<PAGE>

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

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

                                   FORM 10-KSB

 (Mark One)
 [X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
        OF THE SECURITIES EXCHANGE ACT OF 1934

        FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

 [ ]    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.
                 (Name of small business issuer in its charter)

              DELAWARE                                     84-1169358
(State or other jurisdiction of                         (I.R.S. Employer
 incorporation or organization)                        Identification No.)

            303 EAST SEVENTEENTH AVENUE, SUITE 660, DENVER, CO 80203
          (Address of principal executive offices, including Zip Code)

         Issuer's telephone number, including area code: (303) 785-8080

         Securities registered under Section 12(b) of the Exchange Act:
                                      NONE

         Securities registered under Section 12(g) of the Exchange Act:

                     COMMON STOCK, PAR VALUE $.01 PER SHARE
                     --------------------------------------
                                (Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB.

The issuer's revenues for its fiscal year ended December 31, 2002 were
$27,041,505.

As of February 28, 2003, the aggregate market value of the shares of the
issuer's Common Stock, the only class of voting or non-voting common equity of
the issuer, held by non-affiliates was $766,443, based upon $0.17, the last sale
price of the Common Stock on such date as reported on the OTC Bulletin Board.

As of February 28, 2003, 6,043,469 shares of Common Stock were outstanding.

Transitional Small Business Disclosure Format (check one):  Yes   No X

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      NONE



<PAGE>




                           METRETEK TECHNOLOGIES, INC.

                                   FORM 10-KSB
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                                       PAGE
<S>                                                                                                                <C>
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS................................................................... 3

PART I
   Item 1.      Description of Business................................................................................ 4
   Item 2.      Description of Property................................................................................14
   Item 3.      Legal Proceedings......................................................................................15
   Item 4.      Submission of Matters to a Vote of Security Holders....................................................18

PART II
   Item 5.      Market for Common Equity and Related Stockholder Matters...............................................19
   Item 6.      Management's Discussion and Analysis of  Financial Condition and Results of Operations.................20
   Item 7.      Financial Statements...................................................................................45
   Item 8.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...................45

PART III
   Item 9.      Directors, Executive Officers, Promoters and Control Persons; Compliance With
                            Section 16(a) of the Exchange Act..........................................................46
   Item 10.     Executive Compensation.................................................................................48
   Item 11.     Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.........52
   Item 12.     Certain Relationships and Related Transactions.........................................................57
   Item 13.     Exhibits and Reports on Form 8-K.......................................................................57
   Item 14.     Controls and Procedures................................................................................61

SIGNATURES ............................................................................................................62

CERTIFICATIONS ........................................................................................................63

INDEX TO FINANCIAL STATEMENTS.........................................................................................F-1

EXHIBIT INDEX ........................................................................................................X-1

</TABLE>



                                       2
<PAGE>



              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

         This Annual Report on Form 10-KSB contains "forward-looking statements"
within the meaning of and made under the safe harbor provisions of Section 27A
of the Securities Act of 1933, as amended (the "Securities Act"), and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
From time to time in the future, we may make additional forward-looking
statements in presentations, at conferences, in press releases, in other reports
and filings and otherwise. Forward-looking statements are all statements other
than statements of historical facts, including statements that refer to plans,
intentions, objectives, goals, strategies, hopes, beliefs, projections,
expectations or other characterizations of future events or performance, and
assumptions underlying the foregoing. The words "may", "could", "should",
"would", "will", "project", "intend", "continue", "believe", "anticipate",
"estimate", "forecast", "expect", "plan", "potential", "opportunity" and
"scheduled", variations of such words, and other similar expressions are often,
but not always, used to identify forward-looking statements. Examples of
forward-looking statements include, but are not limited to, statements regarding
our plans, intentions, objectives, goals, strategies, hopes, beliefs,
projections and expectations about the following:

         -        our prospects, including our future revenues, expenses, net
                  income, margins, profitability, cash flow, liquidity,
                  financial condition and results of operations;

         -        our products and services, market position, market share,
                  growth and strategic relationships;

         -        our business plans, strategies, goals and objectives;

         -        market demand for and customer benefits attributable to our
                  products and services;

         -        industry trends and customer preferences;

         -        the nature and intensity of our competition, and our ability
                  to successfully compete in our markets;

         -        the sufficiency of our capital resources, including our cash
                  and cash equivalents, funds generated from operations,
                  available borrowings and other capital resources, to meet our
                  future working capital, capital expenditure, debt service and
                  business growth needs;

         -        pending or potential business acquisitions, combinations,
                  sales, alliances, relationships and other similar business
                  transactions;

         -        our ability to successfully develop, operate and grow our
                  distributed generation and our contract manufacturing
                  businesses;

         -        the effects on our business, financial condition and results
                  of operations of the resolution of pending or threatened
                  litigation; and

         -        future economic, business, market and regulatory conditions.

         Any forward-looking statements we make are based on our current plans,
intentions, objectives, goals, strategies, hopes, beliefs, projections and
expectations, as well as assumptions made by and information currently available
to management. You are cautioned not to place undue reliance on any
forward-looking statements, any or all of which could turn out to be wrong.
Forward-looking statements are not guarantees of future performance or events,
but are subject to and qualified by substantial risks, uncertainties and other
factors, which are difficult to predict and are often beyond our control.
Forward-looking statements will be affected by assumptions we might make that do
not materialize or prove to be incorrect and by known and unknown risks,
uncertainties and other factors that could cause actual results to differ
materially from those expressed, anticipated or implied by such forward-looking
statements. These risks, uncertainties and other factors include, but are not
limited to, those described in "Additional Factors That May Affect Our Business
and Future Results" in "Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operations" below, as well as other risks,
uncertainties and factors discussed elsewhere in this Report, in documents that
we include as exhibits to or incorporate by reference in this Report, and in
other reports and documents we from time to time file with or furnish to the
Securities and Exchange Commission ("SEC"). Any forward-looking statements
contained in this Report speak only as of the date of this Report, and any other
forward-looking statement we make from time to time in the future speaks only as
of the date it is made. We do not intend, and we undertake no duty or
obligation, to update or revise any forward-looking statement for any reason,
whether as a result of changes in our expectations or the underlying
assumptions, the receipt of new information, the occurrence of future or
unanticipated events, circumstances or conditions or otherwise.




                                       3
<PAGE>


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS

BACKGROUND

         Metretek Technologies, Inc., through its subsidiaries, is a diversified
provider of energy technology measurement products, services and data management
systems to industrial and commercial users and suppliers of natural gas and
electricity. We currently conduct our operations through three wholly-owned
subsidiaries:

         -        Southern Flow Companies, Inc. ("Southern Flow"), based in
                  Lafayette, Louisiana, which provides a wide variety of natural
                  gas measurement services principally to producers and
                  operators of natural gas production facilities.

         -        PowerSecure, Inc. ("PowerSecure"), based in Wake Forest, North
                  Carolina, which designs, engineers, sells and manages
                  distributed generation systems marketed primarily to
                  industrial and commercial users of electricity.

         -        Metretek, Incorporated ("Metretek Florida"), based in
                  Melbourne, Florida, which designs, manufactures and sells
                  electronic devices and systems, primarily automatic meter
                  reading systems ("AMRs") that automatically monitor, collect,
                  record, store, manage and transmit operational and usage
                  information from various types of field devices, as well as
                  electronic flow correctors and computers, and other energy
                  measurement products and services. Metretek Contract
                  Manufacturing Company, Inc. ("MCM"), a Melbourne, Florida
                  based majority-owned subsidiary of Metretek Florida, provides
                  outsourced manufacturing services with a primary focus on
                  printed circuit boards, mechanical and electrical assemblies.

         In this Report, references to "Metretek", "we", "us" and "our" refer to
Metretek Technologies, Inc. and its subsidiaries, and references to "Metretek
Technologies" refer to Metretek Technologies, Inc. without its subsidiaries,
unless we state otherwise or the context indicates otherwise.

         We were incorporated in Delaware on April 5, 1991 under the name
"Marcum Natural Gas Services, Inc.," and we changed our name in June 1999 to
"Metretek Technologies, Inc." Our principal executive offices are located at 303
East Seventeenth Street, Suite 660, Denver, Colorado 80203, and our telephone
number at those offices is (303) 785-8080.

BUSINESS STRATEGY

         Our business strategy is to position ourself as an integrated provider
of data management products, services and systems that enhance the availability
of energy management information and services to suppliers and users of energy.
While our energy products, services and systems have historically been aimed
primarily at the natural gas industry, we are focusing more of our current and
future products, services and systems to other segments of the energy industry,
especially the electricity industry. The energy industry continues to experience
fundamental regulatory and structural changes and significant new trends. Our
strategy is to acquire, develop, operate and expand businesses that are
positioned to take advantage of these changes and trends.

         In implementing our business strategy, we have acquired or formed the
following important businesses:

         -        In 1993, we acquired substantially all of the assets of the
                  Southern Flow Companies division of Weatherford International
                  Incorporated ("Weatherford").

         -        In 1994, we acquired Metretek Florida.

         -        In 1997, we acquired Sigma VI, Inc. and Quality Control
                  Manufacturing, Inc., two printed circuit board ("PCB")
                  contract manufacturing firms to support and expand Metretek
                  Florida's operations.

         -        In 1998, we acquired the electronic corrector business from
                  American Meter Company ("American Meter") to further expand
                  the product and service offerings of Metretek Florida.


                                       4
<PAGE>

         -        In 2000, we formed PowerSecure to develop and operate our
                  distributed generation business.

         -        In April 2001, we acquired Industrial Automation, Inc.
                  ("Industrial Automation"), a process control and switchgear
                  design and manufacturing firm, as part of PowerSecure's growth
                  strategy.

         -        In June 2002, we formed MCM as a subsidiary of Metretek
                  Florida to operate and expand our contract manufacturing
                  business.

         While we regularly engage in discussions relating to potential
acquisitions and dispositions of assets, businesses and companies, as of the
date of this Report we have not entered into any binding agreement or commitment
with respect to any material acquisition or disposition.

RECENT DEVELOPMENTS

         Reorganization of Metretek Florida. In June 2002, we executed broad
management and business changes within Metretek Florida that were intended to
stem to growing losses and to exploit new business opportunities within its
markets. To that end, we hired Thomas R. Kellogg as President and Chief
Executive Officer of Metretek Florida. We also formed MCM and hired a new
management team responsible for developing and expanding MCM's contract
manufacturing business.

SOUTHERN FLOW COMPANIES, INC.

         Southern Flow provides a variety of natural gas measurement services
principally to customers involved in the business of natural gas production,
gathering, transportation and processing. We commenced providing natural gas
measurement services in 1991 by acquiring an existing business. We expanded this
business significantly in 1993 when we acquired substantially all of the assets
of the Southern Flow Companies division of Weatherford. Through its
predecessors, Southern Flow has provided measurement services to the natural gas
industry since 1953.

         Southern Flow provides a broad array of integrated natural gas
measurement services, including on-site field services, chart processing and
analysis, laboratory analysis, and data management and reporting. Southern
Flow's field services include the installation, testing, calibration, sales and
maintenance of measurement equipment and instruments. Southern Flow's chart
processing operations include analyzing, digitizing and auditing well charts and
providing custom reports as requested by the customer. Southern Flow also
provides laboratory analysis of natural gas and natural gas liquids chemical and
energy content. As part of its services to its customers, Southern Flow
maintains a proprietary database software system which calculates and summarizes
energy measurement data for its customers and allows for easy transfer and
integration of such data into customer's accounting systems. As an integral part
of these services, Southern Flow maintains a comprehensive inventory of natural
gas meters and metering parts, and derived approximately 21% of its annual
revenues from its "parts resale" business in 2002. Southern Flow provides its
services through nine division offices located throughout the Gulf of Mexico,
Southwest, Mid-Continent and Rocky Mountain regions.

         Natural gas measurement services are used by producers of natural gas
and pipeline companies to verify volumes of natural gas custody transfers. To
ensure that such data is accurate, on-site field services and data collection
must be coordinated with chart integration and data development and management
to produce timely and accurate reports.

         The market for independent natural gas measurement services is
fragmented, with no single company having the ability to exercise control. Many
natural gas producers and operators, and most natural gas pipeline and
transportation companies, internally perform some or all of their natural gas
measurement services. In addition to price, the primary consideration for
natural gas measurement customers is the quality of services and the ability to
maintain data integrity, because natural gas measurement has a direct effect on
the natural gas producer's revenue and royalty and working interest owner
obligations. We believe that we are able to effectively compete by:

         -        providing dependable integrated measurement services;

         -        maintaining local offices in proximity to our customer base;
                  and

         -        retaining experienced and competent personnel.


                                       5
<PAGE>

POWERSECURE, INC.

         We formed PowerSecure in the fall of 2000 to engage in the business of
designing, engineering, marketing, constructing and operating turn-key
distributed generation systems. In January 2001, PowerSecure received its first
distributed generation contract. The goal of PowerSecure is to be a national
provider of distributed generation systems, providing customers, primarily
industrial and commercial users of electricity, with access to back-up power
generation to facilitate reliable power with and the ability to take advantage
of peak-shaving and load interruption incentives. Distributed generation is
on-site power generation that supplements or bypasses the public power grid by
generating power at the customer's site. PowerSecure offers a power supply that
serves as an alternative source of energy for the customer's business needs.
PowerSecure's program covers virtually all elements of the peak-power supply
chain, including system design, installation and operation as well as rate
analysis and utility rate negotiation.

         Distributed Generation Background. The demand for distributed
generation facilities offered by PowerSecure is driven primarily by two factors:
the need for high quality and high reliability power, and the economics of
energy pricing structures by utilities and other power suppliers. The need for
power quality and reliability is driven directly by the needs of industrial and
commercial end-users of electricity and, in particular, the specific
consequences to an end user of experiencing a power outage or curtailment. This
need for reliable power became apparent to many businesses as a result of
brown-outs and black-outs, especially those in California in 2000. Distributed
generation allows a business to improve the reliability of its energy generation
by providing a back-up power source that is available if the primary source, for
example a local utility, becomes unable, for any reason, to provide power.
Distributed generation can protect businesses from the adverse effect of power
outages caused by storms, utility equipment failures and black-outs and
brown-outs resulting from instability on the utility power grids. In addition,
businesses utilizing distributed generation are able to mitigate their exposure
to energy price increases by being able to supply their own electricity through
alternative sources. Spikes in power prices, due to electricity spot price
savings, have led many businesses to seek alternative sources of power to
protect against these price spikes by "peak shaving". Peak shaving, as it
generally applies in PowerSecure's business, means utilizing the back-up power
provided by a system of distributed generation to reduce specific demand to
avoid the adverse effect of high energy prices charged by utilities during
"peak" energy use periods.

         In addition, due to the current fragmentation of the energy markets,
real-time energy information has at the same time become both more important to
have and more difficult to obtain. Many energy suppliers, especially utilities,
have complicated pricing and rate structures and tariffs that are difficult for
energy users to understand, which further increases the complexity of monitoring
and managing energy usage and costs. Energy deregulation, with multiple
providers of energy and diverse rate structures, adds to this complexity in
managing energy usage and costs. In order to effectively manage their energy
needs, commercial and industrial users of energy require real-time energy
consumption information.

         PowerSecure provides a "turn-key" solution to these needs of industrial
and commercial users of electricity. By providing a complete and customized
program of distributed generation, the PowerSecure system provides energy users
with a seamless communication between the supply-side and demand-side components
of the customer's power system to capture peak-shaving opportunities and to
quickly respond to emergency and interruption situations. The typical
distributed generation system is installed and maintained at the customer's
location and is small in size relative to a utility's power plant since it is
designed to supply power only to that one particular customer.

         The primary elements of PowerSecure's turn-key distributed generation
offering include:

         -        designing and engineering the distributed generation system;

         -        negotiating with the utility to establish the electricity
                  inter-connect and to take advantage of preferred rates;

         -        acquiring and installing the generators and other system
                  equipment and controls;

         -        designing, engineering, constructing and installing the
                  switchgear and process controls; and

         -        providing ongoing monitoring and servicing of the system.


                                       6
<PAGE>

         Technology. The key component in a distributed generation system is its
source of power, which is the generator. While several distributed generation
technologies are available, PowerSecure currently utilizes a diesel-powered
generator in its turn-key systems. These generators are widely used and
constitute a reliable, cost-effective distributed generation technology, able to
generate sufficient power with reasonable efficiency at a reasonable cost.
However, several new generator technologies are emerging, and PowerSecure
intends to utilize one or more of them as they demonstrate the ability to be a
commercially viable and reliable power source. These new technologies include
microturbines, which generate power using a small-scale natural gas-fueled
turbine, fuel cells, which combine hydrogen and oxygen as an electrochemical
process to produce electricity, and solar cells, also known as photovoltaic
cells, which convert the sun's energy into electricity.

         Internal combustion generators range in individual size from five
kilowatts ("KW") to 2,250 KW, while gas turbines range in individual size from
1,250 KW to 13,500 KW. Units can be installed individually or in multiple
parallel arrangements, allowing PowerSecure to service the needs of customers
ranging from small commercial users of power to large industrial businesses.

         In conjunction with the generators and turbines, PowerSecure designs
and manufactures its own paralleling switchgear and process controls marketed
under the registered trade name "NexGear", which are used to seamlessly shift
power between a customer's primary power source and its distributed generation
system. PowerSecure obtained this technology and know-how by acquiring
Industrial Automation in 2001. Power from onsite generation systems can be
brought online and in parallel with the customer's primary power source without
disrupting the flow of electricity. This allows the customer to seamlessly
substitute onsite-generated power for that supplied by the utility power plant
during times of peak demand.

         Staffing. PowerSecure staffs a team of engineering and project
management personnel who oversee all phases of design and installation of
generators, paralleling switchgear, and wireless remote-monitoring equipment.
PowerSecure's engineering experience and understanding of distributed generation
operations provide it with the capability to create innovative solutions to meet
the needs of virtually any customer.

         Remote Monitoring and Maintenance and System Management. PowerSecure's
remote monitoring and maintenance services are an important part of its system
because they differentiate the PowerSecure solution from that of its
competitors. PowerSecure monitors and maintains the system for its customers,
improving reliability and removing many of the hassles associated with
ownership. Distributed generation systems must be operated periodically so that
they function properly when called upon to supply power. By installing a
communication device on the system, PowerSecure remotely starts and operates the
system and monitors its performance on a periodic basis. In the event of a
mechanical problem, PowerSecure dispatches the appropriate technicians.
PowerSecure manages every aspect of its system on behalf of its customers so
that the distributed generation is a seamless operation to the customer. For
those customers that already have distributed generation systems, PowerSecure
offers valuable management services, including fuel management services,
preventive and emergency maintenance services, and monitoring and dispatching
services. PowerSecure also coordinates the operation of the distributed
generation system during times of peak demand in order to allow its customers to
benefit from complicated utility rate structures. The monitoring device enables
PowerSecure to monitor, on a cost-effective basis, a geographically fragmented
customer-base from a centralized location.

         Sales and Marketing. PowerSecure markets its distributed generation
systems primarily through a direct sales force. PowerSecure markets its products
and services in various types of packages. PowerSecure's initial marketing focus
was, and virtually all of its revenues through December 31, 2002 were derived
from, its turn-key distributed generation program. In its turn-key program,
PowerSecure offers a complete internal distributed generation package, including
assistance in locating and arranging financing, directly to industrial and
commercial users of electricity that desire to own their own distributed
generation system. The size of turn-key distributed generation systems designed
and sold by PowerSecure has ranged from 90 KW to 10,000 KW, although PowerSecure
has the ability to design and sell even larger turn-key systems. A variation of
the turn-key system marketed by PowerSecure involves partnering with natural gas
and electricity utilities to develop, market and manage distributed generation
systems for their customers. In this "utility partnership" model, PowerSecure
partners with a utility to combine its distributed generation package with other
products or services of that utility, and assists the utility in marketing
PowerSecure's distributed generation package to the utility's customers under
the utility's brand name. PowerSecure also offers a "company-owned" distributed
generation system program. Company-owned programs will require significant
capital to develop and have only been offered on a limited basis through the
date of this Report. See "Item 6. Management's Discussion and Analysis of
Financial Condition and Results of Operation--Liquidity and Capital Resources."
PowerSecure's company-owned program involves the design, engineering,
installation, operation and maintenance of distributed generation systems that
are owned by


                                       7
<PAGE>

PowerSecure and leased to customers on a long-term basis for monthly fees
related to the benefits received by the customer. Depending on our ability to
raise sufficient additional capital, market conditions and the preferences of
industrial and commercial users of electricity, PowerSecure believes that a
portion of its future business may be derived from its company-owned program,
making it less dependant upon sales of turn-key systems.

         Acquisition. On April 10, 2001, PowerSecure acquired Industrial
Automation, based in Greensboro, North Carolina, which is in the business of
designing and marketing switchgear and process controls used in distributed
generation operations. As a result of that acquisition, Industrial Automation
has become a wholly-owned subsidiary of PowerSecure.

METRETEK, INCORPORATED

         Founded in 1977 in Melbourne, Florida and acquired by us in 1994,
Metretek Florida has operated primarily as a developer, manufacturer and
marketer of automated systems for remotely monitoring and recording energy
consumption data from a central location. Metretek's systems generally consist
of three components:

         -        field devices, which are intelligent, communications enabled,
                  data collection devices that are installed in the field and
                  automatically communicate with, and retrieve data from,
                  customer energy meters;

         -        a communication link, which is typically a telephone wire-line
                  or cellular/PCS connection (analog, digital, circuit switch or
                  IP-based); and

         -        our DC2000 and PowerSpring software, which provide a platform
                  for automated data collection, management and presentation
                  from energy consumption and other relevant data collected from
                  field devices.

         Overview of Business. Metretek Florida's primary focus is to provide
fully integrated, "turn-key" systems that allow its customers to remotely
monitor, collect and manage data collected from various types of field devices,
principally natural gas and electricity meters. Our primary customers have in
the past tended to be natural gas utilities or combination natural gas and
electric utilities that are supporting the specific market needs of their larger
commercial and industrial ("C & I") customers. In most cases, these systems are
owned, operated and managed by the utility. In such cases, the data that is
managed by the system may support critical utility functions such as billing,
load management, tariff enforcement and verification. As such, the Metretek
Florida system is normally an integral component of the utility's business
processes. In other situations, the systems may support less critical functions
of the utility or may be owned by a C & I utility customer.

         Products. Metretek Florida's manufactured products fall into three
categories: metering data collection products; electronic gas flow computers and
volume correctors and application specific recording products. All manufactured
products are designed on similar platforms and then customized and configured
for application specific and customer specific requirements.

         Metering data collection products, also known as automatic meter
readers or AMRs, are installed on existing energy meters. The AMRs are designed
to automatically collect and transmit metering data according to a schedule
predetermined and preset by the customer. The AMRs contain an electronic printed
circuit board assembly, which is designed and programmed to interface with an
energy meter at the point of energy consumption. The PCB contains a
microprocessor and modem, is packaged with AC or DC power and is installed on,
or in close proximity to, the energy meter. Energy consumption data is
collected, time-stamped, stored, and then transmitted (via the communications
link) by the AMR to a central location on which Metretek Florida's DC 2000
software, running on a PC, or a PC network, manages the data collection and
processing as well as storing the data in a database. Communication from the
remotely located AMRs to the central software system is usually accomplished
using existing, standard voice grade telephone lines. In some instances,
cellular telephones or radios are used for communications, depending upon the
availability and expense of telephone lines and upon customer preferences.

         As a result of a strategic acquisition of assets from American Meter in
May 1998, Metretek Florida also manufactures and markets a complete line of
electronic natural gas flow computers and volume correctors. The corrector
product line incorporates the basic features of the AMR products and provides
the following features and functions:


                                       8
<PAGE>

         -        instantaneous, real time correction of metered volumes for
                  variations in flowing natural gas pressure and temperature;

         -        an on-board microprocessor and memory for calculating and
                  storing corrected natural gas volumes; and

         -        user configurable electronic outputs for control and alarm
                  purposes.

         In addition to the AMR and corrector product lines, Metretek Florida
manufactures and markets systems consisting of remote recorders and central
system software for monitoring and recording natural gas pipeline pressure and
for monitoring cathodic protection systems, as well as other similar application
specific products.

         Software-Based Solutions. Metretek Florida continuously maintains and
upgrades its DC2000 software system and provide upgrades to its customers that
have licensed the use of the software. In exchange for these efforts to maintain
compatibility with the latest customer computing environments, Metretek Florida
charges customers annual licensing fees. As a value added service, Metretek
Florida provides first level support to all customers who have its products
currently installed. Second level and on site support is provided through a
mutually agreed upon service level agreement tailored to the needs of each
customer. Metretek Florida also provides its customers with custom software
development and training for additional fees. As a subscription based service,
Metretek Florida offers the PowerSpring system as a turn-key solution to
customers who are unable or unwilling to purchase and operate a complete
Metretek DC2000 system. The PowerSpring solution includes providing and
installing the remote data collection devices required to meet the specific
needs of the customer and furnishing timely, accurate and properly formatted
information in accordance with their requirements by means of e-mail, file
transfer or the internet. The customer is charged monthly, based on the quantity
of data collected and the frequency at which it is collected.

         Markets. Historically, Metretek Florida's primary customers have been
energy utility companies that have deployed its systems in their natural gas
business. Metretek Florida currently has 74 active utility customers that
operate DC2000 data collection systems, including 60 of the largest 100 natural
gas distribution utility companies in North America. Approximately 32 of these
companies operate both electric and natural gas businesses within their service
areas. Recently, Metretek Florida developed products and technologies aimed at
expanding its offerings of AMR systems to electric utilities. These products
include our recently introduced the digital cellular modem ("DCM") family of
field products that enable IP-based, wireless internet connectivity, and real
time data collection through global system for mobile ("GSM") cellular networks
using general packet radio service ("GPRS"). These products also incorporate
American National Standard Institute ("ANSI") C12 compatibility, which has been
developed as a standard communications interface for electricity metering in the
United States and Canada. The combination of these new technical developments in
concert with the ANSI standards enable Metretek Florida to more effectively
provide large scale solutions for C&I electrical applications.

         Marketing and Customer Service. Metretek Florida utilizes a direct
sales force and an independent, indirect distributor and sales representative
organization in the United States and the United Kingdom, while it relies solely
upon independent representatives and distributors for the promotion, sales and
support of our products outside those two countries. Metretek Florida also
provides its customers with system installation and start-up service, 24/7
telephone technical support, regularly scheduled product training, custom
software development, system monitoring and troubleshooting, and network
management services.

         Metretek Florida participates in utility industry conferences,
symposiums, and trade shows and maintain memberships in several national and
regional utility company associations. Metretek Florida also advertises in and
contribute editorially to industry trade journals, utilize direct mail/e-mail
and telemarketing and have a home page on the internet (www.metretekfl.com).

         International. Outside the United States, Metretek Florida has sold its
AMR systems and natural gas volume correctors to gas distribution utility
companies in the United Kingdom, Netherlands, Pakistan, Australia, Argentina,
Columbia, Taiwan, Korea, Brazil and Canada. All of the six major gas
distribution utility companies in Canada own and operate Metretek Florida's AMR
systems. During the years ended December 31, 2002 and 2001, approximately 13%
and 11%, respectively, of Metretek Florida's annual revenues were generated in
international markets.

         MCM. In June 2002, Metretek Florida formed MCM to operate and expand
its PCB contract manufacturing business. Metretek Florida has been involved in
contract manufacturing since 1997, but recently


                                       9
<PAGE>

reorganized this business and its management in order to focus on increasing
business from third parties. Through MCM, Metretek Florida offers contract
manufacturing services to local, regional and national companies with PCB
product requirements that are short run, high quality, and quick turnaround.

         PowerSpring. We formed PowerSpring in 1999 as a separate subsidiary to
carry out our business objective to become the leading internet provider of
energy information products, services and technologies. During 2001, we
downsized and restructured PowerSpring by discontinuing most of its operations
and transferring to Metretek Florida its product line and most of its remaining
assets and obligations. PowerSpring is now operated as a service offering of
Metretek Florida rather than as an independent entity.

COMPETITION

         The markets for our energy products, services and technology are
intensely competitive and are characterized by rapidly changing technology, new
and emerging products and services, frequent performance improvements and
evolving industry standards. We expect the intensity of competition to increase
in the future because the growth potential and deregulatory environment of the
energy market have attracted and are anticipated to continue to attract many new
competitors, including new businesses as well as established businesses from
different industries. Competition may also increase as a result of industry
consolidation. As a result of increased competition, we may have to reduce the
price of our products and services, and we may experience reduced gross margins,
loss of market share or inability to penetrate or develop new market, any one of
which could significantly reduce our future revenues and operating results.

         Our current and prospective competitors include:

         -        large and well established providers of AMR systems, such as
                  Itron Corp., Badgar Meter, Inc. and Invensys;

         -        large manufacturers of power generation equipment with
                  substantial distribution networks, such as Caterpillar,
                  Cummins and Kohler;

         -        large, well established and diversified companies like
                  Schlumberger, Emerson Electric, ABB, Siemens and Honeywell
                  that have divisions or subsidiaries devoted to our markets;

         -        in-house services provided by utilities and major oil and gas
                  companies;

         -        large, well established and diversified oil and gas companies
                  like Duke Energy and Williams Energy and Hanover Companies;
                  and

         -        numerous prospective competitors that may offer energy
                  information and technology.

         We believe that our ability to compete successfully will depend upon
many factors, many of which are outside of our control. These factors include:

         -        performance and features functionality and benefits of our,
                  and our competitors', products and services;

         -        the value to our customers for the price they pay for our
                  products and services;

         -        the timing and market acceptance of new products and services
                  and enhancements to existing products and services developed
                  by us and by our competitors;

         -        our responsiveness to customers needs;

         -        ease of use of products and services;

         -        quality and reliability of our, and of our competitors',
                  products and services;

         -        reputation;

         -        sales and marketing efforts;



                                       10
<PAGE>

         -        our ability to develop and maintain our strategic
                  relationships; and

         -        the price of our, and of our competitors', products and
                  services.

         We believe that we have established ourselves as a niche supplier of
high quality, reliable products and services and, therefore, that we currently
compete favorably with respect to the above factors other than price. We do not
typically attempt to be the low cost producer. Rather, we endeavor to compete
primarily on the basis of product and service quality rather than price. In
order to be successful in the future, we must continue to respond promptly and
effectively to the challenges of technological change and our competitors'
innovations. We cannot provide any assurance that our products and services will
continue to compete favorably in the future against current and future
competitors or that we will be successful in responding to changes in other
markets including new products and service and enhancements to existing products
and service introduced by our existing competitors or new competitor entering
the market.

         Many of our existing and potential competitors have better name
recognition, longer operating histories, access to larger customer bases and
greater financial, technical, sales marketing, manufacturing and other resources
than we do. This may enable our competitors to respond more quickly to new or
emerging technologies and changes in customer requirements or preferences and to
devote greater resources to the development, promotion and sale of their
products and services than we can. Our competitors may be able to undertake more
extensive marketing campaigns, adopt more aggressive pricing policies and make
more attractive offers to potential employees, customers, strategic partners and
suppliers and vendors than we can. Our competitors may develop products and
services that are equal or superior to the products and services offered by us
or that achieve greater market acceptance than our products do. In addition,
current and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to improve their ability to
address the needs of our existing and prospective customers. As a result, it is
possible that new competitors may emerge and rapidly acquire significant market
share or impede our ability to acquire market share in new markets. Increased
competition could also result in price reductions, reduced gross margins and
loss of market share, and the inability to develop new businesses. We cannot
provide any assurance that we will have the financial resources, technical
expertise, or marketing and support capabilities to successfully compete against
these actual and potential competitors in the future. Our inability to compete
successfully in any respect or to timely respond to market demands or changes
would have a material adverse effect on our business, conditions and results of
operations.

         Numerous companies compete directly with Southern Flow in the natural
gas measurement services industry, including companies which provide the same
services as Southern Flow and those which provide additional or related field
services. Although a significant portion of natural gas measurement services is
currently performed internally by natural gas producers and pipeline companies,
much of Southern Flow's direct competition consists of small measurement
companies providing limited services and serving limited geographical areas.
Southern Flow offers a complete range of natural gas measurement services over a
wide geographical area which management believes offers Southern Flow advantages
over its competitors.

         The market for distributed generation products are highly competitive
and rapidly changing and evolving. PowerSecure's competition is primarily from
manufacturers and distributors of generators and related equipment, such as
Caterpillar, Inc., Detroit Diesel Corporation, Cummins Inc., Kohler, Onan and
Generac Power Systems, as well as small regional electric engineering firms that
compete in certain aspects of distributed generation production. Also,
PowerSecure faces competition in some specific portions of its distributed
generation business. For example, some small regional electric engineering firms
specialize in the engineering aspects of the distributed generation. Similarly,
several well established companies have developed microturbines used in
distributed generation, such as Capstone Turbine Corporation, Honeywell and
Elliot Energy Systems, which develop gas turbines, and NREC (Ingersoll-Rand), as
well as a number of major automotive companies. A number of companies are also
developing alternative generation technology such as fuel cells and solar cells,
such as FuelCell Energy, Inc., Siemens, Westinghouse, Mitsubishi, Ballard Power
Systems, Inc. and Plug Power Inc. Several large companies also are becoming
leaders in uninterruptible power supply system technology, including American
Power Conversion, Invensys, Liebert (a subsidiary of Emerson Electric), GE
Digital Energy, Lucent, MGE UPS Systems and PowerWare. Real Energy, Inc.
designs, owns and operates permanent on-site power generator systems for
commercial real estate owners. Companies developing and marketing
energy-marketing software, such as Silicon Energy Co., Invensys, Engage and
Elutions, are also potential competitors to the extent they partner with
distributed generation equipment manufacturers.


                                       11
<PAGE>

         The market for Metretek Florida's products and services is intensely
competitive. Although Metretek Florida's product offering is very specific to
the requirements for C & I meter reading and monitoring in natural gas and
electricity applications, many suppliers of residential meter reading systems
also offer products for C & I applications and can be formidable competitors for
utility companies desiring to implement residential meter reading and to have
all automatic/remote meter reading, including industrial and commercial,
performed on a single system. Also, major natural gas and electricity meter and
instrument manufacturers offer systems to remotely read and interrogate their
own equipment, and utility companies that use certain manufacturers' meters
exclusively may also choose to buy their communication and data collection
products as well. We believe that several large suppliers of equipment, services
or technology to the utility industry have developed or are currently developing
products or services for the markets in which Metretek Florida is currently
competing or intends to compete. Most of Metretek Florida's present and
potential competitors have substantially greater financial, marketing, technical
and manufacturing resources, as well as greater name recognition and experience,
than Metretek Florida. Metretek Florida competes with a large number of existing
and potential competitors in these markets, some of which do not compete in all
of the same markets as Metretek Florida. In addition, current and potential
competitors may make strategic acquisitions or establish cooperative
relationships among themselves or with third parties that increase their ability
to address the needs of Metretek Florida's prospective customers. Metretek
Florida competes primarily on the basis of product quality and reliability,
applications expertise, and the quality of its service and support.

         The contract manufacturing market, which is very large, is generally
characterized by a diverse group of large international companies followed by a
very fragmented group of smaller companies that serve a variety of different
types of customers and/or geographic regions. Most of MCM's specific competition
comes from local and/or regional firms in the southern half of Florida.

REGULATION

         Our business and operations are affected by various federal, state,
local and foreign laws, regulations and authorities. However, to date, our
compliance with those requirements has not materially adversely affected our
business, financial condition or results of operations.

         Regulation of Natural Gas. Natural gas operations and economics are
affected by price controls, by environmental, tax and other laws relating to the
natural gas industry, by changes in such laws and by changing administrative
regulations and the interpretations and application of such laws, rules and
regulations. Natural gas sales have been deregulated at the wholesale, or
pipeline, level since Federal Energy Regulatory Commission Order 636 was issued
in 1992. Since that time, individual states have been deregulating natural gas
sales at the retail level. Some states have already deregulated natural gas
sales for industrial customers and certain classes of commercial and residential
customers, permitting those customers to purchase natural gas directly from
producers or brokers. Other states are currently conducting pilot programs that
allow residential and small commercial consumers to select a provider of their
choice, other than the local distribution company, to supply their natural gas.
As natural gas sales are deregulated, on a state by state basis, we believe that
timely collection and reporting of consumption data will be needed and desired
by certain customers, utility companies and energy service providers.

         Regulation of Electricity. The electric utility industry continues to
undergo fundamental structural changes due to deregulation and growing
competition at both wholesale and retail levels. This deregulatory movement in
the electricity industry follows a similar deregulatory movement in the natural
gas utility industry. The changing regulatory environment means that new power
market participants will be entering into a market traditionally dominated by
established utilities. Presently, many states offer or will soon offer
deregulated retail access, allowing customers in those states to choose their
own suppliers of electricity power generation services, while additional states
are transitioning to deregulated status. Deregulation may require recordation of
electric power consumption data more frequently than is presently customary
through a much wider use of daily, hourly and possibly even more frequent meter
readings.

         Regulation of International Operations. Our international operations
are also subject to the political, economic and other uncertainties of doing
business abroad including, among others, risks of war, cancellation,
expropriation, renegotiation or modification of contracts, export and
transportation regulations and tariffs, taxation and royalty policies, foreign
exchange restrictions, international monetary fluctuations and other hazards
arising out of foreign government sovereignty over certain areas in which we
conduct, plan to conduct or in the future may conduct operations.

         Regulation of Environment. While various federal, state and local laws
and regulations covering the discharge of materials into the environment, or
otherwise relating to the protection of the environment, may affect

                                       12
<PAGE>

our business, our financial condition and results of operations have not been
materially adversely affected by environmental laws and regulations. We believe
we are in material compliance with those environmental laws and regulations to
which we are subject. We do not anticipate that we will be required in the near
future to make material capital expenditures due to these environmental laws and
regulations. However, because environmental laws and regulations are frequently
changed and expanded, we are unable to provide any assurance that the cost of
compliance in the future will not be material to us.

EMPLOYEES

         As of February 28, 2003, we had 230 full-time employees. None of our
employees is covered by a collective bargaining agreement, and we have not
experienced any work stoppage. We consider our relations with our employees to
be good. We depend upon our ability to attract, retain and motivate qualified
management, technical, sales and other personnel. If we are unable to continue
to do so, our business will be materially adversely affected.

RESEARCH AND DEVELOPMENT

         Most of our basic research and development activities are conducted by
Metretek Florida. Metretek Florida's research and development efforts are
focused on enhancements to its product and service offerings intended to address
anticipated customer requirements and potential new markets. Current research
and development projects at Metretek Florida include the development of data
collection products that utilize the wireless internet provided by the large
cellular and PCS providers worldwide to provide real time data collection
capabilities to utilities and their customers. From time to time, as our
business needs and goals dictate and as our capital resources allow, we may also
conduct research and development efforts for our PowerSecure and Southern Flow
businesses.

         We incurred $552,000 and $797,000 for research and development expenses
during the years ended December 31, 2002 and 2001, respectively. We intend to
continue our research and development efforts to enhance our existing products
and services and technologies and to develop new products, services and
technologies enabling us to enter into new markets and better compete in
existing markets.

RAW MATERIALS

         In our businesses we purchase memory chips, electronic components,
printed circuit boards, specialized sub-assemblies, diesel generators, relays,
electric circuit components, fabricated sheet metal parts, machined components,
aluminum, metallic castings and various other raw materials, equipment, parts
and components for our products and systems from third party vendors and
suppliers. While we generally use standard parts and components for our products
and systems that are readily available from multiple suppliers, we currently
procure, and expect to continue to procure, certain components, such as
generators, from single source manufacturers due to unique designs, quality and
performance requirements, and favorable pricing arrangements. While, in the
opinion of management, the loss of any one supplier of materials, other than
generators, would not have a material adverse impact on our business or
operations due to our belief that suitable and sufficient alternative vendors
would be available, shortages in certain components such as memory chips, supply
problems from our suppliers or our inability to develop alternative sources of
supply quickly or cost-effectively could materially impact and delay our ability
to manufacture and deliver our products and therefore could adversely affect our
business and operations. We attempt to mitigate this risk by maintaining an
inventory of such materials. In addition, some of the raw materials used in
PowerSecure's business have significant lead times before they are available,
which may affect the timing of PowerSecure's project completions.

INTELLECTUAL PROPERTY

         Our success and ability to grow depends, in part, upon our ability to
develop and protect our proprietary technology and intellectual property rights
in order to distinguish our products, services and technology from those of our
competitors. We rely primarily on a combination of copyright, trademark and
trade secret laws, along with confidentiality agreements, contractual provisions
and licensing arrangements, to establish and protect our intellectual property
rights. We hold several copyrights, service marks and trademarks in our
business, and we have applied for additional registrations of marks, although we
may not be successful in obtaining registrations for one or more of them. We
intend to continue to introduce new trademarks and service marks in the future,
as our business and marketing needs require.


