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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, 2004

                                       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)

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

            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. [ ]

     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 June 30, 2004, the last business day of the registrant's most
recently completed second fiscal quarter, the aggregate market value of the
shares of the registrant's Common Stock held by non-affiliates of the registrant
was approximately $18,595,064, based upon $2.55, the last sale price of the
Common Stock on such date as reported on the OTC Bulletin Board. For purposes of
this disclosure, shares of Common Stock held by each director and executive
officer and each person who owns 5% or more of the registrant's Common Stock
have been excluded because such persons may be deemed to be "affiliates" for
this purpose. This determination, however, is not necessarily conclusive for any
other purpose.

     As of March 7, 2005, 12,192,074 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, 2004

                                TABLE OF CONTENTS

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                                                                       PAGE
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<S>                                                                    <C>
Cautionary Note Regarding Forward-Looking Statements................      1

                                     PART I

Item 1.    Business.................................................      2
Item 2.    Properties...............................................     14
Item 3.    Legal Proceedings........................................     14
Item 4.    Submission of Matters to a Vote of Security Holders......     15

                                     PART II

Item 5.    Market for Registrant's Common Equity, Related
              Stockholder Matters and
              Issuer Purchases of Equity Securities.................     16
Item 6.    Selected Financial Data..................................     17
Item 7.    Management's Discussion and Analysis of Financial
              Condition and Results of Operation....................     18
Item 7A.   Quantitative and Qualitative Disclosures About
              Market Risk...........................................     51
Item 8.    Financial Statements and Supplementary Data..............     52
Item 9.    Changes in and Disagreements with Accountants
              on Accounting and Financial Disclosure................     52
Item 9A.   Controls and Procedures..................................     52
Item 9B.   Other Information........................................     53

                                    PART III

Item 10.   Directors and Executive Officers of the Registrant.......     54
Item 11.   Executive Compensation...................................     57
Item 12.   Security Ownership of Certain Beneficial
              Owners and Management and Related
              Stockholder Matters...................................     64
Item 13.   Certain Relationships and Related Transactions...........     67
Item 14.   Principal Accountant Fees and Services...................     68

                                     PART IV

Item 15.   Exhibits and Financial Statement Schedules...............     69

Signatures..........................................................     75

Index to Financial Statements.......................................    F-1

Exhibit Index.......................................................    X-1
</TABLE>

<PAGE>

              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 comparable
terminology and 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 and the markets therefor, including market
          position, market share, market demand and benefits to customers;

     -    our ability to successfully develop, operate and grow our businesses;

     -    our business plans, strategies, goals and objectives;

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

     -    industry trends and customer preferences;

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

     -    business acquisitions, combinations, sales, alliances, ventures and
          other similar business transactions and relationships;

     -    the effects on our business, financial condition and results of
          operations of the resolution of litigation and claims that arise from
          time to time; 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 7. 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 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. is 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. We currently
conduct our operations through three wholly-owned subsidiaries:

     -    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.

     -    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.

     -    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.

     Until recently, Metretek Florida had also provided contract manufacturing
services through its subsidiary, Metretek Contract Manufacturing Company, Inc.
("MCM"). These contract manufacturing services were discontinued during 2004 and
MCM's contract manufacturing business and most of its assets were sold on
December 30, 2004.

     In addition to these operating subsidiaries, Marcum Gas Transmission, Inc.
("MGT"), a wholly-owned subsidiary based in Denver, Colorado, own an approximate
26% economic interest in an unconsolidated business, Marcum Midstream 1995-2
Business Trust ("MM 1995-2"), which operates four production water disposal
facilities located in northeastern Colorado. MGT acquired additional equity
interests in MM 1995-2 during the first quarter of 2004. As a result, the equity
income from MM 1995-2 is becoming a more significant part of our consolidated
results.

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

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

<PAGE>

     -    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 2003, we commenced the development of the Cellular Network
          Interface ("CNI") and InvisiConnect(TM) series of products, which are
          M2M connection solutions for wireless network technology, to enhance
          the product, service and technology offerings of Metretek Florida.

