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================================================================================

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

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

                                    FORM 10-K

         (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, 2003

                                       OR

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

              FOR THE TRANSITION PERIOD FROM  ___________ TO ___________

                         Commission File Number: 0-19793

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

                           METRETEK TECHNOLOGIES, INC.
             (Exact name of registrant as specified in its charter)

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

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

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

        Securities registered pursuant to Section 12(b) of the Act: NONE

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

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

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes [X] No [ ]

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

         Indicate by check mark whether the registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act).

Yes [ ] No [X]

         As of February 27, 2004, the aggregate market value of the shares of
the registrant's Common Stock held by non-affiliates of the registrant was
approximately $14,210,108, based upon $2.95, the last sale price of the Common
Stock on such date as reported on the OTC Bulletin Board.

         As of February 27, 2004, 6,149,421 shares of Common Stock were
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None

================================================================================

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                           METRETEK TECHNOLOGIES, INC.

                                    FORM 10-K
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

                                TABLE OF CONTENTS

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS.............................................................       1

PART I
   Item 1.      Business   ......................................................................................       2
   Item 2.      Properties.......................................................................................      15
   Item 3.      Legal Proceedings................................................................................      15
   Item 4.      Submission of Matters to a Vote of Security Holders..............................................      17

PART II
   Item 5.      Market for Registrant's Common Equity and Related Stockholder Matters............................      18
   Item 6.      Selected Financial Data .........................................................................      19
   Item 7.      Management's Discussion and Analysis of  Financial Condition and Results of Operation............      20
   Item 7A.     Quantitative and Qualitative Disclosures About Market Risk ......................................      51
   Item 8.      Financial Statements and Supplementary Data......................................................      51
   Item 9.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............      51
   Item 9A.     Controls and Procedures..........................................................................      51

PART III
   Item 10.     Directors and Executive Officers of the Registrant...............................................      52
   Item 11.     Executive Compensation...........................................................................      56
   Item 12.     Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters...      61
   Item 13.     Certain Relationships and Related Transactions...................................................      64
   Item 14.     Principal Accountant Fees and Services...........................................................      65

PART IV
   Item 15.     Exhibits, Financial Statement Schedules, and Reports on Form 8-K.................................      66

SIGNATURES.......................................................................................................      72

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

EXHIBIT INDEX....................................................................................................     X-1
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              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

         This Annual Report on Form 10-K (this "Report") 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 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;

         -    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, including our ability to address the redemption
              requirements related to the Series B Preferred Stock;

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

         -    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;

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

         -    our ability to successfully develop, operate and grow our new
              businesses; 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 statements we make from time to time in the future speak only as
of the date they are 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.

                                       1

<PAGE>

                                     PART I

ITEM 1. 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 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 provides data collection, telemetry and other types
              of machine to machine ("M2M") connectivity solutions for
              applications such as automatic meter reading ("AMR"), cathodic
              protection and other types of remote monitoring and collection
              applications. Metretek Contract Manufacturing Company, Inc.
              ("MCM"), a Melbourne, Florida based subsidiary of Metretek
              Florida, provides outsourced manufacturing services with a primary
              focus on printed circuit boards ("PCB"), mechanical and electrical
              assemblies.

         In this Report, references to "Metretek", "we", "us" and "our" refer to
Metretek Technologies, Inc. together with 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 management information and services primarily to suppliers and users of
energy. While our 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, as well as to other industries that require
data management services. 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 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.

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<PAGE>

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

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

         -    In 2003, we developed InvisiConnect((TM)), an M2M connection
              solution for wireless network technology, to enhance the product,
              service and technology offerings of Metretek Florida.

         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, except as otherwise set
forth in the notes to our consolidated financial statements included herewith or
elsewhere in this Report.

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 2003. 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.

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

                                       3

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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 the black-out that struck the Northeast in
2003. 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 become more important to have. 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.

         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, because 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.

         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

                                       4

<PAGE>

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((TM))", 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, 2003 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. PowerSecure's company-owned program involves the design,
engineering, installation, operation and maintenance of distributed generation
systems that are owned by 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.

         Backlog. As of December 31, 2003, PowerSecure's backlog was
approximately $4 million, relating to secured contracts for distributed
generation projects. These contracts are scheduled to be completed by the end of

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the second quarter 2004. Given the irregular sales cycle of customer orders,
PowerSecure's backlog at any given time is not necessarily an accurate
indication of its future revenues.

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, collecting, processing
and managing field data for applications that support the recording of such
information from a central location. Metretek Florida's systems generally
consist of three components:

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

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

         -    our DC2000 or PowerSpring software, which provide platforms for
              automated data collection, management and presentation of
              information retrieved from field devices or InvisiConnect((TM)),
              which enables seamless connectivity from IP-based networks to
              legacy-based serial applications.

         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,
which historically were natural gas and electricity meters. In the past,
Metretek Florida's primary customers have 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 managed by the Metretek Florida system may support critical
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 customer.

         Recent changes in the marketplace driven largely by the deployment of
IP-based digital wireless internet capabilities being installed by commercial
wireless carriers has become a material catalyst for change that is rapidly
impacting telemetry and M2M applications world-wide. In order to take advantage
of the opportunity to participate in this market dynamic while leveraging its
existing core competencies and continuing to serve our existing traditional
customer base, Metretek Florida has developed a new family of products, which it
calls "InvisiConnect((TM))", that enables digital wireless connectivity to be
extended to its existing products and provides solutions that address new market
segments as they evolve within the larger M2M market space. In this regard,
Metretek Florida seeks to retain and leverage its existing assets and
proprietary know-how to build on its core competencies in order to continue to
serve its traditional customer base, which is largely driven by utilities
supporting C & I AMR applications, while it simultaneously positions itself to
supply solutions into numerous other M2M market segments world-wide.

         Products. Metretek Florida's manufactured products fall into three
categories: field data collection and telemetry products; electronic gas flow
computers; and application specific software-based solutions. All manufactured
products are designed on similar platforms and then customized and configured to
provide solutions specific to each customer's specific requirements.

         Field Data Collection Products. Data collection products, also known as
automatic meter readers or AMRs, are installed on existing utility meters. The
AMRs are designed to automatically collect and transmit 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 a utility meter at the point of 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 utility meter. 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 or PowerSpring
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

                                       6

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are used for communications, depending upon the availability and expense of
telephone lines and upon customer preferences.

         Metretek Florida has recently developed communication solutions that
enable its customers to better utilize the wireless internet now provided by
commercial carriers worldwide through third generation ("3G") technology. With
the transition to provide enhanced wireless IP-based M2M and telemetry solutions
driven by widescale deployments of third generation 3G wireless, internet-based
networks, Metretek Florida has identified two additional market opportunities,
and is seeking to exploit those opportunities through its product development
efforts. First, the move from analog to IP digital wireless connectivity will
drive a significant need to replace existing analog and cellular digital packet
data ("CDPD") wireless connections that were installed over the past 20 years.
Second, with the deployment of more robust wireless IP connectivity, the
opportunity for new applications utilizing 3G technology will spur growth in the
telemetry and wireless data sectors of the M2M market space.

         Given these market opportunities, Metretek Florida has developed
InvisiConnect((TM)), which it plans to provide in conjunction with its new
family of digital cellular modem ("DCM") devices using its platform cellular
interface technology ("CNI") that is specifically engineered to take advantage
of 3G network design for the maximum optimization of overall performance and
security. InvisiConnect((TM)) is targeted at both the replacement and new
applications market segments. It is applicable to a wide range of data
collection, remote monitoring and telemetry solutions, in addition to those
typically found in the utility industry. InvisiConnect((TM)) provides a plug and
play solution using 3G wireless network technologies that is seamless and
transparent to the existing communication enabled field devices, as well as
their legacy applications software provided to the customer by any vendor.

         Electronic Flow Computers. As a result of a strategic acquisition of
assets from American Meter in 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:

         -    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.

         Other Field Developments. In addition to supporting data collection,
remote telemetry and gas volume 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, which uses a relational database that
operates on a Windows NT server, and provides 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 71 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.

                                       7

<PAGE>

         In 2003, Metretek Florida expanded its M2M solutions to the electric
markets, leveraging its relationship with an existing electric and natural gas
utility customer. This was accomplished by integrating its DCM 200 IP-based,
wireless internet connectivity solution, and real time data collection device,
through Global System for Mobile ("GSM") cellular networks using General Packet
Radio Service ("GPRS"), and the 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, to deploy
6,000 units to support the introduction of a new tariff for C&I electric
customers at Public Service Electric and Gas in New Jersey ("PSE&G"). The
combination of these new wireless internet capabilities in concert with the ANSI
standards enable Metretek Florida to more effectively provide large scale
solutions for C&I electrical applications. In 2003, over 10% of Metretek
Florida's total revenues were generated from the PSE&G project.

         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 its 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, telecommunications and M2M
industry conferences, symposiums, and trade shows and maintains memberships in
several national and regional related 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
products and services to 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 fiscal 2003, 13% of Metretek Florida's
annual revenues were generated in international markets, compared to 13% in
fiscal 2002 and 11% in fiscal 2001.

         Metretek Contract Manufacturing Company, Inc. 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 reorganized this business and its management in fiscal 2002 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.

         MCM Markets. During fiscal 2003, MCM performed its contract
manufacturing services for a wide variety of customers and markets, including
government and defense related products for government suppliers (although MCM
did not engage in any contracts with federal, state or local government agencies
directly), consumer markets, energy markets, internet markets, transportation
markets and communications markets.

         MCM Marketing and Customer Service. Through MCM, Metretek Florida
offers contract manufacturing services to local, regional and national companies
with outsourcing requirements for PCBs and other related assemblies, that are
based on one or more of the following niche characteristics; moderate volumes,
complex builds, high mix of different board types, high quality requirements or
quick turn proto-types with local engineering support required. MCM further
strives to differentiate itself by providing on-time deliveries, high quality,
cost-effective solutions, and a high level of integrity. This strategy resulted
in MCM's contract manufacturing operations generating approximately $2.2 million
in revenues in fiscal 2003, compared to $650,000 in fiscal 2002. MCM's
value-added services consist of the following:

         -    turn-key manufacturing,

         -    engineering design,

         -    design for manufacturability,

         -    customer packaging design,

         -    prototyping,

         -    plastics and metals component acquisition, and

         -    repair service center.

                                       8

<PAGE>

         At the end of fiscal 2003, MCM had a direct sales force, of one
full-time national sales manager, two indirect representative firms, and two
internally assigned program managers servicing selected key customer accounts.
Other members of MCM's management are actively involved in sales and sales
support as situations warrant. MCM's short term goal is to exploit market
opportunities within its immediate region, the Southeast, but MCM is focused on
expanding its presence nationwide and is currently developing relationships and
recruiting additional indirect representative firms in the Midwest.

         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 for those customers that do not wish to invest in the owning,
operating and maintaining of a centralized data collection facility and prefer
to outsource this function and collect their desired data over the internet from
a server residing at Metretek Florida. Currently, the PowerSpring service
generates approximately $12,000 per month in recurring usage fees.

         Backlog. Metretek Florida's backlog consists primarily of unfulfilled
customer orders at any given time related to its AMR and M2M Technology
business, plus revenues remaining to be earned at a given time from the
uncompleted portions of its existing contracts for its contract manufacturing
business. It does not include revenues that may be earned if customers exercise
options to make additional purchases. At December 31, 2003, Metretek Florida's
backlog was approximately $1,753,000. Metretek Florida expects the entire
backlog to be completed in fiscal 2004. The amount of contract backlog is not
necessarily indicative of future contract revenues because short-term contracts,
modifications to or terminations of present contracts and production delays can
provide additional revenues or reduce anticipated revenues. Metretek Florida's
backlog is typically subject to large variations from time to time when new
contracts are awarded. Consequently, it is difficult to make meaningful
comparisons of backlog. Metretek Florida's contracts with its customers
generally contain provisions permitting rescheduling, deferral or termination at
any time at the convenience of the customer.

CUSTOMERS

         Our customers include a wide variety of mid-sized and large businesses,
utilities and institutions. During 2003, no single customer accounted for 10% or
more of our total revenues. Our revenues derived from sales to customers outside
the United States, primarily from Metretek Florida sales, were approximately 3%
of our total consolidated revenues in each of our last three fiscal years.

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 data collection and
              telemetry solutions, including AMR systems, such as Itron, Inc.,
              Elster Metering, ABB, Badger Meter, Inc., Invensys, Inc. and other
              smaller entities such as Comverge, Inc., Cellnet and Nertec;

         -    numerous and diverse entities in the InvisiConnect M2M market
              segments which include; Telenetics, Airlink, Sierra Wireless,
              Wavecom and Enfora;

         -    contract manufacturers of all sizes, especially those located
              within the state of Florida;

                                       9

<PAGE>

         -    providers of natural gas volume correctors such as Mercury
              Instruments, Inc., Eagle Research, Instromet and Galvanic Applied
              Sciences Inc.;

         -    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, Williams Energy and Hanover Companies;

         -    numerous competitors in the M2M space such as Telenetics
              Corporation, Airlink, Sierra Wireless, Wavecom and Enfora;

         -    contract manufacturers of allsixes, especially those located
              within the State of Florida; and

         -    numerous prospective competitors that may offer energy and data
              management 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 of
              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;

         -    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.

                                       10

<PAGE>

         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.

         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. In addition, as Metretek Florida expands its
product line and market focus to address other new market segments and M2M
applications, it will encounter a large number of established competitors who in
most instances already have significant market share and brand positioning
advantages. 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

                                       11

<PAGE>

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 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 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 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.

         Regulation of Communication Services. With Metretek Florida's focus on
developing digital wireless-enabled data collection, monitoring and telemetry
solutions, such as InvisiConnect((TM)), many of its products are or will be
subject to regulation and testing by the Federal Communications Commission (the
"FCC"). This testing focuses on compliance with FCC specifications for radio
frequency emissions. In addition, these products are designed to comply with a
significant number of industry standards and regulations, some of which are
evolving as new technologies are deployed. For example, our InvisiConnect
products must be tested and certified by the PCS

                                       12

<PAGE>

Type Certification Review Board, a wireless communications supported agency, as
well as by each individual wireless carrier for use on their respective
networks. These tests are principally designed to focus on the operating
characteristics of the products supplied to ensure that they will not have any
unplanned adverse affects on the carrier's networks as they each have them
deployed in various regions The regulatory process can be time-consuming and can
require the expenditure of substantial resources. We cannot assure you that the
FCC or other testing and certifying authorities will grant the requisite
approvals for any of our products on a timely basis, or at all. The failure of
our products to comply, or delays in compliance, with the various existing and
evolving standards could negatively impact our ability to sell our products. In
addition, regulations regarding the manufacture and sale of data communications
devices are subject to future change. We cannot predict what impact, if any,
such changes may have upon our business.

EMPLOYEES

         As of February 27, 2004, we had 255 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 existing product and service offerings intended
to take advantage of advancements in technology, address anticipated customer
requirements and to provide solutions to 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 its traditional utilities customers and to participate in
developing opportunities in other market segments that are evolving in the M2M
market. 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.

         Our research and development expenses, which include engineering
expenses, during 2003 were $627,000, as compared to $552,000 in 2002 and
$797,000 in 2001. 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. Our future success will depend, in part,
upon the success of our research and development efforts.

         The markets for our services are dynamic, characterized by rapid
technological developments, frequent new product introductions and evolving
industry standards. The constantly changing nature of these markets and their
rapid evolution will require us to continually improve the performance, features
and reliability of our services, particularly in response to competitive
offerings, and to introduce both new and enhanced services as quickly as
possible and prior to our competitors. We believe our future success will
depend, in part, upon our ability expand and enhance the features of our
existing products and to develop and introduce new products designed to meet
changing customer needs on a cost-effective and timely basis. Consequently,
failure by us to respond on a timely basis to technological developments,
changes in industry standards or customer requirements, or any significant delay
in product development or introduction, could have a material adverse effect on
our business and results of operations. We cannot assure you that we will
respond effectively to technological changes or new product announcements by
others or that we will be able to successfully develop and market new products
or product enhancements.

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

                                       13

<PAGE>

impact on our business or operations due to our belief that suitable and
sufficient alternative vendors would be available, from time to time we do
encounter difficulties in acquiring certain components due to shortages that
periodically arise, supply problems from our suppliers, obsolesces of parts
necessary to support older product designs or our inability to develop
alternative sources of supply quickly or cost-effectively and these procurement
difficulties 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 a patent protection related to
InvisiConnect((TM)) and registrations of additional marks, although we may not
be successful in obtaining such patent and registering such marks. In the
future, we intend to continue to introduce and register new trademarks and
service marks, and to file new patent applications, as we deem appropriate or
necessary for our business and marketing needs.

         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;

         -    the 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 in this Item.

         Although we do not believe that our products or technologies infringe
on the intellectual property rights of third parties, and we are not aware of
any currently pending claims of infringement, 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.

                                       14

<PAGE>

SEGMENT INFORMATION

         Financial information related to our segment operations for the past
three fiscal years is set forth in Note 14, "Segment and Related Information" of
the notes to our consolidated financial statements included elsewhere in this
Report.

AVAILABLE INFORMATION

         Our corporate internet address is www.metretek.com. Through our website
we make available, free of charge, our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to those
reports filed or furnished pursuant to Section 13(a) and 15(d) of the Exchange
Act as soon as reasonably practicable after we electronically file them with or
furnish them to the SEC. Our SEC filings are also available on the SEC's website
at www.sec.gov. The information on our website is not incorporated by reference
into this Report.

ITEM 2. PROPERTIES

         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
$4,631, 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 $32,900 and terms expiring at various dates through
2008. 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, consisting of 12,134
square feet in the aggregate. The leases on these facilities have a monthly
rental obligation of $11,600 and expire at various dates through 2009.

         Metretek Florida leases its principal business offices, which are
located in Melbourne, Florida and consist of 45,000 square feet, for its
executive, manufacturing, engineering, warehouse and marketing operations. The
lease has a monthly rental obligation of $28,228, not including operating costs,
and expires on July 1, 2005. Metretek Florida has sub-leased 11,364 square feet
of its space on a month-to-month basis for $11,155 monthly rental.

         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

         In January 2001, Douglas W. Heins (the "Class Action Plaintiff"),
individually and on behalf of a class of other persons similarly situated, 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

                                       15

<PAGE>

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 March 27, 2003, we, along with the Class Action Plaintiff, filed a
Stipulation of Settlement, which contains the terms and conditions of a proposed
settlement intended to fully resolve all claims by the Class Action Plaintiff
against us and the other Metretek Defendants in the Class Action. On March 2,
2004, we and the Class Action Plaintiff filed a revised Stipulation of
Settlement (as revised, the "Heins Stipulation"), which revises certain terms of
the settlement (as revised, the "Heins Settlement"). Because this is a class
action, any settlement will be subject to objection by the Class members and
will have to be approved by the Denver Court as described below.

         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 "Policy"), which was issued by Gulf Insurance
Company ("Gulf"). In settlement of the Interpleader Action discussed below, Gulf
has agreed to pay into escrow $2,375,000 in Policy proceeds to be used in the
Heins Settlement. Pursuant to the Heins Stipulation, we have paid $375,000 into
escrow for use in the Heins Settlement, and we have agreed to issue a note
payable to the Heins Settlement Fund in the amount of $3.0 million (the "Heins
Settlement Note"), and to commence payments thereunder in escrow, upon the
earlier of June 30, 2004 or 51 days after the date the Denver Court grants final
approval (subject to appeal) of the Heins Settlement. The Heins Settlement Note
will 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,
and will be guaranteed by the 1997 Trust and all of our subsidiaries. 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 Heins Settlement Fund
will be funded by the escrowed funds and by our payments on the Heins Settlement
Note which will then be paid directly to the Heins Settlement Fund.

         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.

         In addition, we would be required under the Heins Stipulation either to
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.

         A preliminary approval hearing by the Denver Court on the Heins
Settlement has been set for April 15, 2004. If the Denver Court grants the
preliminary approval, then notice of the Heins Settlement will be sent to the
Class, and a final approval hearing is expected to be scheduled for late May or
early June. We cannot provide any assurance that the Denver Court will grant
preliminary or final approval of the Heins Settlement. In addition, final
approval by the Denver Court may be subject to post-judgment challenge or
appeal.

         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 $375,000 and all payments made on the Heins Settlement Note will
be returned to us from the escrow account. The $2,375,000 contributed by Gulf
will remain in escrow and its disposition will be subject to the determination
of the Denver Court. If the Heins Stipulation does receive final and
non-appealable approval (or if all time for appeals has expired), the funds may
be moved from the escrow account into the Heins Settlement Fund and paid out to
the Class.