                                       13
<PAGE>

         Despite our efforts to protect our intellectual property rights,
existing laws afford only limited protection, and our actions may be inadequate
to protect our rights or to prevent others from claiming violations of their
intellectual property rights. Unauthorized third parties may copy, reverse
engineer or otherwise use or exploit aspects of our products and services, or
otherwise obtain and use information that we regard as proprietary. We cannot
assure you that our competitors will not independently develop technology
similar or superior to our technology or design around our proprietary
technology and intellectual property rights. In addition, the laws of some
foreign countries may not protect our intellectual property rights as fully or
in the same manner as the laws of the United States.

         We do not believe that we are dependent upon any one copyright,
trademark, service mark or other intellectual property right. Rather, we believe
that, due to the rapid pace of technology and change within the energy industry,
the following factors are more important to our ability to successfully compete
in our markets:

         -        the technological and creative skills of our personnel;

         -        development of new products, services and technologies;

         -        frequent product, service and technology enhancements;

         -        name recognition;

         -        customer training; and

         -        reliable product and service support.

We cannot assure you that we will be successful in competing on the basis of
these or any other factors. See "--Competition" above.

         Although we are not aware of any present infringement of our products
or technologies on the intellectual property rights of third parties, we cannot
provide any assurance that others will not assert claims of infringement against
us in the future or that, if made, such claims will not be successful or will
not require us to enter into licensing or royalty arrangements or result in
costly and time-consuming litigation.

          We may in the future initiate claims or litigation against third
parties for infringement of our intellectual property rights to protect these
rights or to determine the scope and validity of our intellectual property
rights or the intellectual property rights of competitors. These claims could
result in costly litigation and the diversion of our technical and management
personnel.

ITEM 2.     DESCRIPTION OF PROPERTY

         We lease our principal executive offices, which consist of 2,925 square
feet located in Denver, Colorado. This lease has a monthly rental obligation of
$4,509, including operating costs, and expires December 31, 2004.

         Southern Flow leases office facilities in the following locations:
Lafayette, Belle Chasse and Shreveport, Louisiana; Jackson, Mississippi; Houston
and Victoria, Texas; Tulsa, Oklahoma; and Aztec, New Mexico. These offices have
an aggregate of approximately 64,000 square feet, total monthly rental
obligations of approximately $32,600 and terms expiring at various times through
2007. In addition, Southern Flow owns and occupies an 8,600 square foot office
building in Dallas, Texas, which is subject to a mortgage described in the notes
to our consolidated financial statements included elsewhere in this Report.

         PowerSecure leases three facilities, which are located in Greensboro
and Wake Forest, North Carolina and Atlanta, Georgia. In the aggregate, these
facilities consist of 9,584 square feet and have a monthly rental obligation of
$8,834. The leases on these facilities expire from 2004 through 2006.

         Metretek Florida leases its principal business offices, located in
Melbourne, Florida and consisting of 45,500 square feet, for its executive,
manufacturing, engineering, warehouse and marketing operations. The lease has a
monthly rental obligation of $33,794, including operating costs, and expires
July 30, 2005. Metretek Florida has sub-leased 13,107 square feet of its space
on a month-to-month basis for $12,526 monthly rental.



                                       14
<PAGE>

         We believe our facilities are suitable and adequate to meet our current
and anticipated needs. We continually monitor our facilities requirements, and
we believe that any additional space needed in the future will be available on
commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

CLASS ACTION AND RELATED LITIGATION

         In January 2001, Douglas W. Heins, individually and on behalf of a
class of other persons similarly situated (the "Class Action Plaintiff"), filed
a complaint (the "Class Action") in the District Court for the City and County
of Denver, Colorado (the "Denver Court") against us, Marcum Midstream 1997-1
Business Trust (the "1997 Trust"), Marcum Midstream-Farstad, LLC ("MMF"), Marcum
Gas Transmission, Inc. ("MGT"), Marcum Capital Resources, Inc. ("MCR"), W.
Phillip Marcum, Richard M. Wanger and Daniel J. Packard (the foregoing,
collectively, the "Metretek Defendants"), Farstad Gas & Oil, LLC ("Farstad LLC")
and Farstad Oil, Inc. ("Farstad Inc." and, collectively with Farstad LLC, the
"Farstad Entities"), and Jeff Farstad ("Farstad" and, collectively with the
Farstad Entities, the "Farstad Defendants").

         The 1997 Trust was an energy program of which MGT, a wholly-owned
subsidiary of us, is the managing trustee, and Messrs. Marcum, Wanger, Packard
and Farstad are or were the active trustees. The 1997 Trust raised approximately
$9.25 million from investors in a private placement in 1997 in order to finance
the purchase, operation and improvement of a natural gas liquids processing
plant located in Midland, Texas. As the result of contractual, market and
operational difficulties, the 1997 Trust ceased operations in 1998.

          The Class Action alleges that the Metretek Defendants and the Farstad
Defendants (collectively, the "Class Action Defendants"), either directly or as
"controlling persons", violated certain provisions of the Colorado Securities
Act in connection with the sale of interests in the 1997 Trust. Specifically,
the Class Action Plaintiff claims that his and the class's damages resulted from
the Class Action Defendants negligently, recklessly or intentionally making
false and misleading statements, failing to disclose material information, and
willfully participating in a scheme or conspiracy and aiding or abetting
violations of Colorado law, which scheme and statements related to the
specification of the natural gas liquids product to be delivered under certain
contracts, for the purpose of selling the 1997 Trust's units. The damages sought
in the Class Action include compensatory and punitive damages, pre- and
post-judgment interest, attorneys' fees and other costs.

         On May 11, 2001, the Denver Court granted in part the Class Action
Defendants' motions to dismiss by narrowing certain claims and dismissing the
fourth claim for relief, the allegation that the Farstad Defendants, Mr.
Packard, MCR and MGT are liable under Colorado law for giving substantial
assistance in further any of securities violations, as to all Class Action
Defendants except MCR. The Denver Court also granted a motion to dismiss the
claims against the Farstad Entities.

         On May 24, 2001, the Metretek Defendants filed answers to the Class
Action, generally denying its allegations and claims and making cross-claims
against the Farstad Defendants. The Metretek Defendants have filed additional
cross-claims and third party complaints against the Farstad Defendants alleging
fraud, negligent misrepresentation and contractual indemnification and
contribution, among other claims. The Farstad Defendants have filed answers
generally denying these claims and have asserted cross-claims and third party
counter-claims against the Metretek Defendants. The Metretek Defendants have
denied the allegations of the Farstad Defendants.

         On September 28, 2001, the Denver Court granted the Class Action
Plaintiff's motion to certify a class (the "Class") consisting of all investors
in the 1997 Trust. Ten investors, representing a net investment of approximately
$288,000, opted out of the Class to pursue a separate lawsuit in California, as
described below. The net investment of the remaining members of the Class was
approximately $7.5 million.

         On August 12, 2002, the Metretek Defendants filed a third party
complaint against IFG Network Securities, Inc. ("IFG") and Pringle & Herigstad,
P.C., seeking contribution. On December 31, 2002, the Metretek Defendants filed
a third party complaint against Patrick Sughroue, alleging professional
malpractice and seeking contribution.

         On December 6, 2002, the Class Action Plaintiff filed a motion for
partial summary judgment as to liability on two claims for relief. The Metretek
Defendants have received an extension of time to respond to that motion in light
of the proposed settlement described below.


                                       15
<PAGE>

         As of the date of this Report, a trial date had not been set in the
Class Action and no significant discovery had been conducted.

         On March 27, 2003, we, along with the Class Action Plaintiff, filed a
Stipulation of Settlement (the "Heins Stipulation"), which contains the terms
and conditions of a proposed settlement (the "Heins Settlement") intended to
fully resolve all claims by the Class Action Plaintiff against us and the other
Metretek Defendants in the Heins Class Action. The Heins Settlement is
contingent, among other things, upon the payment of not less than $2,375,000
from the proceeds of our directors' and officers' insurance policy. The Heins
Stipulation creates a settlement fund (the "Heins Settlement Fund") for the
benefit of the Class. If the Denver Court approves the Heins Settlement and all
other conditions to the Heins Settlement are met, then we will pay $2.75 million
into the Heins Settlement Fund, of which no less than $2,375,000 must come from
the proceeds of our insurance policy. In addition, we will issue a note payable
to the Heins Settlement Fund in the amount of $3.0 million (the "Heins
Settlement Note"). The Heins Settlement Note would bear interest at the rate of
prime plus three percent (prime + 3%), payable in 16 quarterly installments,
each of $187,500 principal plus accrued interest, commencing six months after
the effective date of the Heins Settlement. The Heins Settlement Note would be
guaranteed by the 1997 Trust and all of our subsidiaries. Under the Heins
Stipulation, we are required to obtain the consent of the Class's lead counsel
before we can sell any shares of stock of Southern Flow, Metretek or
PowerSecure, although such consent is not required if we make a prepayment of at
least $1 million on the Heins Settlement Note with the proceeds of any such sale
of subsidiary stock. The Heins Stipulation requires the Company to commence its
payment obligations thereunder pursuant to an escrow arrangement after the
Denver Court issues its final judgment and order approving the Heins
Stipulation, but before all appeals, if any, on that judgment and order have
been concluded. If the Heins Stipulation does not receive final and
non-appealable approval by December 31, 2006, or such later date as is agreed to
by the parties, then the escrowed funds will be returned to us.

         In addition, we would be required under the Heins Stipulation to either
vigorously prosecute any third party or cross-claims that we believe we have in
relation to the Class Action through counsel of our choosing or by requesting
that counsel for the Class prosecute these claims. Of the net recovery (after
litigation expenses, including legal fees) of any amounts collected from the
resolution of these third party claims, 50% would be allocated to the Heins
Settlement Fund as additional settlement funds, and 50% would be allocated to
offset our obligations under the Heins Settlement Note, first being applied
against future payments due under the Heins Settlement Note, with any remainder
paid back to us in reimbursement for past payments on the Heins Settlement Note.
In addition, the net recovery from the prosecution of any claims by the Class
against any of the Farstad Defendants, other than Jeff Farstad as described
below, would be treated in the same way as the net recovery from the prosecution
of claims by Metretek Defendants as described above.

         The Heins Stipulation would fully and finally release all claims
between the Class and us and the other Metretek Defendants. Under the Heins
Stipulation, the Class would also release Jeff Farstad from claims by the Class
against him by reason of his status as a trustee of the 1997 Trust. However, it
would not release our claims against him or any claims by either the Class or us
against any other Farstad Defendants. In addition, the Heins Stipulation would
not release any claims against the brokerage firms involved with the offering of
the 1997 Trust's securities that are unique to a particular Class member.

         The effective date of the Heins Stipulation is conditioned, among other
things, upon the following events:

         -        payment by our insurance carrier of at least $2,375,000 in
                  insurance proceeds for the benefit of the Heins Settlement
                  Fund;

         -        the entry by the Denver Court of a preliminary approval order
                  containing certain procedural orders, preliminarily approving
                  the settlement terms and scheduling a settlement hearing;

         -        the entry by the Denver Court of a Final Judgment and Order
                  directing consummation of the Heins Settlement and containing
                  certain other procedural findings and orders; and

         -        the final and successful resolution of any appeals related to
                  the Final Settlement and Order and the Heins Stipulation.

         We cannot provide any assurance that the foregoing conditions will be
satisfied and that the Heins Stipulation will become effective, or if it becomes
effective the timing of such effectiveness. Our insurance carrier has not
consented to the Heins Settlement or committed to the payment of any insurance
proceeds for the benefit of the Heins Settlement Fund, which are conditions of
the Heins Settlement. If the Heins Stipulation does not become effective, we
cannot predict the outcome of this litigation or the impact the resolution of
the Class Action will have on our business, financial position or results of
operations. We and the Metretek Defendants dispute the allegations


                                       16
<PAGE>

of wrongdoing in the Class Action and intend to vigorously defend the claims
against us and them and to vigorously pursue appropriate cross-claims and third
party claims. However, failure to consummate the Heins Settlement or an adverse
judgment against us in the Class Action could have a material adverse effect on
our business, financial condition and results of operations.

         In May 2001, 21 plaintiffs, including Michael Mongiello and Charlotte
Mongiello, trustees of the Mongiello Family Trust dated 8/1/90 (the "Mongiello
Plaintiffs"), filed, and subsequently served, a first amended complaint (the
"Mongiello Case") in the Superior Court in the State of California for the
County of San Diego (the "California Court") against the Metretek Defendants,
the Farstad Defendants, United Pacific Securities, Inc., GBS Financial
Corporation, IFG Network Securities, Inc., and numerous officers, directors,
employees and brokers related to such brokerage houses (the "California
Defendants"). The Mongiello Case contained allegations against the Metretek
Defendants and claims for relief similar to those contained in the Class Action.
The net investment in the 1997 Trust by the Mongiello Plaintiffs was
approximately $542,000.

         On October 5, 2001, the California Court granted the motion by the
Metretek Defendants to dismiss the claims against Metretek Technologies, Mr.
Marcum and Mr. Wanger for lack of personal jurisdiction. The California Court
also granted a similar motion dismissing the claims against the Farstad
Defendants for lack of personal jurisdiction. On November 5, 2001, MGT, MCR,
MMF, Mr. Packard and the 1997 Trust, as the remaining Metretek Defendants, filed
an answer generally denying the allegations and claims in the Mongiello Case. On
March 6, 2002, the remaining Metretek Defendants filed a motion to dismiss the
claims of the non-California resident Mongiello Plaintiffs on forum non
conveniens grounds. On or about March 29, 2002, the California Court granted
this motion, dismissing the claims of 11 of the 21 Mongiello Plaintiffs. The net
investment of the remaining Mongiello Plaintiffs was approximately $266,000. The
ten remaining Mongiello Plaintiffs opted out of the Class Action. In December
2002, the remaining Metretek Defendants settled the Mongiello Case. The
settlement did not have a material adverse effect on our business, financial
condition or results of operation.

         In January 2002, six plaintiffs, including Glenn Puddy (the "Puddy
Plaintiffs"), served a complaint (the "Puddy Case") in the California Court
against the same defendants as in the Mongiello Case, containing allegations,
legal claims and damages similar to those in the Mongiello Case. The Puddy
Plaintiffs and the Mongiello Plaintiffs have the same legal counsel. The net
investment of the Puddy Plaintiffs in the 1997 Trust was approximately $89,000.
All of the Metretek Defendants have been dismissed from the Puddy Case for lack
of personal jurisdiction. A motion by the Puddy Plaintiffs to consolidate the
Puddy Case with the Mongiello Case, or to allow the Mongiello Plaintiffs to
amend their complaint to add the Puddy Plaintiffs as additional plaintiffs, was
denied. None of the Puddy Plaintiffs opted out of the Class Action.

SCIENT NOTE LITIGATION

         During 1999 and 2000, we retained Scient Corporation ("Scient"), an
"eBusiness" consultant, to design and install an eBusiness program that would
enable us to provide our energy management services to commercial customers via
an Internet project, which was called "PowerSpring" (the "PowerSpring Project").
In connection with the PowerSpring Project, we paid Scient approximately $7
million in fees and expenses, as part of a total investment by us in PowerSpring
in excess of $15.6 million.

         In September 2000, as Scient's engagement was being terminated, we
issued a non-negotiable promissory note to Scient for approximately $2.8 million
(the "Scient Note") for the outstanding balance of services invoiced by Scient
in connection with the PowerSpring Project. The Scient Note provided for
payments by us in quarterly installments of $250,000 each until March 31, 2002,
at which time the remaining balance of the Scient Note was to be paid in full.
In June 2001, after we discovered fraudulent activity by Scient and uncovered
other matters of dispute in connection with Scient's services and billings,
Scient agreed to suspend our payment obligations under the Scient Note until the
amount of the fraudulent activity could be resolved. In May 2002, Scient's
engagement manager in charge of the PowerSpring Project pleaded guilty to
federal wire fraud and mail fraud charges stemming primarily from his activities
during Scient's engagement by us.

         In July 2002, Scient filed for Chapter 11 bankruptcy protection with
the United States Bankruptcy Court for the Southern District of New York (the
"Scient Bankruptcy Court"). Although the amount in dispute on the Scient Note
was never resolved between us and Scient, on October 17, 2002, we received a
letter from Scient's counsel purporting to constitute notice by Scient that we
were in breach of the Scient Note for failing to make payments and threatening
to initiate enforcement proceedings if the remaining balance, which was then
approximately $2.5 million, was not paid in full. In November 2002, we filed a
motion with the Scient Bankruptcy Court, seeking to have that court compel
Scient and its successors to arbitrate the dispute related to the Scient Note in
accordance with


                                       17
<PAGE>

an arbitration provision in our agreement with Scient. In November 2002, we also
filed with the Scient Bankruptcy Court a $15.6 million proof of claim against
Scient's estate.

         In March 2003, we and Scient jointly filed a Stipulation and Order of
Settlement (the "Scient Settlement"), which is intended to fully and finally
resolve all claims and disputes with Scient. Under the terms of the Scient
Settlement, in exchange for our payment of $50,000 to Scient, Scient agreed to
release us from any further payment obligations under the Scient Note and we
agreed to dismiss our motion to compel arbitration and our proof of claim. The
Scient Settlement is subject to final and non-appealable approval by the Scient
Bankruptcy Court. Although we cannot provide any assurance that the Scient
Settlement will obtain final and non-appealable approval of the Scient
Bankruptcy Court, as of the date of this Report, management has no reason to
believe that the Scient Settlement will not obtain such approval.

         If the Scient Settlement does not become effective, then we intend to
vigorously challenge Scient's assertion that we have any remaining obligations
under the Scient Note and to vigorously pursue our proof of claim against
Scient's estate. However, we cannot provide any assurance that we will prevail
in our dispute with Scient. An adverse resolution in this matter requiring us to
make significant payments under the Scient Note could have material adverse
effect on our liquidity, financial condition and results of operations.

         From time to time, we are involved in other disputes and legal actions
arising in the ordinary course of business. We intend to vigorously defend all
claims against us. As of the date of this Report, other than as set forth above,
no litigation is currently pending or overtly threatened against us, the adverse
outcome of which, indirectly or in aggregate, we believe would have a material
adverse impact on our business, financial conditions or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matter was submitted to our security holders during the fourth
quarter of 2002.


                                       18
<PAGE>


                                     PART II

ITEM 5.     MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Since October 15, 2002, our Common Stock has traded over-the-counter on
the OTC Bulletin Board under the symbol "MTEK," Our Common Stock was previously
listed and traded on the Nasdaq National Market until May 31, 2002, and on the
Nasdaq SmallCap Market from June 3, 2002 through October 14, 2002. The following
table sets forth, for the periods indicated, the range of the high and low
closing sales prices of our Common Stock, as reported on the Nasdaq National
Market, the Nasdaq SmallCap Market and the OTC Bulletin Board, as indicated
below. Quotations for trades on the OTC Bulletin Board represent inter-dealer
prices without adjustment for retail mark-ups, mark-downs or commissions and
consequently do not necessarily reflect actual transactions.
<TABLE>
<CAPTION>
                                                                             HIGH           LOW
                                                                             ----           ---
<S>                                                                         <C>           <C>
                  YEAR ENDED DECEMBER 31, 2001:
                  First Quarter............................................ $2.44         $1.25
                  Second Quarter...........................................  2.05          1.15
                  Third Quarter............................................  1.49          0.70
                  Fourth Quarter...........................................  0.96          0.43

                  YEAR ENDED DECEMBER 31, 2002:

                  First Quarter............................................ $0.74         $0.43
                  Second Quarter (1, 2)....................................  0.78          0.39
                  Third Quarter (2)........................................  0.60          0.24
                  Fourth Quarter (2, 3)....................................  0.45          0.11
</TABLE>

----------
(1) Traded on the Nasdaq National Market until May 31, 2002.
(2) Traded on the Nasdaq SmallCap Market from June 2, through October 14, 2002.
(3) Traded on the OTC Bulletin Board since October 15, 2002.

HOLDERS

         As of February 28, 2003, there were 338 holders of record of our Common
Stock. Because many of the shares of our Common Stock are held in street name by
brokers and other institutions on behalf of stockholders, we are unable to
precisely determine the total number of stockholders represented by these record
holders, but we estimate, based upon available information, that there are at
least 3,000 beneficial owners of our Common Stock.

DIVIDENDS

         We have never declared or paid any cash dividends on our Common Stock,
and we do not anticipate declaring or paying any cash dividends on our Common
Stock in the foreseeable future. We currently intend to retain all future
earnings, if any, for use in the operation and expansion of our business and for
the servicing and repayment of indebtedness. As a holding company with no
independent operations, our ability to pay dividends is dependant upon the
receipt of dividends or other payments from our subsidiaries. The terms of our
credit facility limit our ability to pay dividends (other than on our Series B
Preferred Stock) by prohibiting the payment of dividends by Southern Flow or
Metretek Florida without the consent of the lender. In addition, the terms of
our Series B Preferred Stock contain certain restrictions on our ability to pay
dividends on our Common Stock. Future dividends, if any, will be determined by
our Board of Directors, based upon our earnings, financial condition, capital
resources, capital requirements, charter restrictions, contractual restrictions
and such other factors as our Board of Directors deems relevant.

         Holders of our Series B Preferred Stock are entitled to receive
dividends in cash at the rate of 8% per annum, which dividends may be paid or
accrued, plus any additional dividends declared by the Board of Directors, and
are entitled, under specified circumstances, to participate in dividends
declared or paid on the Common Stock.

         Information concerning securities authorized for issuance under equity
compensation plans is set forth below in "Item 11. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters."



                                       19
<PAGE>


ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS

INTRODUCTION

         The following discussion and analysis of our consolidated results of
operations for the years ended December 31, 2002 ("fiscal 2002") and 2001
("fiscal 2001") and of our consolidated financial condition as of December 31,
2002 should be read in conjunction with our consolidated financial statements
and related notes included elsewhere in this Report.

         The discussion in this Item, as well as in other Items in this Report,
contains forward-looking statements within the meaning of and made under the
safe harbor provisions of Section 27A of the Securities Act and Section 21E of
the Exchange Act. Forward-looking statements are all statements other than
statements of historical facts, including statements that refer to plans,
intentions, objectives, goals, strategies, hopes, beliefs, projections and
expectations or other characterizations of future events or performance, and
assumptions underlying the foregoing. See "Cautionary Note Regarding
Forward-Looking Statements" above. Forward-looking statements are not guarantees
of future performance or events, but are subject to and qualified by known and
unknown risks, uncertainties and other factors that could cause actual results
to differ materially from those expressed, anticipated or implied by such
forward-looking statements, including those risks, uncertainties and other
factors described below in this Item under "-- Additional Factors That May
Affect Our Business and Future Results", as well as other risks, uncertainties
and factors discussed elsewhere in this Report, in documents that we include as
exhibits to or incorporate by reference in this Report, and in other reports and
documents that we from time to time file with or furnish to the SEC. You are
cautioned not to place undue reliance on any forward-looking statements, any of
which could turn out to be wrong. Any forward-looking statements made in this
Report speak only as of the date of this Report.

CRITICAL ACCOUNTING POLICIES

         Management's discussion and analysis of our financial condition and
results of operations are based on our consolidated financial statements which
have been prepared in conformity with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires management to make estimates, judgments and assumptions that affect
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. On an on-going basis, we
evaluate our estimates, including those related to percentage of completion,
fixed price contracts, product returns, warranty obligations, bad debt,
inventories, cancellations costs associated with long term commitments,
investments, intangible assets, assets subject to disposal, income taxes,
restructuring, service contracts, contingencies and litigation. We base our
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making estimates and judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Estimates, by
their nature, are based on judgment and available information. Therefore, actual
results could differ from those estimates and could have a material impact on
our consolidated financial statements and it is possible that such changes could
occur in the near term.

         We have identified the accounting principles which we believe are most
critical to understanding our reported financial results by considering
accounting policies that involve the most complex or subjective decisions or
assessments. These accounting policies described below include:

         -        revenue recognition;

         -        allowance for doubtful accounts;

         -        inventories;

         -        warranty reserve;

         -        valuation of goodwill and other intangible assets; and

         -        deferred tax valuation allowance.


                                       20
<PAGE>

         For further discussion of our significant accounting polices, refer to
note 1 of the notes to our consolidated financial statements contained elsewhere
in this Report.

         Revenue Recognition. We recognize product revenue, in accordance with
SAB 101, when persuasive evidence of a non-cancelable arrangement exists,
delivery has occurred and/or services have been rendered, the price is fixed or
determinable, collectibility is reasonably assured, legal title and economic
risk is transferred to the customer, and when an economic exchange has taken
place. Virtually all product sales are to end users of the product, who are
responsible for payment for the product. In limited circumstances, sales
representatives or resellers may purchase our products for resale to end users.
In such circumstances, the reseller is responsible for payment to us regardless
of whether the reseller collects payment from the end user.

         For our long-term distributed generation projects, we recognized
revenue and profit as work progresses using the percentage-of-completion method,
which relies on estimates of total expected contract revenue and costs. We
follow this method as reasonably dependable estimates of the revenue and costs
applicable to various stages of a project can be made. Recognized revenues and
profits are subject to revision as a project progresses to completion. Revisions
in profit estimates are charged to income in the period in which the facts that
give rise to the revision become known. In addition, certain contracts provide
for cancellation provisions prior to completion of a project. The cancellation
provisions provide for payment of costs incurred, but may result in an
adjustment to profit already recognized in a prior period.

         Service revenue includes chart services, field services, laboratory
analysis, allocation and royalty services, professional engineering,
installation services, training, and consultation services. Revenues from these
services are recognized when the service is performed and the customer has
accepted the work.

         Software revenue relates the operating systems we license to our
customers designed to manage the collection and presentation of recorded data.
The license revenue is recognized over the 12-month non-cancelable term of the
annual license agreement. The portion of software license fees that has not been
recognized as revenue at any balance sheet date is recorded as a current
liability. In addition, when a customer engages us to install the software and
make any customizations for them, installation service revenue is recognized
when the installation and any related customizations have been completed and the
customer has accepted the product.

         Allowance for Doubtful Accounts. We maintain allowances for doubtful
accounts for estimated losses resulting from the inability of our customers to
make required payments. We assess the customer's ability to pay based on a
number of factors, including our past transaction history with the customer and
the credit worthiness of the customer. Management specifically analyzes accounts
receivable and historical bad debts, customer credit-worthiness, customer
concentrations, current economic trends, and changes in our customer payment
patterns when we evaluate the adequacy of our allowances for doubtful accounts.
We estimate the collectibility of our accounts receivable on an
account-by-account basis. In addition, we provide for a general reserve for all
accounts receivable. If the financial condition of our customers were to
deteriorate in the future, resulting in an impairment of their ability to make
payments, additional allowances may be required.

         Inventories. Inventories are stated at the lower of cost (determined
primarily on a first-in, first-out method) or market (estimated net realizable
value). A portion of our inventory is acquired for specific projects; a portion
of our inventory is acquired to assemble component parts for use in later
assemblies; and a portion of our inventory consists of spare parts and supplies
that we maintain to support a full-product range and a wide variety of customer
requirements. The portion of our inventory acquired for specific projects tends
to be high-dollar value quick turnaround equipment items. The portion of our
inventory used to assemble component parts tends to be comprised of electronic
parts, which may be subject to obsolescence or quality issues. The portion of
our inventory that supports older product lines and other customer requirements
may also be slow-moving and subject to potential obsolescence due to product
lifecycle and product development plans.

         We perform periodic assessments of inventory that includes a review of
component demand requirements, product lifecycle and product development plans,
and quality issues. As a result of this assessment, we write-down inventory for
estimated losses due to obsolescence and unmarketability equal to the difference
between the cost of the inventory and the estimated market value based on
assumptions and estimates concerning future demand, market conditions and
similar factors. If actual demand and market conditions are less favorable than
those estimated by management, additional inventory write-downs may be required.

         Warranty Reserve. We provide a standard one-year warranty for hardware
product sales and distributed generation equipment. In addition, we offer
extended warranty terms on our distributed generation turnkey projects


                                       21
<PAGE>

as well as certain hardware products. We reserve for the estimated cost of
product warranties when revenue is recognized, and we evaluate our reserve
periodically by comparing our warranty repair experience by product. While we
engage in product quality programs and processes, including monitoring and
evaluating the quality of our components suppliers and development of methods to
remotely detect and correct failures, our warranty obligation is affected by
actual product failure rates, parts and equipment costs and service labor costs
incurred in correcting a product failure. In addition, our operating history in
the distributed generation market is limited. Should actual product failure
rates, parts and equipment costs, or service labor costs differ from our
estimates, revisions to the estimated warranty liability would be required.

         Valuation of Goodwill and Other Intangible Assets. In assessing the
recoverability of goodwill and other intangible assets, we make assumptions
regarding the estimated future cash flows and other factors to determine the
fair value of these assets. If these estimates or their related assumptions
change in the future, we may be required to record impairment charges against
these assets in the reporting period in which the impairment is determined. For
intangible assets, this evaluation includes an analysis of estimated future
undiscounted net cash flows expected to be generated by the assets over their
estimated useful lives. If the estimated future undiscounted net cash flows are
insufficient to recover the carrying value of the assets over their estimated
useful lives, we will record an impairment charge in the amount by which the
carrying value of the assets exceeds their fair value. For goodwill, the
impairment evaluation includes a comparison of the carrying value of the
reporting unit which carries the goodwill to that reporting unit's fair value.
The fair value of each reporting unit is based upon an estimate of the net
present value of future cash flows. If the reporting unit's estimated fair value
exceeds the reporting unit's carrying value, no impairment of goodwill exists.
If the fair value of the reporting unit does not exceeds its carrying value,
then further analysis is required to determine the amount of goodwill
impairment, if any.

         During the three-month period ended June 30,2002, we completed the
initial testing of the impairment of goodwill and concluded that there was no
impairment of goodwill. During the three-month period ended December 31, 2002,
we completed our annual testing of the impairment of goodwill as of October 1,
2002. As a result of the test, we concluded that no impairment of goodwill
existed as of October 1, 2002.

         Deferred Tax Valuation Allowance. We currently record a valuation
allowance for 100% of our deferred tax assets based on our net operating losses
incurred in the past, consideration of future taxable income and ongoing prudent
and feasible tax planning strategies. In the event we were to determine that we
would be able to realize deferred tax assets in the future in excess of our net
recorded amount, an adjustment to the deferred tax assets would increase the
income in the period such determination was made. Likewise, in the future,
should we have a net deferred tax asset and determine that we would not be able
to realize all or part of that asset, an adjustment to the deferred tax asset
would be charged to income in the period that such determination was made.

RESULTS OF OPERATIONS

         The following table sets forth information related to our primary
business segments and is intended to assist you in understanding our results of
operations for the periods presented.
<TABLE>
<CAPTION>

                                                                                  YEARS ENDED
                                                                                   DECEMBER 31,
                                                                         -----------------------------
                                                                           2002                2001
                                                                         ---------           --------
                                                                         (dollar amounts in thousands)
REVENUES:
<S>                                                                        <C>                <C>
       Southern Flow...................................................    $12,288            $12,918
       PowerSecure.....................................................      8,229              8,975
       Metretek Florida................................................      6,524              6,629
       PowerSpring.....................................................          -                277
       Other...........................................................          1                294
                                                                           -------            -------
           Total.......................................................    $27,042            $29,093
                                                                           =======            =======
</TABLE>




                                       22
<PAGE>

<TABLE>
<CAPTION>

                                                                                 YEARS ENDED
                                                                                  DECEMBER 31,
                                                                         -----------------------------
                                                                           2002                2001
                                                                         ---------           --------
                                                                         (dollar amounts in thousands)
<S>                                                                         <C>                <C>
GROSS PROFIT:
       Southern Flow...................................................     $3,308             $3,390
       PowerSecure.....................................................      1,944              1,877
       Metretek Florida...............................................       1,850              2,321
       PowerSpring.....................................................        -                 (111)
                                                                          --------            -------
           Total.......................................................   $  7,102           $  7,477
                                                                          ========           ========
SEGMENT PROFIT (LOSS):
       Southern Flow...................................................   $  1,908           $  1,608
       PowerSecure.....................................................       (388)               403
       Metretek Florida................................................       (969)              (993)
       PowerSpring.....................................................        -                 (612)
       Other...........................................................     (3,933)            (1,791)
                                                                          --------            -------
           Total.......................................................   $ (3,382)           $(1,385)
                                                                          ========            =======
</TABLE>

         Our reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and marketing strategies. Our reportable
business segments include: natural gas measurement services; distributed
generation; automated energy data management; and (until April 1, 2001)
Internet-based energy information and services.

         The operations of our natural gas measurement services segment are
conducted by Southern Flow. Southern Flow's services include on-site field
services, chart processing and analysis, laboratory analysis, and data
management and reporting. These services are provided principally to customers
involved in natural gas production, gathering, transportation and processing.

         The operations of our distributed generation segment are conducted by
PowerSecure. PowerSecure commenced operations in September 2000. The primary
elements of PowerSecure's distributed generation products and services include
project design and engineering, negotiation with utilities to establish tariff
structures and power interconnects, generator acquisition and installation,
process control and switchgear design and installation, and ongoing project
monitoring and servicing. PowerSecure markets its distributed generation
products and services directly to large end-users of electricity and through
outsourcing partnerships with utilities. Through December 31, 2002, the vast
majority of PowerSecure's revenues have been generated from sales of distributed
generation systems on a "turn-key" basis, where the customer purchases the
systems from PowerSecure. PowerSecure has also generated a small portion of its
revenues from "company-owned" distributed generation assets that are leased to
customers on a long-term basis.

         The operations of our automated energy data management segment are
conducted by Metretek Florida. Metretek Florida's manufactured products fall
into the following categories: field devices, including metering data collection
products and electronic gas flow computers; data collection software products
(such as DC2000 and PowerSpring); and communications solutions that can use
GSM/GPRS real time wireless internet, traditional cellular radio, 900 MHz
unlicensed radio or traditional wire-line phone service to provide connectivity
between the field devices and the data collection software products. Metretek
Florida also provides energy data collection and management services and
post-sale support services for its manufactured products. In June 2002, Metretek
Florida formed MCM to conduct and expand its PCB contract manufacturing
operations.

         The operations of our internet-based energy information and services
segment were conducted by PowerSpring through March 31, 2001. PowerSpring
commenced limited revenue generating operations in the second quarter of 2000.
Effective April 1, 2001, PowerSpring's business was restructured and transferred
to Metretek Florida, and since that date we have included and reported the
internet-based energy and information business of PowerSpring with Metretek
Florida's automated data management segment.

         We evaluate the performance of our operating segments based on income
(loss) before taxes, nonrecurring items and interest income and expense. Other
profit (loss) amounts in the table above include corporate related items,
results of insignificant operations, and income and expense including
non-recurring charges not allocated to its operating segments. Intersegment
sales are not significant.


                                       23
<PAGE>

         FISCAL 2002 COMPARED TO FISCAL 2001

         Revenues. Our revenues are derived almost entirely from the sales of
products and services by our subsidiaries. Our consolidated revenues for fiscal
2002 decreased $2,051,000, or 7%, compared to fiscal 2001. The decrease was due
to decreased revenues at each of our operating subsidiaries. PowerSecure
revenues decreased $747,000, or 8%, during fiscal 2002 compared to fiscal 2001.
The decrease in PowerSecure's revenues was due to the reduced size of
PowerSecure's completed and in-process projects during fiscal 2002 compared to
fiscal 2001. The effect on revenues of the reduced size of PowerSecure's
projects was partially offset by the effects of an increase in volume of
projects during fiscal 2002 compared to fiscal 2001. PowerSecure had 30 projects
completed or in process during fiscal 2002 compared to 24 projects completed
(none in process) during fiscal 2001. PowerSecure's average revenue per project
for completed and in-process projects was approximately $263,000 during fiscal
2002 compared to approximately $371,000 during fiscal 2001. In addition,
PowerSecure's revenues in fiscal 2002 included $294,000 of professional service
revenue compared to $43,000 of professional service revenue in fiscal 2001. As
discussed below under "Quarterly Fluctuations", PowerSecure's revenues have
fluctuated significantly in the past and are expected to continue to fluctuate
significantly in the future. Southern Flow's revenues decreased $631,000, or 5%,
during fiscal 2002, compared to fiscal 2001, primarily due to a decrease in
equipment sales which was partially offset by an increase in chart processing
and analysis and field services revenues. The reduction in Southern Flow's
equipment sales was due primarily to a reduction in customer requirements for
such equipment during fiscal 2002 compared to fiscal 2001. PowerSpring's
revenues decreased by $532,000 during fiscal 2002, compared to fiscal 2001,
which included approximately $255,000 in other revenues related to the
termination of PowerSpring effective March 31, 2001. PowerSpring's monitoring
products and services, now operated by Metretek Florida, generated approximately
$94,000 of domestic revenues at Metretek Florida during fiscal 2002. Metretek
Florida's revenues decreased $105,000, or less than 2%, during fiscal 2002
compared to fiscal 2001, consisting of a decrease in domestic sales of $206,000
partially offset by an increase in international sales of $101,000.

         Costs and Expenses. Cost of sales and services includes materials,
personnel and related overhead costs incurred to manufacture products and
provide services. Cost of sales and services for fiscal 2002 decreased
$1,384,000, or 6%, compared to fiscal 2001, attributable to the lower sales at
PowerSecure, Southern Flow, and PowerSpring partially offset by higher cost of
sales and services at Metretek Florida, despite overall lower revenues.
PowerSecure's cost of sales and services for fiscal 2002 decreased $814,000, or
11%, compared to fiscal 2001, despite only a 8% decrease in revenues. As a
result, PowerSecure's gross profit margin after cost of sales and services
increased to 23.6% for fiscal 2002 compared to 20.9% for fiscal 2001. The
increase in PowerSecure's gross profit margins is due to a higher percentage of
total revenues from professional services, which has higher profit margins to
PowerSecure, in fiscal 2002 compared to fiscal 2001. Southern Flow's cost of
sales and services for fiscal 2002 decreased $549,000, or 6%, compared to fiscal
2001, despite only a 5% decrease in revenues. As a result, Southern Flow's gross
profit margin after cost of sales and services increased slightly to 26.9% for
fiscal 2002 compared to 26.2% for fiscal 2001, which is within the range of
normal fluctuations for Southern Flow. PowerSpring's cost of sales and services
decreased by $388,000 during fiscal 2002 compared to fiscal 2001 due to the
termination of PowerSpring as a separate operating entity effective March 31,
2001. Metretek Florida's cost of sales and services for fiscal 2002 increased
$366,000, or 9%, compared to fiscal 2001, despite a 2% decline in Metretek
Florida's revenues. The increase in Metretek Florida's cost of sales despite an
overall decline in revenues reflects higher materials, personnel and related
overhead costs attributable to sales of its products and systems and contract
manufacturing activities, and in particular relating to start-up costs
associated with the formation of MCM. As a result, Metretek Florida's overall
gross profit margin decreased to 28.4% for fiscal 2002, compared to 35.0% for
fiscal 2001.

         General and administrative expenses include personnel and related
overhead costs for support and administrative functions. General and
administrative expenses for fiscal 2002 increased $68,000, or 1%, compared to
fiscal 2001, due primarily to an increase of $723,000, or 54%, in personnel and
related overhead costs associated with the continued development of the business
of PowerSecure during fiscal 2002 together with a small increase in personnel
cost at Southern Flow during fiscal 2002 compared to fiscal 2001. These
increases were partially offset by reduced personnel, travel and overhead costs
at Metretek Florida, reduced corporate overhead costs, and the 2001 termination
of PowerSpring as a separate operating entity.


                                       24
<PAGE>

         Selling, marketing and service expenses consist of personnel and
related overhead costs, including commissions, for sales and marketing
activities, together with advertising and promotion costs. Selling, marketing
and service expenses for fiscal 2002 increased $195,000, or 14%, compared to
fiscal 2001. The increase in selling, marketing and service expenses is due to
the offsetting effects of the following: (i) an increase in selling and
marketing costs at Metretek Florida due to consulting, personnel, and service
contract costs associated with Metretek Florida's monitoring products and
services transferred from PowerSpring and now operated by Metretek Florida; (ii)
an increase in selling and marketing costs related to the continued business
development activities of PowerSecure; and (iii) a decrease in selling and
marketing costs of PowerSpring, which is no longer operating as a separate
subsidiary.