     -    In 2004, we significantly increased our economic interest in MM 1995-2
          and we acquired the minority interest in PowerSecure.

     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.

POWERSECURE, INC.

     We formed PowerSecure in the fall of 2000 to engage in the business of
designing, engineering, marketing, constructing and operating turn-key
distributed generation systems. In January 2001, PowerSecure received its first
distributed generation contract. The goal of PowerSecure is to be a national
provider of distributed generation systems, providing customers, primarily
industrial and commercial users of electricity, with access to back-up power
generation to facilitate reliable power and with 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, energy information has become more important for energy
suppliers and users 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;


                                        3

<PAGE>

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

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

     In conjunction with its distributed generation systems, PowerSecure designs
and manufactures its own paralleling switchgear and process controls marketed
under the registered trade name "NexGear(R)", which controls are used to
seamlessly shift power between a customer's primary power source and its
distributed generation system. 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 power generated at the customer's site 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 the 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 a wide
variety of customers.

     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 burdens 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 then monitors its performance. In the event of a mechanical problem,
PowerSecure dispatches the appropriate technicians. PowerSecure manages 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 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 the majority of its revenues through December 31, 2004 were derived
from, its turn-key distributed generation program. In its turn-key program,
PowerSecure offers a complete 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. During fiscal 2004, a portion of PowerSecure's
revenues were generated from electrical specialty products such as
QuickPower(TM) , which is a system focused on allowing customers to quickly
connect to a power system in emergency or urgent circumstances.

     PowerSecure also offers a "shared savings" distributed generation system
program. Shared savings programs will require significant capital to develop and
have only been offered on a limited basis through the date of this Report.
PowerSecure's shared savings program involves the design, engineering,
installation, operation and maintenance of distributed


                                        4

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generation systems that are owned by PowerSecure and leased to customers on a
long-term basis for monthly fees related to the benefits, including energy
savings, realized 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 more significant
portion of its future business and revenues may be derived from its shared
savings program, making it less dependant upon sales of turn-key systems.

     Engineering Services. PowerSecure plans to market its engineering services
to utilities as means to supplement the utilities' own engineering staffs. The
scope of services to be offered by PowerSecure includes the design and
engineering for transmission and distribution (including substations) systems as
well as engineering services such as developing future plans for enhancing and
expanding the utility's infrastructure.

     Backlog. As of January 31, 2005, PowerSecure's backlog was approximately
$9.4 million, relating to secured contracts for distributed generation projects.
These contracts are scheduled to be completed by the end of the third quarter of
2005. 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.

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 in 2004 derived approximately 22% of its revenues
from its parts resale business. 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 meter maintenance, chart integration, meter data acquisition
and data 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 substantial market
influence. 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 and accuracy, because natural gas
measurement has a direct effect on the natural gas producer's revenues and
royalties 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.

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 AMR
systems for remotely monitoring, collecting, processing and managing field
devices and the data provided by such devices. 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;


                                        5

<PAGE>

     -    a communication link, which is typically a telephone wire-line or
          cellular/PCS connection (analog, digital, circuit switched 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) or both, 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.
Historically, Metretek Florida's customers have consisted principally of natural
gas and electric utilities, and field devices have been primarily connected to
natural gas and electric meters. In these markets, Metretek Florida's AMR
systems support its utility customers' business applications that provide
service to 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 AMR systems may support critical
functions such as billing, load management, tariff enforcement and verification.
As such, the Metretek Florida AMR 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.

     The major cellular wireless carriers have recently deployed IP-based
digital wireless systems that are driving changes in numerous telemetry and M2M
applications. Metretek Florida has developed a new family of products, which it
calls InvisiConnect(TM), that enables digital wireless connectivity to be
extended to remote device data management applications in several vertical
market segments that Metretek Florida has not previously serviced. The
InvisiConnect(TM) products leverage Metretek Florida's technology and know-how,
initially developed to serve its utility markets, by seeking to expand sales of
its InvisiConnect(TM) products into several of these vertical market segments.