         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

                                       16

<PAGE>

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 Gulf of at least $2,375,000 in insurance proceeds from
              the Policy for the benefit of the Heins Settlement Fund (which is
              discussed further in connection with the settlement of the
              Interpleader Action);

         -    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 and the
              Interpleader Action discussed below.

         On March 28, 2003, Gulf filed an interpleader complaint against the
Metretek Defendants, the Farstad Defendants and the Class Action Plaintiff (the
"Interpleader Action") in the Denver Court, seeking a determination by the
Denver Court as to the proper beneficiaries of the Policy. In March, 2004, we
settled the Interpleader Action with Gulf and the Farstad Defendants (the
"Interpleader Settlement"). Pursuant to the terms of the Interpleader
Settlement, Gulf has agreed to pay into escrow $2,375,000 for use in the Heins
Settlement, and has agreed to pay the remainder of the Policy proceeds to the
Farstad Defendants. In exchange, we and the Farstad Defendants have agreed to
fully release Gulf from all further claims under the Policy.

         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. 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
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.

         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. Although the ultimate outcome of these claims cannot be
accurately predicted due to the inherent uncertainty of litigation, in the
opinion of management, based upon current information, no other currently
pending or overtly threatened dispute is expected to have a material adverse
effect on our business, financial condition 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 2003.

                                       17

<PAGE>

                                     PART II

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

MARKET INFORMATION

         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, 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

YEAR ENDED DECEMBER 31, 2003:
First Quarter ..................    $ 0.35    $ 0.17
Second Quarter .................      0.62      0.20
Third Quarter ..................      2.00      0.35
Fourth Quarter .................      2.90      1.25
</TABLE>

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

(1) Traded on the Nasdaq National Market until May 31, 2002.

(2) Traded on the Nasdaq SmallCap Market from June 3 through October 14, 2002.

(3) Traded on the OTC Bulletin Board since October 15, 2002.

         On February 27, 2004, the last sale price of our Common Stock as
reported on the OTC Bulletin Board was $2.95.

HOLDERS

         As of February 27, 2004, there were 269 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,
Metretek Florida or PowerSecure 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.

                                       18

<PAGE>


EQUITY COMPENSATION PLANS

         Information concerning securities authorized for issuance under our
equity compensation plans is included in "Item 12. Security Ownership of Certain
Beneficial Owners and Management and Related Stockholder Matters."

ITEM 6. SELECTED FINANCIAL DATA

         The following selected consolidated financial data has been derived
from our audited consolidated financial statements. The information is not
necessarily indicative of results of our future operations, and should be read
in conjunction with our audited consolidated financial statements and the notes
thereto and with "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations" included in this Report.

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                               --------------------------------------------------------
                                                 2003        2002        2001        2000        1999
                                               --------    --------    --------    --------    --------
                                                      (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                            <C>         <C>         <C>         <C>         <C>
Consolidated Statement of
Operations Data:
Total revenues                                 $ 39,312    $ 27,303    $ 29,342    $ 21,757    $ 19,491
Costs and expenses
  Cost of sales and services                     28,483      19,938      21,322      16,695      13,760
  General and administrative                      6,482       5,709       5,641       5,637       3,543
  Selling, marketing and service                  1,601       1,555       1,360       2,269       2,057
  Depreciation and amortization                     691         658       1,418       1,710       1,269
  Research and development                          627         552         797       9,917       2,226
  Interest, finance charges and other               285         205         154         137         287
  Loss on impairment of assets                        -           -           -       3,161           -
  Provision for litigation costs, net                 -       1,764           -           -           -
  Nonrecurring charges                                -         258           -           -           -
                                               --------    --------    --------    --------    --------
      Total costs and expenses                   38,169      30,639      30,692      39,526      23,142
                                               --------    --------    --------    --------    --------
Operating income (loss)                           1,143      (3,336)     (1,350)    (17,769)     (3,651)
Minority interest                                  (207)          -           -         860           -
Income taxes                                        (57)        (46)        (35)        (19)        (25)
                                               --------    --------    --------    --------    --------
Net income (loss)                                   879      (3,382)     (1,385)    (16,928)     (3,676)
Preferred stock deemed distribution                (890)       (852)       (777)     (5,446)         (7)
                                               --------    --------    --------    --------    --------
Net loss applicable to
  Common shareholders                          $    (11)   $ (4,234)   $ (2,162)   $(22,374)   $ (3,683)
                                               ========    ========    ========    ========    ========
Net loss per common share,
  Basic and diluted                            $  (0.00)   $  (0.70)   $  (0.36)   $  (4.13)   $  (1.06)
                                               ========    ========    ========    ========    ========

Weighted average common shares
  outstanding, basic and diluted                  6,043       6,077       6,031       5,412       3,488
                                               ========    ========    ========    ========    ========
</TABLE>

<TABLE>
<CAPTION>
                                                    DECEMBER 31,
                                  -----------------------------------------------
                                    2003      2002      2001      2000      1999
                                  -------   -------   -------   -------   -------
                                                   (IN THOUSANDS)
<S>                               <C>       <C>       <C>       <C>       <C>
Consolidated Balance
Sheet Data:
Cash and cash equivalents         $ 2,102   $   885   $   696   $   469   $   362
Working capital                     5,964     4,097     3,596     4,390     6,744
Total assets                       23,327    19,199    20,294    20,822    19,618
Long-term notes payable             5,227     4,691     1,268     1,930       870
Redeemable preferred shares         9,422     8,532     7,680     6,903     1,450
Total stockholders' equity          1,169     1,165     5,358     7,277    15,259
</TABLE>

         Our net loss for fiscal 2001, 2000 and 1999 included goodwill
amortization of $675,000, $847,000 and $661,000, respectively. On January 1,
2002, we adopted Statement of Financial Accounting Standards (SFAS) No.

                                       19

<PAGE>

142, "Goodwill and Other Intangible Assets", which required us to discontinue
the amortization of goodwill. See note 1 of our consolidated financial
statements included elsewhere in this Report.

         Certain amounts prior to fiscal 2003 have been reclassified to conform
to fiscal 2003 presentation. Such reclassifications had no impact on our net
income (loss) or stockholders' equity.

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

         The following discussion and analysis of our consolidated results of
operations for the years ended December 31, 2003 ("fiscal 2003"), December 31,
2002 ("fiscal 2002") and December 31, 2001 ("fiscal 2001") and of our
consolidated financial condition as of December 31, 2003 and 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" at the beginning of this Report. 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.

OVERVIEW

         We are a diversified provider of energy technology products, services
and data management systems primarily to industrial and commercial users and
suppliers of natural gas and electricity. As a holding company, we conduct our
operations and derive our revenues through our three operating subsidiaries,
each of which operates a separate business:

         -    Southern Flow, which provides natural gas measurement services;

         -    PowerSecure, which designs, sells and manages distributed
              generation systems; and

         -    Metretek Florida, which designs, manufactures and sells data
              collection and energy measurement monitoring systems and provides
              contract manufacturing services.

         We commenced operations in 1991 as an energy services holding company,
owning subsidiaries with businesses designed to exploit service opportunities
primarily in the natural gas industry. Since then, our business has evolved and
expanded through acquisitions of companies, businesses and new product lines
that have allowed us to reach not only a broader portion of the energy market
(including the electricity market) but also markets outside of the energy field.
Over the past two years, we have focused our efforts on growing our businesses
by offering new and enhanced products, services and technologies, and by
entering new markets, within a framework emphasizing the goal of achieving
profitable operations on a sustained basis. During fiscal 2002, we made a number
of management and business changes within Metretek Florida that were intended to
stem its growing losses, and to exploit new business opportunities. To that end,
we formed MCM in fiscal 2002 to conduct and expand our contract manufacturing
business, which provided a significant contribution to our revenues during
fiscal 2003. As a result, Metretek Florida's revenues increased by almost 50% in
fiscal 2003 over fiscal 2002. In addition, a combination of this expanded
revenue base and the execution of a number of cost-cutting and efficiency steps
resulted in a reduction in segment losses at Metretek Florida during fiscal
2003. Metretek Florida continues to explore ways to expand its business and
revenues, especially as it moves into the wireless communications market

                                       20

<PAGE>

through its new remote data collection technology called InvisiConnect((TM)),
which commenced sales at the end of fiscal 2003.

         During fiscal 2003, the distributed generation business and operations
of PowerSecure expanded significantly. PowerSecure's revenues during fiscal 2003
were more than double its fiscal 2002 revenues. PowerSecure accomplished this
growth by winning a number of large contracts during fiscal 2003, and by
expanding its internal services. Also during fiscal 2003, Southern Flow had
another profitable year, although its segment profit and revenue base did
decline slightly primarily as the result of a reduction in customer requirements
stemming from industry and market forces.

         We recorded a net loss applicable to common shareholders of $11,000
during fiscal 2003. This compares to a loss of $4,234,000 during fiscal 2002.
Overall, our consolidated revenues during fiscal 2003 increased by more than $12
million, representing a 44% increase over fiscal 2002 consolidated revenues. The
deemed distribution on our Series B Preferred Stock was $890,000 during fiscal
2003, and will reduce any net income, or increase any net loss, during fiscal
2004.

         During the fourth quarter of fiscal 2003, we enhanced and expanded the
term, capacity and flexibility of our working capital borrowing facility by
entering into new credit agreements with our primary lender. As a result, we
have secured a line of credit of $3 million, subject to our borrowing base which
varies over time, through September 2006. We face a significant challenge to our
liquidity during 2004. On December 9, 2004, we are required to redeem all
shares of our Convertible Series B Preferred Stock that remain outstanding on
such date, unless the terms of the Series B Preferred Stock are restructured, at
an aggregate redemption price of approximately $10 million (if no shares are
converted into Common Shares prior to such date), which includes the liquidation
preference plus accrued and unpaid dividends through the date of redemption.
This is discussed in more detail below in this Item under " -- Liquidity and
Capital Resources" and " -- Additional Factors That May Affect Our Business and
Financial Results."

         Another important factor in our liquidity relates to the settlement of
the Class Action lawsuit. The Heins Settlement is subject to certain conditions,
including court approval. Under the Heins Settlement, we are required to
commence payments on a four year $3 million promissory note on the earlier of
June 30, 2004 or shortly after final court approval. If the Heins Settlement is
not approved, then we will be required to recommence our defense of the Class
Action, with all of the costs and risks inherent in litigation. See "Item 3.
Legal Proceedings" in this Report and "-Liquidity and Capital Resources" below
in this Item.

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 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. On an on-going basis, we
evaluate our estimates, including those related to revenue recognition and
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;

                                       21

<PAGE>

         - warranty reserve;

         - valuation of goodwill and other intangible assets; and

         - deferred tax valuation allowance.

         Further information about our significant accounting polices is
included in 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 distributed generation projects, we recognize 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 because 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, contract manufacturing 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 to the sale and licensing to our customers of
software operating systems 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.

                                       22

<PAGE>

         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 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. We completed our annual testing of the impairment of
goodwill as of October 1, 2003. As a result of the test, we concluded that no
impairment of goodwill existed as of October 1, 2003.

         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.

                                       23

<PAGE>

RESULTS OF OPERATIONS

         The following table sets forth information related to our primary
business segments and is intended to assist in understanding of our results of
operations for the periods presented:

<TABLE>
<CAPTION>
                                       YEARS ENDED DECEMBER 31,
                               ----------------------------------------
                                 2003            2002            2001
                               --------        --------        --------
                                   (ALL AMOUNTS REPORTED IN THOUSANDS)
<S>                            <C>             <C>             <C>
Revenues:
   Southern Flow               $ 11,805        $ 12,288        $ 12,918
   PowerSecure                   17,122           8,229           8,975
   Metretek Florida               9,775           6,524           6,629
   PowerSpring                        -               -             277
   Other                            610             262             543
                               --------        --------        --------
        Total                  $ 39,312        $ 27,303        $ 29,342
                               ========        ========        ========

GROSS PROFIT:
   Southern Flow               $  2,993        $  3,308        $  3,390
   PowerSecure                    4,902           1,944           1,877
   Metretek Florida               2,324           1,850           2,321
   PowerSpring                        -               -            (111)
                               --------        --------        --------
        Total                  $ 10,219        $  7,102        $  7,477
                               ========        ========        ========

SEGMENT PROFIT (LOSS):
   Southern Flow               $  1,619        $  1,953        $  1,642
   PowerSecure                    1,574            (388)            403
   Metretek Florida                (272)           (969)           (993)
   PowerSpring                        -               -            (612)
   Other                         (1,778)         (3,933)         (1,791)
                               --------        --------        --------
        Total                  $  1,143        $ (3,337)       $ (1,351)
                               ========        ========        ========
</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. 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, 2003, 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 data collection and telemetry segment
are conducted by Metretek Florida. Metretek Florida's manufactured products fall
into the following categories: field devices, including data collection

                                       24

<PAGE>

products and electronic gas flow computers; data collection software products
(such as InvisiConnect((TM)), DC2000 and PowerSpring); and communications
solutions that can use public networks operated by commercial wireless carriers
to provide real time IP-based wireless internet connectivity, 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 data collection, M2M telemetry
connectivity and post-sale support services for its manufactured products and
turn-key solutions. 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 collection segment.

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

         FISCAL 2003 COMPARED TO FISCAL 2002

         Revenues. Our revenues are derived almost entirely from the sales of
products and services by our subsidiaries. Our consolidated revenues for fiscal
2003 increased by more than $12 million, or 44%, over our consolidated revenues
for fiscal 2002 to a record $39.3 million. This increase resulted from the
significant increases in revenues by PowerSecure and by Metretek Florida,
although it was partially offset by a slight decrease in revenues by Southern
Flow.

         The 108% increase in PowerSecure's revenues during fiscal 2003 was due
to a significant increase in the number of PowerSecure's completed and
in-process projects. PowerSecure had 63 projects completed or in process during
fiscal 2003 compared to 30 projects completed or in process during fiscal 2002.
PowerSecure's average revenue per project for completed and in-process projects
was essentially unchanged, at $267,000 during fiscal 2003 compared to $263,000
during fiscal 2002, although the size of the projects varied significantly. We
believe PowerSecure is successfully identifying and closing more projects as a
result of an increasingly effective sales effort and increased marketplace
awareness of its presence. PowerSecure's fiscal 2003 revenues also included
$288,000 of service related revenues, as compared to $350,000 during fiscal
2002. As discussed below in this Item under "--Quarterly Fluctuations",
PowerSecure's revenues have fluctuated significantly in the past and are
expected to continue to fluctuate significantly in the future, and consist
primarily of non-recurring sales. Accordingly, there is no assurance that
PowerSecure's revenues will continue to increase on an annual basis in the
future.

         The 50% increase in Metretek Florida's revenues in fiscal 2003 compared
to fiscal 2002 was comprised primarily of an increase in domestic sales of
$2,873,000, together with a slight increase in international sales of $377,000.
The increase in Metretek Florida's domestic sales was due to an increase of
$2,798,000 in sales of field devices, data collection software products, and
communications solutions products, combined with an increase of $1,440,000 in
its contract manufacturing sales. The increase in domestic sales of field
devices, data collection software products, and communications solutions
products was attributable primarily to shipments on a significant order from
Public Service Electric and Gas ("PSE&G") of New Jersey. The increase in
domestic circuit board contract manufacturing sales was due primarily to the
initial shipments on a significant multi-year contract to build electronic
assemblies for a large domestic furniture manufacturer. As discussed below in
this Item under "--Quarterly Fluctuations", Metretek Florida's revenues depend
upon the volume and timing of customer orders and payments and the date of
product delivery. The timing of large individual sales, such as the sale of
Metretek Florida products to PSE&G, is difficult for us to predict, and
customers from time to time defer or cancel purchase orders. Accordingly,
Metretek Florida's revenues are expected to continue to fluctuate significantly
in the future, for a number of reasons discussed below in this Item under " --
Quarterly Fluctuations." There is no assurance that Metretek Florida's revenues
will continue to increase on an annual basis in the future.

          Southern Flow's revenues decreased by approximately 4% during fiscal
2003, as compared to fiscal 2002. We believe that the decrease in Southern
Flow's revenues was primarily attributable to service cutbacks by some customers
concerned about future oil price volatility, and to Gulf Coast weather incidents
that reduced Southern Flow's opportunities to provide on-site field services to
its customers.

                                       25

<PAGE>

         Costs and Expenses. The following table sets forth our costs and
expenses during the periods indicated:

<TABLE>
<CAPTION>
                                                                              YEAR-OVER-YEAR
                                                YEAR ENDED DECEMBER 31,         DIFFERENCE
                                                -----------------------     ------------------
                                                    2003     2002              $           %
                                                  -------   -------         -------       ----
                                                    (In thousands)
<S>                                               <C>       <C>             <C>           <C>
Costs and Expenses:
Costs of Sales and Services
   Southern Flow                                  $ 8,812   $ 8,980         $  (168)        -2%
   PowerSecure                                     12,220     6,284           5,936         94%
   Metretek Florida                                 7,451     4,674           2,777         59%
                                                  -------   -------         -------
        Total                                      28,483    19,938           8,545         43%

General and administrative                          6,482     5,709             773         14%
Selling, marketing and service                      1,601     1,555              46          3%
Depreciation and amortization                         691       658              33          5%
Reserarch and development                             627       552              75         14%
Interest, finance charges and other                   285       205              80         39%
Provision for litigation costs, net                     -     1,764          (1,764)      -100%
Nonrecurring charges                                    -       258            (258)      -100%
Income taxes                                           57        46              11         24%
</TABLE>

         Costs of sales and services include materials, personnel and related
overhead costs incurred to manufacture products and provide services. The 43%
increase in cost of sales and services in fiscal 2003, compared to fiscal 2002,
was almost entirely attributable to and proportionate with the increased sales
generated by PowerSecure and Metretek Florida.

         Southern Flow's costs of sales and services declined by 2% during
fiscal 2003, despite a 4% decrease in Southern Flow's revenues during fiscal
2003, because of the cost structure of Southern Flow's service operations, which
remains generally fixed, over short periods, relative to fluctuations in its
service related revenues. As a result, Southern Flow's gross profit margin after
costs of sales and services decreased to 25.4% for fiscal 2003 compared to 26.9%
for fiscal 2002.

         The 94% increase in PowerSecure's costs of sales and services in fiscal
2003 is almost entirely a direct result of the 108% increase in PowerSecure's
revenues. PowerSecure's gross profit margin was 28.6% during fiscal 2003,
compared to 23.6% in fiscal 2002, which reflects cost efficiencies experienced
in fiscal 2003 in project installation and construction costs compared to fiscal
2002.

         The 59% increase in Metretek Florida's costs of sales and services in
fiscal 2003 was likewise a direct result of the 50% increase in Metretek
Florida's revenues. Metretek Florida's overall gross profit margin decreased to
23.8% for fiscal 2003, compared to 28.4% for fiscal 2002. The primary causes of
this decrease in Metretek Florida's gross profit margin were:

         -    the ramping up of production and overhead costs at MCM in
              anticipation of future growth;

         -    lower margins earned on MCM's contract manufacturing products
              which comprised a greater percentage of Metretek Florida's total
              sales in fiscal 2003 compared to fiscal 2002; and

         -    greater than normal materials costs related to its field devices,
              data collection software products, and communications solutions
              products.

         General and administrative expenses include personnel and related
overhead costs for the support and administrative functions. The 14% increase in
general and administrative expenses in fiscal 2003, as compared to fiscal 2002,
was primarily due to the substantial increases in personnel and related overhead
costs associated with the development and growth of PowerSecure's business
necessitating an expansion of PowerSecure's workforce. In addition, fiscal 2003
general and administrative expenses also increased as the result of smaller
increases in personnel and related overhead costs at the parent level and at
Metretek Florida and Southern Flow during fiscal 2003 attributable to increases
in professional fees, salaries and wages.

                                       26

<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. The 3% increase in
selling, marketing and service expenses in fiscal 2003, as compared to fiscal
2002, was due to increased personnel, commission costs, and business development
expenses associated with the development and growth of the business of
PowerSecure during fiscal 2003, which increase was partially offset by reduced
personnel and marketing costs at Metretek Florida.

         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. The 5% increase in depreciation and
amortization expenses in fiscal 2003, as compared to fiscal 2002, primarily
reflects the acquisition of additional depreciable equipment at Metretek Florida
and PowerSecure during fiscal 2003 and late in fiscal 2002.