         Depreciation and amortization expenses include the depreciation of
property, plant and equipment and the amortization of certain intangible assets
including capitalized software development costs and other intangible assets
that do not have indefinite useful lives. Prior to the required adoption of
Statement of Financial Accounting Standards ("FAS") No. 142 "Goodwill and Other
Intangible Assets" on January 1, 2002, Southern Flow, Metretek Florida, and
PowerSecure also amortized other intangible assets with indefinite useful lives
including customer list and goodwill. Depreciation and amortization expenses for
fiscal 2002 decreased $760,000, or 54%, compared to fiscal 2001. The decrease in
depreciation and amortization expense primarily reflects a reduction of
amortization expense in the amount of $465,000, $190,000, and $20,000 at
Southern Flow, Metretek Florida, and PowerSecure, respectively, related to
goodwill and other intangible assets with indefinite useful lives, which are no
longer amortized under FAS 142. The remaining decrease is due primarily to
reduced depreciation on surplus property plant and equipment items previously
held by PowerSpring prior to its termination that was disposed of throughout
2001.

         Research and development expenses include payments to third parties,
personnel and related overhead costs for product and service development,
enhancements, upgrades, testing and quality assurance. Research and development
expenses for fiscal 2002 decreased $245,000, or 31%, compared to fiscal 2001.
The decrease is due entirely to reduced personnel related product development
expenses at Metretek Florida.

         Interest, finance charges and other expenses include interest and
finance charges on our credit facility as well as other non-operating expenses.
Interest, finance charges and other expenses for fiscal 2002 increased $51,000,
or 33%, compared to fiscal 2001. The increase reflects increased borrowings and
higher finance charges during fiscal 2002 compared to fiscal 2001.

         Provision for litigation costs, net for fiscal 2002 includes the
offsetting effects of a $3,505,000 loss attributable to the proposed settlement
of the Class Action, which is litigation related to our discontinued MGT
subsidiary, offset, in part, by a $1,741,000 gain from the settlement of all
claims and disputes with Scient, a former vendor, which resulted in the
cancellation of the Scient Note, a promissory note that we issued to Scient in
September 2000. See the discussion of this litigation and the details of the
settlement arrangements in "Item 3. Legal Proceedings". We incurred no similar
litigation costs in fiscal 2001.

       Nonrecurring charges for fiscal 2002 include the costs related to the
June 2002 changes in management at Metretek Florida, principally termination
benefits paid or payable to former Metretek Florida management personnel. There
were no similar nonrecurring charges in fiscal 2001.

LIQUIDITY AND CAPITAL RESOURCES

         Capital Requirements.  We require capital primarily to finance our:

         -        operations;

         -        inventory;

         -        accounts receivable;

         -        research and development efforts;

         -        property and equipment acquisitions;

         -        software development;


                                       25
<PAGE>

         -        debt service requirements; and

         -        business and technology acquisitions and other growth
                  transactions.

         In addition, we anticipate that the cash flow requirements of
PowerSecure, primarily to finance "turn-key" distributed generation projects but
also to finance future significant "company-owned" projects, if any, will
require significant capital in future periods.

         Cash Flow. We have historically financed our operations and growth
primarily through a combination of cash on hand, cash generated from operations,
borrowings under credit facilities, and proceeds from private and public sales
of equity. As of December 31, 2002, we had working capital of $4,090,000,
including $885,000 in cash and cash equivalents, compared to working capital of
$3,537,000 on December 31, 2001, which included $696,000 in cash and cash
equivalents.

         Net cash provided by operating activities was $96,000 in fiscal 2002,
consisting of approximately $944,000 of cash used in operations, before changes
in assets and liabilities, and approximately $1,040,000 of cash provided by
changes in working capital and other asset and liability accounts. This compares
to net cash provided by operating activities of $615,000 in fiscal 2001,
consisting of approximately $110,000 of cash provided by operations, before
changes in assets and liabilities, and approximately $505,000 of cash provided
by changes in working capital and other asset and liability accounts.

         Net cash used in investing activities was $545,000 in fiscal 2002, as
compared to $322,000 in fiscal 2001. The majority of the net cash used by
investing activities during fiscal 2002 was attributable to the purchase of
manufacturing equipment at Metretek Florida for use in its contract
manufacturing business. The majority of the net cash used by investing
activities during fiscal 2001 was attributable to capitalized software
development.

         Net cash provided by financing activities was $637,000 in fiscal 2002,
compared to net cash used in financing activities of $66,000 in fiscal 2001. The
net cash provided by financing activities during fiscal 2002 represented net
borrowings on Metretek Florida's new line of credit and proceeds from an
equipment loan offset, in part, by common stock repurchases and payments on our
mortgage loan and capital lease obligations. The net cash used in financing
activities during fiscal 2001 was attributable to initial proceeds from Southern
Flow's line of credit, offset by payments on a prior existing line of credit,
payments on notes payable, and payments on capital lease obligations.

         During fiscal 2003, we plan to continue our research and development
efforts to enhance our existing products and services and to develop new
products and services. Our research and development expenses totaled $552,000
during fiscal 2002. We anticipate that our research and development expenses in
fiscal 2003 will total approximately $792,000, virtually all of which will be
directed to Metretek Florida's business.

         Our capital expenditures in fiscal 2002 were approximately $546,000. We
anticipate capital expenditures in fiscal 2003 of approximately $280,000 which
will benefit all of our key subsidiaries. In addition, the development of
PowerSecure's "company-owned" program business would entail significant
additional capital expenditures, which would require and depend upon us raising
substantial additional capital. We cannot provide any assurance we will be
successful in raising additional capital, or that the amount of any additional
capital that we are able to raise will be sufficient to allow PowerSecure to
meet our objectives for its growth and development or will be on favorable
terms.

         Credit Facility. On September 24, 2001, Southern Flow entered into a
Credit and Security Agreement (the "Southern Flow Credit Agreement") with Wells
Fargo Business Credit, Inc. ("Wells Fargo"), providing for a $2,000,000 credit
facility (the "Southern Flow Credit Facility"). Amounts borrowed under the
Southern Flow Credit Facility bear interest at prime plus one percent. The
Southern Flow Credit Facility contains minimum interest charges and unused
credit line and termination fees, and matures on September 30, 2004. The
Southern Flow Credit Facility refinanced our prior credit facility.

         The obligations of Southern Flow under the Southern Flow Credit
Agreement have been guaranteed by Metretek Technologies, PowerSecure and
Metretek Florida. These guarantees have been secured by a guaranty agreement and
a security agreement entered into by each of the guarantors. The security
agreements grant to Wells


                                       26
<PAGE>

Fargo a first priority security interest in virtually all of the assets of each
of the guarantors. The Southern Flow Credit Facility is further secured by a
first priority security interest in virtually all of the assets of Southern
Flow.

         Southern Flow is permitted to advance funds under the Southern Flow
Credit Facility to the guarantors, provided that total inter-company
indebtedness owing from all guarantors to Southern Flow at the end of each month
may not exceed the cumulative net income of Southern Flow from January 1,
2001 until such date or reduce Southern Flow's tangible book net
worth below $1,400,000.

         The Southern Flow Credit Agreement contains standard affirmative and
negative covenants by Southern Flow, including financial covenants by Southern
Flow to maintain a minimum tangible net book value, minimum quarterly and annual
net income levels and maximum capital expenditures. The Southern Flow Credit
Agreement contains other standard covenants related to Southern Flow's
operations, including limitations on future indebtedness and the payment of
dividends the sale of assets and other corporate transactions by Southern Flow,
without Wells Fargo's consent.

         Borrowings under the Southern Flow Credit Facility are limited to a
borrowing base consisting of the sum of 85% of Southern Flow's eligible accounts
receivable plus the lesser of 20% of Southern Flow's eligible inventory
(consisting primarily of raw materials and finished goods inventory) or
$200,000. As of December 31, 2002, Southern Flow had a borrowing base of
$1,495,000 under the Southern Flow Credit Facility, of which $1,009,000 had been
borrowed, leaving $486,000 in unused availability.

         On September 6, 2002, Metretek Florida entered into a Credit and
Security Agreement (the "Metretek Florida Credit Agreement") with Wells Fargo,
providing for a $1,000,000 credit facility (the "Metretek Florida Credit
Facility" and, collectively with the Southern Flow Credit Facility, the "Credit
Facility"). Amounts borrowed under the Metretek Florida Credit Facility bear
interest at prime plus two percent. The Metretek Florida Credit Facility
contains minimum interest charges and unused credit line and termination fees,
and matures on September 30, 2004. The Metretek Florida Credit Facility operates
as an extension of the Southern Flow Credit Facility.

         The obligations of Metretek Florida under the Metretek Florida Credit
Agreement have been guaranteed by Metretek Technologies, PowerSecure, Southern
Flow and MCM. These guarantees have been secured by a guaranty agreement and a
security agreement entered into by each of the guarantors. The security
agreements grant to Wells Fargo a first priority security interest in virtually
all of the assets of each of the guarantors. The Metretek Florida Credit
Facility is further secured by a first priority security interest in virtually
all of the assets of Metretek Florida. Metretek Florida is permitted to advance
funds under the Metretek Florida Credit Facility to the guarantors, provided
that after making such advances the Metretek Florida Credit Facility
availability is not less than $100,000, and that total advances to the
guarantors do not exceed $500,000.

         Borrowings under the Metretek Florida Credit Facility are limited to a
borrowing base consisting of the sum of 80% of Metretek Florida's eligible
accounts receivable. As of December 31, 2002, Metretek Florida had a borrowing
base of $605,000 under the Metretek Florida Credit Facility, of which $462,000
had been borrowed, leaving $143,000 in unused Metretek Florida Credit Facility
availability.

         The Metretek Florida Credit Agreement contains standard affirmative and
negative covenants by Metretek Florida, including financial covenants by
Metretek Florida to maintain a minimum tangible net worth, minimum net income
levels and maximum capital expenditures. The Metretek Florida Credit Agreement
contains other standard covenants related to Metretek Florida's operations,
including limitations on future indebtedness and the payment of dividends the
sale of assets and other corporate transactions by Metretek Florida, without the
Lender's consent. As of December 31, 2002, Metretek Florida was not in
compliance with the minimum net income and maximum capital expenditure financial
covenants in the Metretek Florida Credit Agreement, but Wells Fargo has waived
these financial covenant requirements for the period ended December 31, 2002
and has established the financial covenants for Metretek Florida for 2003 and
thereafter. This non-compliance under the Metretek Florida Credit Agreement
created a cross-default under the Southern Flow Credit Agreement, but Wells
Fargo has also waived that cross-default and has established the financial
covenants for Southern Flow for 2003 and thereafter.

         The Credit Facility, which constitutes our primary credit agreement, is
used primarily to fund the operations and growth of PowerSecure, as well as the
operations of Metretek Florida and Southern Flow. While the Credit Facility will
restrict our ability to sell or finance our subsidiaries without the consent of
Wells Fargo's, in the event that we are able to secure debt or equity financing
for a subsidiary that is a guarantor or the sale or merger of such subsidiary
and such subsidiary repays all advances made to it by Southern Flow or Metretek
Florida, as applicable, then Wells Fargo has agreed to terminate the applicable
restrictions in the Credit Facility relating to such subsidiary as a Guarantor.

         Heins Stipulation. On March 27, 2003, we filed the Heins Stipulation,
which contains the terms and conditions of the Heins Settlement that is intended
to fully resolve all claims by the Class Action Plaintiff against us


                                       27
<PAGE>

and the other Metretek Defendants in the Heins Class Action. The Heins
Settlement is contingent, among other things, upon the payment of at least
$2,375,000 from the proceeds of our directors' and officers' insurance policy.
If the Denver Court approves the Heins Settlement and all other conditions to
the Heins Settlement are met, then we will pay $2.75 million into the Heins
Settlement Fund, of which no less than $2,375,000 must come from the proceeds of
our insurance policy. In addition, we will issue the Heins Settlement Note, a
note payable to the Settlement Fund in the amount of $3.0 million. The Heins
Settlement Note would bear interest at the rate of prime plus three percent
(prime + 3%), payable in 16 quarterly installments, each of $187,500 principal
plus accrued interest, commencing six months after the effective date of the
Heins Settlement. The Heins Settlement Note would be guaranteed by the Trust and
all of our subsidiaries. The Heins Stipulation requires the Company to commence
its payment obligations thereunder pursuant to an escrow arrangement after the
Denver Court issues its final judgment and order approving the Heins
Stipulation, but before all appeals, if any, on that judgment and order have
been concluded. If the Heins Stipulation does not receive final and
non-appealable approval by December 31, 2006, or such later date as we and the
Class Action Plaintiff agree, then the escrowed funds will be returned to us.
This litigation and proposed settlement are more fully discussed in "Item 3.
Legal Proceedings."

         As a result of Heins Stipulation and the obligations that would become
due under the Heins Settlement Note, we recorded a loss in the amount of
approximately $3,505,000 in the fourth quarter of 2002 resulting from the
amounts due on the Heins Settlement Note, amounts payable by us into the Heins
Settlement Fund, and additional legal costs, but excluding interest costs that
will be incurred on the Heins Settlement Note during the repayment period.

         Scient Settlement. In March 2003, we filed the Scient Settlement, which
is intended to fully and finally resolve all claims and disputes related to the
Scient Note. Under the terms of the Scient Settlement, in exchange for our
payment of $50,000 to Scient, Scient agreed to release us from any further
payment obligations under the Scient Note. The Scient Settlement is subject to
final and non-appealable approval by the Scient Bankruptcy Court. Although we
cannot provide any assurance that the Scient Settlement will obtain the final
and non-appealable approval of the Scient Bankruptcy Court, as of the date of
this Report, management has no reason to believe that the Scient Settlement will
not obtain such approval. This litigation and settlement are more fully
discussed in "Item 3. Legal Proceedings." As a result of the Scient Settlement,
we recorded a gain in the amount of approximately $1,741,000 in the fourth
quarter of 2002 resulting from the cancellation of the Scient Note offset by the
$50,000 cash payment due to Scient and the write-off of the recorded amount of
fraudulent equipment and software purchases we had retained as an offset to the
amount due under the Scient Note.

         Contractual Obligations and Commercial Commitments. We incur various
contractual obligations and commercial commitments in our normal course of
business. We lease certain office space, operating facilities and equipment
under long-term lease agreements. In addition, we are obligated to make future
payments under the Credit Facility and the Mortgage Loan, and to redeem our
Series B Preferred Stock in December 2004. Moreover, if the Heins Stipulation
becomes effective, we will be required to make certain payments under its terms.
The following table sets forth our contractual obligations and commercial
commitments as of December 31, 2002:

<TABLE>
<CAPTION>
                                                     PAYMENTS DUE BY PERIOD (1)
                               --------------------------------------------------------------------------
                                             LESS THAN                                        MORE THAN
CONTRACTUAL OBLIGATIONS           TOTAL        1 YEAR       1-3 YEARS     4-5 YEARS            5 YEARS
-----------------------        -----------   -----------   -----------   -----------          -----------
<S>                         <C>           <C>           <C>           <C>                            <C>
Credit Facility (2)            $ 1,471,000          --     $ 1,471,000          --                   --
Capital Lease Obligations           96,000   $    50,000        46,000          --                   --
Operating Leases                 2,279,000       832,000     1,138,000   $   309,000                 --
Series B Preferred Stock (3)     8,532,000          --       8,532,000          --                   --
Heins Settlement (4)             3,375,000       562,500     1,500,000     1,312,500
Other Long-Term Obligations        481,000        74,000       193,000       214,000                 --
                               -----------   -----------   -----------   -----------          -----------
      Total (4)                $16,234,000   $ 1,518,500   $12,880,000   $ 1,835,500                    0
                               ===========   ===========   ===========   ===========          ===========
</TABLE>

----------

(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 December
         31, 2002, not projected borrowings under the Credit Facility.

(3)      Based upon accrued and unpaid dividends as of December 31, 2002.



                                       28
<PAGE>

(4)      Assumes the Heins Settlement becomes effective in the fall of 2002, but
         excludes interest on the Heins Settlement Note. We cannot provide any
         assurance as to whether the Heins Settlement will obtain final
         approval, or the timing of such approval. See "Item 3. Legal
         Proceedings".

         Off-Balance Sheet Arrangements. During fiscal 2002, we did not engage
in any material off-balance sheet activities or have any relationships or
arrangements with unconsolidated entities established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes. Further, we have not guaranteed any obligations of
unconsolidated entities nor do we have any commitment or intent to provide
additional funding to any such entities.

         Liquidity. Based upon our plans and assumptions as of the date of this
Report, we currently believe that our capital resources, including our cash and
cash equivalents, amounts available under our Credit Facility, along with funds
expected to be generated from our operations, will be sufficient to meet our
anticipated cash needs during the next 12 months, including our working capital
needs, capital requirements and debt service commitments, other than the
development of the company-owned business of PowerSecure. However, any
projections of future cash needs and cash flows are subject to substantial risks
and uncertainties. See "--Additional Factors that May Affect Our Business and
Future Results" below. We cannot provide any assurance that our actual cash
requirements will not be greater than we currently expect or that these sources
of liquidity will be available when needed.

         For the following reasons, we may require additional funds, beyond our
currently anticipated resources, to support our working capital requirements,
our operations or our other cash flow needs:

         -        While we have reorganized our Metretek Florida business with
                  the goal of making its cash flow positive; the operations of
                  Metretek Florida, or its newly formed subsidiary MCM, may
                  require us to fund future operation, losses or costs of
                  business expansion.

         -        We expect that the costs of financing the continuing and
                  anticipated development and growth of PowerSecure, including
                  the equipment, labor and other capital costs of significant
                  turn-key projects that arise from time to time depending on
                  backlog and customer requirements, will, and that similar
                  costs that would be associated with developing any future
                  distributed generation systems for its company-owned business
                  package, would, require us to raise significant additional
                  funds, beyond our current capital resources.

         -        From time to time as part of our business plan, we engage in
                  discussions regarding potential acquisitions of businesses and
                  technologies. Our ability to finance any an acquisition in the
                  future will be dependent upon our ability to raise additional
                  capital. As of the date of this Report, we have not entered
                  into any binding agreement or understanding committing us to
                  any such acquisition, but we regularly engage in discussions
                  related to such acquisitions.

         -        We continually evaluate our opportunity to raise additional
                  funds in order to improve our financial position as well as
                  our cash flow requirements, and we may seek additional capital
                  in order to take advantage of such an opportunity or to meet
                  changing cash flow requirements.

         -        An adverse resolution to claims currently pending against us,
                  including but not limited to the Class Action and the Scient
                  Note if the proposed settlements do not become effective, or
                  to other claims that arise from time to time against us, could
                  significantly increase our cash requirements beyond our
                  available capital resources.

         -        Unanticipated events, over which we have no control, could
                  increase our operating costs or decrease our ability to
                  generate revenues from product and service sales beyond our
                  current expectations.

         We may seek to raise any needed or desired additional capital from the
proceeds of public or private equity or debt offerings at the Metretek
Technologies level or at the subsidiary level or both, from asset or business
sales, from traditional credit financings or from other financing sources.
However, our ability to obtain additional capital when needed or desired will
depend on many factors, including general economic and market conditions, our
operating performance and investor sentiment, and thus cannot be assured. In
addition, depending on how it is structured, a financing could require the
consent of our current lender, of the holders of our Series B Preferred Stock or
of lead counsel in the Class Action. Even if we are able to raise additional
capital, the terms of any financings could be adverse to the interests of our
stockholders. For example, the terms of a debt financing could restrict our
ability to operate our


                                       29
<PAGE>
business or to expand our operations, while the terms of an equity financing,
involving the issuance of capital stock or of securities convertible into
capital stock, could dilute the percentage ownership interests of our
stockholders, and the new capital stock or other new securities could have
rights, preferences or privileges senior to those of our current stockholders.
We cannot assure you that sufficient additional funds will be available to us
when needed or desired or that, if available, such funds can be obtained on
terms favorable to us and our stockholders and acceptable to our current lender
to the holders of our Series B Preferred Stock and to lead counsel in the Class
Action, if their consents are required. Our inability to obtain sufficient
additional capital on a timely basis on favorable terms when needed or desired
could have a material adverse effect on our business, financial condition and
results of operations.

RECENT ACCOUNTING PRONOUNCEMENTS

         In June 2001, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standards ("FAS") FAS No. 141 "Business Combinations". FAS
141 requires that all business combinations be accounted for under the purchase
method of accounting. FAS 141 also changes the criteria for the recognition of
intangible assets acquired in a business combination separately from goodwill
and requires unallocated negative goodwill to be written off immediately as an
extraordinary gain. FAS 141 is applicable to all business combinations initiated
after June 30, 2001.

         In June 2001, the FASB also issued FAS No. 142 "Goodwill and Other
Intangible Assets". FAS 142 addresses accounting and reporting for intangible
assets acquired and the accounting and reporting for goodwill and other
intangible assets subsequent to their acquisition. Under the provisions of FAS
142, goodwill and intangible assets with indefinite lives are no longer
amortized but rather are tested at least annually for impairment. Separable
intangible assets that do not have an indefinite life continue to be amortized
over their estimated useful lives.

         We adopted the provisions of FAS 141 and 142 effective January 1, 2002.
The non-amortization provisions of FAS 142 resulted in a $675,000 reduction in
our net loss applicable to common shareholders in fiscal 2002. During the
three-month period ended June 30,2002, we completed the initial testing of the
impairment of goodwill required by FAS 142 and concluded that there was no
impairment of goodwill. During the three-month period ended December 31, 2002,
we completed our annual testing of the impairment of goodwill as of October 1,
2002. As a result of the test, we concluded that no impairment of goodwill
existed as of October 1, 2002.

         In October 2001, the FASB issued FAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which addresses financial
accounting and reporting for the impairment and disposal of long-lived assets.
While FAS 144 supercedes FAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", it retains many
of the fundamental provisions of FAS 121 for recognition and measurement of the
impairment of long-lived assets to be held and used and for measurement of
long-lived assets to be disposed of by sale. FAS 144 also supercedes the
accounting and reporting provisions of APB Opinion No. 30, "Reporting Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business and
Extraordinary, Unused and Infrequently Occurring Events and Transactions", for
the disposal of segments of a business. FAS 144 establishes a single accounting
model, based on the framework established in FAS 121, for long-lived assets to
be disposed of by sale. We adopted the provisions of FAS 144 effective January
1, 2002. Adoption of FAS 144 had no effect on our financial position or results
of operations.

         In July 2002, the FASB issued FAS No. 146, "Accounting for Costs
Associated With Exit or Disposal Activities", which provides guidance for
financial accounting and reporting of costs associated with exit or disposal
activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain
Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)". FAS 146 requires the recognition of
a liability for a cost associated with an exit or disposal activity when the
liability is incurred, as opposed to when the entity commits to an exit plan
under EITF No. 94-3. FAS 146 is effective for exit or disposal activities that
are initiated after December 31, 2002. The adoption of FAS No. 146 is not
expected to have a material effect on our financial position or results of
operations.

      In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees and Indebtedness of Others". FIN 45 elaborates on the
disclosures to be made by the guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also requires that a guarantor recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. The initial recognition and measurement provisions of this
interpretation are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002, while the provisions of the disclosure
requirements are effective for financial statements of interim or annual reports
ending after December 15, 2002. We adopted the disclosure provisions of


                                       30
<PAGE>

FIN 45 during the fourth quarter of fiscal 2002 and such adoption did not have a
material impact on our consolidated financial statements. We are currently
evaluating the recognition provisions of FIN 45 but expect that they will not
have a material adverse impact on our consolidated results of operations or
financial position upon adoption.


      In December 2002, the FASB issued FAS No. 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure". FAS 148 amends FAS No. 123,
"Accounting for Stock-Based Compensation", to provide alternative methods for
voluntary transition to FAS 123's fair value method of accounting for
stock-based employee compensation ("the fair value method"). FAS 148 also
requires disclosure of the effects of an entity's accounting policy with respect
to stock-based employee compensation on reported net income (loss) and earnings
(loss) per share in annual and interim financials statements. The provisions of
FAS 148 are effective in fiscal years ending after December 15, 2002. We are
currently evaluating the provisions of FAS 148 but expect that they will not
have a material adverse impact on our consolidated results of operations and
financial position upon adoption since we have not adopted the fair value
method. However, should we be required to adopt the fair value method in the
future, such adoption would have a material impact on our consolidated results
of operations or financial position. See the notes to our consolidated financial
statements included elsewhere in this Report.

      In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities". In general, a variable interest
entity is a corporation, partnership, trust, or any other legal structure used
for business purposes that either (a) does not have equity investors with voting
rights or (b) has equity investors that do not provide sufficient financial
resources for the entity to support its activities. FIN 46 requires certain
variable interest entities to be consolidated by the primary beneficiary of the
entity if the investors do not have the characteristics of a controlling
financial interest or do not have sufficient equity at risk for the entity to
finance its activities without additional subordinated financial support from
other parties. The consolidation requirements of FIN 46 apply immediately to
variable interest entities created after January 31, 2003. The consolidation
requirements apply to older entities in the first fiscal year or interim period
beginning after June 15, 2003. Certain of the disclosure requirements apply in
all financial statements issued after January 31, 2003, regardless of when the
variable interest entity was established. Since we currently have no variable
interest entities, we expect that the adoption of the provisions of FIN 46 will
not have a material impact on our consolidated results of operations or
financial position.

ADDITIONAL FACTORS THAT MAY AFFECT OUR BUSINESS AND FUTURE RESULTS

         Our business and future operating results may be affected by many
risks, uncertainties and other factors, including those set forth below and
those contained elsewhere in this Report. However, the risks, uncertainties and
other factors described below are not the only ones we face. There may be
additional risks, uncertainties and other factors that we do not currently
consider material or that are not presently known to us. If any of the following
risks were to occur, our business, affairs, assets, financial condition, results
of operations, cash flows and prospects could be materially and adversely
affected. When we say that something could have a material adverse effect on us
or on our business, we mean that it could have one or more of these effects.

         WE HAVE A HISTORY OF LOSSES, AND WE MAY NEVER BECOME PROFITABLE

         We have incurred net losses in each year of our operations since
inception, including net losses of approximately $4.2 million in fiscal 2002 and
$2.2 million in fiscal 2001. As of December 31, 2002, we had an accumulated
deficit of approximately $54 million. Our losses in fiscal 2002 were due
primarily to operating losses incurred at Metretek Florida and PowerSecure, the
preferred stock deemed distribution and the loss attributable to the proposed
settlement of the Class Action. We may incur significant costs in developing and
expanding the contract manufacturing business of MCM and the company-owned
business of PowerSecure in the near future, and we will continue to accrue the
preferred stock deemed distribution through fiscal 2004, unless we redeem the
Series B Preferred Stock sooner. We cannot assure you that we will not incur
additional losses in our Metretek Florida and PowerSecure businesses. We may
never generate sufficient revenues to achieve profitability. Even if we do
achieve profitability, we may not be able to sustain or increase that
profitability on a quarterly or annual basis in the future. If revenue does not
meet our expectations, or if operating expenses exceed what we anticipate or
cannot be reduced, our business, financial condition and results of operations
will be materially and adversely affected.



                                       31
<PAGE>


         WE WILL REQUIRE A SUBSTANTIAL AMOUNT OF ADDITIONAL CAPITAL TO FINANCE
         THE GROWTH OF OUR BUSINESS, BUT WE MAY NOT BE ABLE TO RAISE A
         SUFFICIENT AMOUNT OF FUNDS TO DO SO ON TERMS FAVORABLE TO US AND OUR
         STOCKHOLDERS

         In order to finance the development and expansion of our business, we
will need to raise significant additional funds. For example, we will need
substantial additional capital if we proceed to develop the company-owned
business of PowerSecure in order to fund our acquisition of capital equipment
for distributed generation systems to be owned by PowerSecure. In addition, from
time to time as part of our business plan, we engage in discussions regarding
potential acquisitions of businesses and technologies. While our ability to
finance future acquisitions will probably require us to raise additional
capital, as of the date of this Report, we have not entered into any agreement
committing us to any such acquisition. Moreover, unanticipated events, over
which we have no control, could increase our operating costs or decrease our
ability to generate revenues from product and service sales, necessitating
additional capital. Also, our Series B Preferred Stock bears a cumulative
dividend at the rate of 8% per year and, if not earlier converted into Common
Stock, is subject to mandatory redemption on December 9, 2004 at a redemption
price equal to the liquidation preference, plus accumulated dividends, which as
of December 31, 2002 was approximately $8.5 million. In addition, if the Heins
Stipulation is approved, we will be required to make approximately $3,375,000 in
payments, plus interest, over a four year period. If the Heins Stipulation is
not approved and the Class Action proceeds, an adverse resolution in the
litigation could also significantly increase our cash requirements beyond our
available capital resources. See "Item 3. Legal Proceedings." We continually
evaluate our cash flow requirements as well as our opportunity to raise
additional capital in order to improve our financial position. We cannot provide
any assurance that we will be able to raise additional capital when needed or
desired, or that the terms of such capital will be favorable to us and our
stockholders.

         Our current credit arrangement is the Credit Facility, consisting of
the $2 million Southern Flow Credit Facility and the $1 million Metretek Florida
Credit Facility. The Credit Facility expires in September 2004. Our ability to
borrow funds under the Credit Facility is limited to our loan availability based
upon certain assets of Southern Flow and Metretek Florida. As of December 31,
2002, we had an aggregate loan availability under the Credit Facility of
approximately $2,101, 000, of which $1,471,000 had been borrowed leaving
$630,000 available for future use. The amount of our loan availability, as well
as the amount borrowed under the Credit Facility, will change in the future
depending on our asset base and our capital requirements.

         Our current Credit Facility has a number of financial covenants that
Southern Flow and Metretek Florida must satisfy. Our ability to satisfy those
covenants depends principally upon our ability to achieve positive operating
performance. If either Southern Flow and Metretek Florida is unable to fully
satisfy the financial covenants of the Credit Facility, it will breach the terms
of the Credit Facility. We have secured our obligations under the Credit
Facility by pledging substantially all of our assets as collateral.
Additionally, our subsidiaries have guaranteed the repayment of our obligations
under the Credit Facility. Any breach of these covenants could result in a
default under the Credit Facility and an acceleration of payment of all
outstanding debt owed, which would materially and adversely affect our business.

         We may seek to raise any needed or desired additional capital from the
proceeds of public or private equity or debt offerings at the Metretek
Technologies level or at the subsidiary level or both, through asset or business
sales, from traditional credit financings or from other financing sources. Our
ability to obtain additional capital when needed or desired will depend on many
factors, including general market conditions, our operating performance and
investor sentiment, and thus cannot be assured. In addition, depending on how it
is structured, raising capital could require the consent of Wells Fargo, our
lender, of the holders of our Series B Preferred Stock or of lead counsel in the
Class Action. Even if we are able to raise additional capital, the terms of any
financing could be adverse to the interests of our stockholders. For example,
the terms of debt financing could include covenants that restrict our ability to
operate our business or to expand our operations, while the terms of an equity
financing, involving the issuance of capital stock or of securities convertible
into capital stock, could dilute the percentage ownership interests of our
stockholders, and the new capital stock or other new securities could have
rights, preferences or privileges senior to those of our current stockholders.
We cannot assure you that sufficient additional funds will be available to us
when needed or desired or that, if available, such funds can be obtained on
terms favorable to us and our stockholders and acceptable to our lender and to
the holders of our Series B Preferred Stock and to lead counsel in the Class
Action, if their consents are required. Our inability to obtain sufficient
additional capital on a timely basis on favorable terms could have a material
adverse effect on our business, financial condition and results of operations.



                                       32
<PAGE>


         OUR OPERATING RESULTS HAVE FLUCTUATED SIGNIFICANTLY IN THE PAST, AND
         FLUCTUATIONS IN THE FUTURE MAY ADVERSELY AFFECT THE TRADING PRICE OF
         OUR COMMON STOCK

         Our operating results have fluctuated significantly from
quarter-to-quarter, period-to-period and year-to-year in the past and are
expected to continue to fluctuate significantly in the future due to a variety
of factors, many of which are outside of our control and any of which may cause
the trading price of our Common Stock to fluctuate. See "-- Quarterly
Fluctuations" above. Because we have little or no control over most of these
factors, our operating results are difficult to predict. Any substantial adverse
change in any of these factors could negatively affect our business and results
of operations.

         Due to all of these factors and the other risks discussed in this
Report, you should not rely on quarter-to-quarter, period-to-period or
year-to-year comparisons of our results of operations as an indication of our
future performance. Quarterly or annual comparisons of our operating results are
not necessarily meaningful or indicative of future performance. It is possible
that in some future periods our results of operations may be below the
expectations of public market analysts and investors, causing the trading price
of our Common Stock to fall.

         WE ARE CURRENTLY SUBJECT TO LAWSUITS THAT, IF THEY ARE SUCCESSFULLY
         PROSECUTED AGAINST US, WOULD MATERIALLY AND ADVERSELY AFFECT OUR
         BUSINESS

         We are in the process of resolving the Class Action lawsuit against us
and some of our subsidiaries and affiliates and their officers, directors and
trustees. We are also in the process of resolving a dispute with Scient over the
amount, if any, we owe under the Scient Note. These lawsuits and the proposed
settlement terms and conditions are described above in "Item 3. Legal
Proceedings." Although we have filed proposed settlements of these matters in
the appropriate courts, if those settlements are not approved, we intend to
defend the claims against us vigorously. Due to the inherent uncertainty of
litigation, it is not possible at this time to predict the outcome of this
litigation or the impact the ultimate resolution of this litigation will have on
us. However, an adverse judgment against us would materially and adversely
affect our business, financial condition and results of operations.

         From time to time we are also involved in other disputes and legal
actions that arise in the ordinary course of business. We cannot provide any
assurance that present or future litigation and claims against us could not
materially and adversely affect our business, financial condition and results of
operation.

         BECAUSE POWERSECURE AND MCM HAVE LIMITED OPERATING HISTORIES AND THEIR
         BUSINESS STRATEGIES ARE STILL BEING DEVELOPED AND ARE UNPROVEN, LIMITED
         INFORMATION IS AVAILABLE TO EVALUATE THEIR FUTURE PROSPECTS

         Our business strategy includes the development and expansion of new
businesses and product lines such as PowerSecure and MCM. Our plans and
strategies with respect to these new businesses are based on unproven models and
are still being developed and modified. PowerSecure commenced its operations in
September 2000 and generated its first significant revenue in the second quarter
2001. Our PowerSecure business strategy depends on our ability to market
distributed generation systems to large users of electricity that can benefit
peak-shaving. MCM was formed in June 2002. Our MCM business strategy is to
leverage our Metretek Florida customer base and manufacturing competency and to
provide quality, timely and cost-effective contract manufacturing service to
mass production companies. Our future success depends in large part upon our
ability to develop these new businesses so that they will generate significant
revenues, profits and cash flow through the offering of energy products,
services and information.

         As a company developing new businesses in the rapidly evolving energy
markets, we face numerous risks and uncertainties which are described in this
Item as well as other parts of this Report. Some of these risks relate to our
ability to:

         -        anticipate and adapt to the changing regulatory climate for
                  energy products, services and technology;

         -        attract customers to our new businesses;

         -        anticipate and adapt to the changing energy markets and
                  end-user preferences;

         -        attract, retain and motivate qualified personnel;

         -        respond to actions taken by our competitors;

         -        integrate acquired businesses, technologies, products and
                  services;


                                       33
<PAGE>

         -        generate revenues, gross margins, cash flow and profits from
                  sales of new products and services;

         -        implement an effective marketing strategy to promote awareness
                  of our new businesses; and

         -        develop and deploy successful versions of the software
                  necessary for our products and services.

         Our business and financial results in the future will depend heavily on
market acceptance and profitability of our new businesses and their product and
service offerings lines. If we are unsuccessful in addressing these risks or in
executing our business strategies, our business would be materially and
adversely affected.

         BECAUSE WE ARE DEPENDENT UPON THE UTILITY INDUSTRY FOR A SIGNIFICANT
         PORTION OF OUR REVENUE, CONTINUED REDUCTIONS OF PURCHASES OF OUR
         PRODUCTS AND SERVICES BY UTILITIES CAUSED BY REGULATORY REFORM MAY
         MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS

         We currently derive a significant portion of our revenue from sales by
Metretek Florida of its products and services to the utility industry, and
particularly the natural gas utility industry. A key reason that we have
experienced variability of operating results on both an annual and quarterly
basis has been utility purchasing patterns, including delays of purchasing
decisions, as the result of mergers and acquisitions in the utility industry and
potential changes to the federal and state regulatory framework within which the
utility industry operates. The utility industry is generally characterized by
long budgeting, purchasing and regulatory process cycles that can take up to
several years to complete. Our utility customers typically issue requests for
quotes and proposals, establish committees to evaluate the purchase proposals,
review different technical options with vendors, analyze performance and
cost/benefit justifications and perform a regulatory review, in addition to
applying a normal budget approval process within the utility. In addition,
utilities may defer purchases of our products and services if the utilities
reduce capital expenditures as the result of mergers and acquisitions, pending
or unfavorable regulatory decisions, poor revenues due to weather conditions,
rising interest rates or general economic downturns, among other factors. The
natural gas utility industry has been virtually the sole market for Metretek
Florida's products and services. However, over the last few years, the
uncertainty in the utility industry that has resulted from the regulatory
uncertainty in the current era of deregulation has caused utilities to defer
even further purchases of Metretek Florida's products and services. The
continuation of this uncertain regulatory climate will materially and adversely
affect our revenues from sales of AMRs.

         The domestic utility industry is currently the focus of regulatory
reform initiatives in virtually every state. These initiatives have resulted in
significant uncertainty for industry participants and raise concerns regarding
assets that would not be considered for recovery through rate payer charges.
This regulatory climate has caused many utilities to delay purchasing decisions
that involve significant capital commitments. As a result of these purchasing
decision delays, utilities have reduced their purchases of our products and
services. While we expect some states will act on these regulatory reform
initiatives in the near future, we cannot assure you that the current regulatory
uncertainty will be resolved in the short term. In addition, new regulatory
initiatives could have a material adverse effect on our business. Moreover, in
part as a result of the competitive pressures in the utility industry arising
from the regulatory reform process, many utilities are pursuing merger and
acquisition strategies. We have experienced considerable delays in purchase
decisions by utilities that have become parties to merger or acquisition
transactions. Typically, capital expenditure purchase decisions are put on hold
indefinitely when merger negotiations begin. If this pattern of merger and
acquisition activity among utilities continues, our business may be materially
and adversely affected. In addition, if any of the utilities that account for a
significant portion of our revenues decide to significantly reduce their
purchases of our products and services, our financial condition and results of
operations may be materially and adversely affected.

         MANY OF OUR PRODUCTS AND SERVICES EXPERIENCE LONG AND VARIABLE SALES
         CYCLES, WHICH COULD HAVE A NEGATIVE IMPACT ON OUR RESULTS OF OPERATIONS
         FOR ANY GIVEN QUARTER.

         Our products and services are often used by our customers to address
critical business problems. Customers generally consider a wide range of issues
before making a decision to purchase our products and service. In addition, the
purchase of our products and services generally involves a significant
commitment of capital and other resources by a customer. This commitment often
requires significant technical review, assessment of competitive products and
approval at a number of management levels within a customer's organization. Our
sales cycle may vary based on the industry in which the potential customer
operates and is difficult to predict for any particular transaction. The length
and variability of our sales cycle makes it difficult to predict whether
particular sales will be concluded in any given quarter. While our customers are
evaluating our products and before they place an order with us, we may incur
substantial sales and marketing and research and development expenses to
customize our products to the customer's needs. We may also expend significant
management efforts, increase manufacturing


                                       34
<PAGE>

capacity and order long-lead-time components or materials prior to receiving an
order. Even after this evaluation process, a potential customer may not purchase
our products. As a result, these long sales cycles may cause us to incur
significant expenses without ever receiving revenue to offset those expenses.

         RESTRICTIONS IMPOSED ON US BY THE TERMS OF OUR SERIES B PREFERRED STOCK
         AND, OUR CURRENT CREDIT FACILITY, AND THE HEINS STIPULATION COULD LIMIT
         HOW WE CONDUCT OUR BUSINESS AND OUR ABILITY TO RAISE ADDITIONAL CAPITAL

         The terms of our Series B Preferred Stock, our current Credit Facility
and the Heins Stipulation contain financial and operating covenants that limit
the discretion of our management. These covenants place significant restrictions
on our ability to:

         -        incur additional indebtedness;

         -        create liens or other encumbrances;

         -        issue or redeem securities;

         -        make dividend payments and investments;

         -        amend our charter documents;

         -        sell or otherwise dispose of our or our subsidiaries'
                  stock or assets;

         -        liquidate or dissolve;

         -        merge or consolidate with other companies; or

         -        reorganize, recapitalize or engage in a similar business
                  transaction.

