affiliate
    
    
    730,468
    
    
    
    557,255Minority interest
    
    
    (72,464
    )
    
    
    (71,124
    )Income taxes
    
    
    (88,515
    )
    
    
    (13,285
    )Income from continuing operations
    
    
    637,639
    
    
    
    21,911Loss from disposal of discontinued operations
    
    
    
    
    
    
    (300,000
    )Net income (loss)
    
    $
    637,639
    
    
    $
    (278,089
    )PER SHARE AMOUNTS (Note 1):Income from continuing operations:Basic
    
    $
    0.05
    
    
    $
    0.00Diluted
    
    $
    0.04
    
    
    $
    0.00Net income (loss)Basic
    
    $
    0.05
    
    
    $
    (0.02
    )Diluted
    
    $
    0.04
    
    
    $
    (0.02
    )WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING:Basic
    
    
    13,183,784
    
    
    
    12,194,720Diluted
    
    
    15,151,903
    
    
    
    12,733,632
 See accompanying notes to unaudited consolidated
financial statements.
 5




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##### Table of Contents



METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
 
 Consolidated Statements of Cash Flows
 (unaudited)
 Three Months EndedMarch 31,2006
    
    
    2005CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    637,639
    
    
    $
    (278,089
    )Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:Loss on disposal of discontinued operations
    
    
    
    
    
    
    300,000Depreciation and amortization
    
    
    172,406
    
    
    
    124,441Minority interest in subsidiary
    
    
    72,464
    
    
    
    71,124Loss on disposal of property, plant and equipment
    
    
    4,144
    
    
    
    840Equity in income of unconsolidated affiliate
    
    
    (730,468
    )
    
    
    (557,255
    )Distributions from unconsolidated affiliate
    
    
    
    
    
    
    563,289Stock compensation expense
    
    
    147,207
    
    
    
    16,500Changes in other assets and liabilities:Trade receivables, net
    
    
    (5,609,567
    )
    
    
    1,570,471Inventories
    
    
    (2,735,758
    )
    
    
    (408,405
    )Other current assets
    
    
    (41,311
    )
    
    
    40,485Other noncurrent assets
    
    
    (49,469
    )
    
    
    Accounts payable
    
    
    1,578,785
    
    
    
    (993,940
    )Accrued and other liabilities
    
    
    4,246,566
    
    
    
    (134,088
    )Net cash provided by (used in) continuing operations
    
    
    (2,307,362
    )
    
    
    315,373Net cash provided by (used in) discontinued operations
of MCM
    
    
    32,222
    
    
    
    (244,370
    )Net cash provided by (used in) operating activities
    
    
    (2,275,140
    )
    
    
    71,003CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property, plant and equipment
    
    
    (399,820
    )
    
    
    (506,103
    )Additions to patents and software development
    
    
    (27,918
    )
    
    
    Investment in unconsolidated affiliate
    
    
    (1,246,359
    )
    
    
    Proceeds from sale of property, plant and equipment
    
    
    15,300
    
    
    
    Net cash used in investing activities
    
    
    (1,658,797
    )
    
    
    (506,103
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from stock warrant and option exercises
    
    
    2,282,777
    
    
    
    105,342Net borrowings (payments) on line of credit
    
    
    685,800
    
    
    
    (641,431
    )Principal payments on long-term notes payable
    
    
    (311,546
    )
    
    
    (292,420
    )Distributions to minority interests
    
    
    
    
    
    
    (55,124
    )Payments on preferred stock redemptions
    
    
    (33,762
    )
    
    
    (297,985
    )Payments on capital lease obligations
    
    
    (931
    )
    
    
    (834
    )Net cash provided by (used in) financing activities
    
    
    2,622,338
    
    
    
    (1,182,452
    )NET DECREASE IN CASH AND CASH EQUIVALENTS
    
    
    (1,311,599
    )
    
    
    (1,617,552
    )CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD
    
    
    2,188,310
    
    
    
    2,951,489CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    876,711
    
    
    $
    1,333,937
 See accompanying notes to unaudited consolidated
financial statements.
 6




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##### Table of Contents



METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
 
 Notes to Unaudited Consolidated Financial Statements
   1. Summary of Significant Accounting Policies
 Organization
   Income (Loss) Per Share 
 7