         Research and development expenses, all of which relate to activities at
Metretek Florida, include payments to third parties, wages and related expenses
for personnel, materials costs and related overhead costs related to product and
service development, enhancements, upgrades, testing and quality assurance. The
14% increase in research and development expenses in fiscal 2003, as compared to
fiscal 2002, primarily reflects the addition of personnel and associated costs
at Metretek Florida during fiscal 2003.

         Interest, finance charges and other expenses include interest and
finance charges on our Credit Facility as well as other non-operating expenses.
The 39% increase in interest, finance charges and other expenses in fiscal 2003,
as compared to fiscal 2002, reflects the addition of a full year of bank finance
charges and interest on borrowings related to Metretek Florida's line of credit,
which commenced in September 2002, as well as a full year of interest costs
related to an equipment loan, which commenced in the fourth quarter of fiscal
2002.

         Provision for litigation costs, net for fiscal 2002 consisted of the
offsetting effects of a $3,505,000 loss attributable to the proposed settlement
of the Class Action, which is litigation related to our MGT subsidiary, and a
$1,741,000 gain from the settlement of all claims and disputes with Scient
Corporation, a former vendor, which resulted in the cancellation of a promissory
note that we had issued to Scient in September 2000. We incurred no similar
litigation costs in fiscal 2003.

         Nonrecurring charges of $258,000 for fiscal 2002 reflected the costs
related to the June 2002 changes in management at Metretek Florida, principally
termination benefits paid to former Metretek Florida management personnel. There
were no nonrecurring charges in fiscal 2003.

         Income tax expenses include state income taxes in various state
jurisdictions in which we have taxable activities. We incur no federal income
tax expense because of our consolidated net operating losses. The 24% increase
in income taxes in fiscal 2003, as compared to fiscal 2002, was entirely due to
increases in state income taxes incurred by Southern Flow in Louisiana,
Oklahoma, and Mississippi.

         FISCAL 2002 COMPARED TO FISCAL 2001

         Revenues. The $2,039,000, or 7%, decrease in our consolidated revenues
for fiscal 2002, as compared to fiscal 2001, was due to decreased revenues at
each of our operating subsidiaries.

         The 8% decrease in PowerSecure's revenues in fiscal 2002 was due to the
reduced size of PowerSecure's completed and in-process projects during fiscal
2002, compared to fiscal 2001, although this reduction in average size of
projects was partially offset by the increase in volume of projects during
fiscal 2002. 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
$350,000 of service related revenue compared to $80,000 of service related
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.

         The 5% decrease in Southern Flow's revenues during fiscal 2002 was
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.

                                       27

<PAGE>

         The decrease in PowerSpring's revenues 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, was due to the
termination of its separate operations, including its marketing efforts.
PowerSpring's monitoring products and services, now operated by Metretek
Florida, generated approximately $94,000 of domestic revenues at Metretek
Florida during fiscal 2002.

         The less than 2% decline in Metretek Florida's revenues during fiscal
2002, compared to fiscal 2001, consisted of a decrease in domestic sales of
$206,000 partially offset by an increase in international sales of $101,000.

         Costs and Expenses. The following table sets forth our costs and
expenses during the periods indicated:

<TABLE>
<CAPTION>
                                                                             YEAR-OVER-YEAR
                                              YEAR ENDED DECEMBER 31,          DIFFERENCE
                                              -----------------------      ------------------
                                                2002           2001           $           %
                                              -------        -------       -------      -----
                                                  (In thousands)
<S>                                           <C>            <C>           <C>          <C>
Costs and Expenses:
Costs of Sales and Services
   Southern Flow                              $ 8,980        $ 9,528       $  (548)       -6%
   PowerSecure                                  6,284          7,098          (814)      -11%
   Metretek Florida                             4,674          4,308           366         8%
   PowerSpring                                      -            388          (388)     -100%
                                              -------        -------       -------
        Total                                  19,938         21,322        (1,384)       -6%

General and administrative                      5,709          5,641            68         1%
Selling, marketing and service                  1,555          1,360           195        14%
Depreciation and amortization                     658          1,418          (760)      -54%
Reserarch and development                         552            797          (245)      -31%
Interest, finance charges and other               205            154            51        33%
Provision for litigation costs, net             1,764              -         1,764       N/A
Nonrecurring charges                              258              -           258       N/A
Income taxes                                       46             35            11        31%
</TABLE>

         The 6% decline in cost of sales and services for fiscal 2002, compared
to fiscal 2001, was attributable to the lower sales at PowerSecure, Southern
Flow, and PowerSpring, despite the higher cost of sales and services at Metretek
Florida. PowerSecure's cost of sales and services for fiscal 2002 decreased 11%,
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 was due to a higher percentage of total revenues from professional
services during fiscal 2002, which has higher profit margins to PowerSecure.
Southern Flow's cost of sales and services for fiscal 2002 decreased 6%, 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. The 8% increase in Metretek Florida's cost of sales and services for
fiscal 2002, despite a 2% decline in Metretek Florida's revenues, reflected
higher materials, personnel and related overhead costs attributable to sales of
its products and systems and contract manufacturing activities, including the
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 for fiscal 2002 increased slightly
over 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.

         The 14% increase in selling, marketing and service expenses in fiscal
2002, compared to fiscal 2001, was due to an increase in selling and marketing
costs at Metretek Florida, in the form of consulting, personnel, and

                                       28

<PAGE>

service contract costs associated with Metretek Florida's monitoring products
and services transferred from PowerSpring and now operated by Metretek Florida,
as well as an increase in selling and marketing costs related to the continued
business development activities of PowerSecure. These increases in selling,
marketing and service expenses in fiscal 2002 were partially offset by a
decrease in the selling and marketing costs of PowerSpring, which ceased
operating as a separate subsidiary in the first quarter of fiscal 2001.

         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 54%, compared to fiscal 2001, primarily as the result of 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 portion of the
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 fiscal 2001.

         The 31% decrease in research and development expenses in fiscal 2002,
compared to fiscal 2001, was entirely due to reduced personnel related product
development expenses at Metretek Florida.

         Interest, finance charges and other expenses for fiscal 2002 increased
by 33%, compared to fiscal 2001, reflecting increased borrowings and higher
finance charges during fiscal 2002.

         Provision for litigation costs, net for fiscal 2002 consisted of the
offsetting effects of a $3,505,000 loss attributable to the proposed settlement
of the Class Action, which is litigation related to our MGT subsidiary, and a
$1,741,000 gain from the settlement of all claims and disputes with Scient
Corporation, a former vendor, which resulted in the cancellation of a promissory
note that we had issued to Scient in September 2000. We incurred no similar
litigation costs in fiscal 2001.

         Nonrecurring charges for fiscal 2002 included 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.

         Income tax expenses include state income taxes in various state
jurisdictions in which we have taxable activities. No federal income tax expense
has been incurred because of our consolidated net operating losses. The 31%
increase in income taxes in fiscal 2002, as compared to fiscal 2001, was due to
increases in state taxes incurred by Southern Flow in Louisiana, Oklahoma, and
Mississippi.

QUARTERLY FLUCTUATIONS

         Our quarterly revenues, expenses, margins, net income and other
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. These factors include, without limitation, the
following:

     -   the size, timing and terms of sales and orders, including customers
         delaying, deferring or canceling purchase orders, or making smaller
         purchases than expected;

     -   our ability to implement our business plans and strategies and the
         timing of such implementation;

     -   the timing, pricing and market acceptance of our new products and
         services such as Metretek Florida's new InvisiConnect offering;

     -   the pace of development of our new businesses and the growth of their
         markets;

     -   changes in our pricing policies and those of our competitors;

     -   variations in the length of our product and service implementation
         process;

     -   changes in the mix of products and services having differing margins;

     -   changes in the mix of international and domestic revenues;

                                       29

<PAGE>

     -   the life cycles of our products and services;

     -   budgeting cycles of utilities and other major customers;

     -   general economic and political conditions;

     -   the resolution of pending and any future litigation and claims;

     -   economic conditions in the energy industry, especially in the natural
         gas and electricity sectors;

     -   the effects of governmental regulations and regulatory changes in our
         markets;

     -   changes in the prices charged by our suppliers;

     -   our ability to make and obtain the expected benefits from acquisitions
         of technology or businesses, and the costs related to such
         acquisitions;

     -   changes in our operating expenses; and

     -   the development and maintenance of business relationships with
         strategic partners.

         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.

         Our revenues and other operating results are heavily dependant upon the
volume and timing of customer orders and payments and the date of product
delivery. The timing of large individual sales, such as the sale of Metretek
Florida products to PSE&G during fiscal 2003, is difficult for us to predict.
Because our operating expenses are based on anticipated revenues and because a
high percentage of these are relatively fixed, a shortfall or delay in
recognizing revenue could cause our operating results to vary significantly from
quarter-to-quarter and could result in significant operating losses in any
particular quarter. If our revenues fall below our expectations in any
particular quarter, we may not be able to reduce our expenses rapidly in
response to the shortfall, which could result in us suffering significant
operating losses in that quarter.

         Over PowerSecure's three year operating history, its revenues, costs,
gross margins, cash flow, net income and other operating results have varied
from quarter-to-quarter, period-to-period and year-to-year, for a number of
reasons, including the factors mentioned above, and we expect such fluctuations
to continue in the future. PowerSecure's revenues depend in large part upon the
timing and the size of projects awarded to PowerSecure, and to a lesser extent
the timing of the completion of those projects. In addition, distributed
generation is an emerging market and PowerSecure is a new competitor in the
market, so there is no established customer base on which to rely or certainty
as to future contracts. Another factor that could cause material fluctuations in
PowerSecure's quarterly results is the amount of recurring, as opposed to
non-recurring, sources of revenue. Through December 31, 2003, the majority of
PowerSecure's revenues constituted non-recurring revenues.

         Metretek Florida has historically derived substantially all of its
revenues from sales of its products and services to the utility industry.
Metretek Florida has experienced variability of operating results on both an
annual and a quarterly basis due primarily to utility purchasing patterns and
delays of purchasing decisions as a result of mergers and acquisitions in the
utility industry and changes or potential changes to the federal and state
regulatory frameworks within which the utility industry operates. The utility
industry, both domestic and foreign, is generally characterized by long
budgeting, purchasing and regulatory process cycles that can take up to several
years to complete. In recent years, Metretek Florida has diversified its
business by entering the contract manufacturing market, but this business
heavily depends upon the amount, size and timing of customer orders, and is
subject to customers delaying, deferring or canceling purchase orders, or making
smaller purchases than expected.

         Due to all of these factors and the other risks discussed below in this
Item under " -- Additional Factors That May Affect Our Business and Our Future
Results", quarter-to-quarter, period-to-period or year-to-year comparisons of
our results of operations should not be relied on as an indication of our future
performance. Quarterly, period or annual comparisons of our operating results
are not necessarily meaningful or indicative of future performance.

                                       30

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

         Capital Requirements. We require capital primarily to finance our:

         -    operations;

         -    inventories (including project expenses);

         -    accounts receivable;

         -    research and development efforts;

         -    property and equipment acquisitions;

         -    software development;

         -    debt service requirements; and

         -    business and technology acquisitions and other growth
              transactions.

         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, 2003, we had working capital of $5,964,000,
including $2,102,000 in cash and cash equivalents, compared to working capital
of $4,097,000 on December 31, 2002, which included $885,000 in cash and cash
equivalents.

         Net cash provided by operating activities was $197,000 in fiscal 2003,
consisting of approximately $1,337,000 of cash provided by operations, before
changes in assets and liabilities, and approximately $1,140,000 of cash used by
changes in working capital and other asset and liability accounts. This compares
to net cash used by operating activities of $5,000 in fiscal 2002, consisting of
approximately $1,155,000 of cash used by operations, before changes in assets
and liabilities, and approximately $1,150,000 of cash provided by changes in
working capital and other asset and liability accounts.

         Net cash provided by investing activities was $37,000 in fiscal 2003,
as compared to net cash used of $444,000 in fiscal 2002. The net cash provided
by investing activities during fiscal 2003 was attributable to distributions
from an unconsolidated affiliate, partially offset by the purchase of equipment
primarily at PowerSecure and Southern Flow. The net cash used by investing
activities during fiscal 2002 was attributable to the purchase of equipment
primarily at Metretek Florida, which was partially offset by distributions from
an unconsolidated affiliate.

         Net cash provided by financing activities was $983,000 in fiscal 2003,
compared to net cash provided by financing activities of $637,000 in fiscal
2002. The net cash provided by financing activities during fiscal 2003
represented net borrowings on our line of credit, including amounts borrowed by
PowerSecure, and proceeds from an equipment loan which were partially offset by
payments on our equipment loans and payments on our capital lease obligations
and a mortgage loan. The net cash provided by financing activities during fiscal
2002 represented net borrowings on Metretek Florida's 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.

         Our research and development expenses totaled $627,000 during fiscal
2003, compared to $552,000 during fiscal 2002. Virtually all of our fiscal 2003
research and development expenses were directed toward the enhancement of
Metretek Florida's business, including the development of its new M2M
communication products such as InvisiConnect and DCM100. During fiscal 2004, we
plan to continue our research and development efforts to enhance our existing
products and services and to develop new products and services, especially the
products, services and technologies of Metretek Florida. We anticipate that our
research and development expenses in fiscal 2004 will total approximately
$812,000.

         Our capital expenditures in fiscal 2003 were approximately $296,000,
compared to $546,000 during fiscal 2002. Our capital expenditures in fiscal 2003
were used primarily to acquire fabrication and construction equipment at
PowerSecure and to replace existing plant and equipment items at Southern Flow.
We anticipate capital

                                       31

<PAGE>

expenditures in fiscal 2004 of approximately $425,000. We also expect to acquire
approximately $600,000 of equipment through capital leases in the second quarter
of fiscal 2004, substantially all of which will be used to increase MCM's
production capacity. 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.

         Working Capital Credit Facility. Through the agreements discussed
below, we have obtained a $3 million credit facility ("Credit Facility") with
Wells Fargo Business Credit, Inc. ("Wells Fargo") that matures in September
2006. The Credit Facility restricts our ability to sell or finance our
subsidiaries, without Wells Fargo's consent. The Credit Facility, which
constitutes our primary credit agreement, is used primarily to fund the
operations and growth of our subsidiaries, especially PowerSecure and MCM.

         The Credit Facility consists of separate credit agreements between
Wells Fargo and each of Southern Flow, Metretek Florida and PowerSecure, as
borrowers. At December 31, 2003, we had an aggregate borrowing base of
$3,000,000 under the Credit Facility, of which $2,545,000 had been borrowed,
leaving $455,000 available to borrow.

         The Credit Facility contains minimum interest charges and unused credit
line and termination fees. The obligations of each of the borrowers have been
guaranteed by Metretek Technologies, the other borrowers and MCM. These
guarantees have been secured by guaranty agreements and security agreements
entered into by 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 Credit Facility is further secured by a first priority security
interest in virtually all of the assets of each borrower. Each credit agreement
contains standard affirmative and negative covenants by the borrower, including
financial covenants and other standard covenants related to operations,
including limitations on future indebtedness and the payment of dividends the
sale of assets and other corporate transactions, without Wells Fargo's consent.

         In September 2001, Southern Flow entered into a Credit and Security
Agreement with 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. 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. 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.

         In September 2002, Metretek Florida entered into a Credit and Security
Agreement with Wells Fargo, providing for an additional $1,000,000 credit
facility (the "Metretek Florida Credit Facility"). Amounts borrowed under the
Metretek Florida Credit Facility bear interest at prime plus two percent.
Borrowings under the aggregate Credit Agreement are limited to a borrowing base
equal to 80% of Metretek Florida's eligible accounts receivable. 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 advances
to the guarantors and repayment to the guarantors on existing advances do not
exceed $400,000 during 2004. As of December 31, 2003, Metretek Florida was not
in compliance with the minimum tangible net worth and the minimum net income
financial covenants in the Metretek Florida Credit Facility, but Wells Fargo has
waived these financial covenants for that period and has established the
financial covenants for Metretek Florida for 2004.

         In September 2003, we modified the Credit Facility by:

              -   adding PowerSecure as an additional borrower under the Credit
                  Facility through a Credit and Security Agreement between Wells
                  Fargo and PowerSecure (the "PowerSecure Credit Facility"),
                  which added certain eligible accounts receivable of
                  PowerSecure to the borrowing base of the Credit Facility; and

              -   amending the Southern Flow Credit Facility and the Metretek
                  Florida Credit Facility to extend the maturity dates of each
                  to September 30, 2006, and to make certain other changes
                  reflected above.

                                       32

<PAGE>

         The $3,000,000 maximum borrowing capacity under the Credit Facility was
not changed in the Credit Facility restructuring, although the additional assets
of PowerSecure included in the borrowing base facilitated increased borrowing
capacity, up to the maximum limit. Borrowings under the PowerSecure Credit
Facility are limited to a borrowing base equal to 80% of PowerSecure's eligible
accounts receivable. PowerSecure is permitted to advance funds under the
PowerSecure Credit Facility to the guarantors, provided that after making such
advances the PowerSecure Credit Facility availability is not less than $100,000
and that total advances to the guarantors did not exceed $800,000 during 2003.

         Heins Stipulation. On March 27, 2003, we filed the Heins Stipulation,
which was amended in March 2004. The Heins Stipulation contains the terms and
conditions of the Heins Settlement, which is 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 at least $2,375,000 from the proceeds of our
directors' and officers' insurance policy and court approval. The Policy
proceeds will be made available under the terms of the Interpleader Settlement.
In settlement of the Interpleader Action, Gulf has agreed to pay into escrow
$2,375,000 in Policy proceeds to be used in the Heins Settlement. Pursuant to
the Heins Stipulation, we have paid $375,000 into escrow for use in the Heins
Settlement, and we have agreed to issue the Heins Settlement Note payable to the
Heins Settlement Fund in the amount of $3.0 million, and to commence payments
thereunder in escrow, upon the earlier of June 30, 2004 or 51 days after the
date the Denver Court grants final approval (subject to appeal) of the Heins
Settlement. The Heins Settlement Note will 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, and will be guaranteed by the 1997
Trust and all of our subsidiaries. If the Denver Court approves the Heins
Settlement and all other conditions to the Heins Settlement are met, then the
Heins Settlement Fund will be funded by the escrowed funds and by our payments
on the Heins Settlement Note directly to the Heins Settlement Fund. If the Heins
Stipulation does not receive final and non-appealable approval by December 31,
2006, then the escrowed payments we have made will be returned to us. This
litigation and proposed settlement are more fully discussed in "Item 3. Legal
Proceedings" of this Report. The loss resulting from the amount due on the items
settlement, other than interest on the Heins Settlement Note, was recorded in
fiscal 2002.

         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 a 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, 2003:

<TABLE>
<CAPTION>
                                                         PAYMENTS DUE BY PERIOD (1)
                                   -------------------------------------------------------------------
                                                  LESS THAN                                 MORE THAN
                                      TOTAL        1 YEAR      1 - 3 YEARS   4 - 5 YEARS     5 YEARS
                                   -----------   -----------   -----------   -----------   -----------
<S>                                <C>           <C>           <C>           <C>           <C>
Contractual Obligations
    Credit Facility (2)            $ 2,545,000   $         -   $ 2,545,000   $         -   $         -
    Capital Lease Obligations           46,000        29,000        17,000             -             -
    Operating Leases                 2,533,000       939,000     1,036,000       558,000             -
    Series B Preferred Stock (3)     9,422,000     9,422,000             -             -             -
    Heins Settlement (4)             3,375,000       937,500     1,500,000       937,500             -
    Other Long-Term
       Obligations                     432,000       188,000        34,000       210,000             -
                                   -----------   -----------   -----------   -----------   -----------

            Total                  $18,353,000   $11,515,500   $ 5,132,000   $ 1,705,500   $         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,
     2003, not projected borrowings under the Credit Facility.

(3)  Based upon accrued and unpaid dividends as of December 31, 2003, although
     the redemption date is December 9, 2004. The Series B Preferred Stock is
     convertible, at the option of the holders thereof, into Common Stock at the
     conversion rate of approximately $3.06 per share of Common Stock, but the
     amount set forth in the table assumes no shares of Series B Preferred Stock
     are converted prior to the redemption date.

(4)  Assumes payments begin on the Heins Settlement Note on June 30, 2004, but
     excludes interest. We cannot provide any assurance that the Heins
     Settlement will obtain final approval and become effective, or if so, on
     the timing of such approval or effectiveness. See "Item 3. Legal
     Proceedings" in this Report.