         Any future financing arrangements will likely contain similar or more
restrictive covenants. As a result of these restrictions, we may be:

         -        limited in how we conduct our business;

         -        unable to raise additional capital, through debt or equity
                  financings, when needed for our operations and growth; and

         -        unable to compete effectively or to take advantage of new
                  business opportunities.

         If, as a result of these covenants, we are unable to pursue a favorable
transaction or course of action or to respond to an unfavorable event, condition
or circumstance, then our business could be materially and adversely affected.

         DIVIDENDS ON THE SERIES B PREFERRED STOCK INCREASE OUR NET LOSS
         AVAILABLE TO COMMON SHAREHOLDERS AND OUR NET LOSS PER COMMON SHARE

         Due to our issuance of the Series B Preferred Stock in December 1999
and February 2000 as part of our offering of "Units", which also included shares
of Common Stock and Common Stock Purchase Warrants, we recognize the 8% coupon
rate and certain "deemed distributions" as dividends on the Series B Preferred
Stock. The proceeds from the sale of the Units were allocated to the Common
Stock, the Unit Warrants and the Series B Preferred Stock based on the relative
fair value of each. This allocation process resulted in the Series B Preferred
Stock that we sold on February 4, 2000 being initially recorded at a discount
from its $1,000 per share liquidation value. This discount will be recorded as a
distribution over the term of the Series B Preferred Stock. Another discount
resulted from the increase in the fair market value of a share of our Common
Stock from the date we offered to sell 5,550 Units to February 4, 2000, the date
we actually issued the Units. This increase caused the conversion feature of the
Series B Preferred Stock to be "in the money" on February 4, 2000. The discount
related to the "in the money" conversion feature has been recorded as a
distribution between February 4, 2000 and June 9, 2000, after which date the
Series B Preferred Stock could first be converted into our Common Stock. The
Series B Preferred Stock dividends adversely affected our operating results in
fiscal 2001 and fiscal 2002 by significantly increasing the net loss available
to common shareholders and the net loss per common share, and will continue to
adversely affect our operating results through fiscal 2004, unless we earlier
redeem the Series B Preferred Stock. By adversely affecting our operating
results, the accounting treatment of these dividends could adversely affect the
trading price of our Common Stock.



                                       35
<PAGE>

         RAPID TECHNOLOGICAL CHANGES MAY PREVENT US FROM REMAINING CURRENT WITH
         OUR TECHNOLOGICAL RESOURCES AND MAINTAINING COMPETITIVE PRODUCT AND
         SERVICE OFFERINGS

         The markets in which our businesses operate are characterized by rapid
technological change, frequent introductions of new and enhanced products and
services, evolving industry standards and changes in customer needs. Significant
technological changes could render our existing and planned new products,
services and technology obsolete. Our future success will depend, in large part,
upon our ability to:

         -        effectively use and develop leading technologies;

         -        continue to develop our technical expertise;

         -        enhance our current products and services;

         -        develop new products and services that meet changing customer
                  needs; and

         -        respond to emerging industry standards and technological
                  changes in a cost-effective manner.

         If we are unable to successfully respond to these developments or if we
do not respond to them in a cost-effective manner, then our business will be
materially and adversely affected. We cannot assure you that we will be
successful in responding to changing technology or market needs. In addition,
products, services and technologies developed by others may render our products,
services and technologies uncompetitive or obsolete.

         Even if we do successfully respond to technological advances and
emerging industry standards, the integration of new technology may require
substantial time and expense, and we cannot assure you that we will succeed in
adapting our products, services and technology in a timely and cost-effective
manner. We may experience financial or technical difficulties or limitations
that could prevent us from introducing new or enhanced products or services.
Furthermore, these new or enhanced products, services and technology may contain
problems that are discovered after they are introduced. We may need to
significantly modify the design of these products and services to correct
problems. Rapidly changing technology and operating systems may impede market
acceptance of our products, services and technology. Our business could be
materially and adversely affected if we experience difficulties in introducing
new or enhanced services and products or if these products and services are not
received favorably by our customers.

         Development and enhancement of our products and services will require
significant additional expenses and could strain our management, financial and
operational resources. The lack of market acceptance of our products or services
or our inability to generate sufficient revenues from this development or
enhancements to offset their costs could have a material adverse effect on our
business. In the past, we have experienced delays in releasing new products and
services and enhancements, and we may experience similar delays in the future.
These delays or problems in the installation of implementation of our new
products and services and enhancements may cause customers to forego purchases
of our products and services to purchase those of our competitors.

         IF WE ARE UNABLE TO CONTINUE TO ATTRACT AND RETAIN KEY MANAGEMENT AND
         TECHNICAL PERSONNEL, OUR BUSINESS WILL BE MATERIALLY AND ADVERSELY
         AFFECTED.

         We believe our future success will depend in large part upon our
ability to attract and retain highly qualified technical, managerial, sales,
marketing, finance and operations personnel. Competition for qualified personnel
is intense, and we cannot assure you that we will be able to attract and retain
these key employment in the future. We do not maintain key person life insurance
policies for any key members of our management team. The loss of the services of
one or more of our key personnel could have a material adverse effect on our
business. We cannot assure you that we will be able to retain our current key
personnel or that we will be able attract or retain other highly qualified
personnel in the future. We have from time to time in the past experienced, and
we expect to continue to experience in the future, difficulty in hiring and
retaining highly skilled employees with appropriate qualifications. Our failure
to attract and retain highly qualified personnel could material and adversely
affect our business.

         WE FACE INTENSE COMPETITION IN THE MARKETS FOR OUR ENERGY PRODUCTS,
         SERVICES AND TECHNOLOGY, AND IF WE CANNOT SUCCESSFULLY COMPETE IN THOSE
         MARKETS, OUR BUSINESS WILL BE MATERIALLY AND ADVERSELY AFFECTED

         The markets for our energy products, services and technology are
intensely competitive and subject to rapidly changing technology, new products
and services, frequent performance improvements and evolving industry


                                       36
<PAGE>

standards. We expect the intensity of competition to increase in the future
because the growth potential and deregulatory environment of the energy market
have attracted and are anticipated to continue to attract many new competitors,
including new business as well as established businesses from different
industries. Competition may also increase as a result of industry consolidation.
As a result of increased competition, we may have to reduce the price of our
products and services, and we may experience reduced gross margins and loss of
market share, any one of which could significantly reduce our future revenues
and operating results.

         Many of our existing competitors, as well as a number of potential new
competitors, have longer operating histories, greater name recognition, larger
customer bases and significantly greater financial, technical, marketing,
manufacturing and other resources than we do. This may enable our competitors to
respond more quickly to new or emerging technologies and changes in customer
requirements or preferences and to devote greater resources to the development,
promotion and sale of their products and services than we can. Our competitors
may be able to undertake more extensive marketing campaigns, adopt more
aggressive pricing policies and make more attractive offers to potential
employees, customers, strategic partners and suppliers and vendors than we can.
Our competitors may develop products and services that are equal or superior to
the products and services offered by us or that achieve greater market
acceptance than our products do. In addition, current and potential competitors
have established or may establish cooperative relationships among themselves or
with third parties to improve their ability to address the needs of our existing
and prospective customers. As a result, it is possible that new competitors may
emerge and rapidly acquire significant market share or impede our ability to
acquire market share in new markets. We cannot assure you that we will have the
financial resources, technical expertise, portfolio of market or services or
marketing and support capabilities to compete successfully in the future. Our
inability to compete successfully in any respect or to timely respond to market
demands or changes would have a material adverse effect on our business,
conditions and results of operations.

         DOWNTURNS IN GENERAL ECONOMIC AND MARKET CONDITIONS COULD MATERIALLY
         AND ADVERSELY AFFECT OUR BUSINESS

         There is potential for a continued downturn in general economic and
market conditions. Various segments of the economy in general, and of the energy
industry in particular, have experienced significant economic downturns
characterized by decreased product demand, price erosion, work slowdown, and
layoffs. This downturn has been especially strong in the technology industry.
Moreover, there is increasing uncertainty in the energy and technology markets
attributed to many factors, including global economic conditions and strong
competitive forces. Our future results of operations may experience substantial
fluctuations from period to period as a consequence of these factors, and such
conditions and other factors affecting capital spending may affect the timing of
orders from major customers. Although we have a diverse client base, we have
targeted a number of vertical markets, such as the manufacturing and
distribution industries, which have been significantly impacted by the recent
economic downturn. A continued economic downturn coupled with decline in our
revenues could affect our ability to secure additional financing or raise
additional funds to support working capital requirements and growth objectives,
maintain existing financing arrangements, or for other purposes. As a result,
any economic downturns in general or in our targeted markets, particularly those
affecting industrial and commercial users of natural gas and electricity, would
have a material adverse effect on our business, operating results, cash flows or
financial condition.

         IF WE FAIL TO EFFECTIVELY MANAGE OUR FUTURE GROWTH, OUR ABILITY TO
         MARKET AND SELL OUR PRODUCTS AND SERVICES AND TO DEVELOP NEW PRODUCTS
         AND SERVICES MAY BE ADVERSELY AFFECTED

         We must plan and manage our growth effectively in order to offer our
products and services and achieve revenue growth and profitability in a rapidly
evolving market. Our future growth will place a significant strain on our
management systems and resources. If we are not be able to effectively manage
our growth in the future, our business may be materially and adversely affected.

         CHANGES IN OUR PRODUCT MIX COULD MATERIALLY AND ADVERSELY AFFECT OUR
         BUSINESS

         The margins on our revenues from some of our product and service
offerings is higher than the margins on our other product and service offerings.
For example, revenues from some of Metretek Florida's AMR devices have
significantly higher margins than Metretek Florida's contract manufacturing
revenues. In addition, due to the limited operating history of PowerSecure, we
cannot currently accurately estimate the margins of its future products and
services. These new products and services may have lower margins than our
current products and services. If in the future we derive a proportionately
greater percentage of our revenues from lower margin products and services, then
our overall margins on our total revenues will decrease and, accordingly, will
result in lower net income, or higher net losses, and less cash flow on the same
amount of revenues.


                                       37
<PAGE>

         OUR MANAGEMENT OF PRIVATE ENERGY PROGRAMS PRESENTS RISKS TO US

         MGT is our subsidiary that manages and holds a small ownership interest
in two private energy programs that own natural gas assets. The operations of
MGT have been discontinued, and MGT does not intend to form any new private
programs, but MGT will continue managing the two business trusts that operate
these energy programs until those programs are sold or liquidated or until MGT's
interests and management obligations in those programs are sold. These private
programs were financed by private placements of equity interests raising capital
to acquire the assets and business operated by the programs. Our management of
these energy programs presents risks to us, including:

         -        lawsuits by investors in these programs who become
                  dissatisfied with the result of these programs, including the
                  lawsuit described in "Item 3. Legal Proceedings";

         -        material and adverse changes in the business, results of
                  operations and financial condition of the programs due to
                  events, conditions and factors outside of our control, such as
                  general and local conditions affecting the energy market
                  generally and the revenues of the programs specifically;

         -        annual preferred shareholder interest repurchase commitments;

         -        changes in the regulatory environment relating to these
                  programs;

         -        reliance upon significant suppliers and customers by these
                  programs;

         -        hazards of energy facilities; and

         -        changes in technology.

         If any of these risks materialize and we are unsuccessful in addressing
these risks, our business could be materially and adversely affected.

         OUR INTERNATIONAL OPERATIONS ARE SUBJECT TO MANY RISKS AND
         UNCERTAINTIES THAT COULD ADVERSELY AFFECT OUR OPERATING RESULTS IF THEY
         MATERIALIZE

         We market and sell some of our products and services in international
markets. Our revenues from sales into international markets were approximately
3.2% and 2.6% of our consolidated revenues in fiscal 2002 and fiscal 2001,
respectively. One component of our strategy for future growth involves the
expansion of our products and services into new international markets and the
expansion of our marketing efforts in our current international markets. This
expansion will require significant management attention and financial resources
to establish additional offices, hire additional personnel, localize and market
products and services in foreign markets and develop relationships with
international service providers. However, we have only limited experience in
international operations, including developing localized versions of our
products and services and in developing relationships with international service
providers. We cannot assure you that we will be successful in expanding our
international operations, or that revenues from international operations will be
sufficient to offset these additional costs. If revenues from international
operations are not adequate to offset the additional expense from expanding
these international operations, our business could be materially and adversely
affected.

         In addition to the uncertainty regarding our ability to generate
sufficient revenues from foreign operations and to expand our international
presence, we are exposed to several risks inherent in conducting business on an
international level that could result in increased expenses, or could limit our
ability to generate revenue, including:

         -        fluctuations in currency exchange rates;

         -        potential adverse tax consequences;

         -        adverse changes in applicable laws and regulatory
                  requirements;

         -        import and export restrictions;

         -        export controls relating to technology;

         -        tariffs and other trade barriers;

         -        difficulties in collecting international accounts receivable
                  and longer collection periods;

         -        the impact of local economic conditions and practices;



                                       38
<PAGE>

         -        difficulties in staffing and managing foreign operations;

         -        difficulties in complying with foreign regulatory and
                  commercial requirements;

         -        increased costs associated with maintaining international
                  marketing efforts;

         -        political and economic instability;

         -        reduced protection for intellectual property rights;

         -        cultural and language difficulties;

         -        the potential exchange and repatriation of foreign earnings;
                  and

         -        localization and translation of products and services.

         Our success in expanding our international operations will depend in
large part on our ability to anticipate and effectively manage these and other
risks, many of which are outside of our control. Any of these risks could
materially and adversely affect our international operations and, consequently,
our operating results. We cannot assure you that we will be able to successfully
market, sell and deliver our products and services in foreign markets.

         WE MAY BE UNABLE TO SUCCESSFULLY ACQUIRE OTHER BUSINESSES, TECHNOLOGY
         OR COMPANIES, OR TO FORM STRATEGIC ALLIANCES, OR TO SUCCESSFULLY
         REALIZE THE BENEFITS OF ANY ACQUISITION OR ALLIANCE

         In the past, we have grown by acquiring complimentary businesses,
technologies, services and products and entering into strategic alliances with
complimentary businesses. We evaluate potential acquisition opportunities from
time to time, including those that could be material in size and scope. As part
of our growth strategy, we intend to continue to evaluate potential
acquisitions, investment opportunities and strategic alliances on an ongoing
basis as they present themselves to facilitate our ability to enhance our
existing products, services and technology, and introduce new products, services
and technology, on a timely basis. However, we do not know if we will be able to
identify any future opportunities that we believe will be beneficial for us.
Even if we are able to identify an appropriate acquisition opportunity, we may
not be able to successfully finance the acquisition. A failure to identify or
finance future acquisitions may impair our growth and adversely affect our
business.

         Any future acquisition involves risks commonly encountered in business
relationships, including:

         -        difficulties in assimilating and integrating the operations,
                  personnel, technologies, products and services of the acquired
                  businesses;

         -        the technologies, products or businesses that we acquire may
                  not achieve expected levels of revenue, profitability,
                  benefits or productivity;

         -        difficulties in retaining, training, motivating and
                  integrating key personnel;

         -        diversion of management's time and resources away from our
                  normal daily operations;

         -        difficulties in successfully incorporating licensed or
                  acquired technology and rights into our product and service
                  offerings;

         -        difficulties in maintaining uniform standards, controls,
                  procedures and policies within the combined organizations;

         -        changes in management resulting from an alliance or
                  acquisition could impair relationships with employees and
                  customers of the acquired company;

         -        risks of entering markets in which we have no or limited
                  direct prior experience;

         -        potential disruptions of our ongoing businesses; and

         -        unexpected costs and unknown liabilities associated with the
                  acquisitions.

         For these reasons, future acquisitions could materially and adversely
affect our existing businesses. Moreover, we cannot predict the accounting
treatment of any acquisition, in part because we cannot be certain whether
current accounting regulations, conventions or interpretations will prevail in
the future.

         In addition, to finance any future acquisitions, it may be necessary
for us to incur additional indebtedness or raise additional funds through public
or private financings. This financing may not be available to us at all, or if
available may not be available on terms satisfactory to us or to those whose
consents are required for such financing.


                                       39
<PAGE>

Available equity or debt financing available may materially and adversely affect
our business and operations and, in the case of equity financings, may
significantly dilute the percentage ownership interests of our stockholders.

         We cannot assure you that we will make any additional acquisitions or
that any acquisitions, if made, will be successful, will assist us in the
accomplishment of our business strategy, or will generate sufficient revenues to
offset the associated costs and other adverse effects or will otherwise result
in us receiving the intended benefits of the acquisition. In addition, we cannot
assure you that any acquisition of new businesses or technology will lead to the
successful development of new or enhanced products and services, or that any new
or enhanced products and services, if developed, will achieve market acceptance
or prove to be profitable.

         IF WE FAIL TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS OR IF
         WE FACE CLAIMS OF INTELLECTUAL PROPERTY INFRINGEMENT BY THIRD PARTIES,
         WE COULD LOSE IMPORTANT RIGHTS TO OUR PROPRIETARY TECHNOLOGY OR BE
         LIABLE FOR SIGNIFICANT DAMAGES, WHICH COULD MATERIALLY AND ADVERSELY
         AFFECT OUR BUSINESS

         Our success and ability to compete depends, in substantial part, upon
our ability to develop and protect our proprietary technology and intellectual
property rights to distinguish our products, services and technology from those
of our competitors. The unauthorized use of our intellectual property rights and
property technologies by others could materially harm our business. We rely
primarily on a combination of copyright, trademark and trade secret laws, along
with confidentiality agreements, contractual provisions and licensing
arrangements, to establish and protect our intellectual property rights.
Although we hold copyrights and trademarks in our business, and we have applied
for registration of a number of key trademarks and service marks and intend to
introduce new trademarks and service marks, we believe that the success of our
business depends more upon our proprietary technology, information, processes
and know-how than on patents or trademarks. In addition, much of our proprietary
information and technology may not be patentable. We may not be successful in
obtaining registration for one or more of these marks.

         Despite our efforts to protect our intellectual property rights,
existing laws afford only limited protection, and our actions may be inadequate
to protect our rights or to prevent others from claiming violations of their
proprietary rights. Unauthorized third parties may attempt to copy, reverse
engineer or otherwise obtain, use or exploit aspects of our products and
services, develop similar technology independently, or otherwise obtain and use
information that we regard as proprietary. We cannot assure you that our
competitors will not independently develop technology similar or superior to our
technology or design around our intellectual property. In addition, the laws of
some foreign countries may not protect our proprietary rights as fully or in the
same manner as the laws of the United States.

         Although we are not aware of any present infringement of our products
or technologies on the intellectual property rights of third parties, we cannot
provide any assurance that others will not assert claims of infringement against
us in the future or that, if made, such claims will not be successful or will
not require us to enter into licensing royalty arrangements or result in costly
and time-consuming litigation.

         We may need to resort to litigation to enforce our intellectual
property rights, to protect our trade secrets, and to determine the validity and
scope of other companies' proprietary rights, or to defend against claims of
infringement or validity in the future. However, litigation could result in
significant costs or the diversion of management and financial resources. We
cannot assure you that any such litigation will be successful or that we will
prevail over counterclaims against us. As a result, any litigation could
materially and adversely affect our business.

         Although we are not aware of any present infringement of our products
or technologies on the intellectual property rights of others, we cannot be
certain that our products, services and technologies do not or in the future
will not infringe on the valid intellectual property rights held by third
parties. In addition, we cannot assure you that third parties will not claim
that we have infringed their intellectual property rights. We may incur
substantial expenses in litigation defending against any third party
infringement claims, regardless of their merit. Successful infringement claims
against us could result in substantial monetary liability, require us to enter
into royalty or licensing arrangements, or otherwise materially disrupt the
conduct of our business. In addition, even if we prevail on these claims, this
litigation could be time-consuming and expensive to defend or settle, and could
result in the diversion of our time and attention, which could materially and
adversely affect our business.

         In recent years, there has been a significant amount of litigation in
the United States involving patents and other intellectual property rights. In
the future, we may be a party to litigation to protect our intellectual property
or as a result of an alleged infringement of others' intellectual property.
These claims and any resulting lawsuit, if


                                       40
<PAGE>

successful, could subject us to significant liability for damages and
invalidation of our proprietary rights. These lawsuits, regardless of their
success, would likely be time-consuming and expensive to resolve and would
divert management time and attention. Any potential intellectual property
litigation also could force us to do one or more of the following:

         -        stop selling, incorporating or using our products and services
                  that use the infringed intellectual property;

         -        obtain from the owner of the infringed intellectual property
                  right a license to sell or use the relevant technology, which
                  license may not be available on reasonable terms, or at all;
                  or

         -        redesign the products and services that use the technology.

         If we are forced to take any of these actions, our business may be
seriously harmed. Although we carry general liability insurance, our insurance
may not cover potential claims of this type or may not be adequate to indemnify
us for all liability that may be imposed.

         RECENT TERRORIST ACTIVITIES AND RESULTING MILITARY AND OTHER ACTIONS
         COULD ADVERSELY AFFECT OUR BUSINESS

         The terrorist attacks on September 11, 2001 disrupted commerce
throughout the world. In response to such attacks, the U.S. is actively using
military force to pursue those behind these attacks and initiating broader
actions against global terrorism, including the possible war on Iraq. The
continued threat of terrorism throughout the world, the escalation of military
action, and heightened security measures in response to such threats may cause
significant disruption to commerce throughout the world. To the extent that such
disruptions result in reductions in capital expenditures or spending on energy
information technology, longer sales cycles, deferral or delay of customer
orders, or an inability to effectively market our products or services, our
business and results of operations could be materially and adversely affected.

         WE FACE SOME RISKS THAT ARE INHERENT IN NATURAL GAS OPERATIONS

         Some of our operations are subject to the hazards and risks inherent of
the servicing and operation of natural gas assets, including encountering
unexpected pressures, explosions, fire, natural disasters, blowouts, cratering
and pipeline ruptures, which could result in personal injuries, loss of life,
environmental damage and other damage to our properties and the properties of
others. These operations involve numerous financial, business, regulatory,
environmental, operating and legal risks. Damages occurring as a result of these
risks may give rise to product liability claims against us. We have product
liability insurance generally providing up to $6 million coverage per occurrence
and $7 million annual aggregate coverage. Although we believe that our insurance
is adequate and customary for companies of our size that are engaged in
operations similar to ours, losses due to risks and uncertainties could occur
for uninsurable or uninsured risks or could exceed our insurance coverage.
Therefore, the occurrence of a significant adverse effect that is not fully
covered by insurance could have a material and adverse effect on our business.
In addition, we cannot assure you that we will be able to maintain adequate
insurance in the future at reasonable rates.

         SOME OF POWERSECURE'S LONG-TERM TURN-KEY CONTRACTS SUBJECT US TO RISKS

         Some of PowerSecure's contracts for turn-key distributed generation
projects have a term of many years, during which time some risks to its business
may arise due to its obligations under those contracts, even though PowerSecure
believes it has mitigated those risks. For example, PowerSecure is responsible
for full maintenance on the generators and switchgear during the term of the
contract, but it has set aside reserves expected to be sufficient to cover its
maintenance obligations and has purchased maintenance packages designed to cover
maintenance on the generators. In addition, changes in circumstances that were
not contemplated at the time of the contract could exposure PowerSecure to
unanticipated risks or to protracted or costly dispute resolution.

         WE COULD BECOME SUBJECT TO BURDENSOME GOVERNMENT REGULATION THAT
         AFFECTS OUR ABILITY TO OFFER OUR PRODUCTS AND SERVICES OR THAT AFFECTS
         DEMAND FOR OUR PRODUCTS AND SERVICES

         Our business operations are subject to varying degrees of federal,
state, local and foreign laws and regulations. Regulatory agencies may impose
special requirements for implementation and operation of our products, services
or technologies that may significantly impact or even eliminate some of our
target markets. We


                                       41
<PAGE>

may incur material costs or liabilities in complying with government
regulations. In addition, potentially significant laws, regulations and
requirements may be adopted or imposed in the future. Furthermore, our potential
utility customers must comply with numerous laws and regulations. The
modification or adoption of future laws and regulations could adversely affect
our business and our ability to continually modify or alter our methods of
operations at reasonable costs. We cannot provide any assurances that we will be
able, for financial or other reasons, to comply with all applicable laws and
regulations. If we fail to comply with these laws and regulations, we could
become subject to substantial penalties which could materially and adversely
affect our business.

         OUR BUSINESS COULD SUFFER IF WE CANNOT MAINTAIN AND EXPAND OUR CURRENT
         STRATEGIC ALLIANCES AND DEVELOP NEW ALLIANCES

         A key element of our business strategy is the formation of corporate
relationships such as strategic alliances with other companies to provide
products and services to existing and new markets and to develop new products
and services and enhancements to existing products and services. We believe that
our success in the future in penetrating new markets will depend in large part
on our ability to maintain these relationships and to cultivate additional or
alternative relationships. However, we cannot assure you that we will be able to
develop new corporate relationships, or that these relationships will be
successful in achieving their purposes. Our failure to continue our existing
corporate relationships and develop new relationships could materially and
adversely affect our business.

         WE DEPEND ON SOLE SOURCE OR LIMITED SOURCE SUPPLIERS FOR SOME OF THE
         KEY COMPONENTS AND MATERIALS IN OUR PRODUCTS, WHICH MAKES US
         SUSCEPTIBLE TO SUPPLY SHORTAGES OR PRICE INCREASES THAT COULD ADVERSELY
         AFFECT OUR BUSINESS

         We depend on sole or limited source suppliers for key components and
materials for some of our products such as generators, and if we are unable to
obtain these components on a timely basis, we will not be able to deliver our
products to customers. Also, we cannot guarantee that any of the parts or
components that we purchase, if available at all, will be of adequate quality or
that the prices we pay for these parts or components will not increase. We may
experience delays in production if we fail to identify alternate vendors, or if
any supply of components is interrupted or reduced and we have failed to
identify an alternative vendor or if there is a significant increase in the cost
of such components, each of which could materially and adversely affect our
business and operations.

         AS A RESULT OF THEIR BENEFICIAL OWNERSHIP OF A LARGE PERCENTAGE OF OUR
         COMMON STOCK, OUR DIRECTORS, EXECUTIVE OFFICERS AND SIGNIFICANT
         STOCKHOLDERS COULD EXERT SIGNIFICANT INFLUENCE OVER MATTERS REQUIRING
         STOCKHOLDER APPROVAL

         As of February 28, 2003, our executive officers, directors and 10% or
greater stockholders beneficially owned, in the aggregate, approximately 56% of
our outstanding Common Stock, assuming they exercise or convert all stock
options, warrants and convertible preferred stock within 60 days of that date.
As a result, these stockholders could, as a practical matter, exercise a
significant level of control over matters requiring approval by our
stockholders, including the election of directors and the approval of mergers,
sales of substantially all of our assets and other significant corporate
transactions. The interests of these stockholders may differ from the interests
of other stockholders. In addition, this concentration of stock ownership may
have the effect of discouraging, delaying or preventing a change in control of
us.

         VIRTUALLY ALL OF OUR SHARES ARE ELIGIBLE FOR FUTURE SALE BY OUR CURRENT
         STOCKHOLDERS, AND SIGNIFICANT SALES OF THESE SHARES COULD RESULT IN A
         DECLINE IN OUR STOCK PRICE

         If our stockholders sell a significant number of shares of our Common
Stock in the public market, including shares issuable upon the exercise of
outstanding options, warrants and other rights, or if there is a perception that
these sales could occur, then the market price of our Common Stock could fall.
These sales also might make it more difficult for us to sell equity securities
in the future at a time and price that we deem appropriate.

         On February 28, 2003, 6,043,469 shares of Common Stock were
outstanding. On the same date, options to purchase 1,723,590 shares of Common
Stock were outstanding, and shares that may be acquired upon exercise of these
stock options are eligible for sale on the public market from time to time
subject to vesting. Also, on that date, 7,000 shares of Series B Preferred Stock
convertible into 2,927,887 shares of Common Stock, and warrants to purchase
871,430 shares of Common Stock, were outstanding. The resale of virtually all
shares underlying these warrants and other rights are covered by a currently
effective registration statement. The exercise or conversion of outstanding
options, warranties and other rights to purchase our Common Stock will dilute
the remaining ownership


                                       42
<PAGE>

of other holders of our Common Stock. In addition, the sale in the public market
of a significant number of these shares issuable upon the exercise of options,
warrants and other rights, or the perception that such sales could occur, could
cause the price of the Common Stock to decline.

         CHANGES IN LAWS, REGULATIONS AND FINANCIAL ACCOUNTING STANDARDS MAY
         MATERIALLY AND ADVERSELY AFFECT OUR REPORTED RESULTS OF OPERATIONS


         The recently enacted Sarbanes-Oxley Act of 2002 and related regulations
may result in changes in accounting standards or accepted practices within our
industry. New pronouncements and varying interpretations of existing
pronouncements have occurred in the past and are likely to occur in the future
as a result of recent Congressional and regulatory actions. New laws,
regulations and accounting standards, as well as the questioning of, or changes
to, currently accepted accounting practices in the technology industry may
adversely affect our reported financial results, which could have an adverse
effect on our stock price. For example, proposals have been made concerning the
expensing of stock options which could result in rules or laws that may
adversely affect our reported financial results and have an adverse effect on
our stock price.

         OUR CHARTER DOCUMENTS AND OUR STOCKHOLDER RIGHTS PLAN, AS WELL AS
         DELAWARE LAW, CONTAIN ANTI-TAKEOVER PROVISIONS THAT COULD DISCOURAGE OR
         PREVENT A THIRD-PARTY ACQUISITION OF OUR COMMON STOCK, EVEN IF AN
         ACQUISITION WOULD BE BENEFICIAL TO OUR STOCKHOLDERS

         Some provisions in our Second Restated Certificate of Incorporation
("Second Restated Certificate"), our Amended and Restated By-Laws ("By-Laws"),
and our stockholder rights plan, as well as some provisions of Delaware law,
could have the effect of discouraging, delaying or preventing a third party from
attempting to acquire us, even if doing so would be beneficial to stockholders.
These provisions could also limit the price that investors might be willing to
pay in the future for shares of our Common Stock. These provisions include:

         -        a classified Board of Directors in which only approximately
                  1/3 of the total Board members are elected at each annual
                  meeting;

         -        authority for our Board of Directors to issue Common Stock and
                  Preferred Stock, and to determine the price, voting and other
                  rights, preferences, privileges and restrictions of
                  undesignated shares of Preferred Stock, without any vote by or
                  approval of our stockholders (other than the consent of
                  holders of Series B Preferred Stock relating to any senior or
                  equal ranking securities);

         -        the existence of large amounts of authorized but unissued
                  shares of Common Stock and Preferred Stock;

         -        super-majority voting requirements to effect material
                  amendments to our Second Restated Certificate and By-Laws;

         -        limiting the persons who may call special meetings of
                  stockholders;

         -        prohibiting stockholders from acting by written consent
                  without a meeting;

         -        the dilutive effects to a potential hostile acquirer under our
                  stockholders rights plan;

         -        a fair price provision that sets minimum price requirements
                  for potential acquirers;

         -        anti-greenmail provisions which limit our ability to
                  repurchase shares of Common Stock from significant
                  stockholders;

         -        restrictions under Delaware law on mergers and other business
                  combinations between us and any 15% stockholders; and

         -        advance notice requirements for director nominations and for
                  stockholder proposals.

         In addition, we have entered into employment agreements with certain
executive officers and other employees which, among other things, include
severance and changes in control provisions.

         WE DO NOT INTEND TO PAY DIVIDENDS ON OUR COMMON STOCK, AND OUR ABILITY
         TO PAY DIVIDENDS ON OUR COMMON STOCK IS LIMITED

         We have never declared or paid any cash dividends on our Common Stock.
Therefore, a stockholder will not experience a return on its investment in our
Common Stock without selling its shares, because we currently


                                       43
<PAGE>

intend on retaining any future earnings to fund our growth and do not expect to
pay dividends in the foreseeable future on the Common Stock.

         Under Delaware law, we are not permitted to make a distribution to our
stockholders, including dividends on our capital stock, if, after giving effect
to the payment, we would not be able to pay our debts as they become due in the
usual course of business or if our total assets would be less than the sum of
our total liabilities plus the amount which would be needed if we were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of stockholders whose preferential rights are superior to those
receiving the distribution.

           We currently intend to retain all future earnings, if any, for use in
the operation and expansion of our business and for the servicing and repayment
of indebtedness. As a holding company with no independent operations, our
ability to pay dividends is dependant upon the receipt of dividends or other
payments from our subsidiaries. The terms of our Credit Facility limit our
ability to pay dividends (other than on our Series B Preferred Stock) by
prohibiting the payment of dividends by Southern Flow or Metretek Florida
without the consent of the lender. In addition, the terms of our Series B
Preferred Stock contain certain restrictions on our ability to pay dividends on
our Common Stock. Future dividends, if any, will be determined by our Board of
Directors, based upon our earnings, financial condition, capital resources,
capital requirements, charter restrictions, contractual restrictions and such
other factors as our Board of Directors deems relevant.

         OUR STOCK PRICE IS SUBJECT TO EXTREME PRICE AND VOLUME FLUCTUATIONS,
         WHICH COULD ADVERSELY AFFECT AN INVESTMENT IN OUR STOCK

         The market price and volume of our Common Stock has in the past been,
and in the future is likely to continue to be, highly volatile. The stock market
in general has been experiencing extreme price and volume fluctuations for
years. The market prices of securities of technology companies have been
especially volatile. A number of factors could cause wide fluctuations in the
market price and trading volume of our Common Stock in the future, including:

         -        actual or anticipated variations in our results of operations;

         -        announcements of technological innovations;

         -        changes in, or the failure by us to meet, securities analysts'
                  estimates and expectations;

         -        introduction of new products and services by us or our
                  competitors;

         -        conditions or trends in the energy industry in general, and in
                  the natural gas and delivery sectors in particular;

         -        announcements by us or our competitors of significant
                  technical innovations, products, services, contracts,
                  acquisitions, strategic relationships, joint ventures or
                  capital commitments;

         -        the lower coverage by securities analysts and the media of
                  issuers with securities trading on the OTC Bulletin Board;

         -        announcements by us or our competitors of the success or
                  status of our business;

         -        changes in the market valuation of other energy or technology
                  companies;

         -        general economic, business and market conditions;

         -        additions or departures of key personnel;

         -        sales of our Common Stock by directors, executive officers and
                  significant stockholders; and

         -        the gain or loss of significant customer orders.

         Many of these factors are beyond our control. These factors may cause
the market price of our Common Stock to fall regardless of our operating
performance.

         In addition, broad fluctuations in price and volume have been unrelated
or disproportionate to operating performance, both of the market in general and
of us in particular. Any significant fluctuations in the future might result in
a material decline in the market price of our Common Stock. In the past,
following periods of volatility in the market price of a company's securities,
securities class action litigation has often been brought against that company.
We may become involved in this type of litigation in the future. Securities
litigation is often expensive


                                       44
<PAGE>

and could divert management's attention and resources, which could have a
material adverse effect on our business, even if we ultimately prevail in the
litigation.

         WE MAY ISSUE ADDITIONAL PREFERRED STOCK RANKING JUNIOR TO THE SERIES B
         PREFERRED STOCK, WHICH COULD DILUTE THE INTERESTS OF HOLDERS OF COMMON
         STOCK

         The terms of the Series B Preferred Stock do not limit the issuance of
additional series of Preferred Stock ranking junior to the Series B Preferred
Stock, but do require the approval of the holders of a majority of the
outstanding shares of Series B Preferred Stock to issue any stock senior to or
on a parity with the Series B Preferred Stock. The issuance of additional shares
of Preferred Stock ranking junior to the Series B Preferred Stock could dilute
the interest of holders of our Common Stock.

ITEM 7.     FINANCIAL STATEMENTS

         The information required by this Item is set forth on pages F-1 through
F-31 of this Report.

ITEM 8.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
            FINANCIAL  DISCLOSURE

            None



                                       45
<PAGE>


                                    PART III

ITEM 9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS;
            COMPLIANCE  WITH SECTION 16(a) OF EXCHANGE ACT

DIRECTORS AND EXECUTIVE OFFICERS

         As of February 28, 2003, our executive officers and directors, their
ages and their positions with us are as follows:
<TABLE>
<CAPTION>

NAME                                                    AGE            POSITION(S)
----                                                    ---            -----------
<S>                                                      <C>           <C>
W. Phillip Marcum                                        58            Chairman of the Board, President, Chief Executive
                                                                            Officer and Director
A. Bradley Gabbard                                       48            Executive Vice President, Chief Financial Officer,
                                                                              Treasurer and Director
Gary J. Zuiderveen                                       43            Controller, Principal Accounting Officer and
                                                                            Secretary
Basil M. Briggs (1) (2)                                  67            Director
Kevin P. Collins (1) (2)                                 52            Director
Anthony D. Pell (1) (2)                                  64            Director
</TABLE>

--------------------
(1)  Member of the Compensation Committee
(2)  Member of the Audit Committee

         W. PHILLIP MARCUM is a founder and has served as our Chairman of the
Board, President and Chief Executive Officer and as a director since our
incorporation in April 1991. He also serves as the Chairman of each of our
subsidiaries. Mr. Marcum currently serves on the board of directors of one
publicly-traded company, Key Energy Services, Inc., East Brunswick, New Jersey
("Key"), an oilfield service provider, and one privately-held company, Test
America, Inc., Asheville, North Carolina, a water analysis company.

         A. BRADLEY GABBARD is a founder and has served as an executive officer
and a director since our incorporation in April 1991. He has served as our
Executive Vice President since July 1993 and as our Chief Financial Officer and
Treasurer since August 1996 and from April 1991 through July 1993. He also
served as our Vice President and Secretary from April 1991 through July 1993.
Mr. Gabbard also serves as the Chief Financial Officer of each of our
subsidiaries.

         GARY J. ZUIDERVEEN has served as our Controller, Principal Accounting
Officer and Secretary since April 2001. He previously served as our Controller
from May 1994 until May 2000 and as our Secretary and Principal Accounting
Officer from August 1996 until May 2000. Since September 1999, he has also
served as the Controller and Secretary, and since March 2000 as the Principal
Accounting Officer, of PowerSpring. He also serves in one or more of the
capacities of Controller, Principal Accounting Officer or Secretary of our other
subsidiaries. From June 1992 until May 1994, Mr. Zuiderveen was the General
Accounting Manager at the University Corporation for Atmospheric Research in
Boulder, Colorado. From 1983 until June 1992, Mr. Zuiderveen was employed in the
Denver, Colorado office of Deloitte & Touche LLP, providing accounting and
auditing services to clients primarily in the manufacturing and financial
services industries and serving in the firm's national office accounting
research department.

         BASIL M. BRIGGS has served as a director since June 1991. He has been
an attorney in the Detroit, Michigan area since 1961, practicing law with Cox,
Hodgman & Giarmarco, P.C., Troy, Michigan, since January 1997. Mr. Briggs was of
counsel with Miro, Weiner & Kramer, P.C., Bloomfield Hills, Michigan, from 1987
through 1996. He was the President of Briggs & Williams, P.C., Attorneys at Law,
from its formation in 1977 through 1986. Mr. Briggs was the Secretary of Patrick
Petroleum Company ("Patrick Petroleum"), Jackson, Michigan, an oil and gas
company, from 1984, and a director of Patrick Petroleum from 1970, until Patrick
Petroleum was acquired by Goodrich Petroleum Company ("Goodrich Petroleum"),
Houston, Texas, an oil and gas company, in August 1995. From August 1995 until
June 2000, he served as a director of Goodrich Petroleum.


                                       46
<PAGE>

         KEVIN P. COLLINS has served as a director since March 2000. Mr. Collins
has been a Managing Member of The Old Hill Company LLC, Westport, Connecticut,
which provides corporate financial and advisory services, since 1997. From 1992
to 1997, he served as a principal of JHP Enterprises, Ltd., and from 1985 to
1992, he served as Senior Vice President of DG Investment Bank, Ltd., both of
which were engaged in providing corporate finance and advisory services. Mr.
Collins has served as a director of Key since March 1996; a director of The Penn
Traffic Company, Syracuse, New York, a food retailer, since June 1999; and a
director of London Fog Industries, Inc., Seattle, Washington, an outerwear
designer and distributor, since 1999. Mr. Collins is a Chartered Financial
Analyst.