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##### Table of Contents



Three Months Ended March 31,2006
    
    
    2005Income from continuing operations
    
    $
    637,639
    
    
    $
    21,911Loss from discontinued operations
    
    
    
    
    
    
    (300,000
    )Net income (loss)
    
    $
    637,639
    
    
    $
    (278,089
    )Basic weighted-average common
shares outstanding in period
    
    
    13,183,784
    
    
    
    12,194,720Add dilutive effects of stock options and warrants
    
    
    1,968,119
    
    
    
    538,912Diluted weighted-average common
shares outstanding in period
    
    
    15,151,903
    
    
    
    12,733,632Basic earnings (loss) per common share:Income from continuing operations
    
    $
    0.05
    
    
    $
    0.00Loss from discontinued operations
    
    
    
    
    
    
    (0.02
    )Basic earnings (loss) per common share
    
    $
    0.05
    
    
    $
    (0.02
    )Diluted earnings (loss) per common share:Income from continuing operations
    
    $
    0.04
    
    
    $
    0.00Loss from discontinued operations
    
    
    
    
    
    
    (0.02
    )Diluted earnings (loss) per common share
    
    $
    0.04
    
    
    $
    (0.02
    )
 Stock Based Compensation
   8




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##### Table of Contents



WeightedAverageWeighted
    
    
    Remaining
    
    
    AggregateAverage
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    Term (years)
    
    
    ValueBalance, December 31, 2005
    
    
    2,289,143
    
    
    $
    2.98Granted
    
    
    140,000
    
    
    
    10.63Exercised
    
    
    (242,951
    )
    
    
    2.09Canceled
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Balance, March 31, 2006
    
    
    2,186,192
    
    
    $
    3.57
    
    
    
    6.93
    
    
    $
    11.38Exercisable, March 31, 2006
    
    
    1,685,358
    
    
    $
    2.95
    
    
    
    6.26
    
    
    $
    12.00
    9




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##### Table of Contents



Statement of Cash Flows 
 Minority Interest
 Reclassification
 2. Significant Equity Transactions
 Stock Warrant Exercises 
 Private Placement (Subsequent Event) 
  10




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##### Table of Contents



Unaudited Pro Forma Condensed Consolidated Balance Sheet
 Historical
    
    
    Pro Forma
    
    
    
    
    
    
    Pro FormaMarch 31, 2006
    
    
    Adjustments
    
    
    Notes
    
    
    March 31, 2006ASSETS:Current Assets:Cash and cash equivalents
    
    $
    876,711
    
    
    
    28,175,672
    
    
    
    (a
    )
    
    $
    21,804,901(1,856,419
    )
    
    
    (b
    )(175,000
    )
    
    
    (c
    )(5,216,063
    )
    
    
    (d
    )Other current assets
    
    
    24,432,380
    
    
    
    
    
    
    
    
    
    
    
    24,432,380Total current assets
    
    
    25,309,091
    
    
    
    
    
    
    
    
    
    
    
    46,237,281Property, plant and equipment, net
    
    
    3,483,951
    
    
    
    
    
    
    
    
    
    
    
    3,483,951Total other assets
    
    
    13,830,883
    
    
    
    
    
    
    
    
    
    
    
    13,830,883TOTAL
    
    $
    42,623,925
    
    
    $
    20,928,190
    
    
    
    
    
    
    $
    63,552,115LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Current portion of notes payable
    
    
    1,255,556
    
    
    
    (1,255,556
    )
    
    
    (d
    )
    
    
    Other current liabilites
    
    
    17,866,310
    
    
    
    
    
    
    
    
    
    
    
    17,866,310Total current liabilities
    
    
    19,121,866
    
    
    
    
    
    
    
    
    
    
    
    17,866,310Long-term notes payable
    
    
    3,960,507
    
    
    
    (3,960,507
    )
    
    
    (d
    )
    
    
    Non-current capital lease obligations
    
    
    2,170
    
    
    
    
    
    
    
    
    
    
    
    2,170Minority Interest
    
    
    242,219
    
    
    
    
    
    
    
    
    
    
    
    242,219Total stockholders equity
    
    
    19,297,163
    
    
    
    28,175,672
    
    
    
    (a
    )
    
    
    45,441,416(1,856,419
    )
    
    
    (b
    )(175,000
    )
    