     Products. Metretek Florida's product offerings fall into two categories:
field data collection and telemetry hardware devices and application specific
software-based solutions. Metretek Florida's hardware devices include AMRs and
electronic flow computers that are specifically sold to utility customers. They
also include telemetry products, which we refer to as our Cellular Network
Interface ("CNI") suite of products, that operate with InvisiConnect(TM)
software that are designed to be sold to customers in other vertical market
segments as well as to customers in the utility markets. All of Metretek
Florida's manufactured hardware devices are designed on similar electronic
platforms that can be configured to provide solutions designed to fit each
customer's specific requirements.

     Metretek Florida's products also include a suite of software solutions that
are an inherent and critical part of system solutions sold to its customers.
Metretek Florida's primary software product utilized by its natural gas and
electric utility customers is DC2000. DC2000 is a Windows based proprietary
software system designed to simultaneously manage thousands of remote field
devices, as well as the data collected from those devices.

     Metretek Florida also offers, as an alternative to the DC2000 software, its
PowerSpring solution, a subscription-based service that provides a turn-key
solution for remote data management and collection 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.

     Metretek Florida has recently introduced its InvisiConnect(TM) software
solution. Operating in conjunction with the CNI suite of telemetry hardware,
InvisiConnect(TM) provides a simple, cost-effective, plug-and-play
communications solution that allows almost any field device in virtually any
remote device data management application to be upgraded to digital wireless or
IP connectivity. In this product solution, Metretek Florida's CNI hardware
provides the digital cellular radio that is installed in the field and connects
directly to the customer's field device. The InvisiConnect(TM) software is
installed on the customer's application computer, and provides the communication
interface to the customer's legacy software package for remote device and data
management. Examples of applications that are ideal candidates for the
InvisiConnect(TM) solution include remote traffic light and intersection
control, remote signage, remote vending control and monitoring, remote
management of ATM machines, as well as numerous other applications.

     Utility Hardware Products. Metretek Florida's products that are typically
sold to natural gas and electric utilities, also known as automatic meter
readers or AMRs, are installed on existing utility meters. The AMRs are designed
to automatically collect and transmit energy consumption and event 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 or other communication link, is packaged
with AC or DC power and is installed on, or in close proximity to, a 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 DC2000 or PowerSpring software, running on a PC, or a PC network,
manages the data collection and processing as well as


                                        6

<PAGE>

storing the data in a database. Communication from the remotely located AMRs to
the central software system has historically been accomplished using existing,
standard voice grade telephone lines, although a more recent trend is evolving
toward the use of Metretek Florida's CNI digital cellular communication
solutions.

     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 energy 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.

     CNI Products. In order to address vertical markets in addition to the
utility markets, Metretek Florida has recently developed its Cellular Network
Interface suite of communication hardware products 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 wide
scale 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 is expected to
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 is expected to spur
growth in the telemetry and wireless data sectors of the M2M market space.
Metretek Florida's CNI hardware products are used with its InvisiConnect(TM)
software to provide a seamless and transparent communication upgrade to existing
field devices, as well as their legacy applications software, provided to the
customer by virtually any vendor.

     Markets. Historically, Metretek Florida's primary customers have been
energy utility companies that have deployed its systems in their business.
Metretek Florida currently has 71 active utility customers that operate DC2000
data collection systems, including 60 of the 100 largest natural gas
distribution utility companies in North America.

     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. This effort
resulted in the deployment of 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.

     Based upon the success of this project, and the recognition that numerous
other markets could potentially benefit from an upgrade in communications to
digital wireless, Metretek Florida developed its CNI suite of hardware products
and its InvisiConnect(TM) software. Metretek Florida's CNI products now include
versions that will operate on any of the major international digital cellular
networks. Metretek Florida has successfully operated its InvisiConnect(TM)
solution with at least 15 different legacy remote device data management systems
and is currently actively marketing this product in numerous vertical markets.