         ANTHONY D. PELL has served as a director since June 1994. Mr. Pell is
President, Chief Executive Officer and co-owner of Pelican Investment
Management, an investor advisory firm with offices in Boston, Massachusetts and
New York, New York, which he co-founded in November 2001. Mr. Pell is a director
of Rochdale Investment Management, Inc., New York, New York. He was the
President and a co-owner of Pell, Rudman & Co., Boston, Massachusetts, an
investment advisory firm, from 1981 until 1993, when it was acquired by United
Asset Management Company, and he continued to serve as an employee until June
1995. Mr. Pell was a director of Metretek Florida from 1985 until Metretek
Florida was acquired by us in March 1994. Mr. Pell was associated with the law
firm of Coudert Brothers from 1966 to 1968 and with the law firm of Cadwalder,
Wickersham and Taft from 1968 to 1972, specializing in estate and tax planning.
In 1972, Mr. Pell joined Boston Company Financial Strategies, Inc. as a Vice
President and was appointed a Senior Vice President in 1975.

         Our Board of Directors currently consists of five members divided into
three classes, designated Class I, Class II and Class III, with members of each
class holding office for staggered three-year terms. The Class I Directors,
whose terms expire at the 2005 Annual Meeting of Stockholders, are Messrs.
Marcum and Briggs. The Class II Director, whose term expires at the 2005 Annual
Meeting of Stockholders, is Mr. Gabbard. The Class III Directors, whose terms
expire at the 2003 Annual Meeting of Stockholders, are Messrs. Collins and Pell.
To accomplish that goal, Robert Lloyd did not seek re-election to our Board when
his term expired, and Stephen E. McGregor, Ronald G. McKee and Albert F.
Thomasson resigned their positions on the Board, thereby reducing the size of
the Board of Directors to five.

         So long as at least 2,000 shares of our Series B Preferred Stock remain
outstanding, the holders of Series B Preferred Stock, voting separately as a
class, have the right to elect one member of our Board of Directors. In March
2000, Mr. Collins was elected to the Board of Directors by the holders of the
Series B Preferred Stock. All other directors are elected by the holders of the
Common Stock. Each director serves in office until his successor is duly elected
and qualified, or until his earlier death, resignation or removal. In the
future, any new members added to the Board of Directors will be distributed
among the three classes so that, as nearly as possible, each class will consist
of an equal number of directors. Our officers are appointed by our Board of
Directors and serve at its discretion, subject to their employment agreements,
as described in "Item 10. Executive Compensation."

OTHER KEY EMPLOYEES

         Information concerning other key employees is set forth below:

         WOOD A. BREAZEALE, JR., 73, has served as the President, Chief
Operating Officer and a director of Southern Flow since May 1993. Mr. Breazeale
was the President and Chief Operating Officer of Southern Flow Companies, a
division of Homco International, Inc., and a Vice President of Homco
International, Inc., from 1979 until we purchased the assets of the Southern
Flow Companies division of Weatherford in April 1993. Mr. Breazeale founded
Southern Flow Companies in 1953.

         SIDNEY HINTON, 40, has served as the President and Chief Executive
Officer and a director of PowerSecure since its incorporation in September 2000.
He also served as the President and Chief Executive Officer of PowerSpring from
May 2000 until January 2001. From February 2000 until May 2000, Mr. Hinton was
an Executive-in-Residence with Carousel Capital, Charlotte, North Carolina, a
private equity firm. From February 1999 until December 1999, he was the Vice
President of Market Planning and Research for Carolina Power & Light (now known
as Progress Energy), Raleigh, North Carolina. From August 1997 until December
1998, Mr. Hinton was the President and Chief Executive Officer of IllumElex
Lighting Company, Raleigh, North Carolina, a national lighting company. From
1982 until 1997, Mr. Hinton was employed in several positions with Southern
Company and Georgia Power Company, Atlanta, Georgia.



                                       47
<PAGE>

         THOMAS R. KELLOGG,, 42, has been the President and Chief Executive
Officer of Metretek Florida since June 24, 2002. Mr. Kellogg has over 20 years
experience in the energy and telecommunications industries. From May 2000 to May
2002, Mr. Kellogg was the Executive Vice President and General Manager of the
Networks & Facilities Group of RCC Communications, in Woodbridge, New Jersey.
RCC Communications is a telecommunications consulting, engineering, design,
construction and operations company with offices in the U.S. and abroad. From
February 1999 to May 2000, he served as the Vice President and General Manager
of MOBEX Managed Services Company, currently headquartered in Washington, D.C.,
a subsidiary of MOBEX Communications, Inc., a provider of specialized mobile
radio services and systems integration for wireless and wire line
telecommunications service providers. From October 1997 until November 1998, Mr.
Kellogg was the Chief Financial Officer and Corporate Secretary of IllumElex
Corporation, based in Raleigh, North Carolina, a national lighting and energy
services company. From April 1995 until October 1997, he served as the Vice
President and General Manager of Southern Development and Investment Group,
located in Atlanta, Georgia, a wholly-owned subsidiary of the Southern Company
focused on the identification, development, funding, and deployment of various
energy, telecommunications and technology related businesses. Prior thereto, he
served in various capacities for divisions of the Southern Company, including
Georgia Power Company, Mississippi Power Company, Southern Company Services and
SouthernLinc.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Exchange Act ("Section 16(a)") requires our
directors and executive officers, and beneficial owners of more than 10% of our
outstanding Common Stock, to file initial reports of ownership on Form 3 and
reports of changes in ownership on Form 4 or Form 5 with the SEC, and to furnish
us with copies of all such reports that they file. Based solely upon our review
of the copies of such forms we have received, and written representations from
certain directors and executive officers that no Form 5s were required to be
filed, we believe that, during fiscal 2002, all reports required by Section
16(a) to be filed by such persons were timely filed, exhibit for one Form 4
covering three transactions by Mr. Pell inadvertently filed late.

ITEM 10.     EXECUTIVE COMPENSATION

SUMMARY COMPENSATION

         The following table sets forth the total compensation that we paid or
accrued for services rendered to us in all capacities during the last three
fiscal years by our Chief Executive Officer and by our only other executive
officer (the "Named Executive Officers") whose total salary and bonus exceeded
$100,000 in fiscal 2002:
<TABLE>
<CAPTION>

                                           SUMMARY COMPENSATION TABLE


                                                                                        LONG TERM
                                                                                      COMPENSATION
                                                                                      ------------
                                                                                         AWARDS
                                                                                      ------------
                                                     ANNUAL COMPENSATION(1)            SECURITIES
                                                     -----------------------           UNDERLYING              ALL OTHER
NAME AND PRINCIPAL POSITION             YEAR         SALARY            BONUS           OPTIONS(2)          COMPENSATION(3)
---------------------------             ----         ------            -----           -----------         ---------------
<S>                                     <C>         <C>              <C>                       <C>              <C>
W. Phillip Marcum...........            2002         $295,000        $       0                 0                $6,471
         President and Chief            2001          295,000                0           200,000                 6,188
         Executive Officer              2000          295,000          150,000                 0                 6,438

A. Bradley Gabbard..........            2002          175,000                0                 0                 6,314
         Executive Vice                 2001          175,000                0           200,000                 6,060
         President and Chief            2000          175,000           75,000                 0                 6,170
         Financial Officer
</TABLE>

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

(1)      Excludes perquisites and other personal benefits, if any, which were
         less than the lesser of $50,000 or 10% of the total annual salary and
         bonus reported for each Named Executive Officer.



                                       48
<PAGE>

(2)      All options, vest in three equal annual investment: one-third on date
         of grant, one-third on the first anniversary of the grant and one-third
         on second anniversary of the grant.

(3)      Includes amounts paid or accrued on behalf of the Named Executive
         Officers in fiscal 2002 for (i) matching contributions under our 401(k)
         plan of $5,500 for Mr. Marcum and $5,361 for Mr. Gabbard; (ii) premiums
         for group term life insurance of $762 for Mr. Marcum and $744 for Mr.
         Gabbard; and (iii) premiums for long-term disability insurance of $209
         for Mr. Marcum and $209 for Mr. Gabbard.

EMPLOYMENT AGREEMENTS, CHANGE IN CONTROL ARRANGEMENTS AND OTHER COMPENSATION
ARRANGEMENTS

         Arrangements with Named Executive Officers. In December 1991, we
entered into employment agreements, which have been amended several times, with
W. Phillip Marcum, our Chairman of the Board, President and Chief Executive
Officer, and A. Bradley Gabbard, our Executive Vice President and Chief
Financial Officer. Under the most recent amendments to these employment
agreements, the employment terms of Messrs. Marcum and Gabbard were extended and
renewed until December 31, 2003, with automatic additional one-year renewal
periods when the terms expire, unless either we or the officer gives six months
prior written notice of termination.

         The base salaries under these employment agreements, which are subject
to annual upward adjustments at the discretion of the Board of Directors, are
currently set at $295,000 for Mr. Marcum and $175,000 for Mr. Gabbard. In
addition to the base annual compensation, the employment agreements provide,
among other things, for standard benefits commensurate with the management
levels involved. The employment agreements also provide for us to establish an
incentive compensation fund, to be administered by our Compensation Committee,
to provide for incentive compensation to be paid to each officer or employee
(including Messrs. Marcum and Gabbard) deemed by the Compensation Committee to
have made a substantial contribution to us in the event of a change of control
of Metretek or of the sale of substantially all of our assets or similar
transactions. The total amount of incentive compensation from the fund available
for distribution will be determined by a formula based on the amount by which
the fair market value per share of the Common Stock exceeds $10.08, multiplied
by a factor ranging from 10-20% depending upon the ratio of the fair market
value to $10.08. In the case of the sale of a significant subsidiary or
substantially all of the assets of a significant subsidiary, a similar pro rata
distribution is required. As amended, the employment agreements with Messrs.
Marcum and Gabbard provide that if the employment period expires without being
renewed, then the executive is entitled to receive a lump-sum severance payment
equal to 12 months, for Mr. Marcum, and six months, for Mr. Gabbard, of his then
base salary, and continued participation in all our insurance plans for such
additional period. The employment agreements also contain certain restrictions
on each executive's ability to compete, use of confidential information and use
of inventions and other intellectual property.

         As amended, the employment agreements with Messrs. Marcum and Gabbard
also include "change in control" provisions designed to provide for continuity
of management in the event we undergo a change in control. The agreements
provide that if within three years after a change in control, the officer is
terminated by us for any reason other than for "cause", or if the officer
terminates his employment for "good reason", as such terms are defined in the
employment agreements, then the officer is entitled to receive a lump-sum
severance payment equal to two times, for Mr. Marcum, and one times, for Mr.
Gabbard, the amount of his then base salary, together with certain other
payments and benefits, including continued participation in all our insurance
plans for a period of two years for Mr. Marcum and one year for Mr. Gabbard.
Under these employment agreements, a "change in control" will be deemed to have
occurred only if:

         -        any person or group becomes the beneficial owner of 50% or
                  more of our Common Stock;

         -        a majority of our present directors are replaced, unless the
                  election of any new director is approved by a two-thirds vote
                  of the current (or properly approved successor) directors;

         -        we approve a merger, consolidation, reorganization or
                  combination, other than one in which our voting securities
                  outstanding immediately prior thereto continue to represent
                  more than 50% of our total voting power or of the surviving
                  corporation following such a transaction and our directors
                  continue to represent a majority of our directors or of the
                  surviving corporation following such transaction; or

         -        we approve a sale of all or substantially all of our assets.



                                       49
<PAGE>

         Arrangements with Other Employees. In June 2002, Metretek Florida
entered into an employment and non-competition agreement with Thomas R. Kellogg,
the President and Chief Executive Officer of Metretek Florida. Mr. Kellogg's
employment agreement expires June 24, 2003, and is renewable for additional
one-year renewal periods when the term expires, unless either Metretek Florida
or Mr. Kellogg gives 30 days prior written notice of termination.

         The base salary under Mr. Kellogg's employment agreement is set at
$175,000. In addition to the base salary, Mr. Kellogg's employment agreement
provides, among other things, for standard benefits commensurate with the
management level involved, including a bonus of 7% of Metretek Florida's cash
flow from operations, options to purchase 100,000 shares of our Common Stock at
$1.50 per share, and 8% of the common shares of MCM. Mr. Kellogg's employment
agreement also provides for incentive compensation in the event of a sale of the
core business of Metretek Florida, consisting generally of all Metretek Florida
business other than the contract manufacturing business, based upon an
increasing proportion of the net proceeds of such a sale. Such incentive
compensation commences at 15.25% of the first $500,000 of the net proceeds over
$2 million from a sale of Metretek Florida's core business, and that percentage
increases incrementally as net proceeds increase, up to 31% of the net proceeds
of such a sale over $5.5 million. Any incentive compensation payable for net
proceeds exceeding $6 million are to be set in the discretion of our Board of
Directors. If we reject a bona fide offer for the sale of the core business of
Metretek Florida before Mr. Kellogg's employment is terminated for any reason,
and if he rejects any severance to which he would otherwise be entitled, then
Mr. Kellogg will be entitled to receive shares of Metretek Florida, under the
terms and conditions of a Shareholders Agreement, in proportion to what his
incentive compensation would have been if the sale had been approved. In
addition, if Mr. Kellogg's employment is terminated without cause, or upon the
expiration of the employment term or any renewal period, or as the result of a
sale of Metretek Florida where Mr. Kellogg waives his incentive compensation,
then Mr. Kellogg will be entitled to receive a severance payment in the amount
of one year's base salary, payable over the subsequent year. Mr. Kellogg's
employment agreement also contains a one-year non-compete covenant and certain
restrictions on Mr. Kellogg's use of confidential information and use of
inventions and other intellectual property.

         In June 2002, MCM issued shares totaling 17% of its outstanding common
stock to three of its employees, including to Mr. Kellogg as described above, as
equity incentive compensation. As of December 31, 2002, Metretek Florida owns
83% of the outstanding MCM shares. The MCM shares are subject to a Shareholders
Agreement, dated June 27, 2002, signed by all the employees receiving MCM
shares. Under the Shareholders Agreement:

         -        MCM holds a right of first refusal on the sale of any MCM
                  shares by any employee-shareholders;

         -        MCM employee-shareholders have the right to participate in a
                  sale of a majority of the outstanding MCM shares by Metretek
                  Florida;

         -        If Metretek Florida desires to sell its MCM shares that
                  constitute a majority of all then outstanding MCM shares, then
                  Metretek Florida has the right to force the
                  employee-shareholders to also sell their MCM shares;

         -        MCM employee-shareholders have the preemptive right to
                  maintain their pro rata equity percentage in MCM in the event
                  of future issuances of MCM shares by participating in such
                  issuances on the same terms as other buyers; and

         -        Upon the termination of employment of any MCM
                  employee-shareholder, MCM has the right to purchase such MCM
                  shares at an appraised value.

         Effective January 1, 2003, PowerSecure entered into an employment and
non-competition agreement with Sidney Hinton, the President and Chief Executive
Officer of PowerSecure. Mr. Hinton's employment agreement is for a term of three
years, and is renewable for additional one-year renewal periods when the term
expires, unless either PowerSecure or Mr. Hinton gives 30 days prior written
notice of termination.

         The base salary under Mr. Hinton's employment agreement is set at
$250,000, subject to annual upward adjustments at the discretion of the Board of
Directors of PowerSecure. In addition to the base salary, Mr. Hinton's
employment agreement provides, among other things, for standard benefits
commensurate with the management level involved, including an annual bonus of 7%
of PowerSecure's cash flow from operations and 7% of the common shares of
PowerSecure. If Mr. Hinton's employment is terminated without cause, or due to
the expiration of the employment term or any renewal period, then Mr. Hinton
will be entitled to receive a severance payment in


                                       50
<PAGE>

the amount of one year's base salary, payable over the subsequent year. Mr.
Hinton's employment agreement also contains a one-year non-competition covenant,
which becomes two years if Mr. Hinton voluntarily resigns or is terminated by
PowerSecure for cause, and certain restrictions on Mr. Hinton's use of
confidential information and use of inventions and other intellectual property.
Mr. Hinton's employment agreement also includes a "change in control" provision
designed to provide for continuity of management in the event we or PowerSecure
undergo a change in control. The employment agreement provides that if within
three years after a "change in control", Mr. Hinton is terminated by us for any
reason other than for "cause", or if Mr. Hinton terminates his employment for
"good reason", as such terms are defined in the employment agreement, then Mr.
Hinton is entitled to receive a lump-sum severance payment equal to one year's
then base salary, together with certain other payments and benefits, including
continued participation in all our insurance plans for a period of one year.

         During March 2003, subject to approval by our Series B Preferred
Stockholders, PowerSecure authorized the issuance of shares totaling up to 15%
of its outstanding common stock to its employees, including to Mr. Hinton as
described above, as equity incentive compensation. As of December 31, 2002, we
owned 100% of the outstanding PowerSecure shares, and we will continue to own
85% of the outstanding PowerSecure shares the issuance of all authorized shares
to PowerSecure employees. The PowerSecure shares will be issued subject to a
Shareholders Agreement to be signed by all employees receiving PowerSecure
shares. Under the Shareholders Agreement:

         -        PowerSecure holds a right of first refusal on the sale of any
                  PowerSecure shares by any employee-shareholders;

         -        PowerSecure employee-shareholders have the right to
                  participate in a sale of a majority of the outstanding
                  PowerSecure shares by us;

         -        If we desire to sell our PowerSecure shares that constitute a
                  majority of all then outstanding PowerSecure shares, then we
                  have the right to force the employee-shareholders to also sell
                  their PowerSecure shares;

         -        If PowerSecure issues additional PowerSecure shares in the
                  future to third persons, then PowerSecure will grant an option
                  for its employee-shareholders to purchase additional
                  PowerSecure shares in order to maintain their pro rata equity
                  percentage in PowerSecure, at the price as paid by such third
                  persons; and

         -        Upon the termination of employment of any PowerSecure
                  employee-shareholder, PowerSecure has the right to purchase
                  such PowerSecure shares at an appraised value.

STOCK OPTION GRANTS

         We did not grant any stock options, or stock appreciation rights, alone
or in tandem with stock options, in fiscal 2002 to the Named Executive Officers.

STOCK OPTION EXERCISES AND VALUES

         The following table sets forth information with respect to stock
options held by the Named Executive Officers on December 31, 2002. The Named
Executive Officers did not exercise any stock options during fiscal 2002.



                                       51
<PAGE>






                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>

                                                   NUMBER OF SECURITIES                 VALUE OF UNEXERCISED
                                             UNDERLYING UNEXERCISED OPTIONS           IN-THE-MONEY OPTIONS AT
                                                  AT FISCAL YEAR-END                     FISCAL YEAR-END (1)
                                             ------------------------------        -----------------------------
           NAME                             EXERCISABLE       UNEXERCISABLE        EXERCISABLE    UNEXERCISABLE
           ----                             ------------      -------------        -----------    -------------
<S>                                            <C>                 <C>                    <C>           <C>
           W. Phillip Marcum........           213,334             66,666                 $0            $0

           A. Bradley Gabbard.......           182,834             66,666                  0             0
</TABLE>

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

         (1)   For purposes of this table, the "Value of Unexercised
               In-the-Money Options" is calculated based upon the difference
               between $0.26, the closing sale price of the Common Stock on
               December 31, 2002, as reported on the OTC Bulletin Board, and the
               option exercise price. An option is "in-the-money" if the fair
               market value of the underlying shares of Common Stock exceeds the
               exercise price of the option. Because the exercise price of all
               options in this table exceeded $0.26, none of the options were
               "in-the-money" on December 31, 2002.

DIRECTOR COMPENSATION

         Directors who are also our officers or employees do not receive any
additional compensation for serving on the Board of Directors or its committees.
All directors are reimbursed for their out-of-pocket costs of attending meetings
of the Board of Directors and its committees. Directors who are not also our
officers or employees ("Non-Employee Directors") currently receive an annual
retainer of $5,000 plus a fee of $1,000 for each meeting of the Board of
Directors attended in person and a fee of $500 for each meeting attended
telephonically. Non-Employee Directors also receive stock options under an
annual formula ("Annual Director Options"). Until June 1998, these Annual
Director Options were granted under our Directors' Stock Option Plan (the
"Directors' Plan"). Since June 1998, these Annual Director Options have been
granted under our 1998 Stock Incentive Plan (the "1998 Plan"). Under the formula
for these Annual Director Options, each person who is first elected or appointed
to serve as a Non-Employee Director is automatically granted an option to
purchase 5,000 shares of Common Stock. On the date of the annual meeting of
stockholders each year, each Non-Employee Director automatically granted an
Annual Director Option to purchase 2,500 shares of Common Stock, unless he was
first elected within six months of that date. All Annual Director Options vest
and become exercisable immediately upon grant. Additional non-formula options
can be granted to Non-Employee Directors under the 1998 Plan in the discretion
of the Board of Directors.

         All Annual Director Options granted to Non-Employee Directors are
non-qualified stock options exercisable at a price equal to the fair market
value of the Common Stock on the date of grant and have ten year terms, subject
to earlier termination in the event of the termination of the optionee's status
as a director or the optionee's death. Annual Director Options typically remain
exercisable for one year after a Non-Employee Director dies and for that number
of years after a Non-Employee Director leaves the Board of Directors (for any
reason other than death or removal for cause) equal to the number of full or
partial years that the Non-Employee Director served as a director, but not
beyond the ten year term of the option. Any other option granted to a director
may contain different terms at the discretion of the Board.

         As of December 31, 2002, options to purchase 328,468 shares of Common
Stock were outstanding to our current Non-Employee Directors under the 1998
Plan, at exercise prices ranging from $0.48 to $17.38 per share.

ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
             AND RELATED STOCKHOLDER MATTERS


         The following table sets forth information regarding the beneficial
ownership of our Common Stock as of February 28, 2003 (except as otherwise
indicated in the footnotes below) by:



                                       52
<PAGE>

         -        each person who is known by us to beneficially own 5% or more
                  of the outstanding shares of our Common Stock;

         -        each of our directors;

         -        each of the Named Executive Officers; and

         -        all of our directors and executive officers as a group.

         The share ownership information in the following table is based upon
information supplied to us by the persons named in the table and upon public
filings with the SEC. Beneficial ownership is determined in accordance with the
rules of the SEC and generally includes either voting or investment power with
respect to securities. Unless otherwise indicated below, to our knowledge, each
person named in the table below has sole voting and investment power with
respect to the shares of Common Stock beneficially owned by such person, subject
to applicable community property laws. In computing the "Number" and the
"Percent of Class" beneficially owned by a person, beneficial ownership includes
any shares of Common Stock issuable under options, warrants, conversion rights
and other rights that are exercisable on or within 60 days of February 28, 2003.
These underlying shares, however, are not included in computing the "Percent of
Class" of any other beneficial owner. The "Percent of Class" is based upon
6,043,469 shares of Common Stock outstanding on February 28, 2003. The business
address for all of our named executive officers and directors is 303 Seventeenth
Street, Suite 660, Denver, Colorado 80203.
<TABLE>
<CAPTION>

                                                                                     SHARES OF COMMON STOCK
                                                                                   ----------------------------
NAME OF BENEFICIAL OWNER                                                           NUMBER      PERCENT OF CLASS
------------------------                                                           ------      ----------------
<S>                                                                             <C>                <C>
DDJ Capital Management, LLC(1) ..............................................      2,159,167          28.4
    141 Linden Street, Suite S-4
    Wellesley, Massachusetts  02482
Special Situations Funds(2) .................................................      1,034,360          14.6
    153 East 53rd Street
    New York, New York  10022
State Street Bank and Trust Company, as trustee (3) .........................        719,722          11.0
    225 Franklin Street
    Boston, Massachusetts  02110
Credit Suisse Asset Management, LLC (4) .....................................        717,180          10.9
    153 East 53rd Street, 57th Floor
    New York, New York, 10022
Kenneth B. Funsten (5) ......................................................        686,260          10.9
    121 Outrigger Mall
    Marina del Ray, California  90292
W. Phillip Marcum (6) .......................................................        404,967           6.3
FamCo Value Income Partners, L.P. (7) .......................................        347,068           5.6
    121 Outrigger Mall
    Marina del Ray, California  90292
American Meter Company (8) ..................................................        325,054           5.4
    300 Welsh Road
    Horsham, Pennsylvania 19044
A. Bradley Gabbard (9) ......................................................        306,616           4.9
Anthony D. Pell (10) ........................................................        112,431           1.8
Basil M. Briggs (11) ........................................................         80,305           1.3
Kevin P. Collins (12) .......................................................         79,832           1.3
All directors and executive officers
     as a group (6 persons)(13) .............................................      1,016,284          15.1
</TABLE>

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

(1)      Information based, in part, on Schedule 13G filed with the SEC on
         February 14, 2002 by State Street Bank and Trust Company, as trustee
         for General Motors Employees Global Group Pension Trust (the "GM
         Trust") and General Motors Investment Management Corporation
         ("GMIMCO"), indicating beneficial ownership as of December 31, 2001.
         Information also based, in part, on Amendment No. 4 to Schedule 13D
         filed with the SEC on December 27, 2000, by DDJ Capital Management, LLC
         ("DDJ"), B III-A


                                       53
<PAGE>
         Capital Partners, L.P. ("B III-A  Capital Partners") and GP III-A, LLC
         ("GP III-A"), indicating beneficial ownership as of December 9, 2000.
         The shares of Common Stock are owned by B III-A Capital Partners
         (359,862 shares), the DDJ Canadian High Yield Fund (1,079,583 shares)
         and the GM Trust (719,721 shares). GP III-A is the general partner of,
         and DDJ is the investment manager for, B III-A Capital Partners. DDJ is
         the investment advisor to the DDJ Canadian High Yield Fund. DDJ and
         GMIMCO are investment managers for the GM Trust. Includes 300,000
         shares of Common Stock that may be acquired upon the exercise of
         currently exercisable warrants, of which warrants to purchase 50,000
         shares are owned by B III-A Capital Partners, warrants to purchase
         150,000 shares are owned by DDJ Canadian High Yield Fund, and warrants
         to purchase 100,000 shares are owned by the GM Trust. Also includes
         1,259,167 shares of Common Stock that may be acquired upon the
         conversion of 3,000 shares of Series B Preferred Stock, of which 500
         shares of Series B Preferred Stock convertible into 209,862 shares of
         Common Stock are owned by B III-A, 1,500 shares of Series B Preferred
         Stock convertible into 629,583 shares of Common Stock are owned by DDJ
         Canadian High Yield Fund, and 1,000 shares of Series B Preferred Stock
         convertible into 419,721 shares of Common Stock are owned by the GM
         Trust.

(2)      Information based, in part, upon Schedule 13G filed with the SEC on
         February 13, 2003 by Austin W. Marxe and David M. Greenhouse,
         indicating beneficial ownership as of December 31, 2002. Austin W.
         Marxe and David M. Greenhouse are the controlling principals of AWM
         Investment Company, Inc. ("AWM"). AWM Investment is the general partner
         of MGP Advisors Limited Partnership ("MGP Partners") and the general
         partner of and the investment advisor to the Special Situations Cayman
         Fund, L.P. MGP Advisors is the general partner of and investment
         adviser to the Special Situations Fund III, L.P. Messrs. Marxe and
         Greenhouse are also members of MG Advisors, L.L.C. ("MG Advisers"), the
         general partner of and the investment advisor to the Special Situations
         Private Equity Fund, L.P. and members of SST Advisors, L.L.C., the
         general partner of and investment advisor to the Special Situations
         Technology Fund, L.P. The shares of Common Stock are owned by Special
         Situations Fund III (426,673 shares), Special Situations Private Equity
         Fund (258,590 shares), Special Situations Technology Fund (206,872
         shares) and Special Situations Cayman Fund (142,225 shares). Includes
         200,000 shares of Common Stock that may be acquired upon the exercise
         of currently exercisable warrants, of which warrants to purchase 82,500
         shares are owned by Special Situations Fund III, warrants to purchase
         50,000 shares are owned by Special Situations Private Equity Fund,
         warrants to purchase 40,000 shares are owned by Special Situations
         Technology Fund, and warrants to purchase 27,500 shares are owned by
         Special Situations Cayman Fund. Also includes 834,360 shares of Common
         Stock that may be acquired upon the conversion of 2,000 shares of
         Series B Preferred Stock, of which 825 shares of Series B Preferred
         Stock convertible into 344,173 shares of Common Stock are owned by
         Special Situations Fund III, 500 shares of Series B Preferred Stock
         convertible into 208,590 shares of Common Stock are owned by Special
         Situations Private Equity Fund, 400 shares of Series B Preferred Stock
         convertible into 166,872 shares of Common Stock are owned by Special
         Situations Technology Fund, and 275 shares of Series B Preferred Stock
         convertible into 114,725 shares of Common Stock are owned by Special
         Situations Cayman Fund.

(3)      Information based, in part, upon Schedule 13G filed with the SEC on
         February 14, 2002 by State Street Bank and Trust Company, as trustee
         for the GM Trust, and GMIMCO. State Street Bank and Trust Company is
         acting as trustee for the GM Trust with respect to these shares, and
         DDJ and GMIMCO are investment managers for the GM Trust with respect to
         these shares. See note (1) above. Includes 100,000 shares of Common
         Stock that may be acquired upon the exercise of currently exercisable
         warrants. Also includes 419,721 shares of Common Stock that may be
         acquired upon the conversion of 1,000 shares of Series B Preferred
         Stock. In this table, the shares beneficially owned by State Street
         Bank and Trust Company, as trustee for the GM Trust, are also included
         in the shares beneficially owned by DDJ.

(4)      Credit Suisse Asset Management, LLC is the investment advisor for SEI
         Institutional Management Trust, Bost & Co., Warburg Pincus High Yield
         Fund, The Common Fund, CSAM Investment Trust - U.S. HYLD Series and SEI
         Global - High Yield Fixed Income Fund. The shares of Common Stock are
         owned by SEI Institutional Management Trust (215,154 shares), Bost &
         Co. (83,436 shares), Warburg Pincus High Yield Fund (107,577 shares),
         The Common Fund (107,577 shares), CSAM Investment Trust - U.S. HYLD
         Series (107,577 shares) and SEI Global - High Yield Fixed Income Fund
         (35,859 shares). Includes 100,000 shares of Common Stock that may be
         acquired upon the exercise of currently exercisable warrants, of which
         warrants to purchase 30,000 shares are owned by SEI Institutional
         Management Trust, warrants to purchase 20,000 shares are owned by Bost
         & Co., warrants to purchase 15,000 shares are owned by Warburg Pincus
         High Yield Fund, warrants to purchase 15,000 shares owned by The Common
         Fund, warrants to purchase 15,000 shares are owned by CSAM Investment
         Trust - U.S. HYLD Series, and


                                       54
<PAGE>

         warrants to purchase 5,000 shares are owned by SEI Global - High Yield
         Fixed Income Fund. Also includes 417,180 shares of Common Stock that
         may be acquired upon the conversion of 1,000 shares of Series B
         Preferred Stock, of which 300 shares of Series B Preferred Stock
         convertible into 125,154 shares of Common Stock are owned by SEI
         Institutional Management Trust, 200 shares of Series B Preferred Stock
         convertible into 83,436 shares of Common Stock are owned by Bost & Co.,
         150 shares of Series B Preferred Stock convertible into 62,577 shares
         of Common Stock are owned by Warburg Pincus High Yield Fund, 150 shares
         of Series B Preferred Stock convertible into 62,577 shares of Common
         Stock are owned by The Common Fund, 150 shares of Series B Preferred
         Stock convertible into 62,577 shares of Common Stock are owned by CSAM
         Investment Trust - U.S. HYLD Series, and 50 shares of Series B
         Preferred Stock convertible into 20,859 shares of Common Stock are
         owned by SEI Global - High Yield Fixed Income Fund.

(5)      Information based, in part, upon Amendment No. 1 to Schedule 13G and
         upon Form 3 filed with the SEC on December 29, 2000 by Kenneth B.
         Funsten, indicating beneficial ownership as of December 9, 2000, and
         Amendment No. 1 to Schedule 13G filed with the SEC on February 21, 2002
         by FamCo Value Income Partners, L.P. ("FamCo VIP"), indicating
         beneficial ownership as of December 31, 2001. Kenneth B. Funsten is the
         president and the portfolio manager of Funsten Asset Management
         Company. Funsten Asset Management Company is the general partner of
         FamCo VIP. Mr. Funsten is a director of FamCo Offshore, Ltd. Mr.
         Funsten holds sole voting and investment power over the securities
         owned by FamCo VIP and FamCo Offshore. The shares of Common Stock are
         owned by Mr. Funsten (245,918 shares), FamCo VIP (347,068 shares) and
         FamCo Offshore (93,274 shares). Includes 50,000 shares of Common Stock
         that may be acquired upon currently exercisable warrants, of which
         warrants to purchase 18,100 shares are owned by Mr. Funsten, warrants
         to purchase 27,000 shares are owned by FamCo VIP, and warrants to
         purchase 4,900 shares are owned by FamCo Offshore. Also includes
         208,590 shares of Common Stock that may be acquired upon the conversion
         of 500 shares of Series B Preferred Stock, of which 181 shares of
         Series B Preferred Stock convertible into 75,510 shares of Common Stock
         are owned by Mr. Funsten, 270 shares of Series B Preferred Stock
         convertible into 112,638 shares of Common Stock are owned by FamCo VIP,
         and 49 shares of Series B Preferred Stock convertible into 20,442
         shares of Common Stock are owned by FamCo Offshore. Does not include
         4,100 shares owned by an employee of Funsten Asset Management Company
         which cannot be sold or further added to without permission by Mr.
         Funsten by virtue of restrictions that are placed on securities
         transactions by employees of Funsten Asset Management Company, because
         Mr. Funsten has no investment or voting authority over the shares of
         the employee and Mr. Funsten expressly disclaims beneficial ownership
         of these shares.

(6)      Includes 253,334 shares that may be acquired by Mr. Marcum upon the
         exercise of currently exercisable stock options.

(7)      Information based upon Amendment No. 1 to Schedule 13G filed with the
         SEC by FamCo VIP on February 21, 2002, indicating beneficial ownership
         as of December 31, 2001. Kenneth B. Funsten and Funsten Asset
         Management Company are the general partners of FamCo VIP. In this
         table, the shares beneficially owned by FamCo VIP are also included in
         the shares beneficially owned by Mr. Funsten. See note (5) above.

(8)      Information based upon Amendment No. 2 to Schedule 13D filed by
         American Meter Company, as successor in interest to its former
         subsidiary Eagle Research Corporation, with the SEC on August 31, 2000.

(9)      Includes 2,187 shares owned by Mr. Gabbard's minor son and 182,834
         shares that may be acquired by Mr. Gabbard upon the exercise of
         currently exercisable stock options.

(10)     Includes 2,937 shares held by Mr. Pell's wife. Also includes 75,082
         shares that may be acquired by Mr. Pell upon the exercise of currently
         exercisable stock options.

(11)     Includes 4,500 shares owned by Mr. Briggs' wife. Also includes 75,805
         shares that may be acquired by Mr. Briggs or his wife upon the exercise
         of currently exercisable stock options.

(12)     Includes 77,582 shares that may be acquired by Mr. Collins upon the
         exercise of currently exercisable stock options.


                                       55
<PAGE>

(13)     Includes 688,971 shares that may be acquired upon the exercise of
         currently exercisable stock options. See note (6) and notes (9) through
         (12).

EQUITY COMPENSATION PLAN INFORMATION

         We have three compensation plans that have been approved by our
stockholders under which our equity securities are authorized for issuance to
directors, officers, employees, advisors and consultants in exchange for goods
or services:

         -        our 1991 Stock Option Plan;

         -        our Directors' Plan; and

         -        our 1998 Stock Incentive Plan.

         In addition, we have issued warrants to purchase our equity securities
to certain advisors consultants and lenders with the approval of our Board of
Directors, but without the approval of our stockholders which was not required.

         The following table sets forth information about our Common Stock that
may be issued upon the exercise of outstanding options, warrants and other
rights under all of our existing equity compensation plans as of December 31,
2002:
<CAPTION>
<TABLE>
                                                                                        NUMBER OF SECURITIES
                                  NUMBER OF SECURITIES                                REMAINING AVAILABLE FOR
                                    TO BE ISSUED UPON         WEIGHTED-AVERAGE         FUTURE ISSUANCE UNDER
                                       EXERCISE OF           EXERCISE PRICE OF       EQUITY COMPENSATION PLANS
                                  OUTSTANDING OPTIONS,      OUTSTANDING OPTIONS,       (EXCLUDING SECURITIES
PLAN CATEGORY                      WARRANTS AND RIGHTS      WARRANTS AND RIGHTS       REFLECTED IN COLUMN (a))
-------------                              (a)                      (b)                         (c)
                                  --------------------      --------------------       -----------------------
<S>                                <C>                         <C>                        <C>
Equity compensation plans
approved by security holders (1)      1,723,590                   $2.03                      183,366

Equity compensation plans not
approved by security holders (2)        170,000                    8.36                            0
                                      ---------                   -----                      -------
Total                                 1,893,590                   $2.60                      183,366
                                      =========                   =====                      =======
</TABLE>

----------

(1)      Represents options to purchase shares of Common Stock granted under our
         1991 Stock Option Plan, our Directors' Plan and our 1998 Stock
         Incentive Plan. We will not grant any future options under our 1991
         Stock Option Plan or our Directors' Plan.

(2)      Represents warrants to purchase shares of Common Stock granted in 1999
         and 2001 to certain advisors, investors and lenders as compensation in
         past for services rendered, at exercise prices ranging from $2.47 to
         $14.50 and expiring at various dates through July 2004.



                                       56
<PAGE>



ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         We have entered into indemnification agreements with each of our
directors. These agreements require us to indemnify such individuals to the
fullest extent permitted by Delaware law.

         Any material transaction between us and any related party must be
approved by a majority of the members of our Board of Directors who are
disinterested in the transaction.

ITEM 13.     EXHIBITS AND REPORTS ON FORM 8-K

(a)     EXHIBITS

         (2)      PLAN OF PURCHASE, SALE, REORGANIZATION, ARRANGEMENT,
                  LIQUIDATION OR SUCCESSION:

                  (2.1)    Termination Agreement and Mutual Release, dated as of
                           March 31, 2001, by and among Metretek Technologies,
                           Inc., PowerSpring, Inc., Mercator Energy
                           Incorporated, John A. Harpole and Mercator Energy
                           LLC. (Incorporated by reference to Exhibit 10.1 to
                           Metretek's Quarterly Report on Form 10-QSB for the
                           quarter ended March 31, 2001.)

                  (2.2)    Stock Purchase Agreement, dated as of April 6, 2001,
                           by and among Stanley W. Timblin, Jeffrey W. Timblin,
                           PowerSecure, Inc. and Metretek Technologies, Inc.
                           (Incorporated by reference to Exhibit 10.2 to
                           Metretek's Quarterly Report on Form 10-QSB for the
                           quarter ended March 31, 2001.)

                  (2.3)    Amendment to Stock Purchase Agreement, dated as of
                           December 31, 2002, by and among Stanley W. Timblin,
                           Jeffrey W. Timblin, PowerSecure, Inc. and Metretek
                           Technologies, Inc.

         (3)      ARTICLES OF INCORPORATION AND BY-LAWS:

                  (3.1)    Second Restated Certificate of Incorporation of
                           Metretek Technologies, Inc. (Incorporated by
                           reference to Exhibit 4.1 to Metretek's Registration
                           Statement on Form S-3, Registration No. 333-96369.)

                  (3.2)    Amended and Restated By-Laws of Metretek
                           Technologies, Inc. (Incorporated by reference to
                           Exhibit 4.2 to Metretek's Registration Statement on
                           Form S-8, Registration No. 333-62714.)

         (4)      INSTRUMENT DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
                  INDENTURES:

                  (4.1)    Specimen Common Stock Certificate. (Incorporated by
                           reference to Exhibit 4.1 to Metretek's Registration
                           Statement on Form S-18, Registration No. 33-44558.)

                  (4.2)    Specimen Series B Preferred Stock Certificate.
                           (Incorporated by reference to Exhibit 4.4 to
                           Metretek's Registration Statement on Form S-3,
                           Registration No. 333-96369.)

                  (4.3)    Form of Certificate representing warrants to purchase
                           shares of Common Stock of Metretek Technologies, Inc.
                           issued to former holders of warrants of Metretek,
                           Incorporated. (Incorporated by reference to Exhibit
                           4.2 to Metretek's Registration Statement on Form S-4,
                           Registration No. 33-73874.)

                  (4.4)    Amended and Restated Rights Agreement, dated as of
                           November 30, 2001, between Metretek Technologies,
                           Inc. and Computershare Investor Services, LLC.
                           (Incorporated by reference to Exhibit 4.1 to
                           Metretek's Registration Statement on Form 8-A/A,
                           Amendment No. 5, filed November 30, 2001.)


                                       57
<PAGE>

                  (4.5)    Form of Registration Rights Agreement among Metretek
                           Technologies, Inc. and the former warrant holders of
                           Metretek, Incorporated. (Incorporated by reference to
                           Exhibit 4.4 to Metretek's Registration Statement on
                           Form S-4, Registration No. 33-73874.)