    
    (c
    )TOTAL
    
    $
    42,623,925
    
    
    $
    20,928,190
    
    
    
    
    
    
    $
    63,552,115
 
 Notes:(a)
    
    Represents gross cash proceeds of Private Placement of 2,012,548 shares at $14.00 per share.(b)
    
    Represents cash commission paid to the placement agent.(c)
    
    Represents other estimated third-party placement costs.(d)
    
    Represents payments to reduce long-term debt obligations of the Company. 11




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##### Table of Contents



3. Investment in Unconsolidated Affiliate
  March 31,
    
    
    December 31,2006
    
    
    2005Total current assets
    
    $
    3,592,156
    
    
    $
    2,173,222Property, plant and equipment, net
    
    
    6,062,277
    
    
    
    6,180,090Total other assets
    
    
    13,497
    
    
    
    15,429Total assets
    
    $
    9,667,930
    
    
    $
    8,368,741Total current liabilities
    
    $
    779,023
    
    
    $
    1,151,906Long-term note payable
    
    
    772,838
    
    
    
    912,799Total shareholders equity
    
    
    8,116,069
    
    
    
    6,304,036Total liabilities and shareholders equity
    
    $
    9,667,930
    
    
    $
    8,368,741
 Three Months EndedMarch 31,2006
    
    
    2005Total revenues
    
    $
    2,930,174
    
    
    $
    2,705,586Total costs and expenses
    
    
    1,118,141
    
    
    
    911,844Net income
    
    $
    1,812,033
    
    
    $
    1,793,742
  12




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##### Table of Contents



4. Debt
  March 31
    
    
    December 312006
    
    
    2005Lines of credit
    
    $
    2,000,000
    
    
    $
    1,314,200Term loans:Settlement note payable
    
    
    1,500,000
    
    
    
    1,687,500Equipment and project loans
    
    
    1,136,576
    
    
    
    1,210,604Investment loan
    
    
    579,487
    
    
    
    629,505Total notes payable
    
    
    5,216,063
    
    
    
    4,841,809Less current maturities:Settlement note payable
    
    
    (750,000
    )
    
    
    (750,000
    )Equipment and project loans
    
    
    (305,650
    )
    
    
    (300,453
    )Investment loan
    
    
    (199,906
    )
    
    
    (197,833
    )Current maturities of notes payable
    
    
    (1,255,556
    )
    
    
    (1,248,286
    )Long-term maturities of notes payable
    
    $
    3,960,507
    
    
    $
    3,593,523
  5. Commitments and Contingencies
 Class Action and Related Litigation
  13




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Other Matters 
   Preferred Stock Redemption 
 14




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##### Table of Contents



6. Segment Information
     TM
 15




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16




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##### Table of Contents



Summarized Segment Financial Information
 Three Months EndedMarch 31,2006
    
    
    2005Revenues:Southern Flow
    
    $
    4,340
    
    
    $
    3,236PowerSecure
    
    
    9,663
    
    
    
    3,818Metretek Florida
    
    
    734
    
    
    
    644Other
    
    
    95
    
    
    
    112Total
    
    $
    14,832
    
    
    $
    7,810Segment profit (loss):Southern Flow
    
    $
    681
    
    
    $
    458PowerSecure
    
    
    256
    
    
    
    (134
    )Metretek Florida
    
    
    (45
    )
    
    
    (185
    )Other
    
    
    (824
    )
    
    
    (590
    )Total
    
    $
    68
    
    
    $
    (451
    )Capital expenditures:Southern Flow
    
    $
    33
    
    
    $
    46PowerSecure
    
    
    368
    
    
    
    445Metretek Florida
    
    
    1
    
    
    
    15Other
    
    
    26
    
    
    
    Total
    
    $
    428
    
    
    $
    506Depreciation and amortization:Southern Flow
    
    $
    30
    
    
    $
    34PowerSecure
    
    
    92
    
    
    
    49Metretek Florida
    
    
    31
    
    
    
    34Other
    
    
    19
    
    
    
    7Total
    
    $
    172
    
    
    $
    124
 March 31,2006
    
    
    2005Total assets:Southern Flow
    
    $
    10,249
    
    
    $
    9,445PowerSecure
    
    
    24,090
    
    
    
    11,129Metretek Florida
    
    
    3,571
    
    
    