     Marketing and Customer Service. In its traditional utility markets,
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.


                                        7

<PAGE>

     Metretek Florida is introducing and actively selling its CNI suite of
hardware products and its InvisiConnect(TM) software solutions into numerous
vertical markets in which it previously had no marketing presence. Metretek
Florida is actively seeking and establishing channel partners and distribution
sources with which it intends to serve these markets.

     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 2004, 24% of Metretek Florida's
annual revenues were generated in international markets, compared to 15% in
fiscal 2003 and 14% in fiscal 2002.

     Metretek Contract Manufacturing Company, Inc. In June 2002, Metretek
Florida formed MCM to operate and expand its printed circuit board ("PCB")
contract manufacturing business. Metretek Florida had been involved in contract
manufacturing as a part of its traditional business 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 offered contract
manufacturing services to local, regional and national companies with PCB
product requirements that were short run, high quality, and quick turnaround.

     During the third quarter of 2004, our Board of Directors approved a plan to
discontinue the contract manufacturing business operated by MCM and to sell all
of the contract manufacturing assets. In connection with this discontinuance, on
December 30, 2004 Metretek Florida and MCM sold their contract manufacturing
business and most of the related assets to InstruTech Florida, LLC ("InstruTech
Florida"). InstruTech Florida is a subsidiary of InstruTech, Inc., a
Colorado-based contract manufacturer of PCBs and other instrumentation products.
The assets of the discontinued business not included in the sale to InstruTech
Florida, which consist principally of receivables and inventory, are being
liquidated through collections of those receivables and through subsequent sales
of the remaining inventory to others, including InstruTech Florida.

     In connection with this sale, InstruTech Florida issued to Metretek Florida
a promissory note in the amount of $780,000, equal to the book value of the
manufacturing equipment sold, that is repayable solely out of 50% of the net
cash flow of InstruTech Florida, without any further recourse. InstruTech
Florida also granted to Metretek Florida an option to acquire up to 19% of the
equity in InstruTech Florida, exercisable for $1,000 until three years after the
closing date or, if later, the date the promissory note has been repaid in full.
In addition, in connection with the sale to InstruTech Florida, we agreed to
provide InstruTech Florida with short-term working capital in an amount of up to
$150,000 through a bridge loan to InstruTech Florida for a period of six months
ending June 30, 2005. Any amounts advanced under the bridge loan are repayable
solely out of 75% of the monthly positive cash flow from the operations of
InstruTech Florida. InstruTech Florida has also agreed to purchase Metretek
Florida's remaining contract manufacturing inventory, which was $368,285 (net of
reserve) as of December 31, 2004, on an as needed basis at fair value. Through
June 2005, subject to extension by mutual agreement, Metretek Florida has agreed
to utilize InstruTech Florida as its exclusive contract manufacturer.

     The sale agreement may be terminated at any time prior to March 31, 2005 by
mutual agreement of us and InstruTech Florida, by InstruTech Florida if it
determines that customer purchase orders and commitments are below a
commercially viable level, or by us if we determine that InstruTech Florida has
no reasonable chance to be commercially successful or to generate positive cash
flow within the succeeding 6 to 12 month period. We cannot provide any assurance
of the amounts that we will be paid under the promissory note or repaid under
the bridge loan or that we will recover from inventory sales.

     Backlog. Metretek Florida's backlog consists primarily of unfulfilled
customer orders at any given time related to its AMR and M2M business. It does
not include revenues that may be earned if customers exercise options to make
additional purchases. At December 31, 2004, Metretek Florida's backlog was
minimal. The amount of backlog is not necessarily indicative of future revenues
because short-term purchase orders, modifications to or terminations of present
orders and production delays can provide additional revenues or reduce
anticipated revenues. Metretek Florida's backlog is typically subject to large
variations from time to as new orders are received. Consequently, it is
difficult to make meaningful comparisons of backlog. Metretek Florida's orders
from its customers generally include provisions permitting rescheduling,
deferral or termination at any time at the convenience of the customer.