                                       33

<PAGE>

         Off-Balance Sheet Arrangements. During fiscal 2003, 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 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
redemption requirement under the terms of our Series B Preferred Stock. However,
any projections of our 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 in this Item. 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 and
as needed.

         Under the terms of our Series B Preferred Stock, we will be required to
redeem all shares of our Series B Preferred Stock that remain outstanding on
December 9, 2004 at a redemption price equal to the liquidation preference of
$1,000 per share plus accumulated and unpaid dividends. The Series B Preferred
Stock is convertible, at the option of the holders thereof, into Common Stock at
the conversion rate of approximately $3.06 per share of Common Stock. While the
conversion of any shares of Series B Preferred Stock into shares of Common Stock
prior to the redemption date will reduce our redemption obligation, we cannot
provide any assurance that any shares of Series B Preferred Stock will be
converted. As of December 31, 2003, the total redemption obligation was
approximately $9.4 million. While we do not currently have the funds to satisfy
that redemption obligation, we intend to either restructure that obligation with
the holders of the Series B Preferred Stock in a manner satisfactory to us, such
as by deferring the redemption date on all or part of the shares, or to raise
sufficient additional capital to fund that obligation through the sale of debt
or equity securities or through the sale of a portion of our business or assets,
or some combination of the foregoing. We believe that, even if we are unable to
restructure the redemption obligation or to raise sufficient capital to fund
that obligation through the issuance of debt or equity securities, we will be
able to receive sufficient proceeds to fund that obligation through the sale of
all or part of one or more of our existing businesses. However, there is no
assurance we will be able to raise sufficient proceeds, as any of these capital
raising activities may require the consent of others, including the holders of
our Series B Preferred Stock and our primary lender, and there is no assurance
that such persons will provide the requisite consents. In addition, our ability
to raise additional capital depends on many other factors, including general
market conditions, our operating performance and investor sentiment, and thus
cannot be assured. Moreover, the terms of any financing could be adverse to the
interests of our stockholders. If we are unable to satisfy or satisfactorily
restructure our redemption obligations under the Series B Preferred Stock, then
our business, financial condition and results of operations may be materially
affected. See " -- Additional Factors That May Affect Our Business and Future
Results" below in this Item.

         For the following reasons, we may require additional funds, beyond our
currently anticipated resources, to support our working capital requirements,
operations or other cash flow needs, other than the Series B Preferred Stock
redemption obligation:

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

         -    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,
              and similar costs associated with developing any future
              distributed generation systems for PowerSecure's company-owned
              business package, could require significant additional funds that
              are in excess of 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 likely 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.

                                       34

<PAGE>

         -    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 the Class Action, if the Heins Settlement
              does not become effective, or to other claims that may 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 or of the holders of our Series B Preferred Stock.
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
a debt financing could 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 current lender or to the holders of our
Series B Preferred Stock, 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 July 2002, the Financial Accounting Standards Board ("FASB") issued
Financial Accounting Standards ("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 146 did not have any
effect on our consolidated financial position, results of operations or cash
flows.

         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 FIN 45
during the fourth quarter of fiscal 2002 and we adopted the recognition
provisions of FIN 45 during the first quarter 2003, and such adoptions did not
have any effect on our consolidated financial position, results of operations or
cash flows.

         In December 2002, the FASB issued FAS 148, "Accounting for Stock-Based
Compensation - Transition and Disclosure". FAS 148 amends FAS 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 adoption of FAS
148 did not have any impact on our consolidated financial position,

                                       35

<PAGE>

results of operations or cash flows 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 financial
position and results of operations. See the notes to our consolidated financial
statements included elsewhere in this Report for additional disclosure
concerning stock-based compensation.

         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 March 15, 2004. 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, the adoption of FIN 46 did not have any effect on our
consolidated financial position, results of operations or cash flows.

         In April 2003, the FASB issued FAS 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". FAS 149 amends and clarifies the
accounting for derivative instruments, including certain derivative instruments
embedded in other contracts, and for hedging activities under FAS 133,
"Accounting for Derivative Instruments and Hedging Activities." FAS 149 is
generally effective for contracts entered into or modified after June 30, 2003
and for hedging relationships designated after June 30, 2003. The adoption of
FAS 149 did not have any effect on our consolidated financial position, results
of operations or cash flows.

         In May 2003, the FASB issued FAS 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". FAS 150
requires that certain financial instruments, which under previous guidance were
accounted for as equity, must now be accounted for as liabilities. The financial
instruments affected include mandatory redeemable stock, certain financial
instruments that require or may require the issuer to buy back some of its
shares in exchange for cash or other assets and certain obligations that can be
settled with shares of stock. FAS 150 is effective for all financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003. The
adoption of FAS 150 did not have any effect on our consolidated financial
position, results of operations or cash flows.

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 in this Report 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 prior year of our operations since
our inception, including a net loss applicable to common shareholders of $11,000
in fiscal 2003 and a net loss applicable to common shareholders of $4.2 million
in fiscal 2002. As of December 31, 2003, we had an accumulated deficit of
approximately $54 million. We may never achieve profitability, and even if we do
we may not be able to sustain or increase that profitability on a quarterly or
annual basis in the future. We may incur expenses in excess of revenues,
including significant costs in developing and expanding the contract
manufacturing business of MCM and the InvisiConnect((TM)) business of Metretek
Florida, and we will continue to accrue the preferred stock deemed distribution
in fiscal 2004. In addition, while our revenues in fiscal 2003 increased
significantly over our revenues in fiscal 2002, there is no guarantee that our
future revenues will continue to grow significantly, if at all. If our future
revenues do not meet our expectations, or if our operating expenses exceed what
we anticipate or cannot be reduced below our revenues, our business, financial
condition and results of operations will be materially and adversely affected.

                                       36

<PAGE>

         IF WE ARE UNABLE TO SATISFACTORILY RESTRUCTURE, OR TO RAISE SUFFICIENT
         ADDITIONAL CAPITAL FUNDS TO MEET, OUR OBLIGATION TO REDEEM THE SERIES B
         PREFERRED STOCK IN DECEMBER 2004, THEN OUR ASSETS, BUSINESS, FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS MAY BE MATERIALLY AND ADVERSELY
         AFFECTED, AND WE MAY FACE A CHANGE IN CONTROL IN OUR BOARD OF DIRECTORS

         Under the terms of our Series B Preferred Stock, we are required to
redeem all shares of Series B Preferred Stock that remain outstanding on
December 9, 2004 at a redemption price equal to the liquidation preference of
$1,000 per share plus accumulated and unpaid dividends, which as of December 31,
2003 was approximately $9.4 million. We do not currently have the funds to
satisfy that redemption obligation. The Series B Preferred Stock is convertible,
at the option of the holders thereof, into Common Stock at the conversion rate
of approximately $3.06 per share of Common Stock. While the conversion of any
shares of Series B Preferred Stock into shares of Common Stock prior to the
redemption date will reduce our redemption obligation, we cannot provide any
assurance that any shares of Series B Preferred Stock will be converted.
Accordingly, we intend to either restructure that obligation with the holders of
our Series B Preferred Stock in a manner satisfactory to us, such as by
deferring the redemption date on all or part of the shares, or by raising
sufficient additional capital to fund that obligation through the sale of debt
or equity securities or of one or more of our businesses. However, there is no
assurance we will be able to do either, as such actions require the consents of
others that we may not obtain, including the holders of our Series B Preferred
Stock and our primary lender. In addition, our ability to raise additional
capital depends on many factors, including general market conditions, our
operating performance, and investor sentiment, and thus cannot be assured.
Moreover, the terms of any financing could be adverse to the interests of our
stockholders. If we are unable to satisfy or satisfactorily restructure our
redemption obligations under the Series B Preferred Stock, then our business,
financial condition and results of operations may be materially and adversely
affected. In such event, holders of the Series B Preferred Stock will have the
right to elect sufficient directors to control a majority of our Board of
Directors until the redemption obligation is fully satisfied, and the dividend
rate on the Series B Preferred Stock will increase from 8% to 10% and continue
to increase by 0.5% each six months to a maximum rate of 15%.

         WE MAY ALSO REQUIRE A SUBSTANTIAL AMOUNT OF ADDITIONAL FUNDS TO FUND
         OUR OTHER CAPITAL REQUIREMENTS AND 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 OR AT ALL

         In addition to our obligation to redeem the Series B Preferred Stock in
December 2004, we may need to obtain additional capital to fund our other
capital obligations and to finance the development and expansion of our
business. For example, we will need substantial additional capital to expand our
contract manufacturing business and to finance the development of our
InvisiConnect((TM)) business. In addition, we may 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. Further, under the Heins Stipulation we are
required to make payments on the $3 million Heins Settlement Note, plus
interest, over a four year period commencing no later than June 30, 2004. If the
Heins Stipulation is not approved and the Class Action proceeds, a resolution of
the litigation adverse to us could also significantly increase our cash
requirements beyond our available capital resources. See "Item 3. Legal
Proceedings" in this Report. 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. 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 $3 million Credit Facility, which
has a term that has been extended to September 2006. Our ability to borrow funds
under the Credit Facility is limited to our loan availability based upon certain
assets of our subsidiaries. As of December 31, 2003, we had an aggregate loan
availability under the Credit Facility of approximately $3,000,000, of which
$2,545,000 had been borrowed, leaving $455,000 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
our subsidiaries must satisfy. Our ability to satisfy those covenants depends
principally upon our ability to achieve positive operating performance. If any
of our borrowing subsidiaries 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, or any other event or circumstance that Wells Fargo deems impairs our
ability to fulfill our obligations under the Credit Agreement, could result in a
default under

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<PAGE>


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, or of the holders of our Series B Preferred Stock. 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, 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.

         IF THE PROPOSED SETTLEMENT OF THE CLASS ACTION DOES NOT BECOME
         EFFECTIVE, OR IF IN THE FUTURE WE BECOME SUBJECT TO NEW LAWSUITS, AND
         IF ANY OF THOSE LAWSUITS ARE SUCCESSFULLY PROSECUTED AGAINST US, OUR
         BUSINESS, FINANCIAL CONDITIONS AND RESULTS OF OPERATING COULD BE
         MATERIALLY AND ADVERSELY AFFECTED

         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. The Class Action and the terms and conditions of the Heins Settlement
are described in "Item 3. Legal Proceedings" in this Report. The Heins
Settlement is subject to various conditions, including preliminary and final
court approval, and is subject to appeal or challenge even if final approval is
granted by the court. Accordingly, we cannot provide any assurance that the
Heins Settlement will become effective. If the Heins Settlement does not become
effective, then the Class Action will continue to be prosecuted against us.
While we expect to defend the claims against us in the Class Action 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 would have on us, if the Heins Settlement does not become
effective. 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 any such future litigation and claims against us could not
materially and adversely affect our business, financial condition and results of
operation.

         OUR FUTURE OPERATING RESULTS ARE DIFFICULT TO PROJECT AND 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 in this Item. Because we have little or no control over most
of these factors, our future 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, period 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.

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<PAGE>

         BECAUSE SOME OF OUR BUSINESS AND PRODUCT OFFERING, HAVE LIMITED
         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 from time to time. Our plans and strategies with
respect to these new businesses are often based on unproven models and must be
developed and modified. 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.

         As a company developing new businesses in the rapidly evolving energy
and technology 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
              and technology 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;

         -    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, products and services; 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
the market acceptance and profitability of our new businesses and these new
product and service offerings lines. If we are unsuccessful in addressing these
risks or in executing our business strategies, or if our business model fails or
is invalid, then our business would be materially and adversely affected.

         RESTRICTIONS IMPOSED ON US BY THE TERMS OF OUR SERIES B PREFERRED
         STOCK, 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 our 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:

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<PAGE>

         -    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 DECREASE OUR NET INCOME OR
         INCREASE OUR NET LOSS AVAILABLE TO COMMON SHAREHOLDERS AND DECREASE OUR
         NET INCOME OR INCREASE 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, fiscal 2002 and fiscal 2003 by significantly decreasing the net
income or increasing the net loss available to common shareholders and
decreasing the net income or increasing the net loss per common share, and will
continue to adversely affect our operating results through fiscal 2004. By
adversely affecting our operating results, the accounting treatment of these
dividends could adversely affect the trading price of our Common Stock.

         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

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<PAGE>

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 OR YEAR

         Our products and services are often used by our customers to address
critical business needs. Customers generally consider a wide range of issues
before making a decision to purchase our products and services. In addition, the
purchase of some of our products and services 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 services 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 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.

         IF WE ARE UNABLE TO DEVELOP NEW AND ENHANCED PRODUCTS AND SERVICES THAT
         ACHIEVE MARKET ACCEPTANCE IN A TIMELY MANNER, OUR OPERATING RESULTS AND
         COMPETITIVE POSITION COULD BE HARMED

         Our future success will depend on our ability to develop new and
enhanced products and services that achieve market acceptance in a timely and
cost-effective manner. The development of technology is often complex, and we
occasionally have experienced delays in completing the development and
introduction of new products and services and enhancements thereof. Successful
development and market acceptance of our products and services depends on a
number of factors, including:

         -    changing requirements of customers;

         -    accurate prediction of market requirements;

         -    timely completion and introduction of new designs;

         -    quality, price, performance, power use and size of our products;

         -    availability, quality, price and performance of competing
              products, services and technologies;

         -    our customer service and support capabilities and responsiveness;

         -    successful development of our relationships with existing and
              potential customers; and

         -    changes in technology, industry standards or end-user preferences.

         We cannot provide assurance that products and services which we
recently have developed or may develop in the future will achieve market
acceptance. If our new products and services fail to achieve market acceptance,
or if we fail to develop new or enhanced products and services that achieve
market acceptance, our growth prospects, operating results and competitive
position could be adversely affected.

         FROM TIME TO TIME WE DEPEND ON REVENUES FROM SIGNIFICANT CONTRACTS, AND
         ANY LOSS, CANCELLATION, REDUCTION, OR DELAY IN THESE CONTRACTS COULD
         HARM OUR BUSINESS AND OPERATING RESULTS

         From time to time, one or more of our subsidiaries have derived a
material portion of our revenue from one or more individual contracts that could
be terminated by the customer at the customer's discretion. It is possible that
in future periods we may again enter into individual contracts with significant
revenue concentrations. If such contracts were to be terminated, our revenues
and net income would significantly decline. Our success will depend

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<PAGE>

on our continued ability to develop and manage relationships with significant
customers. We cannot be sure that we will be able to retain our largest
customers, that we will be able to attract additional customers, or that our
customers will continue to purchase our products and services in the same
amounts as in prior years. Our business and operating results would be hindered
by:

         -    the loss of one or more large customers;

         -    any reduction or delay in sales to these customers;

         -    our inability to successfully develop relationships with
              additional customers; or

         -    future price concessions that we may have to make.

         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 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. The loss of the services of any of our key
personnel could have a material adverse effect on our business. We cannot assure
you that we will be able to retain

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<PAGE>

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 materially and adversely affect our business.

         WE FACE INTENSE COMPETITION IN THE MARKETS FOR OUR 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 products, services and technology are intensely
competitive and subject to rapidly changing technology, new 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
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 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. The most recent downturn was 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. An economic downturn coupled
with a decline in our revenues could affect our ability to secure additional
financing or raise additional funds to meet capital requirement, 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 markets, particularly those affecting industrial and
commercial users of natural gas and electricity, would have a material adverse
effect on our business, cash flows, financial condition and results of
operations.

         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.

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<PAGE>

         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, we cannot currently accurately estimate the margins of
some of our new and developing products and services due to their limited
operating history. Our 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.

         OUR MANAGEMENT OF PRIVATE ENERGY PROGRAMS PRESENTS RISKS TO US

         MGT is our subsidiary that manages and holds a minority ownership
interest in one continuing private energy program and in one discontinued
private energy program. While MGT does not intend to form any new private
programs, it may from time to time repurchase interests in the continuing
program or to initiate or manage actions intended to expand its assets or
activities. These private programs were financed by private placements of equity
interests raising capital to acquire the assets and business operated by the
program. 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" of this Report;

         -    material 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;

         -    risks inherent in managing a program and taking significant
              actions that affect its investors;

         -    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.

         WE DO NOT HAVE LONG-TERM PURCHASE AGREEMENTS WITH MOST OF OUR
         CUSTOMERS, AND, AS A RESULT, MOST OF OUR CUSTOMERS COULD STOP
         PURCHASING OUR PRODUCTS AND SERVICES AT ANY TIME

         We generally do not obtain firm, long-term volume purchase commitments
from our customers, and we generally experience short lead-times for customer
orders. In addition, customer orders can be canceled and volume levels can be
reduced or delayed. We may be unable to replace canceled, delayed or reduced
orders with new business. For example, most of PowerSecure's revenues are
derived on a non-recurring, project by project basis, and there is no assurance
that its revenues and business will continue to grow.

         OUR INTERNATIONAL SALES ACTIVITIES 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% of our consolidated revenues in each of the past three fiscal years. 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 provide
any assurance that we will be successful in expanding our international
operations, or

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<PAGE>

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;

         -    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

         -    the localization and translation of products and services.

         Our success in expanding our international sales activities 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 provide any assurance 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 AND RELATIONSHIPS, 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 and
relationships 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;

                                       45

<PAGE>

         -    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;

         -    difficulties in retaining relationships with customers, employees
              and suppliers 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. 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, WE
         COULD LOSE IMPORTANT PROPRIETARY TECHNOLOGY, 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
proprietary 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 a patent and the registration of a number of new 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 trademark registrations.
In addition, much of our proprietary information and technology may not be
patentable. We may not be successful in obtaining any patents or in registering
new 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.

         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 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. Our failure to protect

                                       46

<PAGE>

any of our important intellectual property rights or any litigation that we
resort to in order to enforce those rights could materially and adversely affect
our business.

         IF WE FACE CLAIMS OF INTELLECTUAL PROPERTY INFRINGEMENT BY THIRD
         PARTIES, WE COULD ENCOUNTER EXPENSIVE LITIGATION, BE LIABLE FOR
         SIGNIFICANT DAMAGES OR INCUR RESTRICTIONS ON OUR ABILITY TO SELL OUR
         PRODUCTS AND SERVICES

         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 as a result of an alleged
infringement of others' intellectual property. These claims and any resulting
lawsuits, if 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 commercially 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. 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 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 AND ELECTRICAL
         OPERATIONS

         Some of our operations are subject to the hazards and risks inherent in
the servicing and operation of natural gas assets, including encountering
unexpected pressures, explosions, fire, natural disasters, blowouts, cratering
and pipeline ruptures, as well as in the manufacture, sale and operation of
electrical equipment such as PowerSecure's distributed generation system,
including electrical shocks, which hazards and risks 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

                                       47

<PAGE>

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 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, some of
our 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

         One element of our business strategy is the development 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 27, 2004, our executive officers, directors and 10% or
greater stockholders beneficially owned, in the aggregate, approximately 55% 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

                                       48
<PAGE>

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 27, 2004, 6,149,421 shares of Common Stock were
outstanding. On the same date, options to purchase 1,706,473 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 3,168,540 shares of Common Stock, and warrants to purchase
716,430 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 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 COULD
         MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS AND OUR REPORTED RESULTS
         OF OPERATIONS

         Recently enacted and proposed changes in the laws and regulations
affecting public companies, including the Sarbanes-Oxley Act of 2002 and related
SEC regulations, may cause us to incur increased costs of compliance and result
in changes in accounting standards or accepted practices within our industry.
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 employee stock options which could result in rules
or laws that could adversely affect our reported financial results and have an
adverse effect on our stock price. New rules could also make it more difficult
for us to obtain certain types of insurance, including director and officer
liability insurance, forcing us to accept reduced policy limits and coverage or
incur substantially higher costs to obtain the same or similar coverage. The
impact of these events could also make it more difficult for us to attract and
retain qualified persons to serve on our board of directors or as our executive
officers.