                  (4.6)    Securities Purchase Agreement, dated as of December
                           9, 1999, by and among Metretek Technologies, Inc. and
                           certain purchasers of securities of Metretek
                           Technologies, Inc. (collectively, the "Unit
                           Purchasers"). (Incorporated by reference to Exhibit
                           4.1 to Metretek's Current Report on Form 8-K filed
                           December 22, 1999).

                  (4.7)    Form of Common Stock Purchase Warrant issued by
                           Metretek Technologies, Inc. to the Unit Purchasers.
                           (Incorporated by reference to Exhibit 4.3 to
                           Metretek's Current Report on Form 8-K filed December
                           22, 1999).

                  (4.8)    Registration Rights Agreement, dated as of December
                           9, 1999, by and among Metretek Technologies, Inc. and
                           the Unit Purchasers. (Incorporated by reference to
                           Exhibit 4.4 to Metretek's Current Report on Form 8-K
                           filed December 22, 1999).

                  (4.9)    Form of Common Stock Purchase Warrant issued by
                           Metretek Technologies, Inc. to Scient Corporation.
                           (Incorporated by reference to Exhibit 4.12 of
                           Metretek's Registration Statement on Form S-3,
                           Registration No. 333-96369).

                  (4.10)   Form of Common Stock Purchase Warrant issued by
                           Metretek Technologies, Inc. to Silverman Heller
                           Associates. (Incorporated by reference to Exhibit
                           4.15 of Metretek's Registration Statement on Form
                           S-3, Registration No. 333-96369).

                  (4.11)   Form of Common Stock Purchase Agreement issued by
                           Metretek Technologies, Inc. to First Albany
                           Corporation, William Reinert, John S. Koodrich and
                           Lawrence C. Petrucci. (Incorporated by reference to
                           Exhibit 4.16 of Metretek's Registration Statement on
                           Form S-3, Registration No. 333-96369).

         (10)     MATERIAL CONTRACTS:

                  (10.1)   1991 Stock Option Plan, as amended and restated
                           December 5, 1996. (Incorporated by reference to
                           Exhibit 10.2 to Metretek's Annual Report on Form
                           10-KSB for the year ended December 31, 1996.)*

                  (10.2)   Directors' Stock Option Plan, as amended and restated
                           December 2, 1996. (Incorporated by reference to
                           Exhibit 10.3 to Metretek's Annual Report on Form
                           10-KSB for the year ended December 31, 1996.)*

                  (10.3)   Employment Agreement, dated as of June 11, 1991, by
                           and between Metretek Technologies, Inc. and W.
                           Phillip Marcum. (Incorporated by reference to Exhibit
                           10.4 to Metretek's Registration Statement on Form
                           S-18, Registration No. 33-44558.)*

                  (10.4)   Amendment No. 1 to Employment Agreement, dated June
                           27, 1997, by and between Metretek Technologies, Inc.
                           and W. Phillip Marcum. (Incorporated by reference to
                           Exhibit 10.1 to Metretek's Quarterly Report on Form
                           10-QSB for the quarterly period ended September 30,
                           1997.)*

                  (10.5)   Amendment No. 2 to Employment Agreement, dated
                           December 3, 1998, by and between Metretek
                           Technologies, Inc. and W. Phillip Marcum.
                           (Incorporated by reference to Exhibit 10.5 to
                           Metretek's Annual Report on Form 10-KSB for the year
                           ended December 31, 1998.)*

                  (10.6)   Amendment No. 3 to Employment Agreement, dated as of
                           January 1, 2000, by and between Metretek
                           Technologies, Inc. and W. Phillip Marcum.
                           (Incorporated by reference to Exhibit 10.6 to
                           Metretek's Annual Report on Form 10-KSB for the year
                           ended December 31, 1999.)


                                       58
<PAGE>

                  (10.7)   Employment Agreement, dated as of June 11, 1991, by
                           and between Metretek Technologies, Inc. and A.
                           Bradley Gabbard. (Incorporated by reference to
                           Exhibit 10.4 to Metretek's Registration Statement on
                           Form S-18, Registration No. 33-44558.)*

                  (10.8)   Amendment No. 1 to Employment Agreement, dated June
                           27, 1997, by and between Metretek Technologies, Inc.
                           and A. Bradley Gabbard. (Incorporated by reference to
                           Exhibit 10.2 to Metretek's Quarterly Report on Form
                           10-QSB for the quarterly period ended September 30,
                           1997.)*

                  (10.9)   Amendment No. 2 to Employment Agreement, dated
                           December 3, 1998, by and between Metretek
                           Technologies, Inc. and A. Bradley Gabbard.
                           (Incorporated by reference to Exhibit 10.8 to
                           Metretek's Annual Report on Form 10-KSB for the year
                           ended December 31, 1998.)*

                  (10.10)  Amendment No. 3 to Employment Agreement, dated as of
                           January 1, 2000, by and between Metretek
                           Technologies, Inc. and A. Bradley Gabbard.*
                           (Incorporated by reference to Exhibit 10.10 to
                           Metretek's Annual Report on Form 10-KSB for the year
                           ended December 31, 1999.)*

                  (10.11)  Amendment No. 4 to Employment Agreement, dated as of
                           January 1, 2002, by and between Metretek
                           Technologies, Inc. and A. Bradley Gabbard.*
                           (Incorporated by reference to Exhibit 10.11 to
                           Metretek's Annual Report on Form 10-KSB for the year
                           ended December 31, 2001.)*

                  (10.12)  Metretek Technologies, Inc. 1998 Stock Incentive
                           Plan, amended and restated as of June 11, 2001
                           (Incorporated by reference to Exhibit 4.3 to
                           Metretek's Registration Statement on Form S-8,
                           Registration No. 333-62714.)*

                  (10.13)  Form of Indemnification Agreement between Metretek
                           Technologies, Inc. and each of its directors.
                           (Incorporated by reference to Exhibit 10.21 to
                           Metretek's Annual Report on Form 10-KSB for the year
                           ended December 31, 1999.)

                  (10.14)  Termination Agreement and Mutual Release, dated as of
                           March 31, 2001, by and among Metretek Technologies,
                           Inc., PowerSpring, Inc., Mercator Energy
                           Incorporated, John A. Harpole and Mercator Energy LLC
                           (Incorporated by reference to Exhibit 10.1 to
                           Metretek's Quarterly Report on Form 10-QSB for the
                           quarter ended March 31, 2001.)

                  (10.15)  Prototype - Basic Plan Document for the Metretek -
                           Southern Flow Savings and Investment Plan.
                           (Incorporated by reference to Exhibit 4.7 to
                           Metretek's Registration Statement on Form S-8,
                           Registration No. 333-42698.)*

                  (10.16)  Adoption Agreement for the Metretek - Southern Flow
                           Savings and Investment Plan. (Incorporated by
                           reference to Exhibit 4.8 to Metretek's Registration
                           Statement on Form S-8, Registration No. 333-42698.)*

                  (10.17)  Non-Negotiable Convertible Promissory Note, dated
                           September 28, 2000, issued by Metretek Technologies,
                           Inc. to Scient Corporation. (Incorporated by
                           reference to Exhibit 10.1 to Metretek's Quarterly
                           Report on Form 10-QSB for the quarter ended September
                           30, 2000.)

                  (10.18)  Credit and Security Agreement, dated as of September
                           24, 2001, by and between Wells Fargo Business Credit,
                           Inc. and Southern Flow Companies, Inc. (Incorporated
                           by reference to Exhibit 10.1 to Metretek's Current
                           Report on Form 8-K filed October 5, 2001.)

                  (10.19)  Form of Guaranty, dated as of September 24, 2001, by
                           each of Metretek Technologies, Inc., PowerSecure,
                           Inc. and Metretek, Incorporated for the benefit of
                           Wells Fargo Business Credit, Inc. (Incorporated by
                           reference to Exhibit 10.2 to Metretek's Current
                           Report on Form 8-K filed October 5, 2001.)


                                       59
<PAGE>

                  (10.20)  Form of Security Agreement, dated as of September 24,
                           2001, between Wells Fargo Business Credit, Inc. and
                           each of Metretek Technologies, Inc., PowerSecure,
                           Inc. and Metretek, Incorporated. (Incorporated by
                           reference to Exhibit 10.3 to Metretek's Current
                           Report on Form 8-K filed October 5, 2001.)

                  (10.21)  Credit and Security Agreement, dated as of September
                           6, 2002, by and between Wells Fargo Business Credit,
                           Inc. and Metretek, Incorporated (Incorporated by
                           reference to Exhibit 10.1 to Metretek's Current
                           Report on Form 8-K filed September 12, 2002.)

                  (10.22)  Form of Guaranty, dated as of September 6, 2002, by
                           each of Metretek Technologies, Inc., PowerSecure,
                           Inc., Metretek Contract Manufacturing Company, Inc.
                           and Southern Flow Companies, Inc., Incorporated for
                           the benefit of Wells Fargo Business Credit, Inc.
                           (Incorporated by reference to Exhibit 10.2 to
                           Metretek's Current Report on Form 8-K filed September
                           12, 2002.)

                  (10.23)  Form of Security Agreement, dated as of September 6,
                           2001, between Wells Fargo Business Credit, Inc. and
                           each of Metretek Technologies, Inc., PowerSecure,
                           Inc., Metretek Contract Manufacturing Company, Inc.
                           and Southern Flow Companies, Inc. (Incorporated by
                           reference to Exhibit 10.3 to Metretek's Current
                           Report on Form 8-K filed September 12, 2002.)

                  (10.24)  Employment Non-Competition Agreement, dated as of
                           June 24, 2002, by and between Metretek, Incorporated
                           and Thomas R. Kellogg.*

                  (10.25)  Employment and Non-Competition Agreement, dated as of
                           January 1, 2003, between PowerSecure, Inc. and Sidney
                           Hinton.*

                  (10.26)  Shareholders Agreement, dated as of June 27, 2002,
                           between Metretek Contract Manufacturing Company, Inc.
                           and its shareholders.*

                  (10.27)  Form of Shareholders Agreement, between Metretek,
                           Incorporated and its shareholders.*

                  (10.28)  Shareholders Agreement, dated as of January 1, 2003,
                           between PowerSecure, Inc. and its shareholders.*

                  (10.29)  Stipulation of Settlement, filed March 27, 2003,
                           among Douglas W. Heins, on behalf of himself and
                           all others similarly situated, and Metretek
                           Technologies, Inc., et al.

                  (10.30)  Stipulation and Order of Settlement, dated as of
                           February 25, 2003, by Scient, Inc. and Metretek
                           Technologies, Inc.

                  (10.31)  First Amendment to Credit and Security Agreement,
                           dated as of November 19, 2002, between Southern Flow
                           Companies, Inc. and Wells Fargo Business Credit, Inc.

                  (10.32)  Second Amendment to Credit and Security Agreement,
                           and Waiver of Defaults dated as of March 26, 2003,
                           between Southern Flow Companies, Inc. and Wells Fargo
                           Business Credit, Inc.

                  (10.33)  First Amendment to Credit and Security Agreement
                           and Waiver of Defaults, dated as of March 26, 2003,
                           between Metretek, Incorporated and Wells Fargo
                           Business Credit Inc.

         (21)     SUBSIDIARIES OF THE SMALL BUSINESS ISSUER:

                  (21.1)   Subsidiaries of Metretek Technologies, Inc.

         (23)     CONSENT OF EXPERTS:

                  (23.1)   Consent of Deloitte & Touche LLP

         (99)     ADDITIONAL EXHIBITS

                  (99.1)   Certification of Chief Executive Officer pursuant to
                           18 U.S.C. Section 1350, as adopted pursuant to
                           Section 906 of the Sarbanes-Oxley Act of 2002

                  (99.2)   Certification of Chief Financial Officer pursuant to
                           18 U.S.C. Section 1350, as adopted pursuant to
                           Section 906 of the Sarbanes-Oxley Act of 2002

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


                                       60
<PAGE>

         *Management contract or compensation plan or arrangement required to be
filed as an exhibit to this form pursuant to Item 13(a) of Form 10-KSB.

(b)      REPORTS ON FORM 8-K

         During the quarter ended December 31, 2002, we filed the following
Current Report on Form 8-K with the SEC:

         Filing Date                Item No.             Description
         -----------                --------             -----------
         October 15, 2002               5,7          Delisting from Nasdaq
                                                        SmallCap Market



ITEM 14. CONTROLS AND PROCEDURES

         Within the 90 day period prior to the filing date of this Report (the
"Evaluation Date"), we carried out an evaluation, under the supervision and with
the participation of our management, including our Chief Executive Officer and
our Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures, as defined in and pursuant to Rules
13a-14 and 15d-14 of the Exchange Act. Based upon that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that, as of the
Evaluation Date, our disclosure controls and procedures were effective and
adequate to ensure that, material information relating to us, including our
consolidated subsidiaries, required to be disclosed by us in the reports that we
file or submit under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified by SEC rules and forms.

         There were no significant changes in our internal controls or in other
factors that could significantly affect these controls subsequent to the
Evaluation Date.

         The design of any system of controls and procedures is based upon
certain assumptions about the likelihood of future events. There can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions.



                                       61
<PAGE>



                                   SIGNATURES

         In accordance with Section 13 or 15(d) of the Exchange Act, the
Registrant caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                                   METRETEK TECHNOLOGIES, INC.


                                   By:    /s/ W. Phillip Marcum
                                       ----------------------------------------
                                          W. Phillip Marcum, President and
                                          Chief Executive Officer
                                          Date: March 27, 2003

         KNOW ALL MEN BY THESE PRESENTS, THAT each of the undersigned directors
and officers of Metretek Technologies, Inc. hereby constitutes and appoints W.
Phillip Marcum, A. Bradley Gabbard and Paul R. Hess, and each of them, as his
true and lawful attorneys-in-fact and agents, with full power of substitution
and re-substitution for him and in his name, place and stead, in any and all
capacities, to do any and all acts and things and to execute any and all
instruments which said attorneys-in-fact and agents may deem necessary or
advisable to enable said corporation to comply with the Securities and Exchange
Act of 1934, as amended, and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Annual Report on
Form 10-KSB, including, without limitation, the power and authority to sign for
us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto, and we do hereby ratify and
confirm all that said attorneys-in-fact and agents shall do or cause to be done
by virtue hereof.

         In accordance with the Exchange Act, this Report has been signed below
by the following persons on behalf of the Registrant and in the capacities and
on the dates indicated:
<TABLE>
<CAPTION>

Signature                             Title                                             Date
---------                             -----                                             ----
<S>                                  <C>                                              <C>
/s/ W. Phillip Marcum                 Chairman of the Board, President,                 March 27, 2003
----------------------------------    Chief Executive Officer and Director
W. Phillip Marcum                     (Principal executive officer)

/s/ A. Bradley Gabbard                Executive Vice President, Chief Financial         March 27, 2003
-----------------------------------   Officer, Treasurer, Secretary and Director
A. Bradley Gabbard                    (Principal financial officer)

/s/ Gary J. Zuiderveen                Controller, Principal Accounting                  March 27, 2003
-----------------------------------   Officer and Secretary
Gary J. Zuiderveen                    (Principal accounting officer)



/s/ Basil M. Briggs                   Director                                          March 27, 2003
-----------------------------------
Basil M. Briggs

/s/ Anthony D. Pell                   Director                                          March 27, 2003
-----------------------------------
Anthony D. Pell

/s/ Kevin P. Collins                  Director                                          March 27, 2003
-----------------------------------
Kevin P. Collins
</TABLE>



                                       62
<PAGE>

                                 CERTIFICATIONS

I, W. Phillip Marcum, certify that:

         1.       I have reviewed this annual report on Form 10-KSB of Metretek
                  Technologies, Inc.;

         2.       Based on my knowledge, this annual report does not contain any
                  untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  annual report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this annual report, fairly
                  present in all material respects the financial condition,
                  results of operations and cash flows of the Registrant as of,
                  and for, the periods presented in this annual report;

         4.       The Registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the Registrant and we have:

                  a)       designed such disclosure controls and procedures to
                           ensure that material information relating to the
                           Registrant, including its consolidated subsidiaries,
                           is made known to us by others within those entities,
                           particularly during the period in which this annual
                           report is being prepared;

                  b)       evaluated the effectiveness of the Registrant's
                           disclosure controls and procedures as of a date
                           within 90 days prior to the filing date of this
                           annual report (the "Evaluation Date"); and

                  c)       presented in this annual report our conclusions about
                           the effectiveness of the disclosure controls and
                           procedures based on our evaluation as of the
                           Evaluation Date;

         5.       The Registrant's other certifying officers and I have
                  disclosed, based on our most recent evaluation, to the
                  Registrant's auditors and the audit committee of Registrant's
                  board of directors (or persons performing the equivalent
                  function):

                  a)       all significant deficiencies in the design or
                           operation of internal controls which could adversely
                           affect the Registrant's ability to record, process,
                           summarize and report financial data and have
                           identified for the Registrant's auditors any material
                           weaknesses in internal controls; and

                  b)       any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the Registrant's internal controls; and

         6.       The Registrant's other certifying officers and I have
                  indicated in this annual report whether or not there were
                  significant changes in internal controls or in other factors
                  that could significantly affect internal controls subsequent
                  to the date of our most recent evaluation, including any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.

Date: March 28, 2003             /s/ W. Phillip Marcum
                                 -----------------------------------
                                 W. Phillip Marcum
                                 President and Chief Executive Officer
                                 Metretek Technologies, Inc.


                                       63
<PAGE>



I, A. Bradley Gabbard, certify that:

         1.       I have reviewed this annual report on Form 10-KSB of Metretek
                  Technologies, Inc.;

         2.       Based on my knowledge, this annual report does not contain any
                  untrue statement of a material fact or omit to state a
                  material fact necessary to make the statements made, in light
                  of the circumstances under which such statements were made,
                  not misleading with respect to the period covered by this
                  annual report;

         3.       Based on my knowledge, the financial statements, and other
                  financial information included in this quarterly report,
                  fairly present in all material respects the financial
                  condition, results of operations and cash flows of the
                  Registrant as of, and for, the periods presented in this
                  annual report;

         4.       The Registrant's other certifying officers and I are
                  responsible for establishing and maintaining disclosure
                  controls and procedures (as defined in Exchange Act Rules
                  13a-14 and 15d-14) for the Registrant and we have:

                  a)       designed such disclosure controls and procedures to
                           ensure that material information relating to the
                           Registrant, including its consolidated subsidiaries,
                           is made known to us by others within those entities,
                           particularly during the period in which this annual
                           report is being prepared;

                  b)       evaluated the effectiveness of the Registrant's
                           disclosure controls and procedures as of a date
                           within 90 days prior to the filing date of this
                           annual report (the "Evaluation Date"); and

                  c)       presented in this annual report our conclusions about
                           the effectiveness of the disclosure controls and
                           procedures based on our evaluation as of the
                           Evaluation Date;

         5.       The Registrant's other certifying officers and I have
                  disclosed, based on our most recent evaluation, to the
                  Registrant's auditors and the audit committee of Registrant's
                  board of directors (or persons performing the equivalent
                  function):

                  a)       all significant deficiencies in the design or
                           operation of internal controls which could adversely
                           affect the Registrant's ability to record, process,
                           summarize and report financial data and have
                           identified for the Registrant's auditors any material
                           weaknesses in internal controls; and

                  b)       any fraud, whether or not material, that involves
                           management or other employees who have a significant
                           role in the Registrant's internal controls; and

         6.       The Registrant's other certifying officers and I have
                  indicated in this annual report whether or not there were
                  significant changes in internal controls or in other factors
                  that could significantly affect internal controls subsequent
                  to the date of our most recent evaluation, including any
                  corrective actions with regard to significant deficiencies and
                  material weaknesses.

Date: March 28, 2003       /s/ A. Bradley Gabbard
                           --------------------------
                           A. Bradley Gabbard
                           Executive Vice President and Chief Financial Officer
                           Metretek Technologies, Inc.


                                       64
<PAGE>
                          INDEX TO FINANCIAL STATEMENTS

                                                                            PAGE

CONSOLIDATED FINANCIAL STATEMENTS OF
   METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

Independent Auditors' Report                                               F-2

Consolidated Balance Sheets as of December 31, 2002 and 2001               F-3

Consolidated Statements of Operations for the Years Ended
   December 31, 2002 and 2001                                              F-5

Consolidated Statements of Stockholders' Equity for the Years
   Ended December 31, 2002 and 2001                                        F-6

Consolidated Statements of Cash Flows for the Years Ended
   December 31, 2002 and 2001                                              F-7

Notes to Consolidated Financial Statements                                 F-8




                                       F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
  Metretek Technologies, Inc.:

We have audited the accompanying consolidated balance sheets of Metretek
Technologies, Inc. and subsidiaries (the "Company") as of December 31, 2002 and
2001, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Metretek Technologies, Inc. and
subsidiaries at December 31, 2002 and 2001, and the results of their operations
and their cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.

As disclosed in Note 1 to the consolidated financial statements, in 2002 the
Company changed its method of accounting for goodwill and other intangible
assets. Also as disclosed in Note 1 to the consolidated financial statements, in
2002 the Company changed its method of accounting for contracts from the
completed-contract method to the percentage-of-completion method.

/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP

Denver, Colorado
March 27, 2003

                                       F-2

<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                     DECEMBER 31,
                                                                            --------------------------------
ASSETS                                                                         2002                 2001
<S>                                                                         <C>                  <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                 $   884,843          $   696,076
  Trade receivables, net of allowance for doubtful accounts
    of $281,422 and $169,632, respectively                                    4,209,942            4,980,419
  Other receivables                                                                 576               14,929
  Inventories                                                                 3,208,774            3,135,297
  Prepaid expenses and other current assets                                     519,113              559,562
                                                                            -----------          -----------

      Total current assets                                                    8,823,248            9,386,283
                                                                            -----------          -----------

PROPERTY, PLANT AND EQUIPMENT:
  Equipment                                                                   3,776,586            4,150,686
  Vehicles                                                                       63,867               50,227
  Furniture and fixtures                                                        580,551              561,664
  Land, building and improvements                                               742,424              736,388
                                                                            -----------          -----------
      Total property, plant and equipment, at cost                            5,163,428            5,498,965
  Less accumulated depreciation and amortization                              3,449,635            3,318,054
                                                                            -----------          -----------

      Property, plant and equipment, net                                      1,713,793            2,180,911
                                                                            -----------          -----------

OTHER ASSETS:
  Goodwill (Notes 1 and 4)                                                    7,617,196            7,407,931
  Patents and capitalized software development, net of accumulated
   amortization of $930,633 and $818,065, respectively                          389,133              489,860
  Other assets (Note 7)                                                         619,747              691,042
                                                                            -----------          -----------

      Total other assets                                                      8,626,076            8,588,833
                                                                            -----------          -----------

TOTAL                                                                       $19,163,117          $20,156,027
                                                                            ===========          ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-3

<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                        DECEMBER 31,
                                                                             ----------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY                                             2002                  2001
<S>                                                                         <C>                    <C>
CURRENT LIABILITIES:
  Accounts payable                                                          $  1,576,580           $  1,405,632
  Accrued and other liabilities                                                2,852,737              1,962,617
  Notes payable (Note 5)                                                         261,387              2,479,172
  Deposits and capital lease obligations (Note 6)                                 42,458                  1,896
                                                                            ------------           ------------

      Total current liabilities                                                4,733,162              5,849,317
                                                                            ------------           ------------

LONG-TERM NOTES PAYABLE (NOTE 5)                                               4,690,758              1,268,024
                                                                            ------------           ------------

NON-CURRENT CAPITAL LEASE OBLIGATIONS (NOTE 6)                                    41,893
                                                                            ------------           ------------
COMMITMENTS AND CONTINGENCIES (NOTE 7)

REDEEMABLE PREFERRED STOCK - SERIES B,
  $.01 PAR VALUE; 1,000,000 SHARES AUTHORIZED;
  7,000 SHARES ISSUED AND OUTSTANDING;
  REDEMPTION VALUE $1,000 PER SHARE (NOTE 3)                                   8,531,941              7,680,217
                                                                            ------------           ------------
STOCKHOLDERS' EQUITY (NOTE 9):
  Preferred stock - undesignated, $.01 par value; 2,000,000 shares
    authorized; none issued and outstanding
  Preferred stock - Series C, $.01 par value; 500,000 shares
    authorized; none issued and outstanding
 Common stock, $.01 par value 25,000,000 shares authorized;
    6,043,469 and 6,077,764 shares issued and outstanding,
    respectively                                                                  60,435                 60,778
  Additional paid-in-capital                                                  55,092,132             55,116,789
  Accumulated other comprehensive loss                                                                  (65,935)
  Accumulated deficit                                                        (53,987,204)           (49,753,163)
                                                                            ------------           ------------

      Total stockholders' equity                                               1,165,363              5,358,469
                                                                            ------------           ------------

TOTAL                                                                       $ 19,163,117           $ 20,156,027
                                                                            ============           ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-4

<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                    YEAR ENDED
                                                                   DECEMBER 31,
                                                        -----------------------------------
                                                           2002                    2001
<S>                                                     <C>                    <C>
REVENUES:
  Sales and services                                    $ 27,040,333           $ 28,798,771
  Other                                                        1,172                294,015
                                                        ------------           ------------

      Total revenues                                      27,041,505             29,092,786
                                                        ------------           ------------
COSTS AND EXPENSES:
  Cost of sales and services                              19,938,103             21,321,934
  General and administrative                               5,494,173              5,426,352
  Selling, marketing and service                           1,555,150              1,360,296
  Depreciation and amortization                              658,417              1,418,571
  Research and development                                   551,518                796,672
  Interest, finance charges and other                        205,234                154,253
  Provision for litigation costs, net (Note 7)             1,763,723                   --
  Nonrecurring charges (Note 2)                              257,504                   --
                                                        ------------           ------------

      Total costs and expenses                            30,423,822             30,478,078
                                                        ------------           ------------

OPERATING LOSS                                            (3,382,317)            (1,385,292)

MINORITY INTEREST IN LOSS (Note 9)                              --                     --

INCOME TAXES (Note 8)                                           --                     --
                                                        ------------           ------------

NET LOSS                                                  (3,382,317)            (1,385,292)

PREFERRED STOCK DEEMED DISTRIBUTION                         (851,724)              (776,732)
                                                        ------------           ------------

NET LOSS APPLICABLE TO COMMON SHAREHOLDERS              $ (4,234,041)          $ (2,162,024)
                                                        ============           ============

NET LOSS PER COMMON SHARE, BASIC AND DILUTED            $      (0.70)          $      (0.36)
                                                        ============           ============
WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING, BASIC AND DILUTED                           6,077,388              6,031,272
                                                        ============           ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-5

<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2002 AND 2001
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                           ACCUMULATED
                                   COMMON STOCK           ADDITIONAL          OTHER
                                -------------------         PAID-IN        COMPREHENSIVE    ACCUMULATED
                                SHARES        VALUE         CAPITAL        INCOME (LOSS)       DEFICIT           TOTAL
<S>                            <C>           <C>         <C>                 <C>           <C>               <C>
BALANCE,
  JANUARY 1, 2001              5,908,067     $ 59,081    $ 54,814,659        $ (5,926)     $ (47,591,139)    $ 7,276,675

Comprehensive loss:
  Foreign currency
    translation adjustments                                                   (60,009)                           (60,009)
  Net loss                                                                                    (1,385,292)     (1,385,292)
                                                                                                             ------------
Total comprehensive loss                                                                                      (1,445,301)
Warrant compensation                                           60,977                                             60,977
Stock issued in acquisition      150,000        1,500         241,350                                            242,850
Stock issued for royalty
  make-up payment                 19,697          197            (197)
Preferred stock
  distribution                                                                                  (776,732)       (776,732)
                               ---------       ------      ----------         --------       ------------      ---------
BALANCE,
  DECEMBER 31, 2001            6,077,764       60,778      55,116,789         (65,935)       (49,753,163)      5,358,469

Comprehensive loss:
  Foreign currency
    translation adjustments                                                    65,935                             65,935
  Net loss                                                                                    (3,382,317)     (3,382,317)
                                                                                                              -----------
Total comprehensive loss                                                                                      (3,316,382)
Repurchases of
  common stock                   (34,295)        (343)        (24,657)                                           (25,000)
Preferred stock
  distribution                                                                                  (851,724)       (851,724)
                               ---------       ------      ----------         --------       ------------      ---------
BALANCE,
  DECEMBER 31, 2002            6,043,469     $ 60,435    $ 55,092,132        $             $ (53,987,204)    $ 1,165,363
                               =========     ========    ============         =======       ==============    ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-6

<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                         Year Ended
                                                                                        December 31,
                                                                             ----------------------------------
                                                                                 2002                  2001
                                                                             -----------           -----------
<S>                                                                          <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                                   $(3,382,317)          $(1,385,292)
  Adjustments to reconcile net loss to net cash provided by
    operating activities:
    Depreciation and amortization                                                658,417             1,418,571
    Provision for litigation costs                                             1,763,723
    Loss on disposal of property, plant and equipment                             16,352                76,742
  Changes in operating assets and liabilities, net of acquisitions:
      Trade receivables, net                                                     770,477              (503,578)
      Inventories                                                                (73,477)               91,698
      Other current assets                                                      (154,463)              201,943
      Other noncurrent assets                                                    (58,269)              128,199
      Accounts payable                                                           170,948               370,902
      Accrued and other liabilities                                              384,840               216,144
                                                                             -----------           -----------
      Net cash provided by operating activities                                   96,231               615,329
                                                                             -----------           -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Capitalized software purchases or development                                  (11,840)             (498,869)
  Purchases of property, plant and equipment                                    (534,426)             (157,849)
  Proceeds from sale of property, plant and equipment                              1,500               334,585
                                                                             -----------           -----------
      Net cash used in investing activities                                     (544,766)             (322,133)
                                                                             -----------           -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net payments on old line of credit                                                                (1,011,541)
  Net borrowings on new line of credit                                           445,258             1,025,770
  Payments on notes payable                                                                           (125,000)
  Repurchase of common stock                                                     (25,000)
  Proceeds from equipment loan                                                   238,863
  Proceeds from mortgage loan                                                                          250,000
  Payments on mortgage loan and capital lease obligations                        (21,819)             (205,162)
                                                                             -----------           -----------
      Net cash provided by (used in) financing activities                        637,302               (65,933)
                                                                             -----------           -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                        188,767               227,263

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                   696,076               468,813
                                                                             -----------           -----------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                     $   884,843           $   696,076
                                                                             ===========           ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-7

<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 2002 AND 2001

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

1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        ORGANIZATION - The accompanying consolidated financial statements
        include the accounts of Metretek Technologies, Inc. ("Metretek
        Technologies") and its subsidiaries, Southern Flow Companies, Inc.
        ("Southern Flow"), PowerSecure, Inc. ("PowerSecure"), Metretek,
        Incorporated ("Metretek Florida") (and its wholly-owned subsidiaries,
        Metretek Europe, Limited ("Metretek Europe") and Sigma VI, Inc. ("Sigma
        VI") and its majority-owned subsidiary, Metretek Contract Manufacturing
        Company, Inc. ("MCM")), PowerSpring, Inc. ("PowerSpring"), and Marcum
        Gas Transmission, Inc. ("MGT") (and its wholly-owned subsidiary Marcum
        Capital Resources, Inc. ("MCR")), collectively referred to as the
        "Company."

        Metretek Technologies was incorporated on April 5, 1991. The focus of
        the Company's business operations is in the following areas relating to
        the natural gas industry: 1) natural gas measurement services, 2)
        distributed generation, 3) the design, manufacture and distribution of
        automated energy consumption monitoring and recording systems, and 4)
        Internet-based business to business energy information and services.
        Southern Flow provides natural gas measurement services. PowerSecure
        designs and constructs electric generation equipment and controls
        directly within a commercial or industrial customer's facility. Metretek
        Florida designs, manufactures and sells automated systems to monitor and
        record natural gas consumption of commercial and industrial customers of
        natural gas utility companies. The operations of our internet-based
        energy information and services segment were conducted by PowerSpring
        through March 31, 2001. Effective April 1, 2001, PowerSpring's business
        was restructured and transferred to Metretek Florida. See Note 10 for
        more information concerning the Company's reportable segments.

        PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
        include the accounts of Metretek Technologies and its subsidiaries after
        elimination of intercompany accounts and transactions.

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

        REVENUE RECOGNITION - Equipment and supply sales are recognized when
        delivered, and natural gas measurement revenues are recognized as
        services are provided. During the initial startup period of
        PowerSecure's operations in 2001, the Company used the
        completed-contract method of revenue recognition for PowerSecure's
        contracts. Under the completed-contract method, revenue is recognized
        when a project or contract is completed or substantially completed.

        Effective January 1, 2002, the Company elected to change its method of
        accounting for PowerSecure's contracts to the percentage-of-completion
        method of accounting. Under the percentage-of-completion method of
        accounting, PowerSecure recognizes project revenues (and associated
        project costs) based on estimates of the value added for each portion of
        the projects completed. Revenues and gross profit are





                                      F-8
<PAGE>

        adjusted prospectively for revisions in estimated total contract costs
        and contract values. Estimated losses, if any, are recorded when
        identified. Amounts billed to customers in excess of revenues recognized
        to date are classified as current liabilities. Management believes the
        percentage-of-completion method of accounting results in a better
        matching of revenues and costs to the period in which the earnings
        process occurs and the costs are actually incurred. As a result of the
        adoption of the new accounting method described above, sales and service
        revenues for the year ended December 31, 2002 increased $912,894 and net
        loss for the period ended December 31, 2002 decreased $247,549 or $0.04
        per share. There was no financial statement effect on the year ended
        December 31, 2001, as a result of the adoption of the new accounting
        method, due to the short-term nature of PowerSecure's contracts through
        December 31, 2001.

        In December 1999, the Securities and Exchange Commission issued Staff
        Accounting Bulletin No. 101, "Revenue Recognition in Financial
        Statements" ("SAB 101"). The Company believes that its revenue
        recognition practices comply with the guidance in SAB 101.

        STATEMENT OF CASH FLOWS - The Company considers all highly liquid
        investments with a maturity of three months or less from the date of
        purchase to be cash equivalents.

        Supplemental statement of cash flows information is as follows:

                                                       2002             2001

            Cash paid for interest                  $147,956         $ 148,475

            Cash paid for income taxes              $ 45,509          $ 34,614


        In October 2002, the Company incurred a capital lease obligation in the
        amount of $98,424 in connection with the acquisition of manufacturing
        equipment.

        Subsequent to December 31, 2002, a $2,471,426 promissory note payable
        issued in September 2000 in connection with a payable for services
        rendered, which was later disputed, was cancelled in connection with the
        settlement of all claims and disputes with the vendor (Notes 5 and 7).

        In March 2001, a $741,666 promissory note payable issued in March 2000
        in connection with an acquisition was cancelled in connection with the
        termination of PowerSpring (Note 2).

        In April 2001, the Company issued 150,000 shares of its common stock in
        connection with the acquisition of Industrial Automation (Note 4). As a
        result of a modification to the purchase agreement during the fourth
        quarter of 2002, an additional $209,265 of costs incurred representing
        payments for liabilities assumed in the acquisition were reallocated to
        goodwill during the fourth quarter of 2002.

        A non-cash distribution to preferred stockholders in the amount of
        $161,907 in both 2002 and 2001 was recognized upon the amortization of a
        discount recorded when the preferred stock was sold with a beneficial
        conversion feature (Note 3).

        ACCOUNTS RECEIVABLE - The Company performs ongoing credit evaluations of
        its customers' financial condition and generally does not require
        collateral. The Company continuously monitors collections and payments
        from its customers and regularly adjusts credit limits of customers
        based upon payment



                                      F-9
<PAGE>

        history and a customer's current credit worthiness, as judged by the
        Company. The Company maintains a provision for estimated credit losses.

        INVENTORIES - Inventories are stated at the lower of cost (determined
        primarily on a first-in, first-out basis) or market. Inventories at
        December 31, 2002 and 2001 are summarized as follows:
<TABLE>
<CAPTION>
                                                                 2002              2001
<S>                                                          <C>               <C>
          Raw materials and supplies                         $1,186,677        $1,269,173
          Work in process                                       950,773           449,524
          Finished goods and merchandise                      1,466,250         1,829,638
          Valuation and shrinkage reserve                      (394,926)         (413,038)
                                                             ----------        ----------

          Total                                              $3,208,774        $3,135,297
                                                             ==========        ==========
</TABLE>




        PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated
        at cost and are generally depreciated using the straight-line method
        over their estimated useful lives, which depending on asset class ranges
        from 2 to 40 years. Property, plant and equipment includes items under
        capital lease with a net book value of $91,360 and $0 at December 31,
        2002 and 2001, respectively.

        GOODWILL AND OTHER INTANGIBLE ASSETS - Effective January 1, 2002, the
        Company adopted the provisions of Statement of Financial Accounting
        Standards ("FAS") No. 141, "Business Combinations" and FAS No. 142
        "Goodwill and Other Intangible Assets." These pronouncements
        significantly modify the accounting for business combinations, goodwill,
        and intangible assets. FAS 141 eliminates the pooling-of-interests
        method of accounting for business combinations and further clarifies the
        criteria to recognize intangible assets separately from goodwill. FAS
        142 states that goodwill and intangible assets with indefinite lives are
        no longer amortized but are reviewed for impairment annually (or more
        frequently if impairment indicators arise). Separable intangible assets
        that do not have an indefinite life continue to be amortized over their
        estimated useful lives. During the three-month period ended June 30,
        2002, the Company completed the initial testing of the impairment of
        goodwill required by FAS 142 and concluded that there was no impairment
        of goodwill. During the three-month period ended December 31, 2002, the
        Company completed its annual testing of the impairment of goodwill as of
        October 1, 2002. As a result of the test, the Company concluded that no
        impairment of goodwill existed as of October 1, 2002.

        The following table reflects pro forma results of operations of the
        Company, giving effect to FAS 142 as if it were adopted on January 1,
        2001:
<TABLE>
<CAPTION>
                                                                            YEAR ENDED
                                                                        DECEMBER 31, 2001
                                                                        -----------------
<S>                                                                        <C>
          Net loss applicable to
            common shareholders, as reported                               $ (2,162,024)
          Add back: amortization expense, net of tax                            675,320
                                                                           ------------
          Pro forma net loss applicable
            to common shareholders                                         $ (1,486,704)
                                                                           ============
          Net loss per common share, basic and diluted
            As reported                                                    $      (0.36)
                                                                           ============
            Pro forma                                                      $      (0.25)
                                                                           =============
</TABLE>



                                      F-10
<PAGE>

        The Company capitalizes software development costs integral to its
        products once technological feasibility of the products and software has
        been determined. Software development costs are being amortized over
        five years, using the straight-line method. Unamortized software
        development costs at December 31, 2002 and 2001 are $389,133 and
        $478,149, respectively. Patents and license agreements are amortized
        using the straight-line method over the lesser of their estimated
        economic lives or their legal term of existence, generally 10 to 17
        years.

        ACCRUED AND OTHER LIABILITIES - Accrued and other liabilities at
        December 31, 2002 and 2001 are summarized as follows:
<TABLE>
<CAPTION>
                                                                                   2002             2001
                                                                                ----------       ----------
<S>                                                                            <C>               <C>
          Payroll, employee benefits and related liabilities                   $   755,099       $  589,852
          Deferred revenue                                                         509,397          628,226
          Sales, property and other taxes payable                                   56,897          115,915
          Insurance premiums and reserves                                          343,884          108,541
          Accrued project costs                                                    224,953          324,858
          Advance billings on projects in progress                                 145,891          134,863
          Warranty reserve                                                          84,344           27,042
          Accrued litigation costs                                                 569,319                -
          Termination benefits payable                                              99,016                -
          Other                                                                     63,937           33,320
                                                                                ----------       ----------

          Total                                                                 $2,852,737       $1,962,617
                                                                                ==========       ==========
</TABLE>


        RESEARCH AND DEVELOPMENTS COSTS - Research and development costs
        relating principally to the design and development of products
        (exclusive of costs capitalized under FAS 86) are expensed as incurred.

        FOREIGN CURRENCY TRANSLATION - Metretek Europe operated in Europe
        primarily using local functional currency. Accordingly, the assets and
        liabilities of Metretek Europe were translated into U.S. dollars for
        consolidated balance sheet accounts at the rate of exchange in effect at
        year end, while sales and expenses were translated into U.S. dollars for
        consolidated statements of operations accounts at the average exchange
        rates in effect during the year. The net effect of translation
        adjustments is shown in the accompanying financial statements as a
        component of comprehensive income. During 2002, the Company terminated
        the separate business activities of Metretek Europe and combined its
        operations with Metretek Florida. The remaining balance of the foreign
        currency translation adjustment in the amount of ($65,935) at December
        31, 2001 was eliminated when Metretek Europe's separate business
        activities were terminated and the remaining net assets were combined
        with Metretek Florida or otherwise disposed during 2002.