MM 1995-2

     As of December 31, 2004, MGT owned an approximate 26% economic interest in
MM 1995-2. MM 1995-2 owns and operates four oil field production water disposal
facilities located in northeastern Colorado. MM 1995-2 was formed in February
1996, and since that time MGT has served as its managing trustee. MGT acquired
additional equity interests in MM


                                        8

<PAGE>

1995-2 during the first quarter of 2004. In connection with the acquisition of
these additional equity interests, MGT formed Conquest Acquisition Company LLC
("Conquest Acquisition") as a majority-owned subsidiary to hold equity interests
in MM 1995-2. Upon formation, MGT acquired 73.75% of Conquest Acquisition, with
the remainder of the interest in Conquest Acquisition being owned by the
operator of MM 1995-2. As a result of this acquisition, the equity income from
MM 1995-2 is becoming a more significant part of our consolidated results,
contributing $1,254,000 to our income from continuing operations during fiscal
2004, a substantial increase from $469,000 in fiscal 2003.

CUSTOMERS

     Our customers include a wide variety of mid-sized and large businesses,
utilities and institutions. During 2004, Food Lion, a PowerSecure customer
accounting for approximately 15% of our consolidated revenues, was our only
customer that 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 2% of our total consolidated revenues
in fiscal 2004 and 3% in fiscal 2003 and fiscal 2002.

COMPETITION

     The markets for our 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 adversely affect our
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., Sensus Metering
               Systems, inc. (formerly known as Invensys, Inc.), Neptune
               Technology Group, Inc. and other smaller entities such as
               Comverge, Inc., Cellnet Technology, Inc. and Nertec, Inc.;

          -    numerous and diverse entities in the M2M market segments,
               including Telenetics Corporation, Airlink Communications Inc.,
               Sierra Wireless Inc., Wavecom SAand Enfora L.P.;

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

          -    large manufacturers of power generation equipment with
               substantial distribution networks, such as Caterpillar Inc.,
               Cummins Inc. (including Onan), Detroit Diesel Corp., Kohler
               Co.and Generac Power Systems, Inc.;

          -    large, well established and diversified companies like
               Schlumberger, Emerson Electric Co., ABB, Siemens and Honeywell
               International Inc. 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 Corp., Williams Energy and Hanover Compressor
               Company; 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;


                                        9

<PAGE>

          -    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 in many of our markets 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 competitors
entering the market.

     Many of our existing and potential competitors have better name
recognition, longer operating histories, access to larger customer bases and
greater financial, technical, 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, financial condition and
results of operations.

     Numerous companies compete directly with Southern Flow in the natural gas
measurement services industry, including companies that provide the same
services as Southern Flow and companies that 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.
Because Southern Flow offers a complete range of natural gas measurement
services over a wide geographical area, management believes Southern Flow offers
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, 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 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 Electric Company, Mitsubishi, Ballard Power Systems, Inc.


                                       10

<PAGE>

and Plug Power Inc. Several large companies also are becoming leaders in
uninterruptible power supply system technology, including American Power
Conversion Corporation, Invensys, Liebert Corporation (a subsidiary of Emerson
Electric), GE Digital Energy, Lucent Technology, Inc. , MGE UPS Systems (a unit
of Schneider Electric Group) and PowerWare Corporation. RealEnergy, 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. (now owned by Itron,
Inc.), Invensys, Engage Energy and eLutions Inc., 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 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.

REGULATION

     Our businesses 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


                                       11

<PAGE>

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 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 March 1, 2005, we had 225 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. Our
future success is dependent in substantial part upon our ability to attract,
retain and motivate qualified management, technical, marketing and other
personnel.