         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
              one-third of the total Board members are elected at each annual
              meeting;

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

         -    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);

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

                                       49
<PAGE>

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

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

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

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

         -    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 HAVE NOT IN THE PAST AND WE DO NOT CURRENTLY INTEND TO PAY DIVIDENDS
         ON OUR COMMON STOCK, AND EVEN IF WE DID OUR ABILITY TO PAY DIVIDENDS 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 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 our subsidiaries 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;

         -    the receipt or loss of significant customer orders;

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

         -    conditions or trends in the energy and technology industries in
              general, and in the particular markets we service;

                                       50
<PAGE>

         -    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;

         -    additions or departures of key personnel;

         -    general economic, business and market conditions; and

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

         Many of these factors are beyond our control. The occurrence of any one
or more of these factors could 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 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, even if it ranks junior to the Series B Preferred Stock,
could dilute the interest of holders of our Common Stock.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We are exposed to certain financial instrument market risks, primarily
due to changes in interest rates, which may adversely affect our financial
condition, results of operations and cash flow. Our exposure to market risk for
changes in interest rates relates primarily to (i) income from our investments
in short-term interest-bearing marketable securities, the income from which is
dependent upon the interest rate of the securities held, and (ii) interest
expenses attributable to our Credit Facility, which is based on floating
interest rates as described in "Item 7. Management's Discussion and Analysis of
Financial Conditions and Results of Operations" of this Report. Since
substantially all of our revenues, expenses and capital spending are transacted
in U.S. dollars, we are not exposed to significant foreign exchange risk. We do
not believe that our exposure to commodity price changes is material. We do not
use derivative financial instruments to manage exposure to interest rate
changes, or for trading or other speculative purposes.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

         None

                                       51
<PAGE>

ITEM 9A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

         Our Chief Executive Officer and our Chief Financial Officer evaluated
our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act) as of December 31, 2003, the end of the period
covered by this Report. Based upon that evaluation, our Chief Executive Officer
and our Chief Financial Officer have concluded that our disclosure controls and
procedures were effective to ensure that information 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 in the
SEC's rules and forms.

         A control system, no matter how well conceived and operated, can
provide only reasonable, not absolute, assurance that the objectives of the
control system are met. When designing and evaluating controls and procedures,
we make assumptions about the likelihood of future events. At the same time, we
make judgments about the cost-benefit relationship of possible controls and
procedures. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within a company have been detected.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

         No change in our internal control over financial reporting (as defined
in Rule 13a-15(f) under the Exchange Act) occurred during the quarter ended
December 31, 2003 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

                                       52
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

         As of February 27, 2004, our executive officers and directors, and
their ages and their positions with us, were as follows:

<TABLE>
<CAPTION>
        NAME               AGE                          POSITION(S)
        ----               ---                          -----------
<S>                        <C>  <C>
W. Phillip Marcum          59   Chairman of the Board, President, Chief Executive
                                   Officer and Director
A. Bradley Gabbard         49   Executive Vice President, Chief Financial Officer,
                                   Treasurer and Director
Gary J. Zuiderveen         44   Controller, Principal Accounting Officer and
                                   Secretary
Sidney Hinton              41   President and Chief Executive Officer of
                                   PowerSecure
Thomas Kellogg             43   President and Chief Executive Officer of Metretek
                                   Florida
Basil M. Briggs (1) (2)    68   Director
Kevin P. Collins (1) (2)   53   Director
Anthony D. Pell (1) (2)    65   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 Key
Energy Services, Inc., New Hope, Pennsylvania ("Key"), an oilfield service
provider.

         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
serves as the Chief Financial Officer of each of our subsidiaries. Mr. Gabbard
also served as our Vice President and Secretary from April 1991 through July
1993.

         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 March 2000, he has also served as
the Secretary, Controller and 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.

         SIDNEY HINTON, 41, has served as the President, 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

                                       53
<PAGE>

lighting company. From 1982 until 1997, Mr. Hinton was employed in several
positions with Southern Company and Georgia Power Company, Atlanta, Georgia.

         THOMAS R. KELLOGG, 43, has served as the President and Chief Executive
Officer and a director of Metretek Florida since June 2, 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.

         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.

         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 2004 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 2006 Annual Meeting of Stockholders, are Messrs. Collins and Pell.

         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 April
2003, Mr. Collins was re-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

                                       54
<PAGE>

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 11. Executive Compensation."

KEY EMPLOYEE

         WOOD A. BREAZEALE, JR., 74, has served as the President, the Chief
Executive Officer and the 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.

AUDIT COMMITTEE

         Audit Committee Members. Our Board of Directors has established a
standing Audit Committee in accordance with Section 3(a)(58)(A) of the Exchange
Act. The members of the Audit Committee are Anthony D. Pell, Chairman, Basil M.
Briggs and Kevin P. Collins. Our Board of Directors has determined that each
member of the Audit Committee is "independent", as that term is used in Item
7(d)(3)(iv) of Schedule 14A under the Exchange Act and Rule 10A-3 under the
Exchange Act, and is an "independent director" under the current listing
standards of the Nasdaq Stock Market (which are utilized by the Board of
Directors although the Company is traded with OTC Bulletin Board).

         Audit Committee Financial Expert. Our Board of Directors has determined
that each member of the Audit Committee (Anthony D. Pell, Chairman, Basil M.
Briggs and Kevin P. Collins) is financially literate and is an "audit committee
financial expert", as that term is defined in Item 401(h) of Regulation S-K
under the Exchange Act.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

         Section 16(a) of the Exchange Act ("Section 16(a)") requires our
directors and executive officers, and persons who beneficially own 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 reports we have received, and written
representations from our directors and executive officers, we believe that,
during fiscal 2003, all reports required by Section 16(a) to be filed by such
persons were timely filed.

CODES OF ETHICS

         We have adopted two codes of ethics, each designed to promote our
directors, officers and employees to act with the highest level of integrity.
Each of these codes are attached as an exhibit to this Report and is publicly
available on our website at www.metretek.com under "Investor Info - Corporate
Governance."

         We have adopted the Metretek Technologies, Inc. Code of Ethics for
Principal Executive Officer and Senior Financial Officers, which is a code of
ethics that applies to our Chief Executive Officer, Chief Financial Officer,
Principal Accounting Officer and other senior financial employees. The purpose
of the Code of Ethics is to deter wrongdoing and to promote, among other things,
honest and ethical conduct and to ensure to the greatest possible extent that
our business is conducted in a consistently legal and ethical manner. We will
provide a copy of the Code of Ethics without charge upon written request
addressed to our Secretary at our principal executive offices. If we make any
substantive amendment to the Code of Ethics or grant any waiver, including any
implicit waiver, from a provision of the Code of Ethics to our Chief Executive
Officer, Chief Financial Officer or Principal Accounting Officer, we will
disclose the nature of such amendment or waiver on our website or in a current
report on Form 8-K.

         We have also adopted the Metretek Technologies, Inc. Code of Business
Conduct and Ethics, which is a code of conduct that applies to all of our
directors, officers and employees. Under the Code of Business Conduct and
Ethics, each officer, director and employee is required to maintain a commitment
to high standards of conduct and ethics. The Code of Business Conduct and Ethics
covers many areas of professional conduct, including conflicts of interest,
protection of confidential information, and strict adherence to all laws and
regulations applicable to the conduct of the Company's business. Directors,
officers and employees are required to report any conduct that they believe in
good faith to be an actual or apparent violation of the Code of Business Conduct
and Ethics. We will

                                       55
<PAGE>

provide a copy of the Code of Business Conduct and Ethics without charge upon
written request addressed to our Secretary at our principal executive offices.
If we make any substantive amendment to the Code of Business Conduct and Ethics
or grant any waiver, including any implicit waiver, from a provision of the Code
of Business Conduct and Ethics to any of our directors or executive officers, we
will disclose the nature of such amendment or waiver on our website or in a
current report on Form 8-K.

ITEM 11. 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 other executive officers
(the "Named Executive Officers") whose total salary and bonus exceeded $100,000
in fiscal 2003:

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                         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 ....................  2003  $295,000       $      0           0       $ 7,138
         President and Chief            2002   295,000              0           0         6,471
         Executive Officer              2001   295,000              0     200,000         6,188


A. Bradley Gabbard ...................  2003   175,000         75,000           0         7,117
         Executive Vice                 2002   175,000              0           0         6,314
         President and Chief            2001   175,000              0     200,000         6,060
         Financial Officer

Sidney Hinton (4) ....................  2003   250,000        117,341           0         7,138
         President,
         PowerSecure, Inc.

Thomas R. Kellogg (4) ................  2003   175,000         21,354           0         5,990
         President,
         Metretek Florida

Gary J. Zuiderveen (5)................  2003    92,692         15,000           0         3,925
         Controller and Principal
         Accounting 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.

(2)  All options were fully vested as of December 31, 2003.

(3)  Includes amounts paid or accrued on behalf of the Named Executive Officers
     in fiscal 2003 for:

     -   matching contributions under our 401(k) plan of $6,000 for Mr. Marcum,
         $6,000 for Mr. Gabbard, $6,000 for Mr. Hinton, $5,250 for Mr. Kellogg
         and $3,231 for Mr. Zuiderveen;

     -   premiums for group term life insurance of $882 for Mr. Marcum, $861 for
         Mr. Gabbard, $882 for Mr. Hinton, $360 for Mr. Kellogg and $438 for Mr.
         Zuiderveen; and

     -   premiums for long-term disability insurance of $256 for Mr. Marcum,
         $256 for Mr. Gabbard, $256 for Mr. Hinton, $380 for Mr. Kellogg and
         $256 for Mr. Zuiderveen.

                                       56
<PAGE>

(4)  Named as an executive officer by our Board of Directors during fiscal 2003.

(5)  Fiscal 2003 was the first year his total salary and bonus exceeded
     $100,000.

EMPLOYMENT AGREEMENTS, CHANGE IN CONTROL ARRANGEMENTS AND OTHER COMPENSATION
ARRANGEMENTS

         W. Phillip Marcum and A. Bradley Gabbard. 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.

         Thomas R. Kellogg. 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 was for an initial term of one year, expire June 24, 2003 and
currently in a one year renewal period, is renewable for additional one-year
renewal periods, unless either Metretek Florida or Mr. Kellogg gives 30 days
prior written notice of termination. Mr. Kellogg's employment agreement is
currently in a one year renewal term that expires in June 2004.

                                       57
<PAGE>

         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.

         MCM has issued shares totaling 13% of its outstanding common stock to
two of its employees, including to Mr. Kellogg as described above, as equity
incentive compensation. As of December 31, 2003, Metretek Florida owns 87% 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.

         Sidney Hinton. 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 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.

                                       58
<PAGE>

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, PowerSecure authorized the issuance of PowerSecure
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, 2003, we owned approximately 86% of the outstanding PowerSecure
shares. The PowerSecure shares were 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 2003 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, 2003. The Named
Executive Officers did not exercise any stock options during fiscal 2003.

                                       59
<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 .......     250,000           0               $ 0          $ 0
A. Bradley Gabbard ......     237,500           0                 0            0
Sidney Hinton ...........     145,000           0                 0            0
Thomas R. Kellogg .......     100,000           0                 0            0
Gary J. Zuiderveen ......      31,000           0                 0            0
</TABLE>

-------------------
(1)  For purposes of this table and in accordance with SEC rules, the "Value of
     Unexercised In-the-Money Options" is calculated based upon the difference
     between $1.44, the closing sale price of the Common Stock on December 31,
     2003 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 $1.44, none of the
     options were "in-the-money" on December 31, 2003.

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. Commencing in September 2003,
directors who are not also our officers or employees ("Non-Employee Directors")
receive a monthly retainer of $2,000 per month for their service on our Board of
Directors and any committees thereof, including attending meetings. Prior
thereto, Non-Employee Directors received an annual retainer of $5,000 plus a fee
of $1,000 for each meeting of the Board of Directors attended in person and $500
for each meeting attended telephonically. Non-Employee Directors also receive
stock options under an annual formula ("Annual Director Options") 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 is 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 original 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 February 27, 2004, options to purchase 230,016 shares of Common
Stock were outstanding to our current Non-Employee Directors, at exercise prices
ranging from $0.46 to $17.38 per share.

                                       60
<PAGE>

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

         Our Board of Directors has constituted and appointed a Compensation
Committee, which during fiscal 2003 consisted of Messrs. Pell, Briggs and
Collins. No member of our Compensation Committee is or has ever been one of our
officers or employees. None of our executive officers serves as a member of the
board of directors or on the compensation committee of any other entity that has
one or more executive officers serving as a member of our Board of Directors or
on our Compensation Committee. In addition, no member of the Compensation
Committee has an interlocking relationship with the board of directors or
compensation committee of any other entity.

ITEM 12. 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 27, 2004 (except as otherwise
indicated in the footnotes below) by:

         -    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 27, 2004.
These underlying shares, however, are not included in computing the "Percent of
Class" of any other persons. The "Percent of Class" is based upon 6,149,421
shares of Common Stock outstanding on February 27, 2004. 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) ..............    2,262,660         29.0
    141 Linden Street, Suite S-4
    Wellesley, Massachusetts 02482

Special Situations Funds (2) ................    1,102,940         15.2
    153 East 53rd Street
    New York, New York 10022

GMAM Investment Funds Trust II (3) ..........      754,218         11.3
    141 Linden Street, Suite S-4
    Wellesley, Massachusetts 02482

Credit Suisse Asset Management, LLC (4) .....      751,420         11.2
    153 East 53rd Street, 57th Floor
    New York, New York, 10022

W. Phillip Marcum (5) .......................      416,634          6.5
American Meter Company (6) ..................      325,054          5.3
    300 Welsh Road
    Horsham, Pennsylvania 19044
A. Bradley Gabbard (7) ......................      361,452          5.6
Sidney Hinton (8) ...........................      235,000          3.7
Anthony D. Pell (9) .........................      137,264          2.2
Basil M. Briggs (10) ........................      121,138          2.0
Kevin P. Collins (11) .......................      115,665          1.9
</TABLE>

                                       61
<PAGE>

<TABLE>
<S>                                              <C>               <C>
Thomas R. Kellogg (12) ......................      100,000          1.6
Gary J. Zuiderveen (13) .....................       38,798          0.6
All directors and executive officers
    as a group (8 persons)(14) .............     1,525,951         21.4
</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 (which has been succeeded in
     interest by GMAM Investment Funds Trust II-Promark Alternative High Yield
     Bond Fund ("GMAM") 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 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 GMAM
     (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 is an investment manager
     for GMAM. 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 GMAM. Also includes
     1,362,660 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 227,212 shares of Common Stock are owned
     by B III-A, 1,500 shares of Series B Preferred Stock convertible into
     681,330 shares of Common Stock are owned by DDJ Canadian High Yield Fund,
     and 1,000 shares of Series B Preferred Stock convertible into 454,218
     shares of Common Stock are owned by GMAM.

(2)  Information based, in part, upon Amendment No. 2 to Schedule 13G filed with
     the SEC on February 13, 2004 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 is the general partner of MGP Advisors Limited
     Partnership ("MGP Partners") and the general partner of and the investment
     advisor to Special Situations Cayman Fund, L.P. MGP Advisors is the general
     partner of and investment adviser to Special Situations Fund III, L.P.
     Messrs. Marxe and Greenhouse are also members of MG Advisers, 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 Advisers,
     L.L.C., the general partner of and investment advisor to the Special
     Situations Technology Fund, L.P. and Special Situations Technology Fund II,
     L.P. The shares of Common Stock are owned by Special Situations Fund III
     (454,963 shares), Special Situations Private Equity Fund (275,735 shares),
     Special Situations Technology Fund (35,892 shares), Special Situations
     Technology Fund II (156,242 shares) and Special Situations Cayman Fund
     (151,154 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 6,546 shares are owned by Special
     Situations Technology Fund, warrants to purchase 33,454 shares are owned by
     Special Situations Technology Fund II and warrants to purchase 27,500
     shares are owned by Special Situations Cayman Fund. Also includes 902,940
     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 372,463 shares of Common Stock are owned
     by Special Situations Fund III, 500 shares of Series B Preferred Stock
     convertible into 225,735 shares of Common Stock are owned by Special
     Situations Private Equity Fund, 65 shares of Series B Preferred Stock
     convertible into 29,346 shares of Common Stock are owned by Special
     Situations Technology Fund, 335 shares of Series B Preferred Stock
     convertible into 156,242 shares of Common Stock are owned by Special
     Situations Technology Fund II, and 275 shares of Series B Preferred Stock
     convertible into 124,154 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 General Motors Employees Global Group Pension Trust (which has been
     succeeded in interest by GMAM Investment Funds Trust II-Promark Alternative
     High

                                       62
<PAGE>

     Yield Bond Fund) and by GMIMCO. DDJ is an investment manager for GMAM 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 454,218 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 GMAM are also
     included in the shares beneficially owned by DDJ.

(4)  Credit Suisse Asset Management, LLC is the investment advisor for, and the
     shares of Common Stock are owned by, 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. Includes 100,000 shares of Common Stock that may be acquired
     upon the exercise of currently exercisable warrants. Also includes 451,420
     shares of Common Stock that may be acquired upon the conversion of 1,000
     shares of Series B Preferred Stock.

(5)  Includes 250,000 shares that may be acquired by Mr. Marcum upon the
     exercise of currently exercisable stock options.

(6)  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.

(7)  Includes 2,187 shares owned by Mr. Gabbard's minor son and 237,500 shares
     that may be acquired by Mr. Gabbard upon the exercise of currently
     exercisable stock options.

(8)  Includes 145,000 shares that may be acquired by Mr. Hinton upon the
     exercise of currently exercisable stock options.

(9)  Includes 2,937 shares held by Mr. Pell's wife. Also includes 110,915 shares
     that may be acquired by Mr. Pell upon the exercise of currently exercisable
     stock options.

(10) Includes 9,500 shares owned by Mr. Briggs' wife. Also includes 5,686 shares
     that may be acquired by Mr. Briggs upon the exercise of currently
     exercisable stock options.

(11) Includes 113,415 shares that may be acquired by Mr. Collins upon the
     exercise of currently exercisable stock options.

(12) Includes 100,000 shares that may be acquired by Mr. Kellogg upon the
     exercise of currently exercisable stock options.

(13) Includes 31,000 shares that may be acquired by Mr. Gary Zuiderveen upon the
     exercise of currently exercisable stock options.

(14) Includes 993,516 shares that may be acquired upon the exercise of currently
     exercisable stock options. See note (5) and notes (7) through (13).

EQUITY COMPENSATION PLAN INFORMATION

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

         -    our 1991 Stock Option Plan;

         -    our Directors' Stock Option Plan; and

         -    our 1998 Stock Incentive Plan.

                                       63
<PAGE>

         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,
2003:

<TABLE>
<CAPTION>
                                                                                   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
                                   WARRANTS AND RIGHTS   WARRANTS AND RIGHTS     REFLECTED IN COLUMN (a))
        PLAN CATEGORY                     (a)                    (b)                       (c)
-----------------------------     --------------------   --------------------   -------------------------
<S>                               <C>                    <C>                    <C>
Equity compensation plans
approved by security
holders (1)...................         1,812,425             $   1.96                     43,031

Equity compensation plans
not approved by security
holders (2)...................            45,000                10.83                          0
                                       ---------             --------                     ------

Total.........................         1,857,425             $   2.17                     43,031
                                       =========             ========                     ======
</TABLE>

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

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

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

ITEM 13. 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 our Audit Committee, which is comprised solely of independent
directors.

                                       64
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

         The aggregate fees for professional services rendered to us by Deloitte
& Touche LLP, our independent auditors, for fiscal 2002 and 2003 were as
follows:

<TABLE>
<CAPTION>
                                                              2003             2002
                                                            --------         --------
<S>                                                         <C>              <C>
Audit Fees (1)......................................        $139,000         $111,000
Audit-Related Fees (2)..............................               0            9,500
Tax Fees ...........................................               0                0
All Other Fees......................................               0                0
                                                            --------         --------
       Total  ......................................        $139,000         $120,500
                                                            ========         ========
</TABLE>

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


(1)  "Audit Fees" represents fees billed for professional services rendered for
     the audits of our consolidated annual financial statements and for the
     reviews of our unaudited financial statements included in our Quarterly
     Reports on Form 10-Q and Form 10-QSB.

(2)  "Audit-Related Fees" represents fees for professional services rendered in
     connection with issuing a preferability letter related to a change in
     accounting principles.

         Our Audit Committee has determined that the provision of non-audit
services by Deloitte & Touche LLP was compatible with maintaining its
independence.

         Our Audit Committee has adopted a policy that requires the Audit
Committee to pre-approve all audit and non-audit services to be provided by the
independent auditors. The Audit Committee may delegate this pre-approval
authority to one or more of its members. Such a member must report any decisions
to the Audit Committee at the next scheduled meeting. In accordance with this
pre-approval policy, all professional services provided by Deloitte & Touche LLP
during fiscal 2003 were pre-approved by the Audit Committee.