        COMPREHENSIVE INCOME (LOSS) - The Company's comprehensive income (loss)
        consists solely of foreign currency translation adjustments attributable
        to the accounts of Metretek Europe and is presented in the Consolidated
        Statement of Stockholders' Equity.

        INCOME (LOSS) PER SHARE - The Company's net loss per share is computed
        based on the net loss applicable to common shareholders and the weighted
        average number of shares of common stock outstanding during the periods
        presented. The assumed conversion of stock options, convertible
        preferred stock and warrants has been excluded from weighted average
        common shares, because the effect would be anti-dilutive.



                                      F-11
<PAGE>

        STOCK BASED COMPENSATION - The Company utilizes the intrinsic value
        method to account for employee stock options as well as stock options
        issued to independent members of the board of directors. The Company
        utilizes the fair value method to account for stock based compensation
        to non-employees. In December 2002, the FASB issued FAS No. 148,
        "Accounting for Stock-Based Compensation - Transition and Disclosure".
        FAS 148 amends FAS No. 123, "Accounting for Stock-Based Compensation",
        to provide alternative methods for voluntary transition to FAS 123's
        fair value method of accounting for stock-based employee compensation
        ("the fair value method"). FAS 148 also requires disclosure of the
        effects of an entity's accounting policy with respect to stock-based
        employee compensation on reported net income (loss) and earnings (loss)
        per share in annual and interim financials statements. The provisions of
        FAS 148 are effective in fiscal years ending after December 15, 2002.
        The Company is currently evaluating the provisions of FAS 148 but
        expects that they will not have a material adverse impact on its
        consolidated results of operations and financial position upon adoption
        since the Company has not adopted the fair value method. However, should
        the Company be required to adopt the fair value method in the future,
        such adoption would have a material impact on its consolidated results
        of operations or financial position.

        At December 31, 2002, the Company has three stock-based employee and
        director compensation plans, which are described more fully in Note 9.
        The Company accounts for these plans under the recognition and
        measurement principles of APB Opinion No. 25, "Accounting for Stock
        Issued to Employees", and related Interpretations. Accordingly, no
        compensation cost has been recognized for stock option grants to
        employees and directors, as all options granted under those plans had an
        exercise price equal to or in excess of the market value of the
        underlying common stock on the date of grant. The following table
        illustrates the effect on net loss and loss per share if the Company had
        applied the fair value recognition provisions of FAS 123 for the years
        ended December 31, 2002 and 2001:

<TABLE>
<CAPTION>
                                                                                      YEAR ENDED DECEMBER 31,
                                                                                    2002                  2001
<S>                                                                              <C>                   <C>
          Net loss applicable to common shareholders - as reported               $ (4,234,041)         $ (2,162,024)
          Deduct: Total stock-based employee compensation
            expense determined under fair value based method                          (34,837)           (1,275,327)
                                                                                 ------------          ------------
          Net loss applicable to common shareholders - pro forma                 $ (4,268,878)         $ (3,437,351)
                                                                                 ============          ============

          Loss per basic and diluted Common Share - as reported                  $      (0.70)         $      (0.36)
                                                                                 ============          ============
          Loss per basic and diluted Common Share - pro forma                    $      (0.70)         $      (0.57)
                                                                                 ============          ============
</TABLE>

        The fair values of stock options were calculated using the Black-Scholes
        stock option valuation model with the following weighted average
        assumptions for grants in 2002 and 2001: stock price volatility of 105%
        and 94%, respectively; risk-free interest rate of 3.50% and 4.25%,
        respectively; dividend rate of $0.00 per year; and an expected life of 4
        years for options granted to employees and 10 years for options granted
        to directors.

        DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - In June 1998, the FASB
        issued FAS No. 133, "Accounting for Derivative Instruments and Hedging
        Activities", which was amended in June 2000 by FAS No. 138, "Accounting
        for Certain Derivative Instruments and Certain Hedging Activities". FAS
        133, as amended, establishes methods of accounting for derivative
        financial instruments and hedging activities related to those
        instruments as well as other hedging activities including hedging
        foreign currency expenses. The Company adopted FAS 133 on January 1,
        2001. Because the Company does



                                      F-12
<PAGE>

        not utilize derivative financial instruments, the adoption of FAS 133
        had no affect on the financial position or results of operations of the
        Company.

        IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS - The Company evaluates its
        long-lived assets whenever significant events or changes in
        circumstances occur that indicate that the carrying amount of an asset
        may not be recoverable. Recoverability of these assets is determined by
        comparing the forecasted undiscounted future net cash flows from the
        operations to which the assets relate, based on management's best
        estimates using appropriate assumptions and projections at the time, to
        the carrying amount of the assets. If the carrying value is determined
        not to be recoverable from future operating cash flows, the asset is
        deemed impaired and an impairment loss is recognized equal to the amount
        by which the carrying amount exceeds the estimated fair value of the
        asset

        In October 2001, the FASB issued FAS No. 144, "Accounting for the
        Impairment or Disposal of Long-Lived Assets", which addresses financial
        accounting and reporting for the impairment and disposal of long-lived
        assets. FAS 144 supercedes FAS No. 121, although it retains many of the
        fundamental provisions of FAS No. 121 for recognition and measurement of
        the impairment of long-lived assets to be held and used and for
        measurement of long-lived assets to be disposed of by sale. FAS 144 also
        supercedes the accounting and reporting provisions of APB Opinion No.
        30, "Reporting Results of Operations-Reporting the Effects of Disposal
        of a Segment of a Business and Extraordinary, Unused and Infrequently
        Occurring Events and Transactions", for the disposal of segments of a
        business. FAS 144 establishes a single accounting model, based on the
        framework established in FAS 121, for long-lived assets to be disposed
        of by sale. The Company adopted FAS 144 on January 1, 2002. The adoption
        of FAS 144 had no affect on the financial position or results of
        operations of the Company.

        EXIT OR DISPOSAL ACTIVITIES - In July 2002, the FASB issued FAS No. 146,
        "Accounting for Costs Associated With Exit or Disposal Activities",
        which provides guidance for financial accounting and reporting of costs
        associated with exit or disposal activities and nullifies EITF Issue No.
        94-3, "Liability Recognition for Certain Employee Termination Benefits
        and Other Costs to Exit an Activity (including Certain Costs Incurred in
        a Restructuring)". FAS 146 requires the recognition of a liability for a
        cost associated with an exit or disposal activity when the liability is
        incurred, as opposed to when the entity commits to an exit plan under
        EITF No. 94-3. FAS 146 is effective for exit or disposal activities that
        are initiated after December 31, 2002. The adoption of FAS No. 146 is
        not expected to have a material effect on the financial position or
        results of operations of the Company.

        GUARANTEES AND INDEBTEDNESS OF OTHERS - In November 2002, the FASB
        issued FASB Interpretation No. 45 ("FIN 45"), "Guarantor's Accounting
        and Disclosure Requirements for Guarantees, Including Indirect
        Guarantees and Indebtedness of Others". FIN 45 elaborates on the
        disclosures to be made by the guarantor in its interim and annual
        financial statements about its obligations under certain guarantees that
        it has issued. It also requires that a guarantor recognize, at the
        inception of a guarantee, a liability for the fair value of the
        obligation undertaken in issuing the guarantee. The initial recognition
        and measurement provisions of this interpretation are applicable on a
        prospective basis to guarantees issued or modified after December 31,
        2002; while the provisions of the disclosure requirements are effective
        for financial statements of interim or annual reports ending after
        December 15, 2002. The Company adopted the disclosure provisions of FIN
        45 during the fourth quarter of fiscal 2002 and such adoption did not
        have a material impact on its consolidated financial statements. The
        Company has no guarantees of indebtedness of others.

        CONSOLIDATION OF VARIABLE INTEREST ENTITIES - In January 2003, the FASB
        issued FASB Interpretation No. 46 ("FIN 46"), "Consolidation of Variable
        Interest Entities". In general, a variable interest entity is a
        corporation, partnership, trust, or any other legal structure used for
        business purposes that either (a)



                                      F-13
<PAGE>

        does not have equity investors with voting rights or (b) has equity
        investors that do not provide sufficient financial resources for the
        entity to support its activities. FIN 46 requires certain variable
        interest entities to be consolidated by the primary beneficiary of the
        entity if the investors do not have the characteristics of a controlling
        financial interest or do not have sufficient equity at risk for the
        entity to finance its activities without additional subordinated
        financial support from other parties. The consolidation requirements of
        FIN 46 apply immediately to variable interest entities created after
        January 31, 2003. The consolidation requirements apply to older entities
        in the first fiscal year or interim period beginning after June 15,
        2003. Certain of the disclosure requirements apply in all financial
        statements issued after January 31, 2003, regardless of when the
        variable interest entity was established. The Company does not have any
        variable interest entities.

        RECLASSIFICATION - Certain 2001 amounts have been reclassified to
        conform to current year presentation.

2.      NONRECURRING CHARGES AND TERMINATION OF POWERSPRING SEGMENT

        Nonrecurring charges for the year ended December 31, 2002 includes the
        costs related to the June 2002 changes in management at Metretek
        Florida, principally termination benefits paid or payable to former
        Metretek Florida management personnel. At December 31, 2002, the balance
        of unpaid termination benefits included in accrued and other liabilities
        was $99,016.

        Effective March 31, 2001, the Company completed the discontinuance of
        its PowerSpring subsidiary as an entity and the restructuring of its
        business, including the transfer of management and control of the
        PowerSpring product line to Metretek Florida. As part of the
        discontinuance of PowerSpring, the Company, PowerSpring and John A.
        Harpole entered into a Termination Agreement and Mutual Release that
        terminated the employment of Mr. Harpole, formerly the Vice President of
        PowerSpring, and set forth the terms and conditions of the termination,
        which included the termination of various agreements and instruments to
        which the Company, PowerSpring and Mr. Harpole were parties.

        In connection with the termination: (i) the $741,666 promissory note
        made by PowerSpring to Mr. Harpole was cancelled, and the related
        security agreement pursuant to which PowerSpring had granted a security
        interest in its asset to Mr. Harpole was terminated, (ii) Mr. Harpole
        transferred his 2,500,000 shares of PowerSpring common stock, which
        represented 12.5% of the outstanding capital stock of PowerSpring, back
        to PowerSpring, (iii) Mr. Harpole's employment and non-competition
        agreement was terminated, (iv) PowerSpring transferred the assets and
        business of Mercator to Mercator Energy LLC ("New Mercator"), a new
        limited liability company formed by Mr. Harpole, (v) PowerSpring agreed
        to pay $250,000 to Mr. Harpole over a one-year period, (vi) the Company
        reduced the exercise prices of Mr. Harpole's warrants to purchase 60,000
        shares of Company common stock by $1.50 per share to a range of $3.00 to
        $4.00, (vii) the Company issued Mr. Harpole options to purchase 80,000
        shares of common stock at $2.00 per share, (viii) PowerSpring retained
        New Mercator on an eight month consulting basis at $5,000 per month, and
        (ix) the parties entered into a standard mutual release of all claims.
        The Company recorded compensation expense in the amount of $60,977 in
        March 2001 for the fair value of the stock options issued and for the
        fair value of the changes in the warrant exercise prices.

        The Company recorded other income in March 2001 of approximately
        $255,000, which represents the difference between the note amount of
        $741,666 and the costs to the Company in connection with the termination
        of PowerSpring.


                                      F-14
<PAGE>

3.      REDEEMABLE PREFERRED STOCK

        On February 4, 2000, the Company completed a $14,000,000 private
        placement (the "Units Private Placement") of 7,000 units ("Units"),
        including 1,450 Units the Company issued on December 9, 1999. Each Unit
        consisted of 200 shares of common stock, 1 share of Series B Preferred
        Stock and warrants ("Unit Warrants") to purchase 100 shares of common
        stock. In the Units Private Placement, the Company issued 1,400,000
        shares of common stock, 7,000 shares of Series B Preferred Stock and
        Unit Warrants to purchase 700,000 shares of common stock. The Units
        Private Placement was approved and ratified by the stockholders of the
        Company at a special meeting held on February 3, 2000. The primary
        purpose of the Units Private Placement was to raise capital to enable
        the Company to develop the Internet-based business of PowerSpring and to
        repay outstanding indebtedness.

        Each share of Series B Preferred Stock is mandatorily redeemable on
        December 9, 2004 at a liquidation preference of $1,000 per share plus
        accrued and unpaid dividends, accrues dividends at 8% annually payable
        quarterly in arrears, and became convertible at any time after June 9,
        2000 at the option of the holder at an initial conversion price of
        $5.9334 per share of common stock, which constitutes an initial
        conversion rate (based upon the initial liquidation preference of
        $1,000) per share of 168.54 shares of common stock of the Company.
        Pursuant to the terms of the Series B Preferred Stock, the conversion
        price of the Series B Preferred Stock was adjusted downward on December
        9, 2000 to $3.0571 per share of common stock, which price was the
        average closing bid price of the Company's common stock for the 30
        trading days immediately preceding that date. This downward adjustment
        in the conversion price of the Series B Preferred Stock resulted in a
        conversion rate, as of December 31, 2002, of 416.97 shares of common
        stock per share of Series B Preferred Stock issued on December 9, 1999,
        and 411.78 shares of common stock per share of Series B Preferred Stock
        issued on February 4, 2000. The Series B Preferred Stock is also subject
        to certain anti-dilution provisions. In addition, the Company has the
        right to redeem the Series B Preferred Stock on or after December 9,
        2000, if the Company's common stock is trading at 200% of the conversion
        price of the Series B Preferred Stock.

        Each Unit Warrant entitles the holder to purchase one share of the
        Company's common stock. Pursuant to the terms of the Unit Warrants, the
        initial exercise price of the Unit Warrants of $6.7425 per share was
        adjusted downward on December 9, 2000 to $3.4740, the average closing
        bid price of the Company's common stock for the 30 trading days
        immediately preceding that date.

        The proceeds from the sale of the Units, including the 1,450 Units
        issued on December 9, 1999, were allocated to common stock, the Unit
        Warrants, and the Series B Preferred Stock based on the relative fair
        value of each on the date of issuance. This allocation process resulted
        in the Series B Preferred Stock issued on February 4, 2000 being
        initially recorded at a discount of $141 per share from its $1,000 per
        share liquidation value. The amortization of the discount is being
        recorded as a distribution over the term of the Series B Preferred
        Stock.

4.      ACQUISITION

        On April 10, 2001, the Company, through its wholly-owned subsidiary
        PowerSecure, acquired Industrial Automation Corp. ("Industrial
        Automation"), a North Carolina corporation. The Company issued 150,000
        restricted shares of its common stock in exchange for all of the issued
        and outstanding capital stock of Industrial Automation. As a result of
        the acquisition, Industrial Automation became a wholly-owned subsidiary
        of PowerSecure.

        Industrial Automation, founded in 1991 and headquartered in Greensboro,
        North Carolina, is in the business of designing and marketing process
        controls used in distributed generation operations. This



                                      F-15
<PAGE>

        acquisition enhanced PowerSecure's technology and time to market in the
        field of distributed generation.

        PowerSecure also entered into five-year employment and non-competition
        agreements with each of the two former owners of Industrial Automation.
        The employment and non-competition agreements include an "earn out" that
        generally entitles the former owners to any net earnings of PowerSecure
        arising from projects commenced by Industrial Automation prior to the
        acquisition. The acquisition was accounted for as a purchase, and
        therefore the results of operations of Industrial Automation have been
        combined with those of the Company effective April 10, 2001. The entire
        purchase price amount, including costs of the acquisition, was allocated
        to goodwill.

        During the fourth quarter of 2002, the purchase agreement between
        PowerSecure and the former owners of Industrial Automation was modified
        to eliminate the "earn out" provision described above. The modification
        eliminated PowerSecure's obligation to the former owners for any net
        earnings from projects commenced by Industrial Automation prior to the
        acquisition. The modification also eliminated the former owners'
        obligation to PowerSecure to repay certain costs incurred on behalf of
        the former owners that were being offset against the net earnings of the
        "earn out" projects. As a result of the modification to the purchase
        agreement during the fourth quarter of 2002, an additional $209,265 of
        costs incurred representing payments for liabilities assumed in the
        acquisition were reallocated to goodwill, and $136,623 of costs incurred
        representing project and salary payment offsets to the "earn out"
        obligation were expensed to cost of goods sold and general and
        administrative expense during the fourth quarter of 2002.

        Pro forma results of operations for the year ended December 31, 2001
        assuming the acquisition had occurred on January 1, 2001 has not been
        included herein as the effects of the acquisition were not material to
        the Company's results of operations.

5.      DEBT

        The balance of notes payable at December 31, 2002 and 2001 consisted of
        the following:
<TABLE>
<CAPTION>
                                                                            2002             2001
<S>                                                                     <C>               <C>
          Lines of credit                                               $ 1,471,028       $ 1,025,770
          Term loans:
            Note payable litigation settlement                            3,000,000                 -
            Note payable to Scient                                               -          2,471,426
            Equipment loan                                                  238,863                 -
            Mortgage loan                                                   242,254           250,000
                                                                        -----------       -----------
          Total notes payable                                             4,952,145         3,747,196
                                                                        -----------       -----------

          Less current maturities:
            Note payable litigation settlement                             (187,500)                -
            Note payable to Scient                                                         (2,471,426)
            Equipment loan                                                  (65,351)                -
            Mortgage loan                                                    (8,536)           (7,746)
                                                                        -----------       -----------
          Current maturities of notes payable                              (261,387)       (2,479,172)
                                                                        -----------       -----------

          Long-term maturities of notes payable                         $ 4,690,758       $ 1,268,024
                                                                        ===========       ===========
</TABLE>



                                      F-16
<PAGE>

        LINES OF CREDIT - In September 2001, Southern Flow entered into a Credit
        and Security Agreement (the "Southern Flow Credit Agreement") with Wells
        Fargo Business Credit, Inc. ("Wells Fargo"), providing for a $2,000,000
        credit facility (the "Southern Flow Credit Facility"). The Southern Flow
        Credit Facility refinanced the Company's prior credit facility with
        National Bank of Canada.

        In September 2002, Metretek Florida entered into a Credit and Security
        Agreement (the "Metretek Florida Credit Agreement" and, collectively
        with the Southern Flow Credit Agreement, the "Credit Agreement") with
        Wells Fargo, providing for a $1,000,000 credit facility (the "Metretek
        Florida Credit Facility" and, collectively with the Southern Flow Credit
        Facility, the "Credit Facility"). The Metretek Florida Credit Facility
        operates as an extension of the Southern Flow Credit Facility.

        Borrowings under the Southern Flow Credit Facility bear interest at
        prime plus one percent and are limited to a borrowing base consisting of
        the sum of 85% of Southern Flow's eligible accounts receivable plus the
        lesser of 20% of Southern Flow's eligible inventory (consisting
        primarily of raw materials and finished goods inventory) or $200,000. As
        of December 31, 2002, Southern Flow had a borrowing base of $1,495,692
        under the Southern Flow Credit Facility, of which $1,009,282 had been
        borrowed, leaving $486,410 available to borrow.

        Borrowings under the Metretek Florida Credit Facility bear interest at
        prime plus two percent and are limited to a borrowing base consisting of
        the sum of 80% of Metretek Florida's eligible accounts receivable. As of
        December 31, 2002, Metretek Florida had a borrowing base of $604,995
        under the Metretek Florida Credit Facility, of which $461,746 had been
        borrowed, leaving $143,249 available to borrow.

        Southern Flow is permitted to advance funds under the Southern Flow
        Credit Facility to the Company, PowerSecure and Metretek Florida,
        provided that total inter-company indebtedness owing to Southern Flow
        at the end of each month may not exceed the cumulative net income of
        Southern Flow from January 1, 2001 until such date or reduce Southern
        Flow's tangible book net worth below $1,400,000.

        Metretek Florida is permitted to advance funds under the Metretek
        Florida Credit Facility to the Company, PowerSecure and Southern Flow,
        provided that after making such advances the Metretek Florida Credit
        Facility availability is not less than $100,000 and that total advances
        to the guarantors do not exceed $500,000.

        The Credit Facility contains various financial and other affirmative and
        negative covenants, provides for minimum interest charges and unused
        credit line and termination fees, and matures on September 30, 2004. At
        December 31, 2002, Metretek Florida was not in compliance with the
        minimum net income and maximum capital expenditure financial covenants
        in the Metretek Florida Credit Facility. Wells Fargo has waived these
        financial covenant requirements for Metretek Florida for the period
        ended December 31, 2002 and has established the financial covenants
        for Metretek Florida for 2003 and thereafter. This non-compliance under
        the Metretek Florida Credit Agreement created a cross-default under
        the Southern Flow Credit Agreement, but Wells Fargo has also waived
        that cross-default and has established the financial covenants for
        Southern Flow for 2003 and thereafter.

        The obligations of Southern Flow under the Southern Flow Credit
        Agreement have been guaranteed by the Company along with PowerSecure and
        Metretek Florida. The obligations of Metretek Florida under the Metretek
        Florida Credit Agreement have been guaranteed by the Company along with
        MCM, PowerSecure and Southern Flow. The Credit Facility is secured by a
        first priority security interest in virtually all of the assets of
        Metretek Technologies, Southern Flow, PowerSecure, Metretek Florida and
        MCM.

        While the Credit Facility will restrict the ability of the Company to
        sell or finance its subsidiaries without the consent of Wells Fargo, in
        the event that the Company is able to secure debt or equity financing
        for a subsidiary that is a guarantor or the sale or merger of such
        subsidiary and such


                                      F-17
<PAGE>


        subsidiary repays all advances made to it under the Credit Facility,
        then Wells Fargo has agreed to terminate the applicable restrictions in
        the Credit Facility relating to such subsidiary as a guarantor.

        TERM LOANS - In connection with the proposed settlement of the Heins
        litigation more fully described in Note 7, the Company will, subject to
        certain contingencies, be required to issue the Heins Settlement Note, a
        note payable in the amount of $3.0 million, which has been recorded in
        the accompanying consolidated balance sheet at December 31, 2002. The
        Heins Settlement Note would bear interest at the rate of prime plus
        three percent and would be payable in 16 quarterly installments, each of
        $187,500 principal plus accrued interest, commencing 6 months after the
        effective date of the settlement. The Heins Settlement Note is to be
        guaranteed by Southern Flow, MGT and MCR. The Company would be required
        to commence its payment obligations pursuant to an escrow arrangement
        after preliminary court approval is granted, but prior to the court
        order becoming final and non-appealable. In the event the Heins
        litigation is not settled as currently proposed, the final terms of any
        future settlement or results of litigation of the matter may result in
        payment obligations to the Company that are different from those
        currently expected and the differences may be material.

        In September 2000, the Company issued a $2.8 million unsecured
        convertible promissory note to Scient (the "Scient Note") in fulfillment
        of an account payable to Scient for services rendered by Scient to
        PowerSpring. The Scient Note provided for payments by the Company in
        quarterly installments of $250,000 each until March 31, 2002, at which
        time the remaining balance of the Scient Note was to be paid in full. In
        June 2001, after management of the Company discovered fraudulent
        activity by Scient and uncovered other matters of dispute in connection
        with Scient's services and billings, Scient agreed to suspend the
        Company's payment obligations under the Scient Note until the amount of
        the fraudulent activity could be resolved. As described more fully in
        Note 7, the Scient Note was cancelled upon settlement of all claims and
        disputes with Scient.

        In November 2002, the Southern Flow Credit Facility was amended to
        provide advances to Southern Flow to purchase equipment (the "Equipment
        Loan"). Proceeds of Equipment Loan were used to purchase production
        equipment for use by Metretek Florida. Amounts borrowed under the
        Equipment Loan bear interest at prime plus two percent (6.25% at
        December 31, 2002). Monthly principal payments in the amount of $6,635
        plus interest commence March 1, 2003, and all principal and accrued but
        unpaid interest is due and payable on September 30, 2004.

        On December 3, 2001, Southern Flow entered into a $250,000 loan
        agreement (the "Mortgage Loan") with a mortgage lender. The Mortgage
        Loan is secured by land and a building owned by Southern Flow in Dallas,
        Texas. The unpaid balance of the Mortgage Loan accrues interest at the
        annual rate of 9.75%. Monthly principal and interest installment
        payments in the amount of $2,648 commenced January 1, 2002. While under
        the original Mortgage Loan, all principal and accrued but unpaid
        interest was to become due and payable on December 1, 2003, the Company
        and the mortgage lender have entered into a modification, renewal and
        extension of the Mortgage Loan that extends the term of the Mortgage
        Loan to November 1, 2007 and reduces the interest rate to 9% per annum.
        The revised monthly principal and interest installment payments of
        $2,429 commence May 1, 2003.

6.      CAPITAL LEASE OBLIGATIONS

        Capital lease obligations at December 31, 2002 consists of two
        manufacturing equipment leases at Metretek Florida payable in monthly
        installments, including interest, at rates ranging from 6% to 12%. The
        scheduled annual payments are as follows:



                                      F-18
<PAGE>

          YEAR ENDING DECEMBER 31:
          2003                                                        $ 50,130
          2004                                                          29,216
          2005                                                          17,043
                                                                      --------
          Total minimum lease payments                                  96,389
          Less: Interest included in the lease payments                 12,038
                                                                      --------
          Present value of minimum lease payments                     $ 84,351
                                                                      ========


7.      COMMITMENTS AND CONTINGENCIES

        ASSETS SUBJECT TO DISPOSAL - During 1998, the Company decided to
        discontinue the operations of MGT, a directly owned subsidiary of the
        Company. MGT had been formed by the Company in 1991 to acquire or
        finance the acquisition of natural gas assets through privately financed
        programs, and then to manage and maintain a small ownership interest in
        those programs. The decision to discontinue MGT was based on the
        declining prospects of MGT's markets and to enable the Company to focus
        on its other operations. As part of the discontinuation of MGT, one of
        the programs in which MGT participated was liquidated, MGT sold
        one-third of its interests in two other programs, and the assets of the
        two remaining programs have been offered for sale. The remaining net
        assets of MGT consist primarily of its remaining equity interest in
        those two programs and receivables from the programs for managing the
        programs. Subsequent to its decision to discontinue MGT but prior to the
        ultimate disposal of MGT, the Company and MGT became a defendant in
        legal proceedings related to one of those programs. Partially as a
        result of this litigation (see "Legal Proceedings" below), the Company
        has been unable to complete the disposition of all the remaining net
        assets of MGT as it had originally planned. The balance of the remaining
        net assets of MGT at December 31, 2002 and 2001, is $561,747 and
        $370,903, respectively. The increase in net assets of MGT resulted from
        cash distributions from one of the programs that were temporarily
        deferred in order for that program to complete a significant capital
        expansion project. Because the timing of both the resolution of the
        legal proceedings and the ultimate disposal of the assets is uncertain,
        the Company has classified the remaining net assets of MGT as an other
        asset in the accompanying consolidated balance sheet.

        As part of its continuing obligation to manage one of the two remaining
        programs, MGT has an annual commitment to offer to repurchase, for an
        amount not to exceed $452,000 in the aggregate, preferred shareholder
        interests in that program from interested shareholders. Through December
        31, 2002, the balance of preferred shareholder interests repurchased
        under this repurchase commitment was $4,263.

        Management believes that the net recoverable value that will be received
        upon ultimate disposal of the remaining net assets of MGT (exclusive of
        the effects of a settlement of the legal proceedings discussed below in
        this note) exceeds the carrying value of these assets, including the
        cost to hold these assets until disposition, at December 31, 2002 and
        2001.

        CLASS ACTION AND RELATED LITIGATION - In January 2001, Douglas W. Heins,
        individually and on behalf of a class of other persons similarly
        situated (the "Class Action Plaintiff"), filed a complaint (the "Class
        Action") in the District Court for the City and County of Denver,
        Colorado (the "Denver Court") against the Company, Marcum Midstream
        1997-1 Business Trust (the "1997 Trust"), Marcum Midstream-Farstad, LLC
        ("MMF"), MGT, MCR, W. Phillip Marcum, Richard M. Wanger and Daniel J.
        Packard (the foregoing, collectively, the "Metretek Defendants"),
        Farstad Gas & Oil, LLC ("Farstad



                                      F-19
<PAGE>

        LLC") and Farstad Oil, Inc. ("Farstad Inc." and, collectively with
        Farstad LLC, the "Farstad Entities"), and Jeff Farstad ("Farstad" and,
        collectively with the Farstad Entities, the "Farstad Defendants").

        The 1997 Trust was an energy program of which MGT, a wholly-owned
        subsidiary of the Company, is the managing trustee, and Messrs. Marcum,
        Wanger, Packard and Farstad are or were the active trustees. The 1997
        Trust raised approximately $9.25 million from investors in a private
        placement in 1997 in order to finance the purchase, operation and
        improvement of a natural gas liquids processing plant located in
        Midland, Texas. As the result of contractual, market and operational
        difficulties, the 1997 Trust ceased operations in 1998.

        The Class Action alleges that the Metretek Defendants and the Farstad
        Defendants (collectively, the "Class Action Defendants"), either
        directly or as "controlling persons", violated certain provisions of the
        Colorado Securities Act in connection with the sale of interests in the
        1997 Trust. Specifically, the Class Action Plaintiff claims that his and
        the class's damages resulted from the Class Action Defendants
        negligently, recklessly or intentionally making false and misleading
        statements, failing to disclose material information, and willfully
        participating in a scheme or conspiracy and aiding or abetting
        violations of Colorado law, which scheme and statements related to the
        specification of the natural gas liquids product to be delivered under
        certain contracts, for the purpose of selling the 1997 Trust's units.
        The damages sought in the Class Action include compensatory and punitive
        damages, pre- and post-judgment interest, attorneys' fees and other
        costs.

        On May 11, 2001, the Denver Court granted in part the Class Action
        Defendants' motions to dismiss by narrowing certain claims and
        dismissing the fourth claim for relief, the allegation that the Farstad
        Defendants, Mr. Packard, MCR and MGT are liable under Colorado law for
        giving substantial assistance in further any of securities violations,
        as to all Class Action Defendants except MCR. The Denver Court also
        granted a motion to dismiss the claims against the Farstad Entities.

        On May 24, 2001, the Metretek Defendants filed answers to the Class
        Action, generally denying its allegations and claims and making
        cross-claims against the Farstad Defendants. The Metretek Defendants
        have filed additional cross-claims and third party complaints against
        the Farstad Defendants alleging fraud, negligent misrepresentation and
        contractual indemnification and contribution, among other claims. The
        Farstad Defendants have filed answers generally denying these claims and
        have asserted cross-claims and third party counter-claims against the
        Metretek Defendants. The Metretek Defendants have denied the allegations
        of the Farstad Defendants.

        On September 28, 2001, the Denver Court granted the Class Action
        Plaintiff's motion to certify a class (the "Class") consisting of all
        investors in the 1997 Trust. Ten investors, representing a net
        investment of approximately $288,000, opted out of the Class to pursue a
        separate lawsuit in California, as described below. The net investment
        of the remaining members of the Class was approximately $7.5 million.

        On August 12, 2002, the Metretek Defendants filed a third party
        complaint against IFG Network Securities, Inc. ("IFG") and Pringle &
        Herigstad, P.C., seeking contribution. On December 31, 2002, the
        Metretek Defendants filed a third party complaint against Patrick
        Sughroue, alleging professional malpractice and seeking contribution.

        On December 6, 2002, the Class Action Plaintiff filed a motion for
        partial summary judgment as to liability on two claims for relief. The
        Metretek Defendants have received an extension of time to respond to
        that motion in light of the proposed settlement described below.



                                      F-20
<PAGE>

        As of March 27, 2003, a trial date has not been set in the Class Action
        and no significant discovery has been conducted.

        On March 27, 2003, the Company, along with the Class Action Plaintiff,
        filed a Stipulation of Settlement (the "Heins Stipulation"), which
        contains the terms and conditions of a proposed settlement (the "Heins
        Settlement") intended to fully resolve all claims by the Class Action
        Plaintiff against the Company and the other Metretek Defendants in the
        Heins Class Action. The Heins Settlement is contingent, among other
        things, upon the payment of not less than $2,375,000 from the proceeds
        of the Company's directors' and officers' insurance policy. The Heins
        Stipulation creates a settlement fund (the "Heins Settlement Fund") for
        the benefit of the Class. If the Denver Court approves the Heins
        Settlement and all other conditions to the Heins Settlement are met,
        then the Company will pay $2.75 million into the Heins Settlement Fund,
        of which no less than $2,375,000 must come from the proceeds of the
        Company's insurance policy. In addition, the Company will issue a note
        payable to the Heins Settlement Fund in the amount of $3.0 million (the
        "Heins Settlement Note"). The Heins Settlement Note would bear interest
        at the rate of prime plus three percent (prime + 3%), payable in 16
        quarterly installments, each of $187,500 principal plus accrued
        interest, commencing six months after the effective date of the Heins
        Settlement. The Heins Settlement Note would be guaranteed by the 1997
        Trust and all of the Company's subsidiaries. Under the Heins
        Stipulation the Company is required to obtain the consent of the
        Class's lead counsel before it can sell any shares of stock of Southern
        Flow, Metretek Florida or PowerSecure, although such consent is not
        required if the Company makes a prepayment of at least $1.0 million on
        the Heins Settlement Note with the proceeds of any such sale of subsid-
        iary stock. The Heins Stipulation requires the Company to commence its
        payment obligations thereunder pursuant to an escrow arrangement after
        the Denver Court issues its final judgment and order approving the Heins
        Stipulation, but before all appeals, if any, on that judgment and order
        have been concluded. If the Heins Stipulation does not receive final and
        non-appealable approval by December 31, 2006, or such later date as is
        agreed to by the parties, then the escrowed funds will be returned to
        the Company.

        In addition, the Company would be required under the Heins Stipulation
        to either vigorously prosecute any third party or cross-claims that the
        Company believes it has in relation to the Class Action through counsel
        of the Company's choosing or by requesting that counsel for the Class
        prosecute these claims. Of the net recovery (after litigation expenses,
        including legal fees) of any amounts collected from the resolution of
        these third party claims, 50% would be allocated to the Heins Settlement
        Fund as additional settlement funds, and 50% would be allocated to
        offset the Company's obligations under the Heins Settlement Note, first
        being applied against future payments due under the Heins Settlement
        Note, with any remainder paid back to the Company in reimbursement for
        past payments on the Heins Settlement Note. In addition, the net
        recovery from the prosecution of any claims by the Class against any of
        the Farstad Defendants, other than Jeff Farstad as described below,
        would be treated in the same way as the net recovery from the
        prosecution of claims by Metretek Defendants as described above.

        The Heins Stipulation would fully and finally release all claims between
        the Class and the Company and the other Metretek Defendants. Under the
        Heins Stipulation, the Class would also release Jeff Farstad from claims
        by the Class against him by reason of his status as a trustee of the
        1997 Trust. However, it would not release the Company's claims against
        him or any claims by either the Class or the Company against any other
        Farstad Defendants. In addition, the Heins Stipulation would not release
        any claims against the brokerage firms involved with the offering of
        the 1997 Trust's securities that are unique to a particular Class
        member.

        The effective date of the Heins Stipulation is conditioned, among other
        things, upon the following events:

                -       payment by the Company's insurance carrier of at least
                        $2,375,000 in insurance proceeds for the benefit of the
                        Heins Settlement Fund;


                                      F-21
<PAGE>

                -       the entry by the Denver Court of a preliminary approval
                        order containing certain procedural orders,
                        preliminarily approving the settlement terms and
                        scheduling a settlement hearing;

                -       the entry by the Denver Court of a Final Judgment and
                        Order directing consummation of the Heins Settlement and
                        containing certain other procedural findings and orders;
                        and

                -       the final and successful resolution of any appeals
                        related to the Final Settlement and Order and the Heins
                        Stipulation.

        As a result of the Heins Stipulation and the obligations that would
        become due under the Heins Note, the Company recorded a loss in the
        amount of approximately $3,505,000 in the fourth quarter of 2002
        resulting from the amounts due on the Heins Note, amounts payable by the
        Company into the Heins Settlement Fund, and additional legal costs, but
        excluding interest costs that will be incurred on the Heins Note during
        the repayment period. The loss is reflected as a component of the
        "Provision for litigation costs, net" in the accompanying consolidated
        statement of operations for the year ended December 31, 2002.

        The Company cannot provide any assurance that the foregoing conditions
        will be satisfied and that the Heins Stipulation will become effective,
        or if it becomes effective the timing of such effectiveness. The
        Company's insurance carrier has not consented to the Heins Settlement or
        committed to payment of any insurance proceeds for the benefit of the
        Heins Settlement Fund, which are conditions of the Heins Settlement. If
        the Heins Stipulation does not become effective, the Company cannot
        predict the outcome of this litigation or the impact the resolution of
        the Class Action will have on the Company's business, financial position
        or results of operations. The Company and the Metretek Defendants
        dispute the allegations of wrongdoing in the Class Action and intend to
        vigorously defend the claims against them and to vigorously pursue
        appropriate cross-claims and third party claims. However, failure to
        consummate the Heins Settlement or an adverse judgment against the
        Company in the Class Action could have a material adverse effect on the
        Company's business, financial condition and results of operations.

        In May 2001, 21 plaintiffs, including Michael Mongiello and Charlotte
        Mongiello, trustees of the Mongiello Family Trust dated 8/1/90 (the
        "Mongiello Plaintiffs"), filed, and subsequently served, a first amended
        complaint (the "Mongiello Case") in the Superior Court in the State of
        California for the County of San Diego (the "California Court") against
        the Metretek Defendants, the Farstad Defendants, United Pacific
        Securities, Inc., GBS Financial Corporation, IFG Network Securities,
        Inc., and numerous officers, directors, employees and brokers related to
        such brokerage houses (the "California Defendants"). The Mongiello Case
        contained allegations against the Metretek Defendants and claims for
        relief similar to those contained in the Class Action. The net
        investment in the 1997 Trust by the Mongiello Plaintiffs was
        approximately $542,000.

        On October 5, 2001, the California Court granted the motion by the
        Metretek Defendants to dismiss the claims against Metretek Technologies,
        Mr. Marcum and Mr. Wanger for lack of personal jurisdiction. The
        California Court also granted a similar motion dismissing the claims
        against the Farstad Defendants for lack of personal jurisdiction. On
        November 5, 2001, MGT, MCR, MMF, Mr. Packard and the 1997 Trust, as the
        remaining Metretek Defendants, filed an answer generally denying the
        allegations and claims in the Mongiello Case. On March 6, 2002, the
        remaining Metretek Defendants filed a motion to dismiss the claims of
        the non-California resident Mongiello Plaintiffs on forum non conveniens
        grounds. On or about March 29, 2002, the California Court granted this
        motion, dismissing the claims of 11 of the 21 Mongiello Plaintiffs. The
        net investment of the remaining Mongiello Plaintiffs was



                                      F-22
<PAGE>

        approximately $266,000. The ten remaining Mongiello Plaintiffs opted out
        of the Class Action. In December 2002, the remaining Metretek Defendants
        settled the Mongiello Case. The settlement did not have a material
        adverse effect on the Company's business, financial condition or results
        of operation.

        In January 2002, six plaintiffs, including Glenn Puddy (the "Puddy
        Plaintiffs"), served a complaint (the "Puddy Case") in the California
        Court against the same defendants as in the Mongiello Case, containing
        allegations, legal claims and damages similar to those in the Mongiello
        Case. The Puddy Plaintiffs and the Mongiello Plaintiffs have the same
        legal counsel. The net investment of the Puddy Plaintiffs in the 1997
        Trust was approximately $89,000. All of the Metretek Defendants have
        been dismissed from the Puddy Case for lack of personal jurisdiction. A
        motion by the Puddy Plaintiffs to consolidate the Puddy Case with the
        Mongiello Case, or to allow the Mongiello Plaintiffs to amend their
        complaint to add the Puddy Plaintiffs as additional plaintiffs, was
        denied. None of the Puddy Plaintiffs opted out of the Class Action.

        SCIENT NOTE LITIGATION - During 1999 and 2000, the Company retained
        Scient Corporation ("Scient"), an "eBusiness" consultant, to design and
        install an eBusiness program that would enable the Company to provide
        the Company's energy management services to commercial customers via an
        Internet project, which was called "PowerSpring" (the "PowerSpring
        Project"). In connection with the PowerSpring Project, the Company paid
        Scient approximately $7 million in fees and expenses, as part of a total
        investment by the Company in PowerSpring in excess of $15.6 million.