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 provide for solutions in 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 2004 were $667,000, as compared to $627,000 in 2003 and $552,000 in 2002.
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 generators, memory chips, electronic
components, printed circuit boards, specialized sub-assemblies, 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


                                       12

<PAGE>

that are readily available from multiple suppliers, we currently procure, and
expect to continue to procure, certain components, such as generators, from
single source manufacturers due to unique designs, quality and performance
requirements, and favorable pricing arrangements. While, in the opinion of
management, the loss of any one supplier of materials, other than generators,
would not have a material adverse impact on our business or operations due to
our belief that suitable and sufficient alternative vendors would be available,
from time to time we do encounter difficulties in acquiring certain components
due to shortages that periodically arise, supply problems from our suppliers,
obsolescence 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.


                                       13

<PAGE>

SEGMENT INFORMATION

          We operate in three market segments:

          -    distributed generation;

          -    natural gas measurement services; and

          -    automated data collection and telemetry.

          Financial information related to our segment operations for the past
three fiscal years is set forth in Note 11, "Segment and Related Information",
of the notes to our consolidated financial statements included elsewhere in this
Report and incorporated herein by this reference.

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 contents of and the information on our website is
not a part of, and 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 $3,778, including operating costs, and expires December 31, 2009,
with an option to cancel the lease on December 31, 2007.

          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 $33,000 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 two facilities, which are located in Greensboro and
Wake Forest, North Carolina, consisting of 11,306 square feet in the aggregate.
The leases on these facilities have a monthly rental obligation of $10,851 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. 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 11,365 square feet of its space
(plus rights to common areas) on a month-to-month basis for $11,907 monthly
rental. InstruTech Florida is utilizing a significant portion of the remainder
of this space on a cost-free basis as one of the terms of the sale of the
contract manufacturing business to InstruTech Florida. Metretek Florida is
evaluating its facilities and space needs after the lease expires, as its needs
have been substantially reduced since it discontinued its contract manufacturing
business.

          We believe our facilities are suitable and adequate to meet our
current and anticipated needs, except as noted above for Metretek Florida. 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

          Effective in July 2004, we obtained final approval of the settlement
of the class action lawsuit (the "Class Action") filed in January 2001 by
Douglas W. Heins (the "Class Action Plaintiff"), individually and on behalf of a
class of other persons similarly situated (the "Class") 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"), 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


                                       14

<PAGE>

Defendants"). The 1997 Trust was an energy program of which MGT, the managing
trustee, and Messrs. Marcum, Wanger, Packard and Farstad are or were the active
trustees. The Class Action alleged 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.

          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"). The Heins Settlement was
granted final approval by the Denver Court on June 11, 2004 and became effective
on July 26, 2004.

          The Heins Settlement created a settlement fund (the "Heins Settlement
Fund") for the benefit of the Class. A total of $2,375,000 in proceeds of our
Company's directors' and officers' insurance policy (the "Policy") was used in
the Heins Settlement. Pursuant to the Heins Settlement, we paid $375,000 and on
June 30, 2004 we issued a note payable to the Heins Settlement Fund in the
amount of $3.0 million (the "Heins Settlement Note") and commenced payments
under the Heins Settlement Note. The Heins Settlement Note bears interest at the
rate of prime plus three percent, is payable in 16 quarterly installments of
$187,500 principal plus accrued interest each, and is guaranteed by the 1997
Trust and our subsidiaries.

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

          The Heins Settlement fully and finally released all claims between the
Class and us and the other Metretek Defendants. Under the Heins Settlement, the
Class also released Jeff Farstad from claims by the Class against him by reason
of his status as a trustee of the 1997 Trust. However, the Heins Settlement did
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 did 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.

          We are vigorously pursuing cross-claims and third party claims ("Other
Party Claims"), including claims against the Farstad Defendants and against
attorneys, consultants and a brokerage firm (the "Other Parties") involved in
the transactions underlying the claims in the Class Action, seeking recovery of
damages and contribution, among other things, from the Other Parties. Some of
the Other Parties have asserted counterclaims against us, which we are
aggressively defending and believe are without merit. Out of any net recovery
from the resolution of any of these claims, which is calculated by deducting our
litigation expenses and any counterclaims against us that result in a recovery
by Other Parties related to the Other Parties' liability to the Class (but is
calculated without deducting any other counterclaims successfully asserted
against us by the Other Parties), 50% would be allocated to offset our
obligations under the Heins Settlement Note, and the remaining 50% would be
allocated to the Heins Settlement Fund as additional settlement funds. We cannot
provide any assurance that we will be successful on any of these Other Party
Claims or the Other Party counterclaims or, even if successful, on the amount,
if any, or the timing of any recovery from any of these claims.