    4,730Other
    
    
    4,714
    
    
    
    2,452Total
    
    $
    42,624
    
    
    $
    27,756
 17




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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.
    18




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##### Table of Contents



19
    Table of Contents  Critical Accounting Policies
  20
    Table of Contents  Results of Operations
  Three Months EndedMarch 31,2006
    
    
    2005(all amounts reported in thousands)Revenues:Southern Flow
    
    $
    4,340
    
    
    $
    3,236PowerSecure
    
    
    9,663
    
    
    
    3,818Metretek Florida
    
    
    734
    
    
    
    644Other
    
    
    95
    
    
    
    112Total
    
    $
    14,832
    
    
    $
    7,810Gross Profit:Southern Flow
    
    $
    1,117
    
    
    $
    877PowerSecure
    
    
    3,020
    
    
    
    1,074Metretek Florida
    
    
    468
    
    
    
    310Total
    
    $
    4,605
    
    
    $
    2,261Segment Profit
(Loss):Southern Flow
    
    $
    681
    
    
    $
    458PowerSecure
    
    
    256
    
    
    
    (134
    )Metretek Florida
    
    
    (45
    )
    
    
    (185
    )Other
    
    
    (824
    )
    
    
    (590
    )Total
    
    $
    68
    
    
    $
    (451
    )
 21
    Table of Contents  TM
 22
    Table of Contents  First Quarter 2006 Compared to First Quarter 2005
 Revenues.
     23
    Table of Contents  Costs and Expenses.
 Quarter-over-QuarterQuarter Ended March 31,
    
    
    Difference2006
    
    
    2005
    
    
    $
    
    
    %(In thousands)Costs and Expenses:Costs of Sales and ServicesSouthern Flow
    
    $
    3,222
    
    
    $
    2,359
    
    
    $
    863
    
    
    
    37
    %PowerSecure
    
    
    6,643
    
    
    
    2,744
    
    
    
    3,899
    
    
    
    142
    %Metretek Florida
    
    
    266
    
    
    
    335
    
    
    
    (69
    )
    
    
    -21
    %Total
    
    
    10,131
    
    
    
    5,438
    
    
    
    4,693
    
    
    
    86
    %General and administrative
    
    
    3,435
    
    
    
    1,816
    
    
    
    1,619
    
    
    
    89
    %Selling, marketing and service
    
    
    759
    
    
    
    574
    
    
    
    185
    
    
    
    32
    %Depreciation and amortization
    
    
    172
    
    
    
    124
    
    
    
    48
    
    
    
    39
    %Reserarch and development
    
    
    178
    
    
    
    162
    
    
    
    16
    
    
    
    10
    %Interest, finance charges and other
    
    
    88
    
    
    
    147
    
    
    
    (59
    )
    
    
    -40
    %Income taxes
    
    
    89
    
    
    
    13
    
    
    
    76
    
    
    
    585
    %
      24
    Table of Contents  Quarterly Fluctuations
  
    
    the size, timing and terms of sales and orders, including large customer
orders, such as
 25
    Table of Contents  the recent significant orders at PowerSecure, 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 the new PowerSecure
businesses, and the growth of their markets;
    
    the timing, pricing and market acceptance of our new products and services
such as Metretek Floridas new M2M offerings;
    
    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.
   26
    Table of Contents  27
    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; and
    
    business and technology acquisitions and other growth transactions.
 Cash Flow.
    28
    Table of Contents  Project Loans
 Working Capital Credit Facility.
  29
    Table of Contents  Preferred Stock Redemption
 Term Loan
 30
    Table of Contents  Settlement Note.
 Contractual Obligations and Commercial Commitments.
 Payments Due by Period (1)Remainder of
    
    
    Years
    
    
    Years
    
    
    AfterTotal
    
    
    2006
    
    
    2007-2008
    
    
    2009-2010
    
    
    2010Contractual ObligationsCredit Facility (2)
    
    $
    2,000,000
    
    
    $
    
    
    
    $
    2,000,000
    
    
    $
    
    
    
    $
    Capital Lease Obligations
    
    
    6,000
    
    
    
    3,000
    
    
    
    3,000
    
    
    
    
    
    
    
    Operating Leases
    
    
    4,099,000
    
    
    
    524,000
    
    
    