        In September 2000, as Scient's engagement was being terminated, the
        Company issued a non-negotiable promissory note to Scient for
        approximately $2.8 million (the "Scient Note") for the outstanding
        balance of services invoiced by Scient in connection with the
        PowerSpring Project. The Scient Note provided for payments by the
        Company in quarterly installments of $250,000 each until March 31, 2002,
        at which time the remaining balance of the Scient Note was to be paid in
        full. In June 2001, after the Company discovered fraudulent activity by
        Scient and uncovered other matters of dispute in connection with
        Scient's services and billings, Scient agreed to suspend the Company's
        payment obligations under the Scient Note until the amount of the
        fraudulent activity could be resolved. In May 2002, Scient's engagement
        manager in charge of the PowerSpring Project pleaded guilty to federal
        wire fraud and mail fraud charges stemming primarily from his activities
        during Scient's engagement by the Company.

        In July 2002, Scient filed for Chapter 11 bankruptcy protection with the
        United States Bankruptcy Court for the Southern District of New York
        (the "Scient Bankruptcy Court"). Although the amount in dispute on the
        Scient Note was never resolved between the Company and Scient, on
        October 17, 2002, the Company received a letter from Scient's counsel
        purporting to constitute notice by Scient that the Company was in breach
        of the Scient Note for failing to make payments and threatening to
        initiate enforcement proceedings if the remaining balance, which was
        then approximately $2.5 million, was not paid in full. In November 2002,
        the Company filed a motion with the Scient Bankruptcy Court, seeking to
        have that court compel Scient and its successors to arbitrate the
        dispute related to the Scient Note in accordance with an arbitration
        provision in the Company's agreement with Scient. In November 2002, the
        Company also filed with the Scient Bankruptcy Court a $15.6 million
        proof of claim against Scient's estate.

        In March 2003, the Company and Scient jointly filed a Stipulation and
        Order of Settlement (the "Scient Settlement"), which is intended to
        fully and finally resolve all claims and disputes with Scient. Under the
        terms of the Scient Settlement, in exchange for the Company's payment of
        $50,000 to Scient, Scient agreed to release the Company from any further
        payment obligations under the Scient Note and the Company



                                      F-23
<PAGE>
        agreed to dismiss the Company's motion to compel arbitration and the
        Company's proof of claim. The Scient Settlement is subject to final and
        non-appealable approval by the Scient Bankruptcy Court. Although the
        Company cannot provide any assurance that the Scient Settlement will
        obtain final and non-appealable approval of the Scient Bankruptcy Court,
        management has no reason to believe that the Scient Settlement will not
        obtain such approval.

        As a result of the Scient Settlement, the Company recorded a gain in the
        amount of approximately $1,741,000 in the fourth quarter of 2002
        resulting from the cancellation of the Scient Note offset by the $50,000
        cash payment due to Scient and the write-off of the recorded amount of
        fraudulent equipment and software purchases the Company had retained as
        an offset to the amount due under the Scient Note. The gain is reflected
        as a component of the "Provision for litigation costs, net" in the
        accompanying consolidated statement of operations for the year ended
        December 31, 2002.

        If the Scient Settlement does not become effective, then the Company
        intends to vigorously challenge Scient's assertion that the Company has
        any remaining obligations under the Scient Note and to vigorously pursue
        the Company's proof of claim against Scient's estate. However, the
        Company cannot provide any assurance that the Company will prevail in
        the Company's dispute with Scient. An adverse resolution in this matter
        requiring the Company to make significant payments under the Scient Note
        could have material adverse effect on the Company's liquidity, financial
        condition and results of operations.

        From time to time, the Company is involved in other disputes and legal
        actions arising in the ordinary course of business. The Company intends
        to vigorously defend all claims against the Company. Other than as set
        forth above, no litigation is currently pending or overtly threatened
        against the Company, the adverse outcome of which, indirectly or in
        aggregate, the Company believes would have a material adverse impact on
        the Company's business, financial conditions or results of operations.

        OPERATING LEASES - The Company leases business facilities and vehicles
        under operating lease agreements which specify minimum rentals.
        Substantially all leases have renewal provisions. Rental expense for the
        years ended December 31, 2002 and 2001 totaled $1,292,958 and
        $1,109,071, respectively.

        Future minimum rental payments under noncancelable operating leases
        having an initial or remaining term of more than one year are as
        follows:

          YEAR ENDING DECEMBER 31:

          2003                                                    $  831,957
          2004                                                       698,091
          2005                                                       440,020
          2006                                                       208,350
          2007                                                       101,005
                                                                  ----------

          Total                                                   $2,279,423
                                                                  ==========

        EMPLOYEE BENEFIT PLANS - The Company has adopted a defined contribution
        savings and investment plan (the "401(k) Plan") under Section 401(k) of
        the Internal Revenue Code. All employees age 21 or older with at least
        one year of service are eligible to participate in the 401(k) Plan. The
        401(k) Plan provides for discretionary contributions by employees of up
        to 15% of their eligible compensation. The Company may make
        discretionary matching contributions up to 50% of participant
        contributions,



                                      F-24
<PAGE>

        subject to a maximum of 6% of each participant's eligible compensation.
        The Company's 401(k) Plan expense for the years ended December 31, 2002
        and 2001 was $176,973 and $177,917, respectively.

        LICENSE AGREEMENT - Metretek Florida had a commitment to pay in cash or
        restricted shares of common stock of the Company a 5% royalty on sales
        of certain royalty-bearing products of Metretek Florida with a minimum
        annual royalty payment of $50,000 through the year 2002. Royalty expense
        of $50,000 has been recognized in each of 2002 and 2001 under the
        license agreement. In fulfillment of commitments under make-up
        provisions of the license agreement, the Company issued 19,697
        restricted shares of common stock of the Company in lieu of cash during
        the year ended December 31, 2001, with no additional royalty expense
        being recognized.

        EMPLOYMENT AGREEMENTS - The Company has employment agreements with its
        executive officers and with other key employees which provide for base
        salary, incentive compensation, "change-in-control" provisions,
        non-competition provisions, severance arrangements, and other normal
        employment terms and conditions.

8.      INCOME TAXES

        No tax expense or benefit has been recognized during the years ended
        December 31, 2002 and 2001 because of net operating losses incurred and
        because a valuation allowance has been provided for 100% of the net
        deferred tax assets at December 31, 2002 and 2001.

        The components of the Company's deferred tax assets and liabilities at
        December 31, 2002 and 2001 are shown below:
<TABLE>
<CAPTION>
                                                                               2002                2001
                                                                           ------------        ------------
<S>                                                                        <C>                 <C>
         Deferred tax assets:
           Net operating loss carryforwards                                $ 14,320,000        $ 13,221,000
           Tax credit carryforwards                                              45,000              45,000
           Allowance for bad debts                                               96,000              58,000
           Excess of financial statement impairment losses
             over income tax amounts
                                                                           ------------        ------------
                Total deferred tax assets                                    14,461,000          13,324,000
                                                                           ------------        ------------
         Deferred tax liabilities

           Excess of income tax depreciation and amortization
             over financial statement amounts                                   813,000             536,000
           Other                                                                 97,000              43,000
                                                                           ------------        ------------
                Total deferred tax liabilities                                  910,000             579,000
                                                                           ------------        ------------

           Net deferred tax asset                                            13,551,000          12,745,000
           Valuation allowance                                              (13,551,000)        (12,745,000)
                                                                           ------------        ------------

                Total                                                      $          0        $          0
                                                                           ============        ============
</TABLE>

        At December 31, 2002, the Company had unused net operating losses to
        carry forward against future years' taxable income of approximately
        $42,117,000 expiring in various amounts from 2003 to 2016. At December
        31, 2002, the Company had unused investment tax credits, general
        business tax credits, and research and development tax credit
        carryforwards expiring in various amounts from 2006 to 2008.

        As a result of an acquisition in 1991, the Company acquired a remaining
        net operating loss carryforwards for tax purposes of approximately
        $800,000 ($99,000, net of current limitation). Such carryforwards expire
        in 2003 through 2005. As a result of the change in ownership upon
        acquisition,


                                      F-25
<PAGE>

        utilization of these net operating loss carryforwards is limited to
        approximately $33,000 annually. If the benefits related to the net
        operating loss carryforwards that were not recognized at the acquisition
        date are recognized in a subsequent period, they will first reduce to
        zero any goodwill related to the acquisition, then reduce to zero all
        other noncurrent intangible assets, and then reduce income tax expense.

9.      CAPITAL STOCK

        MINORITY INTEREST - Upon formation of MCM in June 2002, MCM issued
        shares totaling 17% of its outstanding common stock to three of its
        employees, including 8% to the President and Chief Executive Officer of
        Metretek Florida, as equity incentive compensation. The
        employee-shareholders of MCM entered into a shareholder agreement with
        MCM providing for the following:

                -       MCM holds a right of first refusal on the sale of any
                        MCM shares by any employee-shareholders;

                -       MCM employee-shareholders have the right to participate
                        in a sale of a majority of the outstanding MCM shares by
                        Metretek Florida;

                -       If Metretek Florida desires to sell its MCM shares that
                        constitute a majority of all then outstanding MCM
                        shares, then Metretek Florida has the right to force the
                        employee-shareholders to also sell their MCM shares;

                -       MCM employee-shareholders have the preemptive right to
                        maintain their pro rata equity percentage in MCM in the
                        event of future issuances of MCM shares by participating
                        in such issuances on the same terms as other buyers; and

                -       Upon the termination of employment of any MCM
                        employee-shareholder, MCM has the right to purchase such
                        MCM shares at an appraised value.

        Effective January 1, 2003, subject to approval by the Company's Series B
        Preferred Stockholders, PowerSecure authorized the issuance of shares
        totaling up to 15% of its outstanding common stock to its employees,
        including 7% to the President and Chief Executive Officer of
        PowerSecure, as equity incentive compensation. The employee shareholders
        of PowerSecure are expected to enter into a shareholder agreement with
        the Company providing for the following:

                -       PowerSecure holds a right of first refusal on the sale
                        of any PowerSecure shares by any employee-shareholders;

                -       PowerSecure employee-shareholders have the right to
                        participate in a sale of a majority of the outstanding
                        PowerSecure shares by the Company;

                -       If the Company desires to sell its PowerSecure shares
                        that constitute a majority of all then outstanding
                        PowerSecure shares, then the Company has the right to
                        force the employee-shareholders to also sell their
                        PowerSecure shares;

                -       If PowerSecure issues additional PowerSecure shares in
                        the future to third persons, then PowerSecure will grant
                        an option for its employee-shareholders to purchase
                        additional PowerSecure shares in order to maintain their
                        pro rata equity percentage in PowerSecure, at the price
                        as paid by such third persons; and


                                      F-26
<PAGE>

                -       Upon the termination of employment of any PowerSecure
                        employee-shareholder, PowerSecure has the right to
                        purchase such PowerSecure shares at an appraised value.

        No accounting recognition was given to the issuance of shares of MCM to
        its employee shareholders because the fair value of the MCM shares
        granted to the employee-shareholders was $0 at the date the shares were
        issued. There was no minority interest in losses of MCM during the year
        ended December 31, 2002, because the minority interest shareholders
        losses are limited to their capital contributions and accumulated
        earnings, which as $0 at December 31, 2002.

        The equity in future earnings, if any, of MCM and PowerSecure of the
        employee-shareholders of MCM and PowerSecure will be reflected as
        minority interest income in the consolidated statement of operations.
        Equity in future losses, if any, of MCM and PowerSecure of the
        employee-shareholders of MCM and PowerSecure will be reflected as
        minority interest losses, but only to the extent that minority interest
        earnings had been recorded in prior periods.

        STOCK OPTIONS - The Company has granted stock options to employees,
        directors, advisors and consultants under three stock plans. Under the
        Company's 1991 Stock Option Plan, as amended (the "1991 Stock Plan"),
        the Company granted incentive stock options and non-qualified stock
        options to purchase common stock to officers, employees and consultants.
        Options granted under the 1991 Stock Plan contained exercise prices not
        less than the fair market value of the Company's common stock on the
        date of grant and had a term of ten years, the vesting of which was
        determined on the date of the grant, but generally contain a 2-4 year
        vesting period. Under the Company's Directors' Stock Plan as amended
        ("Directors' Stock Plan"), the Company granted non-qualified stock
        options to purchase common stock to non-employee directors of the
        Company at an exercise price not less than the fair market value of the
        Company's common stock on the date of grant. Options granted under the
        Director's Stock Plan generally had a term of ten years and vested on
        the date of grant. Certain options granted to officers and non-employee
        directors under the 1991 Stock Plan and the Directors Stock Plan contain
        limited rights for receipt of cash for appreciation in stock value in
        the event of certain changes in control.

        In March 1998, the Board of Directors of the Company adopted the
        Metretek Technologies, Inc. 1998 Stock Incentive Plan (the "1998 Stock
        Plan"), which was approved by the Company's stockholders at the Annual
        Meeting of Stockholders held on June 12, 1998. The 1998 Stock Plan
        authorizes the Board of Directors to grant incentive stock options,
        non-qualified stock options, stock appreciation rights, restricted
        stock, performance awards and other stock-based awards to officers,
        directors, employees, consultants and advisors of the Company and its
        subsidiaries for shares of the Company's common stock. The 1998 Stock
        Plan replaced the Company's 1991 Stock Plan and Directors' Stock Plan
        (the "Prior Plans"), and no new awards have been made under the Prior
        Plans since the 1998 Stock Plan was adopted, although options
        outstanding under the Company's Prior Plans remain in effect under these
        terms. On February 3, 2000, the stockholders of the Company adopted a
        proposal by the Board of Directors to increase the number of shares
        available under the 1998 Stock Plan from 250,000 to 750,000 shares of
        common stock. On June 11, 2001, the stockholders of the Company adopted
        a proposal by the Board of Directors to increase the number of shares
        available under the 1998 Stock Plan to a total of 1,750,000 shares of
        common stock of the Company.


                                      F-27
<PAGE>

        The following table summarizes the Company's stock option activity since
        January 1, 2001:
<TABLE>
<CAPTION>
                                  1998 STOCK              DIRECTORS STOCK            1991 STOCK
                                INCENTIVE PLAN              OPTION PLAN             OPTION PLAN
                             --------------------       -------------------      -------------------
                                         WEIGHTED                  WEIGHTED                 WEIGHTED
                              NUMBER      AVERAGE       NUMBER     AVERAGE       NUMBER     AVERAGE
                                OF        OPTION          OF        OPTION         OF        OPTION
                              SHARES       PRICE        SHARES      PRICE        SHARES      PRICE
                             -------     --------       ------     --------      ------     --------
<S>                            <C>        <C>            <C>        <C>          <C>        <C>
Outstanding at
  January 1, 2001              295,351    $ 7.58         65,000     $ 2.00       214,159    $ 2.00

Granted                      1,187,500      1.55
Forfeited                      (78,835)    14.45                                  (1,814)     2.00
                             ---------                  -------                  -------
Outstanding at
  December 31, 2001          1,404,016      2.10         65,000       2.00       212,345      2.00

Granted                        120,500      1.44
Expired                                                 (27,500)      2.00       (44,311)     2.00
Forfeited                       (5,835)     4.79                                    (625)     2.00
                             =========                  =======                  =======
Outstanding at
  December 31, 2002          1,518,681    $ 2.03         37,500     $ 2.00       167,409    $ 2.00
                             =========                  =======                  =======

Exercisable at
  December 31:
  2002                       1,158,639    $ 2.20         37,500     $ 2.00       167,409    $ 2.00
                             =========                   ======                  =======

  2001                         784,099    $ 2.47         65,000     $ 2.00       210,259    $ 2.00
                             =========                   ======                  =======

</TABLE>

        The weighted average grant date fair values of options granted during
        the years ended December 31, 2002 and 2001 were $0.29 and $1.07 per
        share, respectively. During the year ended December 31, 2002, incentive
        stock options to purchase 113,000 shares of common stock were granted to
        employees and non-qualified stock options to purchase 7,500 shares of
        common stock were granted to non-employee directors of the Company.
        During the year ended December 31, 2001, incentive stock options to
        purchase 775,000 shares were granted to employees and non-qualified
        stock options to purchase 412,500 common stock shares were granted to
        non-employee directors of the Company. The following table summarizes
        information about all of the Company's stock options outstanding at
        December 31, 2002:
<TABLE>
<CAPTION>
            Range of                                           Weighted Average           Weighted Average
        Exercise Prices             Number of Shares            Exercise Price         Remaining Life (years)
        ---------------             ----------------            ---------------        ----------------------
<S>                                  <C>                          <C>                         <C>
        $0.48 to $ 1.74                1,168,500                    $1.49                       7.56
        $1.75 to $ 2.49                  391,404                     2.00                       2.59
        $2.50 to $17.38                  163,686                     5.95                       6.14
        ---------------                ---------                    -----                       ----

         $0.48 - $17.38                1,723,590                    $2.03                       6.30
         ==============                =========                    ======                      ====
</TABLE>

        STOCKHOLDER RIGHTS PLAN - On December 12, 1991, the Board of Directors
        of the Company adopted a Stockholder Rights Plan, which was amended and
        restated on October 25, 2001 in order to extend, renew and modify its
        terms (as amended and restated the "Rights Plan"), to protect
        stockholder interests



                                      F-28
<PAGE>


        against takeover strategies that may not provide maximum shareholder
        value. Pursuant to the Rights Plan, a dividend of one preferred stock
        purchase right ("Right") was issued with respect to each share of common
        stock outstanding on December 9, 1991, and attaches to each share of
        common stock issued there after by the Company. No separate certificates
        representing the Rights have been issued. Each Right entitles the holder
        to purchase one one-hundredth of a share of Series C. Preferred Stock of
        the Company at an exercise price of $15.00 per share under certain
        circumstances. This portion of a preferred share provides the holder
        with approximately the same dividend, voting and liquidation rights as
        one share of common stock. If any person or group (referred to as an
        "Acquiring Person") becomes the beneficial owner of, or announces a
        tender offer that would result in the Acquiring Person becoming the
        beneficial owner of, 15% or more of the Company's common stock (subject
        to certain exceptions), then each Right, other than Rights held by the
        Acquiring Person which become void, will become exercisable for common
        stock of the Company, or of the Acquiring Person in the case where the
        Acquiring Person acquires the Company, having a then current market
        value of twice the exercise price of the Right. At the option of the
        Board of Directors, the Rights may be redeemed for $0.01 per Right or
        exchanged for shares of Company common stock at the exchange rate of one
        share per Right, in each cases subject to adjustment. Until a Right is
        exercised, the holder thereof, as such has no rights as a stockholder of
        the Company. The Rights will expire on November 30, 2011, unless such
        date is extended prior thereto by the Board of Directors.

        METRETEK FLORIDA STOCK WARRANTS - In 1994, in connection with the
        Company's acquisition of Metretek Florida the Company issued warrants to
        purchase shares of Company common stock to the holders of then
        outstanding warrants to purchase Metretek Florida capital stock, which
        warrants had been previously issued by Metretek Florida in connection
        with the issuance by Metretek Florida of its common stock and
        debentures, as well as in connection with remuneration to certain
        Metretek Florida stockholders for loans provided to Metretek Florida and
        to a venture capital company as remuneration for services rendered. At
        December 31, 2002, warrants to purchase a total of 1,430 shares of
        Company common stock exerciseable at $88.96 per share were outstanding.
        The Metretek Florida stock warrants expire June 30, 2004. No accounting
        recognition was given to these stock warrants, all of which were granted
        prior to guidance set forth in Emerging Issues Task Force Issue No.
        96-13, "Accounting for Derivative Financial Instruments Indexed to, and
        Potentially Settled in, a Company's Own Stock."

        The shares of the Company's common stock issuable upon the exercise of
        the Metretek Florida Warrants cannot be resold unless such resale is
        registered under the Securities Act of 1933 and under applicable state
        securities laws or is made pursuant to an available exemption therefrom.
        The holders of these warrants have the right, under certain
        circumstances, to require the Company to register the shares of the
        Company's common stock issuable upon exercise of the warrants under the
        Securities Act and applicable state securities laws.

        OTHER STOCK WARRANTS - In connection with the Units Private Placement
        (Note 3), the Company issued Unit Warrants to purchase 700,000 shares of
        common stock of the Company.

        Warrants to purchase 170,000 shares of common stock at exercise prices
        ranging from $2.47 to $14.50 per share were outstanding at December 31,
        2002. These warrants expire at various dates ranging in 2003 and 2004.
        The Company issued these warrants in prior years for consulting and
        other advisory services rendered to the Company by the warrant holders.

10.     SEGMENT AND RELATED INFORMATION

        In accordance with FAS No. 131, "Disclosures about Segments of an
        Enterprise and Related Information," the Company defines operating
        segments as components of an enterprise for which



                                      F-29
<PAGE>

        discrete financial information is available and is reviewed regularly by
        the chief operating decision-maker, or decision-making group, to
        evaluate performance and make operating decisions. The Company's
        reportable segments are strategic business units that offer different
        products and services. They are managed separately because each business
        requires different technology and marketing strategies.  The Company's
        reportable business segments include: natural gas measurement services;
        distributed generation; automated energy data management; and
        Internet-based energy information and services.

        The operations of the Company's natural gas measurement services segment
        are conducted by Southern Flow. Southern Flow's services include on-site
        field services, chart processing and analysis, laboratory analysis, and
        data management and reporting. These services are provided principally
        to customers involved in natural gas production, gathering,
        transportation and processing.

        The operations of the Company's distributed generation segment are
        conducted by PowerSecure. PowerSecure commenced operations in September
        2000. The primary elements of PowerSecure's distributed generation
        products and services include project design and engineering,
        negotiation with utilities to establish tariff structures and power
        interconnects, generator acquisition and installation, process control
        and switchgear design and installation, and ongoing project monitoring
        and servicing. PowerSecure markets its distributed generation products
        and services directly to large end-users of electricity and through
        outsourcing partnerships with utilities. Through December 31, 2002, the
        vast majority of PowerSecure's revenues have been generated from sales
        of distributed generation systems on a "turn-key" basis, where the
        customer acquires the systems from PowerSecure. To date, PowerSecure has
        also generated a small portion of its revenues from "company-owned"
        distributed generation assets that are leased to customers on a
        long-term basis.

        The operations of our automated energy data management segment are
        conducted by Metretek Florida. Metretek Florida's manufactured products
        fall into the following categories: field devices, including metering
        data collection products and electronic gas flow computers; data
        collection software products (such as DC2000 and PowerSpring); and
        communications solutions that can use GSM/GPRS real time wireless
        internet, traditional cellular radio, 900 MHz unlicensed radio or
        traditional wire-line phone service to provide connectivity between the
        field devices and the data collection software products. Metretek
        Florida also provides energy data collection and management services and
        post-sale support services for its manufactured products. In June 2002,
        Metretek Florida formed MCM to conduct and expand its circuit board
        contract manufacturing operations.

        The operations of the Company's Internet-based energy information and
        services segment were conducted by PowerSpring through March 31, 2001.
        Effective April 1, 2001, PowerSpring's business was restructured and the
        remaining limited business was transferred to Metretek Florida, and
        since that date the Company has included and reported the remnants of
        the Internet-based energy information business of PowerSpring with
        Metretek Florida's automated data management segment.

        The accounting policies of the reportable segments are the same as those
        described in Note 1 of the Notes to Consolidated Financial Statements.
        The Company evaluates the performance of its operating segments based on
        income (loss) before income taxes, nonrecurring items and interest
        income and expense. Intersegment sales are not significant.

        Summarized financial information concerning the Company's reportable
        segments is shown in the following table. The "Other" column includes
        corporate related items, results of insignificant



                                      F-30
<PAGE>



        operations and, as it relates to segment profit or loss, income and
        expense (including nonrecurring charges) not allocated to reportable
        segments. Amounts are reported in thousands.
<TABLE>
<CAPTION>
                                                                                INTERNET-BASED
                                        NATURAL GAS                 AUTOMATED      ENERGY
                                        MEASUREMENT  DISTRIBUTED   ENERGY DATA   INFORMATION
                                          SERVICES    GENERATION   MANAGEMENT   AND SERVICES     OTHER       TOTAL
                                        -----------  -----------   -----------  --------------   -----       -----
          2002
<S>                                        <C>          <C>           <C>           <C>         <C>          <C>
          Revenues                         $ 12,288     $ 8,229       $ 6,524       $           $      1     $ 27,042
          Segment profit (loss)               1,908        (388)         (969)                    (3,933)      (3,382)
          Total assets                        9,285       2,318         6,842                        718       19,163
          Capital expenditures                  122          41           372                         11          546
          Depreciation and amortization         135          47           453                         23          658

          2001

          Revenues                         $ 12,918     $ 8,975       $ 6,629       $  277      $    294     $ 29,093
          Segment profit (loss)               1,608         403          (993)        (612)       (1,791)      (1,385)
          Total assets                        9,487       1,672         7,500                      1,497       20,156
          Capital expenditures                  116         141           400                                     657
          Depreciation and amortization         610          36           546          135            92        1,419
</TABLE>

        The following table presents revenues by geographic area based on the
        location of the use of the product or service:

                                                   2002               2001
                                               -----------        -----------

        United States                          $26,179,705        $28,332,145
        Canada                                     418,173            366,755
        Europe                                     156,482            228,198
        South America                              120,741            108,150
        Asia                                        88,900             15,504
        Other                                       77,504             42,034
                                               -----------        -----------
        Total                                  $27,041,505        $29,092,786
                                               ===========        ===========


                                    * * * * *



                                      F-31
<PAGE>


                           METRETEK TECHNOLOGIES, INC.

                                   FORM 10-KSB

                      FOR THE YEAR ENDED DECEMBER 31, 2002

                                  EXHIBIT LIST
                                  ------------


         (2)      PLAN OF PURCHASE, SALE, REORGANIZATION, ARRANGEMENT,
                  LIQUIDATION OR SUCCESSION:

                  (2.1)    Termination Agreement and Mutual Release, dated as of
                           March 31, 2001, by and among Metretek Technologies,
                           Inc., PowerSpring, Inc., Mercator Energy
                           Incorporated, John A. Harpole and Mercator Energy
                           LLC. (Incorporated by reference to Exhibit 10.1 to
                           Metretek's Quarterly Report on Form 10-QSB for the
                           quarter ended March 31, 2001.)

                  (2.2)    Stock Purchase Agreement, dated as of April 6, 2001,
                           by and among Stanley W. Timblin, Jeffrey W. Timblin,
                           PowerSecure, Inc. and Metretek Technologies, Inc.
                           (Incorporated by reference to Exhibit 10.2 to
                           Metretek's Quarterly Report on Form 10-QSB for the
                           quarter ended March 31, 2001.)

                  (2.3)    Amendment to Stock Purchase Agreement, dated as of
                           December 31, 2002, by and among Stanley W. Timblin,
                           Jeffrey W. Timblin, PowerSecure, Inc. and Metretek
                           Technologies, Inc.

         (3)      ARTICLES OF INCORPORATION AND BY-LAWS:

                  (3.1)    Second Restated Certificate of Incorporation of
                           Metretek Technologies, Inc. (Incorporated by
                           reference to Exhibit 4.1 to Metretek's Registration
                           Statement on Form S-3, Registration No. 333-96369.)

                  (3.2)    Amended and Restated By-Laws of Metretek
                           Technologies, Inc. (Incorporated by reference to
                           Exhibit 4.2 to Metretek's Registration Statement on
                           Form S-8, Registration No. 333-62714.)

         (4)      INSTRUMENT DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
                  INDENTURES:

                  (4.1)    Specimen Common Stock Certificate. (Incorporated by
                           reference to Exhibit 4.1 to Metretek's Registration
                           Statement on Form S-18, Registration No. 33-44558.)

                  (4.2)    Specimen Series B Preferred Stock Certificate.
                           (Incorporated by reference to Exhibit 4.4 to
                           Metretek's Registration Statement on Form S-3,
                           Registration No. 333-96369.)

                  (4.3)    Form of Certificate representing warrants to purchase
                           shares of Common Stock of Metretek Technologies, Inc.
                           issued to former holders of warrants of Metretek,
                           Incorporated. (Incorporated by reference to Exhibit
                           4.2 to Metretek's Registration Statement on Form S-4,
                           Registration No. 33-73874.)

                  (4.4)    Amended and Restated Rights Agreement, dated as of
                           November 30, 2001, between Metretek Technologies,
                           Inc. and Computershare Investor Services, LLC.
                           (Incorporated by reference to Exhibit 4.1 to
                           Metretek's Registration Statement on Form 8-A/A,
                           Amendment No. 5, filed November 30, 2001.)

                  (4.5)    Form of Registration Rights Agreement among Metretek
                           Technologies, Inc. and the former warrant holders of
                           Metretek, Incorporated. (Incorporated by reference to
                           Exhibit 4.4 to Metretek's Registration Statement on
                           Form S-4, Registration No. 33-73874.)

                  (4.6)    Securities Purchase Agreement, dated as of December
                           9, 1999, by and among Metretek Technologies, Inc. and
                           certain purchasers of securities of Metretek
                           Technologies, Inc.


                                      X-1
<PAGE>

                           (collectively, the "Unit Purchasers"). (Incorporated
                           by reference to Exhibit 4.1 to Metretek's Current
                           Report on Form 8-K filed December 22, 1999).

                  (4.7)    Form of Common Stock Purchase Warrant issued by
                           Metretek Technologies, Inc. to the Unit Purchasers.
                           (Incorporated by reference to Exhibit 4.3 to
                           Metretek's Current Report on Form 8-K filed December
                           22, 1999).

                  (4.8)    Registration Rights Agreement, dated as of December
                           9, 1999, by and among Metretek Technologies, Inc. and
                           the Unit Purchasers. (Incorporated by reference to
                           Exhibit 4.4 to Metretek's Current Report on Form 8-K
                           filed December 22, 1999).

                  (4.9)    Form of Common Stock Purchase Warrant issued by
                           Metretek Technologies, Inc. to Scient Corporation.
                           (Incorporated by reference to Exhibit 4.12 of
                           Metretek's Registration Statement on Form S-3,
                           Registration No. 333-96369).

                  (4.10)   Form of Common Stock Purchase Warrant issued by
                           Metretek Technologies, Inc. to Silverman Heller
                           Associates. (Incorporated by reference to Exhibit
                           4.15 of Metretek's Registration Statement on Form
                           S-3, Registration No. 333-96369).

                  (4.11)   Form of Common Stock Purchase Agreement issued by
                           Metretek Technologies, Inc. to First Albany
                           Corporation, William Reinert, John S. Koodrich and
                           Lawrence C. Petrucci. (Incorporated by reference to
                           Exhibit 4.16 of Metretek's Registration Statement on
                           Form S-3, Registration No. 333-96369).

         (10)     MATERIAL CONTRACTS:

                  (10.1)   1991 Stock Option Plan, as amended and restated
                           December 5, 1996. (Incorporated by reference to
                           Exhibit 10.2 to Metretek's Annual Report on Form
                           10-KSB for the year ended December 31, 1996.)*

                  (10.2)   Directors' Stock Option Plan, as amended and restated
                           December 2, 1996. (Incorporated by reference to
                           Exhibit 10.3 to Metretek's Annual Report on Form
                           10-KSB for the year ended December 31, 1996.)*

                  (10.3)   Employment Agreement, dated as of June 11, 1991, by
                           and between Metretek Technologies, Inc. and W.
                           Phillip Marcum. (Incorporated by reference to Exhibit
                           10.4 to Metretek's Registration Statement on Form
                           S-18, Registration No. 33-44558.)*

                  (10.4)   Amendment No. 1 to Employment Agreement, dated June
                           27, 1997, by and between Metretek Technologies, Inc.
                           and W. Phillip Marcum. (Incorporated by reference to
                           Exhibit 10.1 to Metretek's Quarterly Report on Form
                           10-QSB for the quarterly period ended September 30,
                           1997.)*

                  (10.5)   Amendment No. 2 to Employment Agreement, dated
                           December 3, 1998, by and between Metretek
                           Technologies, Inc. and W. Phillip Marcum.
                           (Incorporated by reference to Exhibit 10.5 to
                           Metretek's Annual Report on Form 10-KSB for the year
                           ended December 31, 1998.)*

                  (10.6)   Amendment No. 3 to Employment Agreement, dated as of
                           January 1, 2000, by and between Metretek
                           Technologies, Inc. and W. Phillip Marcum.
                           (Incorporated by reference to Exhibit 10.6 to
                           Metretek's Annual Report on Form 10-KSB for the year
                           ended December 31, 1999.)

                  (10.7)   Employment Agreement, dated as of June 11, 1991, by
                           and between Metretek Technologies, Inc. and A.
                           Bradley Gabbard. (Incorporated by reference to
                           Exhibit 10.4 to Metretek's Registration Statement on
                           Form S-18, Registration No. 33-44558.)*

                  (10.8)   Amendment No. 1 to Employment Agreement, dated June
                           27, 1997, by and between Metretek Technologies, Inc.
                           and A. Bradley Gabbard. (Incorporated by reference to


                                      X-2
<PAGE>

                           Exhibit 10.2 to Metretek's Quarterly Report on Form
                           10-QSB for the quarterly period ended September 30,
                           1997.)*

                  (10.9)   Amendment No. 2 to Employment Agreement, dated
                           December 3, 1998, by and between Metretek
                           Technologies, Inc. and A. Bradley Gabbard.
                           (Incorporated by reference to Exhibit 10.8 to
                           Metretek's Annual Report on Form 10-KSB for the year
                           ended December 31, 1998.)*

                  (10.10)  Amendment No. 3 to Employment Agreement, dated as of
                           January 1, 2000, by and between Metretek
                           Technologies, Inc. and A. Bradley Gabbard.*
                           (Incorporated by reference to Exhibit 10.10 to
                           Metretek's Annual Report on Form 10-KSB for the year
                           ended December 31, 1999.)*

                  (10.11)  Amendment No. 4 to Employment Agreement, dated as of
                           January 1, 2002, by and between Metretek
                           Technologies, Inc. and A. Bradley Gabbard.*
                           (Incorporated by reference to Exhibit 10.11 to
                           Metretek's Annual Report on Form 10-KSB for the year
                           ended December 31, 2001.)*

                  (10.12)  Metretek Technologies, Inc. 1998 Stock Incentive
                           Plan, amended and restated as of June 11, 2001
                           (Incorporated by reference to Exhibit 4.3 to
                           Metretek's Registration Statement on Form S-8,
                           Registration No. 333-62714.)*

                  (10.13)  Form of Indemnification Agreement between Metretek
                           Technologies, Inc. and each of its directors.
                           (Incorporated by reference to Exhibit 10.21 to
                           Metretek's Annual Report on Form 10-KSB for the year
                           ended December 31, 1999.)

                  (10.14)  Termination Agreement and Mutual Release, dated as of
                           March 31, 2001, by and among Metretek Technologies,
                           Inc., PowerSpring, Inc., Mercator Energy
                           Incorporated, John A. Harpole and Mercator Energy LLC
                           (Incorporated by reference to Exhibit 10.1 to
                           Metretek's Quarterly Report on Form 10-QSB for the
                           quarter ended March 31, 2001.)

                  (10.15)  Prototype - Basic Plan Document for the Metretek -
                           Southern Flow Savings and Investment Plan.
                           (Incorporated by reference to Exhibit 4.7 to
                           Metretek's Registration Statement on Form S-8,
                           Registration No. 333-42698.)*

                  (10.16)  Adoption Agreement for the Metretek - Southern Flow
                           Savings and Investment Plan. (Incorporated by
                           reference to Exhibit 4.8 to Metretek's Registration
                           Statement on Form S-8, Registration No. 333-42698.)*

                  (10.17)  Non-Negotiable Convertible Promissory Note, dated
                           September 28, 2000, issued by Metretek Technologies,
                           Inc. to Scient Corporation. (Incorporated by
                           reference to Exhibit 10.1 to Metretek's Quarterly
                           Report on Form 10-QSB for the quarter ended September
                           30, 2000.)

                  (10.18)  Credit and Security Agreement, dated as of September
                           24, 2001, by and between Wells Fargo Business Credit,
                           Inc. and Southern Flow Companies, Inc. (Incorporated
                           by reference to Exhibit 10.1 to Metretek's Current
                           Report on Form 8-K filed October 5, 2001.)

                  (10.19)  Form of Guaranty, dated as of September 24, 2001, by
                           each of Metretek Technologies, Inc., PowerSecure,
                           Inc. and Metretek, Incorporated for the benefit of
                           Wells Fargo Business Credit, Inc. (Incorporated by
                           reference to Exhibit 10.2 to Metretek's Current
                           Report on Form 8-K filed October 5, 2001.)

                  (10.20)  Form of Security Agreement, dated as of September 24,
                           2001, between Wells Fargo Business Credit, Inc. and
                           each of Metretek Technologies, Inc., PowerSecure,
                           Inc. and Metretek, Incorporated. (Incorporated by
                           reference to Exhibit 10.3 to Metretek's Current
                           Report on Form 8-K filed October 5, 2001.)



                                      X-3
<PAGE>

                  (10.21)  Credit and Security Agreement, dated as of September
                           6, 2002, by and between Wells Fargo Business Credit,
                           Inc. and Metretek, Incorporated (Incorporated by
                           reference to Exhibit 10.1 to Metretek's Current
                           Report on Form 8-K filed September 12, 2002.)

                  (10.22)  Form of Guaranty, dated as of September 6, 2002, by
                           each of Metretek Technologies, Inc., PowerSecure,
                           Inc., Metretek Contract Manufacturing Company, Inc.
                           and Southern Flow Companies, Inc., Incorporated for
                           the benefit of Wells Fargo Business Credit, Inc.
                           (Incorporated by reference to Exhibit 10.2 to
                           Metretek's Current Report on Form 8-K filed September
                           12, 2002.)

                  (10.23)  Form of Security Agreement, dated as of September 6,
                           2001, between Wells Fargo Business Credit, Inc. and
                           each of Metretek Technologies, Inc., PowerSecure,
                           Inc., Metretek Contract Manufacturing Company, Inc.
                           and Southern Flow Companies, Inc. (Incorporated by
                           reference to Exhibit 10.3 to Metretek's Current
                           Report on Form 8-K filed September 12, 2002.)

                  (10.24)  Employment Non-Competition Agreement, dated as of
                           June 24, 2002, by and between Metretek, Incorporated
                           and Thomas R. Kellogg.*

                  (10.25)  Employment and Non-Competition Agreement, dated as of
                           January 1, 2003, between PowerSecure, Inc. and Sidney
                           Hinton.*

                  (10.26)  Shareholders Agreement, dated as of June 27, 2002,
                           between Metretek Contract Manufacturing Company, Inc.
                           and its shareholders.*

                  (10.27)  Form of Shareholders Agreement, between Metretek,
                           Incorporated and its shareholders.*

                  (10.28)  Shareholders Agreement, dated as of January 1, 2003,
                           between PowerSecure, Inc. and its shareholders.*

                  (10.29)  Stipulation of Settlement, filed March 27,
                           2003, among Douglas W. Heins, on behalf of himself
                           and all others similarly situated, and Metretek
                           Technologies, Inc., et al.

                  (10.30)  Stipulation and Order of Settlement, dated as of
                           February 25, 2003, by Scient, Inc. and Metretek
                           Technologies, Inc.

                  (10.31)  First Amendment to Credit and Security Agreement,
                           dated as of November 19, 2002, between Southern Flow
                           Companies, Inc. and Wells Fargo Business Credit, Inc.

                  (10.32)  Second Amendment to Credit and Security Agreement
                           and Waiver of Defaults, dated as of March 26, 2003,
                           between Southern Flow Companies, Inc. and Wells
                           Fargo Business Credit, Inc.

                  (10.33)  First Amendment to Credit and Security Agreement
                           and Waiver of Defaults, dated as of March 26, 2003,
                           between Metretek, Incorporated and Wells Fargo
                           Business Credit Inc.


         (21)     SUBSIDIARIES OF THE SMALL BUSINESS ISSUER:

                  (21.1)   Subsidiaries of Metretek Technologies, Inc.

         (23)     CONSENT OF EXPERTS:

                  (23.1)   Consent of Deloitte & Touche LLP

         (99)     ADDITIONAL EXHIBITS

                  (99.1)   Certification of Chief Executive Officer pursuant to
                           18 U.S.C. Section 1350, as adopted pursuant to
                           Section 906 of the Sarbanes-Oxley Act of 2002

                  (99.2)   Certification of Chief Financial Officer pursuant to
                           18 U.S.C. Section 1350, as adopted pursuant to
                           Section 906 of the Sarbanes-Oxley Act of 2002




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

         *Management contract or compensation plan or arrangement required to be
filed as an exhibit to this form pursuant to Item 13(a) of Form 10-KSB.


                                      X-4
<PAGE>

                           METRETEK TECHNOLOGIES, INC.


                                   FORM 10-KSB





                                 EXHIBIT PACKAGE