          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 matters were submitted to a vote of our security holders during the
fourth quarter of 2004.


                                       15

<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
        ISSUER PURCHASES OF EQUITY SECURITIES

MARKET INFORMATION

          Since October 15, 2002, our Common Stock has traded over-the-counter
on the OTC Bulletin Board under the symbol "MTEK". Previously, our Common Stock
was listed and traded on the Nasdaq SmallCap Market from June 3, 2002 through
October 14, 2002, and before June 3, 2002 our Common Stock was listed and traded
on the Nasdaq National Market.

          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
OTC Bulletin Board, as indicated below. Quotations for trades on the OTC
Bulletin Board related 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, 2004:
First Quarter...................   $3.70   $1.35
Second Quarter..................    4.17    2.45
Third Quarter...................    2.50    1.16
Fourth Quarter .................    2.50    1.65

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>

          On March 7, 2005, the last sale price of our Common Stock as reported
on the OTC Bulletin Board was $3.00.

HOLDERS

          As of March 7, 2005, there were 304 holders of record of our Common
Stock. Because many of the shares of our Common Stock are held by brokers and
other institutions on behalf of the beneficial owners, 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 by prohibiting the payment of
dividends by Southern Flow, Metretek Florida or PowerSecure without the consent
of the lender. 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.

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."

RECENT SALES OF UNREGISTERED SECURITIES

          All securities sold by us during fiscal 2004 in transactions that were
not registered under the Securities Act have been previously reported in
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the
SEC.

ISSUER PURCHASES OF EQUITY SECURITIES

          We did not repurchase any of our equity securities during the fourth
quarter of fiscal 2004.


                                       16

<PAGE>

ITEM 6. SELECTED FINANCIAL DATA

          The following selected consolidated financial data has been derived
from our audited consolidated financial statements. This 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,
                                              ------------------------------------------------
                                                2004      2003      2002      2001      2000
                                              -------   -------   -------   -------   --------
                                                  (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S>                                           <C>       <C>       <C>       <C>       <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Total revenues                                $35,177   $36,474   $26,453   $29,326   $ 21,698
Costs and expenses
   Cost of sales and services                  23,897    25,687    17,938    21,322     16,695
   General and administrative                   6,835     6,105     5,710     5,641      5,637
   Selling, marketing and service               2,112     1,601     1,555     1,360      2,269
   Depreciation and amortization (1)              579       515       576     1,418      1,710
   Research and development                       667       627       552       797      9,917
   Interest, finance charges and other            480       285       205       154        137
   Loss on impairment of assets                    --        --        --        --      3,161
   Provision for litigation costs, net             --        --     1,764        --         --
   Nonrecurring charges                            --        --       182        --         --
                                              -------   -------   -------   -------   --------
      Total costs and expenses                 34,570    34,820    28,482    30,692     39,526
                                              -------   -------   -------   -------   --------
Income (loss) from continuing operations
   before minority interest and taxes             607     1,654    (2,029)   (1,366)   (17,828)
Minority interest                                (238)     (207)       --        --        860
Income taxes                                      (48)      (57)      (46)      (35)       (19)
Equity income in unconsolidated affiliate       1,254       469       211        16         59
                                              -------   -------   -------   -------   --------
Income (loss) from continuing operations        1,575     1,859    (1,864)   (1,385)   (16,928)
                                              -------   -------   -------   -------   --------
Discontinued Operations (2):
   Loss on disposal                            (3,356)       --        --        --         --
   Loss from operations                        (1,463)     (980)   (1,518)       --         --
                                              -------   -------   -------   -------   --------
Loss on discontinued operations                (4,819)     (980)   (1,518)       --         --
                                              -------   -------   -------   -------   --------
Net income (loss)                             $(3,244)  $   879   $(3,382)  $(1,385)  $(16,928)
                                              =======   =======   =======   =======   ========
PER SHARE AMOUNTS (3):
Income (loss) from continuing operations:
   Basic                                      $  0.03   $  0.11   $ (0.45)  $ (0.36)  $  (4.13)
                                              =======   =======   =======   =======   ========
   Diluted                                    $  0.03   $  0.11   $ (0.45)  $ (0.36)  $  (4.13)
                                              =======   =======   =======   =======   ========
Net income (loss):
   Basic                                      $ (0.47)  $ (0.06)  $ (0.70)  $ (0.36)  $  (4.13)
                                              =======   =======   =======   =======   ========
   Diluted                                    $ (0.45)  $ (0.06)  $ (0.70)  $ (0.36)  $  (4.13)
                                              =======   =======   =======   =======   ========
Weighted average common shares outstanding:
   Basic                                        9,531     6,043     6,077     6,031      5,412
                                              =======   =======   =======   =======   ========
   Diluted                                     10,036     6,051     6,077     6,031      5,412
                                              =======   =======   =======   =======   ========
</TABLE>