                                       65
<PAGE>

                                     PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)      DOCUMENTS FILED AS A PART OF THIS REPORT:

         1.       Financial Statements

                  The following financial statements are included on page F-1 to
                  F-31 of this Report:

                  Independent Auditors' Report
                  Consolidated Balance Sheets as of December 31, 2003 and 2002
                  Consolidated Statements of Operations for the Years Ended
                        December 31, 2003, 2002 and 2001
                  Consolidated Statements of Stockholders' Equity for the Years
                        Ended December 31, 2003, 2002 and 2001
                  Consolidated Statements of Cash Flows for the Years Ended
                        December 31, 2003, 2002 and 2001
                  Notes to Consolidated Financial Statements

         2.       Financial Statement Schedules

                  The following schedule is filed as part of this Report:

                  Schedule II - Valuation and Qualifying Accounts
                                For the Years Ended December 31, 2003, 2002 and
                                    2001

                  All other financial statement schedules are omitted because
                  the required information is not applicable or required or is
                  presented in our consolidated financial statements and notes
                  thereto.

         3.       Exhibits

<TABLE>
<CAPTION>
Number                                  Description
------                                  -----------
<S>      <C>
(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.)

(4.1)    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
</TABLE>

                                       66
<PAGE>

<TABLE>
<S>      <C>
         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 Silverman Heller Associates. (Incorporated by reference to
         Exhibit 4.15 of Metretek's Registration Statement on Form S-3,
         Registration No. 333-96369).

(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 Exhibit 10.2 to Metretek's Quarterly
         Report on Form 10-QSB for the quarterly period ended September 30,
         1997.)*
</TABLE>

                                       67
<PAGE>

<TABLE>
<S>      <C>
(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)  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.)*

(10.15)  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.)*

(10.16)  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.)

(10.17)  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.)

(10.18)  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.)

(10.19)  First Amendment to Credit and Security Agreement, dated as of November
         19, 2002, between Southern Flow Companies, Inc. and Wells Fargo
         Business Credit, Inc. (Incorporated by reference to Exhibit 10.31 to
         Metretek's Annual Report on Form 10-KSB for the year ended December 31,
         2002.)

(10.20)  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. (Incorporated by reference
         to Exhibit 10.32 to Metretek's Annual Report on Form 10-KSB for the
         year ended December 31, 2002.)

(10.21)  Third Amendment to Credit and Security Agreement, dated as of April 4,
         2003, between Southern Flow Companies, Inc. and Wells Fargo Business
         Credit, Inc.
</TABLE>

                                       68
<PAGE>

<TABLE>
<S>      <C>
         (Incorporated by reference to Exhibit 10.1 to Metretek's Quarterly
         Report on Form 10-Q for the period ended March 31, 2003.)

(10.22)  Fourth Amendment to Credit and Security Agreement, dated as of
         September 24, 2003, between Southern Flow Companies, Inc. and Wells
         Fargo Business Credit, Inc. (Incorporated by reference to Exhibit 10.4
         to Metretek's Current Report on Form 8-K filed October 3, 2003.)

(10.23)  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.)

(10.24)  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.)

(10.25)  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.)

(10.26)  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. (Incorporated by reference to
         Exhibit 10.33 to Metretek's Annual Report on Form 10-KSB for the year
         ended December 31, 2002.)

(10.27)  Second Amendment to Credit and Security Agreement, dated as of
         September 24, 2003, between Metretek, Incorporated and Wells Fargo
         Business Credit, Inc. (Incorporated by reference to Exhibit 10.5 to
         Metretek's Current Report on Form 8-K filed October 3, 2003.)

(10.28)  Third Amendment to Credit and Security Agreement, dated as of November
         13, 2003, between Metretek, Incorporated and Wells Fargo Business
         Credit, Inc. (Filed herewith)

(10.29)  Fourth Amendment to Credit and Security Agreement, dated as of March
         24, 2004, between Metretek, Incorporated and Wells Fargo Business
         Credit, Inc. (Filed herewith)

(10.30)  Credit and Security Agreement, dated as of September 24, 2003, by and
         between Wells Fargo Business Credit, Inc. and PowerSecure, Inc.
         (Incorporated by reference to Exhibit 10.1 to Metretek's Current Report
         on Form 8-K filed October 3, 2003.)

(10.31)  Form of Guaranty, dated as of September 24, 2003, by each of Metretek
         Technologies, Inc., Metretek, Incorporated, 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 October 3, 2003.)

(10.32)  Form of Security Agreement, dated as of September 6, 2001, between
         Wells Fargo Business Credit, Inc. and each of Metretek Technologies,
         Inc., Metretek, Incorporated., 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 October 3,
         2003.)

(10.33)  Employment Non-Competition Agreement, dated as of June 24, 2002, by and
         between Metretek, Incorporated and Thomas R. Kellogg. (Incorporated by
         reference to Exhibit 10.24 to Metretek's Annual Report on Form 10-KSB
         for the year ended December 31, 2002.)*
</TABLE>

                                       69
<PAGE>

<TABLE>
<S>      <C>
(10.34)  Employment and Non-Competition Agreement, dated as of January 1, 2003,
         between PowerSecure, Inc. and Sidney Hinton. (Incorporated by reference
         to Exhibit 10.25 to Metretek's Annual Report on Form 10-KSB for the
         year ended December 31, 2002.)*

(10.35)  Shareholders Agreement, dated as of June 27, 2002, between Metretek
         Contract Manufacturing Company, Inc. and its shareholders.
         (Incorporated by reference to Exhibit 10.26 to Metretek's Annual Report
         on Form 10-KSB for the year ended December 31, 2002.)*

(10.36)  Form of Shareholders Agreement, between Metretek, Incorporated and its
         shareholders. (Incorporated by reference to Exhibit 10.27 to Metretek's
         Annual Report on Form 10-KSB for the year ended December 31, 2002.)*

(10.37)  Shareholders Agreement, dated as of January 1, 2003, between
         PowerSecure, Inc. and its shareholders. (Incorporated by reference to
         Exhibit 10.28 to Metretek's Annual Report on Form 10-KSB for the year
         ended December 31, 2002.)*

(10.38)  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. (Incorporated by reference to
         Exhibit 10.29 to Metretek's Annual Report on Form 10-KSB for the year
         ended December 31, 2002.)

(10.39)  Amended Stipulation of Settlement, filed March 3, 2004, among Douglas
         W. Heins on behalf of himself and all others similarly situated, and
         Metretek Technologies, Inc., et. al. (Filed herewith.)

(10.40)  Stipulation and Order of Settlement, dated as of February 25, 2003, by
         Scient, Inc. and Metretek Technologies, Inc. (Incorporated by reference
         to Exhibit 10.30 to Metretek's Annual Report on Form 10-KSB for the
         year ended December 31, 2002.)

(14.1)   Metretek Technologies, Inc. Code of Ethics for Principal Executive
         Officer and Senior Financial Officers. (Filed herewith).

(14.2)   Metretek Technologies, Inc. Code of Business Conduct and Ethics. (Filed
         herewith.)

(21.1)   Subsidiaries of Metretek Technologies, Inc. (Filed herewith.)

(23.1)   Consent of Deloitte & Touche LLP. (Filed herewith.)

(31.1)   Certification of Chief Executive Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002 and Rule 13a-14(a) under the Securities
         Exchange Act of 1934, as amended. (Filed herewith.)

(31.2)   Certification of Chief Financial Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002 and Rule 13a-14(a) under the Securities
         Exchange Act of 1934, as amended. (Filed herewith.)

(32.1)   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, and Rule 13a-14(b) under the Securities Exchange Act of 1934, as
         amended. (Filed herewith.)

(32.2)   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, and Rule 13a-14(b) under the Securities Exchange Act of 1934, as
         amended. (Filed herewith.)
</TABLE>

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

         *Management contract or compensation plan or arrangement.

                                       70
<PAGE>

(b)      REPORTS ON FORM 8-K

         During the quarter ended December 31, 2003, we filed the following
Current Reports on Form 8-K with the SEC:

<TABLE>
<CAPTION>
Filing Date                        Item No.                   Description
-----------                        --------                   -----------
<S>                                <C>               <C>
October 3, 2003                    5, 7              PowerSecure, Inc. Credit and Security
                                                     Agreement with Wells Fargo Business Credit, Inc.

November 10, 2003                  7, 12             Press release announcing financial
                                                     results for third quarter 2003.

November 10, 2003                  7, 9              Revised and updated investment materials
                                                     to be presented to investment analysts
                                                     and others.
</TABLE>

(c)      ITEM 601 EXHIBITS

         The exhibits required by this Item are listed under Item 15(a)(3) of
this Report, above.

(d)      FINANCIAL STATEMENT SCHEDULES

         The financial statement schedules required by this Item are listed
under Item 15(a)(2) of this Report, above.

                                       71
<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly 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 26, 2004

                                POWER OF ATTORNEY

         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, each with full power of
substitution and re-substitution for him and in his name, place and stead, in
any and all capacities, sign any and all amendments to this report, and the file
the same, with exhibitions thereto and other documents in connection therein
with the Securities and Exchange Commission hereby ratifying and confirming all
that said attorneys-in-fact and agents, or his substitute or substitutes, may do
or cause to be done by virtue hereof.

         Pursuant to the requirements of the Securities Exchange Act of 1934,
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 26, 2004
----------------------------------      Chief Executive Officer and Director
W. Phillip Marcum                       (Principal executive officer)

/s/ A. Bradley Gabbard                Executive Vice President, Chief Financial        March 26, 2004
----------------------------------      Officer, Treasurer, Secretary and Director
A. Bradley Gabbard                      (Principal financial officer)

/s/ Gary J. Zuiderveen                Controller, Principal Accounting                 March 26, 2004
----------------------------------      Officer and Secretary
Gary J. Zuiderveen                      (Principal accounting officer)

/s/ Basil M. Briggs                   Director                                         March 26, 2004
----------------------------------
Basil M. Briggs

/s/ Anthony D. Pell                   Director                                         March 26, 2004
----------------------------------
Anthony D. Pell

/s/ Kevin P. Collins                  Director                                         March 26, 2004
----------------------------------
Kevin P. Collins
</TABLE>

                                       72
<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                  PAGE
<S>                                                               <C>
CONSOLIDATED FINANCIAL STATEMENTS OF
   METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
Independent Auditors' Report                                      F-2
Consolidated Balance Sheets as of December 31, 2003 and 2002      F-3
Consolidated Statements of Operations for the Years Ended
   December 31, 2003, 2002 and 2001                               F-5
Consolidated Statements of Stockholders' Equity for the Years
   Ended December 31, 2003, 2002 and 2001                         F-6
Consolidated Statements of Cash Flows for the Years Ended
   December 31, 2003, 2002 and 2001                               F-7
Notes to Consolidated Financial Statements                        F-8
</TABLE>

                                      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, 2003 and
2002, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the three years ended December 31, 2003. Our audits
also included the financial statement schedule listed in the index at Item 15.
These financial statements and the financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and the financial statement schedule 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, 2003 and 2002, and the results of their operations
and their cash flows for each of the three years ended December 31, 2003, in
conformity with accounting principles generally accepted in the United States of
America. Also, in our opinion, the financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.

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 25, 2004

                                      F-2
<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                 DECEMBER 31,
                                                                         ---------------------------
ASSETS                                                                       2003            2002
                                                                         ------------   ------------
<S>                                                                      <C>            <C>
CURRENT ASSETS:
  Cash and cash equivalents                                              $  2,101,675   $    884,843
  Trade receivables, net of allowance for doubtful accounts
    of $200,706 and $281,422, respectively                                  6,613,153      4,209,942
  Other receivables                                                            59,864         44,199
  Inventories                                                               3,984,223      3,208,774
  Prepaid expenses and other current assets                                   489,253        519,113
                                                                         ------------   ------------
      Total current assets                                                 13,248,168      8,866,871
                                                                         ------------   ------------

PROPERTY, PLANT AND EQUIPMENT:
  Equipment                                                                 3,810,632      3,776,586
  Vehicles                                                                     66,590         63,867
  Furniture and fixtures                                                      588,869        580,551
  Land, building and improvements                                             754,167        742,424
                                                                         ------------   ------------
      Total property, plant and equipment, at cost                          5,220,258      5,163,428
  Less accumulated depreciation and amortization                            3,814,908      3,449,635
                                                                         ------------   ------------

      Property, plant and equipment, net                                    1,405,350      1,713,793
                                                                         ------------   ------------
OTHER ASSETS:

  Goodwill (Notes 1 and 4)                                                  7,617,196      7,617,196
  Patents and capitalized software development, net of accumulated
   amortization of $1,033,109 and $930,633, respectively                      288,657        389,133
  Investment in unconsolidated affiliate                                      691,100        554,447
  Other assets                                                                 76,070         58,001
                                                                         ------------   ------------
      Total other assets                                                    8,673,023      8,618,777
                                                                         ------------   ------------
TOTAL                                                                    $ 23,326,541   $ 19,199,441
                                                                         ============   ============
</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                                         2003            2002
                                                                         ------------    ------------
<S>                                                                      <C>             <C>
CURRENT LIABILITIES:
  Accounts payable                                                       $  1,978,226    $  1,596,870
  Accrued and other liabilities                                             4,530,149       2,868,771
  Notes payable (Note 5)                                                      750,753         261,387
  Capital lease obligations (Note 6)                                           25,411          42,458
                                                                         ------------    ------------
      Total current liabilities                                             7,284,539       4,769,486
                                                                         ------------    ------------
LONG-TERM NOTES PAYABLE (NOTE 5)                                            5,226,950       4,690,758
                                                                         ------------    ------------
NON-CURRENT CAPITAL LEASE OBLIGATIONS (NOTE 6)                                 16,483          41,893
                                                                         ------------    ------------
COMMITMENTS AND CONTINGENCIES (NOTE 7)

MINORITY INTEREST IN SUBSIDIARIES (NOTE 9)                                    207,280
                                                                         ------------    ------------

REDEEMABLE CONVERTIBLE 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)                                9,422,132       8,531,941
                                                                         ------------    ------------

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 shares issued and outstanding                                    60,435          60,435
  Additional paid-in-capital                                               55,107,132      55,092,132
  Accumulated deficit                                                     (53,998,410)    (53,987,204)
                                                                         ------------    ------------
      Total stockholders' equity                                            1,169,157       1,165,363
                                                                         ------------    ------------
TOTAL                                                                    $ 23,326,541    $ 19,199,441
                                                                         ============    ============
</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,
                                                 --------------------------------------------
                                                     2003            2002            2001
                                                 ------------    ------------    ------------
<S>                                              <C>             <C>             <C>
REVENUES:
  Sales and services                             $ 38,701,344    $ 27,040,333    $ 28,798,771
  Other                                               610,381         262,402         543,404
                                                 ------------    ------------    ------------
      Total revenues                               39,311,725      27,302,735      29,342,175
                                                 ------------    ------------    ------------

COSTS AND EXPENSES:
  Cost of sales and services                       28,482,692      19,938,103      21,321,934
  General and administrative                        6,482,048       5,709,894       5,641,127
  Selling, marketing and service                    1,600,684       1,555,150       1,360,296
  Depreciation and amortization                       690,859         658,417       1,418,571
  Research and development                            626,760         551,518         796,672
  Interest, finance charges and other                 285,437         205,234         154,253
  Provision for litigation costs, net (Note 7)              -       1,763,723               -
  Nonrecurring charges (Note 2)                             -         257,504               -
                                                 ------------    ------------    ------------

      Total costs and expenses                     38,168,480      30,639,543      30,692,853
                                                 ------------    ------------    ------------

OPERATING INCOME (LOSS)                             1,143,245      (3,336,808)     (1,350,678)

MINORITY INTEREST (Note 9)                           (207,280)              -               -

INCOME TAXES (Note 8)                                 (56,980)        (45,509)        (34,614)
                                                 ------------    ------------    ------------

NET INCOME (LOSS)                                     878,985      (3,382,317)     (1,385,292)

PREFERRED STOCK DEEMED DISTRIBUTION                  (890,191)       (851,724)       (776,732)
                                                 ------------    ------------    ------------
NET LOSS APPLICABLE TO
  COMMON SHAREHOLDERS                            $    (11,206)   $ (4,234,041)   $ (2,162,024)
                                                 ============    ============    ============
NET LOSS PER COMMON SHARE,
  BASIC AND DILUTED                              $      (0.00)   $      (0.70)   $      (0.36)
                                                 ============    ============    ============
WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING, BASIC AND DILUTED                    6,043,469       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, 2003, 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
Net income                                                                                            878,985         878,985
Minority interest stock
  compensation                                                         15,000                                          15,000
Preferred stock
  distribution                                                                                       (890,191)       (890,191)
                                    ---------    ------------    ------------    ------------    ------------    ------------
BALANCE,
  DECEMBER 31, 2003                 6,043,469    $     60,435    $ 55,107,132    $               $(53,998,410)   $  1,169,157
                                    =========    ============    ============    ============    ============    ============
</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,
                                                                         --------------------------------------------
                                                                             2003            2002            2001
                                                                         ------------    ------------    ------------
<S>                                                                      <C>             <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                                      $    878,985    $ (3,382,317)   $ (1,385,292)
  Adjustments to reconcile net loss to net cash provided by
   operating activities:
   Depreciation and amortization                                              690,859         658,417       1,418,571
   Provision for litigation costs                                                           1,763,723
   Minority interest in subsidiary                                            222,280
   Loss on disposal of property, plant and equipment                           13,327          16,352          76,742
   Equity in income of unconsolidated affiliate                              (468,790)       (211,265)        (15,771)
  Changes in operating assets and liabilities, net of acquisitions:
     Trade receivables, net                                                (2,403,211)        770,477        (503,578)
     Inventories                                                             (775,449)        (73,477)         91,698
     Other current assets                                                      14,195            (757)        157,588
     Other noncurrent assets                                                  (18,069)           (278)        (46,352)
     Accounts payable                                                         381,356         140,656         419,588
     Accrued and other liabilities                                          1,661,378         313,450         279,552
                                                                         ------------    ------------    ------------
     Net cash provided by (used in) operating activities                      196,861          (5,019)        492,746
                                                                         ------------    ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capitalized software purchases or development                                (2,000)        (11,841)       (498,869)
  Purchases of property, plant and equipment                                 (294,067)       (534,426)       (157,849)
  Distributions from unconsolidated affiliate                                 332,137         101,251         122,583
  Proceeds from sale of property, plant and equipment                             800           1,500         334,585
                                                                         ------------    ------------    ------------
     Net cash provided by (used in) investing activities                       36,870        (443,516)       (199,550)
                                                                         ------------    ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowings on line of credit                                          1,074,390         445,258          14,229
  Payments on notes payable                                                                                  (125,000)
  Repurchase of common stock                                                                  (25,000)
  Proceeds from equipment loan                                                 30,169         238,863
  Payments on equipment loans                                                 (71,049)
  Proceeds from mortgage loan                                                                                 250,000
  Payments on mortgage loan and capital lease obligations                     (50,409)        (21,819)       (205,162)
                                                                         ------------    ------------    ------------
     Net cash provided by (used in) financing activities                      983,101         637,302         (65,933)
                                                                         ------------    ------------    ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS                                   1,216,832         188,767         227,263
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                884,843         696,076         468,813
                                                                         ------------    ------------    ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                 $  2,101,675    $    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, 2003, 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, primarily Southern Flow Companies,
         Inc. ("Southern Flow"), PowerSecure, Inc. ("PowerSecure"), Metretek,
         Incorporated ("Metretek Florida") (and its wholly-owned subsidiary,
         Metretek Europe, Limited ("Metretek Europe") and its majority-owned
         subsidiary, Metretek Contract Manufacturing Company, Inc. ("MCM")), and
         Marcum Gas Transmission, Inc. ("MGT"), collectively referred to as the
         "Company."

         Metretek Technologies was incorporated on April 5, 1991. The focus of
         the Company's business operations is currently in the following areas:
         1) Southern Flow provides natural gas measurement services; 2)
         PowerSecure designs and installs distributed generation equipment and
         related services; and 3) Metretek Florida is engaged in automated
         energy data management. 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. The
         Company uses the equity method to account for its investment in
         unconsolidated affiliate.

         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 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 years ended December 31, 2003 and
         2002 increased $1,785,000 and $913,000, respectively. Net loss
         applicable to common shareholders for the years ended December 31, 2003
         and 2002 decreased $454,000 (or $.08 per share)

                                      F-8
<PAGE>

         and $248,000 (or $0.04 per share), respectively. 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.