    1,196,000
    
    
    
    755,000
    
    
    
    1,624,000Series B Preferred Stock
    
    
    371,000
    
    
    
    371,000
    
    
    
    
    
    
    
    
    
    
    
    Settlement Note
    
    
    1,500,000
    
    
    
    562,000
    
    
    
    938,000
    
    
    
    
    
    
    
    Term Loan
    
    
    579,000
    
    
    
    149,000
    
    
    
    430,000
    
    
    
    
    
    
    
    Project Loans
    
    
    1,137,000
    
    
    
    225,000
    
    
    
    653,000
    
    
    
    259,000
    
    
    
    Total
    
    $
    9,692,000
    
    
    $
    1,834,000
    
    
    $
    5,220,000
    
    
    $
    1,014,000
    
    
    $
    1,624,000
 
 (1)
    
    Does not include interest that may become due and payable on such obligations in any
future period. Also does not include the effects of payments and debt extinguishments made in
April 2006, subsequent to the completion of the Private Placement described above.(2)
    
    Total repayments are based upon borrowings outstanding as of March 31, 2006, not projected
borrowings under the Credit Facility. 31
    Table of Contents  Off-Balance Sheet Arrangements
 Liquidity.
 Recent Accounting Pronouncements
     32
    Table of Contents  Cautionary Note Regarding Forward-Looking Statements
  
    
    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 the markets therefor, including market position, market
share, market demand and benefits to customers;
    
    our ability to successfully develop, operate and grow our 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
 33
    Table of Contents  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.
   
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
      34
    Table of Contents  Item 4. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control over Financial Reporting
  35
    Table of Contents  Limitations in Control systems
  36
    Table of Contents  PART IIOTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Price increases in some of the key components in our products could materially and
adversely affect our operating results and cash flows.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    37
    Table of Contents  38
    Table of Contents  Item 6. Exhibits
 4.1
    
    Notice of Redemption of Warrants, dated January 19, 2006, issued by
Metretek Technologies, Inc. (Incorporated by reference to Exhibit 10.2 to the
Metretek Current Report on Form 8-K filed January 20, 2006).10.1
    
    Employment and Non-Competition Agreement, dated as of February 6,
2006, between EnergyLite, Inc. and Ronald W. Gilcrease. (Incorporated by
reference to Exhibit 10.1 to the Metretek Current Report on Form 8-K filed
February 10, 2006).10.2
    
    Second Amended and Restated Employment Agreement, dated as of March
20, 2006, between Metretek Technologies, Inc. and W. Phillip Marcum (Incorporated
by reference to Exhibit 10.3 to the Metretek Annual Report on Form 10-K for the
fiscal year ended December 31, 2005).10.3
    
    Second Amended and Restated Employment Agreement, dated as of March
20, 2006, between Metretek Technologies, Inc. and A. Bradley Gabbard (Incorporated by
reference to Exhibit 10.4 to the Metretek Annual Report on Form
10-K for the fiscal year ended December 31, 2005).10.4
    
    Securities Purchase Agreement, dated as of March 29, 2006, by and
among Metretek Technologies, Inc., the selling stockholders named therein and the
investors named therein (Incorporated by reference to Exhibit 10.1 to the
Metretek Current Report on Form 8-K filed March 30, 2006).10.5
    
    Registration Rights Agreement, dated as of March 29, 2006, by and
among Metretek Technologies, Inc. and the investors named therein (Incorporated
by reference to Exhibit 10.2 to the Metretek Current Report on Form 8-K filed
March 30, 2006).10.6
    
    Amendment No. 2, dated March 29, 2006, to the Amended and Restated
Rights Agreement by and between Metretek Technologies, Inc. and ComputerShare
Investor Services, LLC (Incorporated by reference to Exhibit 10.3 to the Metretek
Current Report on Form 8-K filed March 30, 2006).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.)
 39
    Table of Contents  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.)
 40
    Table of Contents  SIGNATURES
  METRETEK TECHNOLOGIES, INC.Date: May 15, 2006
    By:
    /s/ W. Phillip MarcumW. Phillip MarcumPresident and Chief Executive OfficerDate: May 15, 2006
    By:
    /s/ A. Bradley GabbardA. Bradley GabbardExecutive Vice President
and Chief Financial Officer 41