         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:

<TABLE>
<CAPTION>
                                          2003           2002           2001
                                      ------------   ------------   ------------
<S>                                   <C>            <C>            <C>
Cash paid for interest                $    202,668   $    147,956   $    148,475
Cash paid for state income taxes      $     56,980   $     45,509   $     34,614
</TABLE>

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

         In March 2003, 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 (Note 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 each of 2003, 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 history and a customer's current credit worthiness,
         as judged by the Company. The Company maintains a provision for
         estimated credit losses.

                                      F-9
<PAGE>

         INVENTORIES - Inventories are stated at the lower of cost (determined
         primarily on a first-in, first-out basis) or market. Inventories at
         December 31, 2003 and 2002 are summarized as follows:

<TABLE>
<CAPTION>
                                     2003            2002
                                 ------------    ------------
<S>                              <C>             <C>
Raw materials and supplies       $  2,222,461    $  1,186,677
Work in process                     1,085,315         950,773
Finished goods and merchandise        964,246       1,466,250
Valuation reserve                    (287,799)       (394,926)
                                 ------------    ------------
Total                            $  3,984,223    $  3,208,774
                                 ============    ============
</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 $66,406 and $91,360
         at December 31, 2003 and 2002, respectively.

         INVESTMENT IN UNCONSOLIDATED AFFILIATE - During 1998, the Company
         decided to discontinue the operations of MGT, a wholly owned subsidiary
         of the Company. The Company formed MGT 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. Between 1992 and 1998, MGT formed and invested in three
         such programs. The decision to discontinue MGT was based on the
         declining prospects of MGT's markets and intended 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 and
         MGT sold one-third of its interests in each of the two other programs.
         Subsequently, MGT wrote-off the balance of its remaining investment in
         one of the programs, and its equity interest in the last program was
         offered for sale. At December 31, 2002, the balance of the remaining
         net assets of MGT was $561,747. For a variety of reasons, including the
         Class Action Litigation described in Note 7, the Company was unable to
         complete the disposition of the remaining net assets of MGT as it had
         originally planned.

         During the third quarter of 2003, the Company determined that retaining
         and potentially expanding its equity interest in the remaining
         operating program would be a more economically viable alternative to
         disposing its equity interest. Accordingly, management decided to
         retain MGT's investment in the remaining program and evaluate
         opportunities to expand its existing investment. For financial
         statement presentation purposes, the remaining net assets of MGT have
         been reclassified from other assets to its various components in the
         accompanying balance sheets at December 31, 2002, as follows:

<TABLE>
<CAPTION>
                                           DECEMBER 31,
                                               2002
<S>                                        <C>
Assets:
  Other receivables                        $     43,623
  Investment in unconsolidated affiliate        554,447
                                           ------------
     Total                                 $    598,070
                                           ============
Liabilities:
  Accounts payable                         $     20,290
  Accrued and other liabilities                  16,033
                                           ------------
     Total                                 $     36,323
                                           ============
</TABLE>

                                      F-10
<PAGE>

         MGT utilizes the equity method to account for its investment in
         unconsolidated affiliate. MGT's revenues, consisting of equity earnings
         and management and administrative fees, included in other revenues for
         the years ended December 31, 2003, 2002 and 2001 were $623,743,
         $261,230, and $249,389, respectively. MGT's costs, consisting of costs
         associated with managing the unconsolidated affiliate and other legal
         and administrative costs, included in general and administrative
         expenses for the years ended December 31, 2003, 2002, and 2001 were
         $283,312, $261,230 and $249,389, respectively.

         During the fourth quarter of 2003, MGT commenced efforts to acquire
         additional equity interests in the unconsolidated affiliate from other
         investors in the program. Through December 31, 2003, no additional
         interests had been acquired, but additional equity interests in the
         program were acquired in the first quarter of 2004 at a purchase price
         of $956,000, with an effective date of the acquisition of January 1,
         2004. To facilitate the acquisition of the additional equity interests,
         MGT formed Conquest Acquisition Company LLC ("CAC LLC"), a
         majority-owned subsidiary. Financing of the acquired equity interests
         was provided by a $1,000,000 term loan from a commercial bank to CAC
         LLC. The loan is secured by CAC LLC's and MGT's collective interests in
         the program and the Company has provided a guaranty of $625,000 of the
         loan. Upon formation, MGT owned approximately 75% of CAC LLC.

         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. Effective
         June 30, 2002, the Company completed the initial testing of the
         impairment of goodwill required by FAS 142. The Company also tests for
         goodwill impairment annually on October 1. As a result of these tests,
         the Company has concluded that there has been no impairment of goodwill
         as of each of the respective testing dates.

         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>

         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, 2003 and 2002 are $288,657 and
         $389,133, respectively. Patents and license agreements

                                      F-11
<PAGE>

         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. Patent and license agreement costs have been fully
         amortized at December 31, 2003 and 2002.

         ACCRUED AND OTHER LIABILITIES - Accrued and other liabilities at
         December 31, 2003 and 2002 are summarized as follows:

<TABLE>
<CAPTION>
                                                              2003           2002
                                                          ------------   ------------
<S>                                                       <C>            <C>
Payroll, employee benefits and related liabilities        $  1,159,067   $    755,099
Deferred revenue                                               436,063        509,397
Sales, property and other taxes payable                         80,282         56,897
Insurance premiums and reserves                                326,961        343,884
Accrued project costs                                        1,008,159        224,953
Advance billings on projects in progress                       951,020        145,891
Warranty reserve                                                97,494         84,344
Accrued litigation costs                                       420,017        569,319
Termination benefits payable                                         -         99,016
Other                                                           51,086         79,971
                                                          ------------   ------------
Total                                                     $  4,530,149   $  2,868,771
                                                          ============   ============
</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 and the remaining balance of the
         foreign currency translation adjustment in the amount of ($65,935) at
         December 31, 2001 was eliminated.

         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.

         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

                                      F-12
<PAGE>

         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.
         Because the Company has not adopted the fair value method of
         accounting, the provisions of FAS 148 had no effect on the Company's
         consolidated financial position, results of operations and cash flows.
         However, should the Company be required to adopt the fair value method
         in the future, such adoption could have a material impact on its
         consolidated financial position and results of operations.

         At December 31, 2003, 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, 2003, 2002 and 2001:

<TABLE>
<CAPTION>
                                                            YEAR ENDED DECEMBER 31,
                                                     2003            2002            2001
                                                 ------------    ------------    ------------
<S>                                              <C>             <C>             <C>
Net loss applicable to common
  shareholders - as reported                     $    (11,206)   $ (4,234,041)   $ (2,162,024)
Deduct: Total stock-based employee
  compensation expense determined
  under fair value based method                      (113,416)        (34,837)     (1,275,327)
                                                 ------------    ------------    ------------
Net loss applicable to common
  shareholders - pro forma                       $   (124,622)   $ (4,268,878)   $ (3,437,351)
                                                 ============    ============    ============
Loss per basic and diluted Common Share:
     As reported                                 $          -    $      (0.70)   $      (0.36)
                                                 ============    ============    ============
     Pro forma                                   $      (0.02)   $      (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 2003, 2002 and 2001: stock price
         volatility of 107%, 105% and 94%, respectively; risk-free interest rate
         of 3.5% in 2003 and 2002 and 4.25% in 2001; 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. In April 2003, the FASB issued FAS No. 149, "Amendment of
         Statement 133 on Derivative Instruments and Hedging Activities". FAS
         149 amends and clarifies the accounting for derivative instruments,
         including certain derivative instruments embedded in other contracts,
         and for hedging activities under FAS 133, "Accounting for Derivative
         Instruments and Hedging Activities." FAS 149 is generally effective for
         contracts entered

                                      F-13
<PAGE>

         into or modified after June 30, 2003 and for hedging relationships
         designated after June 30, 2003. Because the Company does not utilize
         derivative financial instruments, the adoption of FAS 133 and FAS 149
         had no affect on the consolidated financial position, results of
         operations or cash flows 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 effect on the consolidated financial
         position, results of operations or cash flows 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 Company adopted FAS 146 on January 1, 2003. The
         adoption of FAS 146 had no effect on the consolidated financial
         position, results of operations or cash flows 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 the recognition
         provisions of FIN 45 during the first quarter 2003. The Company
         currently has no

                                      F-14
<PAGE>

         guarantees of indebtedness of others and the adoption of FIN 45 had no
         effect on the consolidated financial position, results of operations or
         cash flows of the Company.

         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) 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 March 15, 2004. 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 currently does not have any variable interest
         entities and the adoption of FIN 46 had no effect on the consolidated
         financial position, results of operations or cash flows of the Company.

         FINANCIAL INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND
         EQUITY - In May 2003, the FASB issued FAS 150, "Accounting for Certain
         Financial Instruments with Characteristics of both Liabilities and
         Equity". FAS 150 requires that certain financial instruments, which
         under previous guidance were accounted for as equity, must now be
         accounted for as liabilities. The financial instruments affected
         include mandatory redeemable stock, certain financial instruments that
         require or may require the issuer to buy back some of its shares in
         exchange for cash or other assets and certain obligations that can be
         settled with shares of stock. FAS 150 is effective for all financial
         instruments entered into or modified after May 31, 2003, and otherwise
         is effective at the beginning of the first interim period beginning
         after June 15, 2003. The adoption of FAS 150 had no effect on the
         consolidated financial position, results of operations or cash flows of
         the Company.

         RECLASSIFICATION - Certain 2002 and 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, 2003 and 2002,
         the balance of unpaid termination benefits included in accrued and
         other liabilities was $0 and $99,016, respectively.

         In March 2001, the Company completed the discontinuance of its
         PowerSpring business segment 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 and the transfer of management control, the Company
         recorded compensation expense in the amount of $60,977 in March 2001
         for the fair value of stock options of the Company issued to
         PowerSpring's former vice president and for the fair value of
         negotiated changes in exercises prices of certain preexisting stock
         warrants.

         The Company also recorded other income in March 2001 of approximately
         $255,000, which represented the difference between the settlement of
         certain obligations of PowerSpring and the costs to the Company in
         connection with the termination of PowerSpring as a separate business
         segment.

                                      F-15
<PAGE>

3.       REDEEMABLE CONVERTIBLE 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, 2003, of 451.34 shares of common
         stock per share of Series B Preferred Stock issued on December 9, 1999,
         and 445.72 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 and its operating activities were consolidated with the
         operating activities of PowerSecure.

                                      F-16
<PAGE>

         Industrial Automation, founded in 1991 and headquartered in Greensboro,
         North Carolina, was in the business of designing and marketing process
         controls used in distributed generation operations. This 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 included 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, 2003 and 2002 consists of
         the following:

<TABLE>
<CAPTION>
                                               2003            2002
                                           ------------    ------------
<S>                                        <C>             <C>
Lines of credit                            $  2,545,418    $  1,471,028
Term loans:
     Note payable                             3,000,000       3,000,000
     Equipment loans                            197,983         238,863
     Mortgage loan                              234,302         242,254
                                           ------------    ------------
Total notes payable                           5,977,703       4,952,145
                                           ------------    ------------
Less current maturities:
     Note payable                              (562,500)       (187,500)
     Equipment loans                           (179,849)        (65,351)
     Mortgage loan                               (8,404)         (8,536)
                                           ------------    ------------
Current maturities of notes payable            (750,753)       (261,387)
                                           ------------    ------------
Long-term maturities of notes payable      $  5,226,950    $  4,690,758
                                           ============    ============
</TABLE>

                                      F-17
<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"). 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").

         In September 2003, the Company modified its existing $3,000,000 Credit
         Facility with Wells Fargo by:

                  -   adding PowerSecure as an additional borrower under the
                      Credit Facility through a Credit and Security Agreement
                      (the "PowerSecure Credit Agreement") between Wells Fargo
                      and PowerSecure, which added certain eligible accounts
                      receivable of PowerSecure to the borrowing base of the
                      Credit Facility; and

                  -   amending the Southern Flow Credit Agreement and the
                      Metretek Florida Credit Agreement to extend the maturity
                      dates thereof to September 30, 2006, and to make certain
                      other changes discussed below.

         The $3,000,000 maximum borrowing capacity under the Credit Facility was
         not changed in the Credit Facility restructuring, although the
         additional assets of PowerSecure included in the borrowing base
         facilitated increased borrowing capacity, up to the maximum limit.

         Borrowings under the Southern Flow Credit Facility bear interest at
         prime plus one percent (5% at December 31, 2003) and are limited to a
         borrowing base consisting of the sum of 85% of Southern Flow's eligible
         accounts receivable, 65% of Southern Flow's eligible unbilled accounts
         receivable, and the lesser of 20% of Southern Flow's eligible inventory
         or $200,000. Borrowings under the Metretek Florida Credit Facility bear
         interest at prime plus two percent (6% at December 31, 2003) and are
         limited to a borrowing base consisting of 80% of Metretek Florida's
         eligible accounts receivable. Borrowings under the PowerSecure Credit
         Facility bear interest at prime plus two percent (6% at December 31,
         2003) and are limited to a borrowing base consisting of 80% of
         PowerSecure's eligible accounts receivable. At December 31, 2003, the
         Company had an aggregate borrowing base of $3,000,000 under the Credit
         Facility, of which $2,545,418 had been borrowed, leaving $454,582
         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 advances at the end of each month may not exceed
         the cumulative net income of Southern Flow from January 1, 2001 until
         such date.

         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.

         PowerSecure is permitted to advance funds under the PowerSecure Credit
         Facility to the Company, Southern Flow, and Metretek Florida, provided
         that after making such advances the PowerSecure Credit Facility
         availability is not less than $100,000 and that total advances to the
         guarantors do not exceed $800,000.

                                      F-18
<PAGE>

         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,
         2006. At December 31, 2003, Metretek Florida was not in compliance with
         the minimum tangible net worth and the minimum net income financial
         covenants in the Metretek Florida Credit Agreement, but Wells Fargo has
         waived these financial covenants for that period.

         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 obligations of
         PowerSecure under the PowerSecure Credit Facility have been guaranteed
         by the Company, Southern Flow, Metretek Florida and MCM. 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.

         TERM LOANS - In connection with the proposed settlement of the class
         action litigation more fully described in Note 7, the Company will,
         subject to certain contingencies, be required to issue a term note
         payable in the amount of $3.0 million, which has been recorded in the
         accompanying consolidated balance sheets at December 31, 2003 and 2002.
         The 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. The note is to be guaranteed by all of
         the Company's subsidiaries. The Company is required to commence its
         payment obligations under the note pursuant to an escrow arrangement
         the earlier of June 30, 2004 or when preliminary court approval is
         granted, although in either case prior to the court order becoming
         final and non-appealable. In the event the class action 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 November 2002, the Southern Flow Credit Facility was amended to
         provide advances to Southern Flow to purchase equipment. Proceeds of
         loan were used to purchase production equipment for use by Metretek
         Florida (the "Metretek Equipment Loan"). Amounts borrowed under the
         Metretek Equipment Loan bear interest at prime plus two percent (6% at
         December 31, 2003). Monthly principal payments in the amount of $6,635
         plus interest commenced March 1, 2003, and all principal and accrued
         but unpaid interest is due and payable on September 30, 2004. The
         principal balance due on the Metretek Equipment Loan at December 31,
         2003 and 2002 was $172,513 and $238,863, respectively.

         In April 2003, PowerSecure financed the acquisition of certain
         construction equipment with proceeds of a loan from the equipment
         dealer (the "PowerSecure Equipment Loan"). Amounts borrowed under the
         PowerSecure Equipment Loan bear interest at 3.2%. The term of the
         PowerSecure Equipment Loan is 48 months and monthly principal and
         interest payments in the amount of $671 commenced May 1, 2003. At
         December 31, 2003, the principal balance due on the PowerSecure
         Equipment Loan was $25,470.

         In December 2001, Southern Flow entered into a $250,000 loan agreement
         (the "Mortgage Loan") with a mortgage lender, which was modified in
         April 2003. The Mortgage Loan is secured by land and a building owned
         by Southern Flow in Dallas, Texas; it bears interest at 9%; and it
         requires monthly principal and interest installment payments in the
         amount of $2,429. All principal and accrued but unpaid interest under
         the Mortgage Loan becomes due and payable on November 1, 2007.

                                      F-19
<PAGE>

6.       CAPITAL LEASE OBLIGATIONS

         Capital lease obligations at December 31, 2003 consists of two
         manufacturing equipment leases at Metretek Florida payable in monthly
         installments, including interest, at 12%. The scheduled annual payments
         are as follows:

YEAR ENDING DECEMBER 31:

<TABLE>
<S>                                                  <C>
2004                                                 $     29,216
2005                                                       17,043
                                                     ------------
Total minimum lease payments                               46,259
Less: Interest included in the lease payments               4,365
                                                     ------------
Present value of minimum lease payments              $     41,894
                                                     ============
</TABLE>

7.       COMMITMENTS AND CONTINGENCIES

         ANNUAL REPURCHASE COMMITMENT - MGT has an annual commitment to offer to
         repurchase, for an amount not to exceed $452,000 in the aggregate,
         preferred shareholder interests in the remaining program in which it
         holds an equity interest. Through December 31, 2003, the preferred
         shareholder interests acquired under this repurchase commitment was not
         significant.

         CLASS ACTION AND RELATED LITIGATION - In January 2001, Douglas W. Heins
         (the "Class Action Plaintiff"), individually and on behalf of a class
         of other persons similarly situated, 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"), 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 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.

                                      F-20
<PAGE>

         On March 27, 2003, the Company, along with the Class Action Plaintiff,
         filed a Stipulation of Settlement, which contains the terms and
         conditions of a proposed settlement intended to fully resolve all
         claims by the Class Action Plaintiff against the Company and the other
         Metretek Defendants in the Class Action. On March 2, 2004, the Company
         and the Class Action Plaintiff filed a revised Stipulation of
         Settlement (as revised, the "Heins Stipulation"), which revises certain
         terms of the settlement (as revised, the "Heins Settlement"). Because
         this is a class action, any settlement will be subject to objection by
         the Class members and will have to be approved by the Denver Court as
         described below.

         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 "Policy"), which was
         issued by Gulf Insurance Company ("Gulf"). In settlement of the
         Interpleader Action discussed below, Gulf has agreed to pay into escrow
         $2,375,000 in Policy proceeds to be used in the Heins Settlement.
         Pursuant to the Heins Stipulation, the Company has paid $375,000 into
         escrow for use in the Heins Settlement, and the Company has agreed to
         issue a note payable to the Heins Settlement Fund in the amount of $3.0
         million (the "Heins Settlement Note"), and to commence payments
         thereunder in escrow, upon the earlier of June 30, 2004 or 51 days
         after the date the Denver Court grants final approval (subject to
         appeal) of the Heins Settlement. The Heins Settlement Note will 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, and will be guaranteed by the 1997 Trust and all of the
         Company's subsidiaries. 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 Heins Settlement Fund will be
         funded by the escrowed funds and by the Company's payments on the Heins
         Settlement Note which will then be paid directly to the Heins
         Settlement Fund.

         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 or PowerSecure, although such consent
         is not required if the Company makes a prepayment of at least $1
         million on the Heins Settlement Note with the proceeds of any such sale
         of subsidiary stock.

         In addition, the Company would be required under the Heins Stipulation
         either to vigorously prosecute any third party or cross-claims that the
         Company believes it has in relation to the Class Action through counsel
         of its 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.

         A preliminary approval hearing by the Denver Court on the Heins
         Settlement has been set for April 15, 2004. If the Denver Court grants
         the preliminary approval, then notice of the Heins Settlement will be
         sent to the Class, and a final approval hearing is expected to be
         scheduled for late May or early June. The Company cannot provide any
         assurance that the Denver Court will grant preliminary or final
         approval of the Heins Settlement. In addition, final approval by the
         Denver Court may be subject to post-judgment challenge or appeal.

                                      F-21
<PAGE>

         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 $375,000 and all payments made on the Heins
         Settlement Note will be returned to the Company from the escrow
         account. The $2,375,000 contributed by Gulf will remain in escrow and
         its disposition will be subject to the determination of the Denver
         Court. If the Heins Stipulation does receive final and non-appealable
         approval (or if all time for appeals has expired), the funds may be
         moved from the escrow account into the Heins Settlement Fund and paid
         out to the Class.

         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 Gulf of at least $2,375,000 in insurance proceeds
                  from the Policy for the benefit of the Heins Settlement Fund
                  (which is discussed further in connection with the settlement
                  of the Interpleader Action);

              -   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 and
                  the Interpleader Action discussed below.

         On March 28, 2003, Gulf filed an interpleader complaint against the
         Metretek Defendants, the Farstad Defendants and the Class Action
         Plaintiff (the "Interpleader Action") in the Denver Court, seeking a
         determination by the Denver Court as to the proper beneficiaries of the
         Policy. In March 2004, the Company settled the Interpleader Action with
         Gulf and the Farstad Defendants (the "Interpleader Settlement").
         Pursuant to the terms of the Interpleader Settlement, Gulf has agreed
         to pay into escrow $2,375,000 for use in the Heins Settlement, and has
         agreed to pay the remainder of the Policy proceeds to the Farstad
         Defendants. In exchange, the Company and the Farstad Defendants have
         agreed to fully release Gulf from all further claims under the Policy.

         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. 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 it 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 the Company in the Class Action could have a material adverse
         effect on its business, financial condition and results of operations.

                                      F-22
<PAGE>

         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 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 that were suspended 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. 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 March 2003, the Company and Scient jointly filed a Stipulation and
         Order of Settlement (the "Scient Settlement"), which fully and finally
         resolved 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 agreed to dismiss all
         of its claims against Scient. The Scient Settlement became final in
         April 2003. 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.

         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, 2003, 2002 and 2001 totaled $1,327,828,
         $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:
<TABLE>
<S>                                                                 <C>
  2004                                                               $   938,941
  2005                                                                   650,565
  2006                                                                   384,726
  2007                                                                   342,727
  2008                                                                   214,740
                                                                     -----------
Total                                                                $ 2,531,699
                                                                     ===========
</TABLE>

                                      F-23
<PAGE>

         EMPLOYEE BENEFIT PLAN - 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, 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, 2003, 2002 and 2001 was $188,336, $176,973 and
         $177,917, respectively.

         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

         Income tax expense included in the consolidated statements of
         operations represents state income taxes in various state jurisdictions
         in which the Company has taxable activities. No federal income tax
         expense or benefit has been recognized during the years ended December
         31, 2003, 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, 2003 and 2002.

         The components of the Company's deferred tax assets and liabilities at
         December 31, 2003 and 2002 are shown below:

<TABLE>
<CAPTION>
                                                              2003            2002
                                                          ------------    ------------
<S>                                                       <C>             <C>
Deferred tax assets:
  Net operating loss carryforwards                        $ 16,420,000    $ 14,320,000
  Tax credit carryforwards                                      45,000          45,000
  Allowance for bad debts                                       68,000          96,000
                                                          ------------    ------------
        Total deferred tax assets                           16,533,000      14,461,000
                                                          ------------    ------------
Deferred tax liabilities
  Excess of income tax depreciation and amortization
    over financial statement amounts                         1,066,000         813,000
  Other                                                        117,000          97,000
                                                          ------------    ------------
        Total deferred tax liabilities                       1,183,000         910,000
                                                          ------------    ------------
Net deferred tax asset                                      15,350,000      13,551,000
Valuation allowance                                        (15,350,000)    (13,551,000)
                                                          ------------    ------------
Total                                                     $          0    $          0
                                                          ============    ============
</TABLE>

         At December 31, 2003, the Company had unused net operating losses to
         carry forward against future years' taxable income of approximately
         $48,293,000 expiring in various amounts from 2004 to 2016. At December
         31, 2003, 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 ($66,000, net of current limitation). Such carryforwards
         expire in 2004 and 2005. As a result of the change in ownership upon
         acquisition, utilization of these net operating loss carryforwards is
         limited to approximately $33,000 annually. If the

                                      F-24
<PAGE>

         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 (which was subsequently reduced to 13% of its outstanding
         common stock to two 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.

         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
         years ended December 31, 2003 and 2002 because the minority interest
         shareholders losses are limited to their capital contributions and
         accumulated earnings, which was $0 at December 31, 2003 and 2002.

         Effective January 1, 2003, 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. At December 31, 2003,
         shares representing 13.88% of the outstanding shares of PowerSecure had
         been issued to PowerSecure employees. The employee shareholders of
         PowerSecure entered 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;

                                      F-25
<PAGE>

              -   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

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

         The Company recognized compensation expense in the amount of $15,000
         during the first quarter of 2003 upon the issuance of shares of
         PowerSecure to its employee shareholders based on the estimated fair
         value of the shares on the date of issuance, net of amounts owed by
         PowerSecure to the Company. The minority interest in the income of
         PowerSecure for the year ended December 31, 2003, was $207,280, and is
         included as a separate line-item in the consolidated statements of
         operations.

         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-26
<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

Granted                      271,500          1.54
Expired                     (131,165)         1.97       (7,500)        2.00      (44,000)       2.00
                          ----------                  ----------                  -------

Outstanding at
 December 31, 2003         1,659,016      $   1.96       30,000      $  2.00      123,409    $   2.00
                          ==========                  =========                   =======
Exercisable at
 December 31:
 2003                      1,529,183      $   1.99       30,000      $  2.00      123,409    $   2.00
                          ==========                  =========                   =======
 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, 2003, 2002 and 2001 were $.42, $0.29 and
         $1.07 per share, respectively. During the year ended December 31, 2003,
         incentive stock options to purchase 264,000 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, 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, 2003:

                                     F - 27
<PAGE>

<TABLE>
<CAPTION>
    RANGE OF                                WEIGHTED AVERAGE       WEIGHTED AVERAGE
EXERCISE PRICES       NUMBER OF SHARES       EXERCISE PRICE      REMAINING LIFE (YEARS)
---------------       ----------------      ----------------     ----------------------
<S>                   <C>                   <C>                  <C>
$0.46 to $ 1.74          1,401,000               $ 1.49                  7.04
$1.75 to $ 2.49            247,739                 2.00                  4.44
$2.50 to $17.38            163,686                 5.95                  5.15
---------------          ---------               ------                  ----

$ 0.46 - $17.38          1,812,425               $ 1.96                  6.51
===============          =========               ======                  ====
</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 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. At
         December 31, 2003, 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.

         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. These warrants expire December 9, 2004.

         In addition to the warrants discussed above, warrants to purchase
         45,000 shares of common stock at exercise prices ranging from $2.47 to
         $14.50 per share were outstanding at December 31, 2003. These warrants
         expire at various dates in 2004. The Company issued these warrants in
         prior years for consulting and other advisory services rendered to the
         Company by the warrant holders.

         OTHER - In fulfillment of certain make-up provisions of a license and
         royalty agreement at Metretek Florida that expired in 2002, the Company
         issued 19,697 restricted shares of common stock of the

                                     F - 28
<PAGE>

         Company in lieu of cash during the year ended December 31, 2001, with
         no additional royalty expense being recognized.

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 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, 2003, 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 data collection and telemetry segment
         are conducted by Metretek Florida. Metretek Florida's manufactured
         products fall into the following categories: field devices, including
         data collection products and electronic gas flow computers; data
         collection software products (such as InvisiConnect(TM), DC2000 and
         PowerSpring); and communications solutions that can use public networks
         operated by commercial wireless carriers to provide real time IP-based
         wireless internet connectivity, 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 data collection, M2M telemetry
         connectivity and post-sale support services for its manufactured
         products and turn-key solutions. 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.

                                     F - 29
<PAGE>

         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 operating 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, equity in income of unconsolidated affiliate,
         results of insignificant operations and, as it relates to segment
         profit or loss, income and expense (including nonrecurring charges) not
         allocated to reportable segments.

                    SUMMARIZED SEGMENT FINANCIAL INFORMATION
                       (all amounts reported in thousands)

<TABLE>
<CAPTION>
                                                  2003              2002              2001
                                                --------          --------          --------
<S>                                             <C>               <C>               <C>
REVENUES:
   Southern Flow                                $ 11,805          $ 12,288          $ 12,918
   PowerSecure                                    17,122             8,229             8,975
   Metretek Florida                                9,775             6,524             6,629
   PowerSpring                                                                           277
   Other                                             610               262               543
                                                --------          --------          --------
     Total                                      $ 39,312          $ 27,303          $ 29,342
                                                ========          ========          ========
SEGMENT PROFIT (LOSS):
   Southern Flow                                $  1,619          $  1,953          $  1,642
   PowerSecure                                     1,574              (388)              403
   Metretek Florida                                 (272)             (969)             (993)
   PowerSpring                                                                          (612)
   Other                                          (1,778)           (3,933)           (1,791)
                                                --------          --------          --------
     Total                                      $  1,143          $ (3,337)         $ (1,351)
                                                ========          ========          ========

CAPITAL EXPENDITURES:
   Southern Flow                                $    103          $    122          $    116
   PowerSecure                                       124                41               141
   Metretek Florida                                   65               372               400
   Other                                               4                11
                                                --------          --------          --------
     Total                                      $    296          $    546          $    657
                                                ========          ========          ========

DEPRECIATION AND AMORTIZATION:
   Southern Flow                                $    129          $    135          $    610
   PowerSecure                                        66                47                36
   Metretek Florida                                  474               453               546
   PowerSpring                                                                           135
   Other                                              22                23                92
                                                --------          --------          --------
     Total                                      $    691          $    658          $  1,419
                                                ========          ========          ========
TOTAL ASSETS:
   Southern Flow                                $  9,339          $  9,285          $  9,487
   PowerSecure                                     5,701             2,318             1,672
   Metretek Florida                                7,098             6,842             7,500
   Other                                           1,189               754             1,635
                                                --------          --------          --------
     Total                                      $ 23,327          $ 19,199          $ 20,294
                                                ========          ========          ========
</TABLE>

                                     F - 30
<PAGE>

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

<TABLE>
<CAPTION>
                                                2003                      2002                2001
                                             -----------              -----------          -----------
<S>                                          <C>                      <C>                  <C>
United States                                $38,074,625              $26,440,935          $28,581,534
Canada                                           726,830                  418,173              366,755
Europe                                           376,090                  156,482              228,198
South America                                     44,980                  120,741              108,150
Asia                                                                       88,900               15,504
Other                                             89,200                   77,504               42,034
                                             -----------              -----------          -----------
Total                                        $39,311,725              $27,302,735          $29,342,175
                                             ===========              ===========          ===========
</TABLE>

11.      UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL DATA

         Summarized quarterly consolidated financial information (unaudited) for
         the years ended December 31, 2003 and 2002 is as follows (in thousands,
         except per share amounts):

<TABLE>
<CAPTION>
                                                              QUARTER
                                    ------------------------------------------------------------
           2003                      FIRST             SECOND            THIRD            FOURTH
                                    -------           -------           -------           ------
<S>                                 <C>               <C>               <C>               <C>
Total revenues                      $ 7,383           $11,151           $12,019           $8,759
Operating (loss) income                (613)              829               428              499
Minority interest                       (11)              (51)              (59)             (86)
Income taxes                            (21)              (12)              (12)             (12)
Net (loss) income                      (645)              766               357              401
Preferred stock deemed
  distribution                         (217)             (221)             (224)            (228)
Net (loss) income applicable
  to common shareholders            $  (862)          $   545           $   133           $  173
Net (loss) income per common
  share, basic and diluted          $ (0.14)          $  0.09           $  0.02           $ 0.03
</TABLE>

<TABLE>
<CAPTION>
                                                              QUARTER
                                    -------------------------------------------------------------
          2002                       FIRST             SECOND            THIRD             FOURTH
                                    -------           -------           -------           -------
<S>                                 <C>               <C>               <C>               <C>
Total revenues                      $ 6,472           $ 6,099           $  8,061          $ 6,671
Operating (loss) income                (342)             (726)                 8           (2,276)
Minority interest                         -                 -                  -                -
Income taxes                             (1)              (17)               (14)             (14)
Net loss                               (343)             (743)                (6)          (2,290)
Preferred stock deemed
  distribution                         (201)             (204)              (208)            (239)
Net loss applicable
  to common shareholders            $  (544)          $  (947)          $   (214)         $(2,529)
Net loss per common
  share, basic and diluted          $ (0.09)          $ (0.16)          $  (0.04)         $ (0.42)
</TABLE>

         Financial results for the fourth quarter of 2002 included a provision
         for litigation costs, net of $1,764,000. Financial results for the
         second quarter of 2002 included nonrecurring charges of $258,000
         related to changes in management at Metretek Florida, principally
         termination benefits paid.

                                    * * * * *

                                     F - 31

<PAGE>

                                                                     SCHEDULE II

                           METRETEK TECHNOLOGIES, INC.

                        VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                           ADDITIONS:
                                            BALANCE AT     CHARGED TO                           BALANCE AT
                                            BEGINNING      OPERATING         DEDUCTIONS:          END OF
             DESCRIPTION                    OF PERIOD       EXPENSES         WRITE-OFFS           PERIOD
             -----------                    ----------     ----------       --------------      ----------
<S>                                         <C>            <C>              <C>                 <C>
Allowance for doubtful accounts:
  Year ended December 31, 2003...........      $281          $   54             $(134)(1)         $ 201
  Year ended December 31, 2002...........       170             177               (66)(1)           281
  Year ended December 31, 2001...........       548               9              (387)(1)           170

Inventory reserve:
  Year ended December 31, 2003...........      $395          $  152             $(259)(2)         $ 288
  Year ended December 31, 2002...........       413             144              (162)(2)           395
  Year ended December 31, 2001...........       492              43              (122)(2)           413

</TABLE>

(1) Represents amounts written off as uncollectible, less recoveries.

(2) Represents amounts written off against reserve; less recoveries.
<PAGE>

                           METRETEK TECHNOLOGIES, INC.

                                    FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 2003
                                  EXHIBIT LIST


                  Number   Description

                  (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.)

                  (4.1)    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.)

                                       X-1
<PAGE>

                  (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. (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 Silverman Heller
                           Associates. (Incorporated by reference to Exhibit
                           4.15 of Metretek's Registration Statement on Form
                           S-3, Registration No. 333-96369).

                  (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.)*

                                       X-2
<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)  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.)*

                  (10.15)  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.)*

                  (10.16)  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.)

                  (10.17)  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.)

                  (10.18)  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>

                  (10.19)  First Amendment to Credit and Security Agreement,
                           dated as of November 19, 2002, between Southern Flow
                           Companies, Inc. and Wells Fargo Business Credit, Inc.
                           (Incorporated by reference to Exhibit 10.31 to
                           Metretek's Annual Report on Form 10-KSB for the year
                           ended December 31, 2002.)

                  (10.20)  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. (Incorporated by reference to
                           Exhibit 10.32 to Metretek's Annual Report on Form
                           10-KSB for the year ended December 31, 2002.)

                  (10.21)  Third Amendment to Credit and Security Agreement,
                           dated as of April 4, 2003, between Southern Flow
                           Companies, Inc. and Wells Fargo Business Credit, Inc.
                           (Incorporated by reference to Exhibit 10.1 to
                           Metretek's Quarterly Report on Form 10-Q for the
                           period ended March 31, 2003.)

                  (10.22)  Fourth Amendment to Credit and Security Agreement,
                           dated as of September 24, 2003, between Southern Flow
                           Companies, Inc. and Wells Fargo Business Credit, Inc.
                           (Incorporated by reference to Exhibit 10.4 to
                           Metretek's Current Report on Form 8-K filed October
                           3, 2003.)

                  (10.23)  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.)

                  (10.24)  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.)

                  (10.25)  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.)

                  (10.26)  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. (Incorporated by reference to
                           Exhibit 10.33 to Metretek's Annual Report on Form
                           10-KSB for the year ended December 31, 2002.)

                  (10.27)  Second Amendment to Credit and Security Agreement,
                           dated as of September 24, 2003, between Metretek,
                           Incorporated and Wells Fargo Business Credit, Inc.
                           (Incorporated by reference to Exhibit 10.5 to
                           Metretek's Current Report on Form 8-K filed October
                           3, 2003.)

                  (10.28)  Third Amendment to Credit and Security Agreement,
                           dated as of November 13, 2003, between Metretek,
                           Incorporated and Wells Fargo Business Credit, Inc.
                           (Filed herewith)

                  (10.29)  Fourth Amendment to Credit and Security Agreement,
                           dated as of March 24, 2004, between Metretek,
                           Incorporated and Wells Fargo Business Credit, Inc.
                           (Filed herewith)


                  (10.30)  Credit and Security Agreement, dated as of September
                           24, 2003, by and between Wells Fargo Business Credit,
                           Inc. and PowerSecure, Inc. (Incorporated by reference
                           to Exhibit 10.1 to Metretek's Current Report on Form
                           8-K filed October 3, 2003.)

                  (10.31)  Form of Guaranty, dated as of September 24, 2003, by
                           each of Metretek Technologies, Inc., Metretek,
                           Incorporated, Metretek Contract Manufacturing
                           Company, Inc. and Southern Flow Companies, Inc.,
                           Incorporated for the benefit of

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<PAGE>

                           Wells Fargo Business Credit, Inc. (Incorporated by
                           reference to Exhibit 10.2 to Metretek's Current
                           Report on Form 8-K filed October 3, 2003.)

                  (10.32)  Form of Security Agreement, dated as of September 6,
                           2001, between Wells Fargo Business Credit, Inc. and
                           each of Metretek Technologies, Inc., Metretek,
                           Incorporated., 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 October
                           3, 2003.)

                  (10.33)  Employment Non-Competition Agreement, dated as of
                           June 24, 2002, by and between Metretek, Incorporated
                           and Thomas R. Kellogg. (Incorporated by reference to
                           Exhibit 10.24 to Metretek's Annual Report on Form
                           10-KSB for the year ended December 31, 2002.)*

                  (10.34)  Employment and Non-Competition Agreement, dated as of
                           January 1, 2003, between PowerSecure, Inc. and Sidney
                           Hinton. (Incorporated by reference to Exhibit 10.25
                           to Metretek's Annual Report on Form 10-KSB for the
                           year ended December 31, 2002.)*

                  (10.35)  Shareholders Agreement, dated as of June 27, 2002,
                           between Metretek Contract Manufacturing Company, Inc.
                           and its shareholders. (Incorporated by reference to
                           Exhibit 10.26 to Metretek's Annual Report on Form
                           10-KSB for the year ended December 31, 2002.)*

                  (10.36)  Form of Shareholders Agreement, between Metretek,
                           Incorporated and its shareholders. (Incorporated by
                           reference to Exhibit 10.27 to Metretek's Annual
                           Report on Form 10-KSB for the year ended December 31,
                           2002.)*

                  (10.37)  Shareholders Agreement, dated as of January 1, 2003,
                           between PowerSecure, Inc. and its shareholders.
                           (Incorporated by reference to Exhibit 10.28 to
                           Metretek's Annual Report on Form 10-KSB for the year
                           ended December 31, 2002.)*

                  (10.38)  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. (Incorporated by reference to Exhibit
                           10.29 to Metretek's Annual Report on Form 10-KSB for
                           the year ended December 31, 2002.)

                  (10.39)  Amended Stipulation of Settlement, filed March 3,
                           2004, among Douglas W. Heins on behalf of himself and
                           all others similarly situated, and Metretek
                           Technologies, Inc., et. al. (Filed herewith.)

                  (10.40)  Stipulation and Order of Settlement, dated as of
                           February 25, 2003, by Scient, Inc. and Metretek
                           Technologies, Inc. (Incorporated by reference to
                           Exhibit 10.30 to Metretek's Annual Report on Form
                           10-KSB for the year ended December 31, 2002.)

                  (14.1)   Metretek Technologies, Inc. Code of Ethics for
                           Principal Executive Officer and Senior Financial
                           Officers. (Filed herewith).

                  (14.2)   Metretek Technologies, Inc. Code of Business Ethics
                           and Conduct. (Filed herewith.)

                  (21.1)   Subsidiaries of Metretek Technologies, Inc. (Filed
                           herewith.)

                  (23.1)   Consent of Deloitte & Touche LLP. (Filed herewith.)

                  (31.1)   Certification of Chief Executive Officer pursuant to
                           Section 302 of the Sarbanes-Oxley Act of 2002 and
                           Rule 13a-14(a) under the Securities Exchange Act of
                           1934, as amended. (Filed herewith.)

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<PAGE>

                  (31.2)   Certification of Chief Financial Officer pursuant to
                           Section 302 of the Sarbanes-Oxley Act of 2002 and
                           Rule 13a-14(a) under the Securities Exchange Act of
                           1934, as amended. (Filed herewith.)

                  (32.1)   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, and
                           Rule 13a-14(b) under the Securities Exchange Act of
                           1934, as amended. (Filed herewith.)

                  (32.2)   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, and
                           Rule 13a-14(b) under the Securities Exchange Act of
                           1934, as amended. (Filed herewith.)

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

         *Management contract or compensation plan or arrangement.

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