                                       17

<PAGE>

<TABLE>
<CAPTION>
                                               DECEMBER 31,
CONSOLIDATED BALANCE         -----------------------------------------------
SHEET DATA:                    2004      2003      2002      2001      2000
--------------------         -------   -------   -------   -------   -------
                                              (IN THOUSANDS)
<S>                          <C>       <C>       <C>       <C>       <C>
Cash and cash equivalents    $ 2,951   $ 2,102   $   885   $   696   $   469
Working capital                5,117     5,964     4,097     3,596     4,390
Total assets                  30,211    23,327    19,199    20,294    20,822
Long-term notes payable        6,075     5,227     4,691     1,268     1,930
Redeemable preferred stock               9,422     8,532     7,680     6,903
Total stockholders' equity    12,917     1,169     1,165     5,358     7,277
</TABLE>

----------
(1)  Depreciation and amortization amounts for fiscal 2001 and 2000 included
     goodwill amortization of $675,000 and $847,000, respectively. On January 1,
     2002, we adopted Statement of Financial Accounting Standards (SFAS) No.
     142, "Goodwill and Other Intangible Assets", which required us to
     discontinue the amortization of goodwill.

(2)  During fiscal 2004, our Board of Directors approved a plan to discontinue
     the business of MCM and sell all of its manufacturing assets. The
     operations of the discontinued MCM disposal group have been reclassified to
     discontinued operations for all periods presented. In addition, certain
     other amounts prior to fiscal 2004 have been reclassified to conform to
     fiscal 2004 presentation. Such reclassifications had no impact on our net
     income (loss) or stockholders' equity.

(3)  Per share amounts for all periods presented include the effects of
     preferred stock deemed distributions. Per share amounts for fiscal 2003
     include the effects of allocation of earnings to participating preferred
     stock as required by the provision of EITF 03-06.

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, 2004 ("fiscal 2004"), December 31,
2003 ("fiscal 2003") and December 31, 2002 ("fiscal 2002") and of our
consolidated financial condition as of December 31, 2004 and 2003 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;


                                       18

<PAGE>

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

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

     Until recently, Metretek Florida had also provided contract manufacturing
services through its MCM subsidiary. These contract manufacturing services were
discontinued during fiscal 2004, and the contract manufacturing business and
most of its assets were sold in December 2004.

     In addition to these operating subsidiaries, we also own an approximate 26%
economic interest in an unconsolidated business, MM 1995-2, through our
subsidiary MGT. MGT acquired additional equity interests in MM 1995-2 during the
first quarter of 2004, increasing its economic interest in MM 1995-2 from 15% to
26%. As a result of this acquisition, the equity income from MM 1995-2 is
becoming a more significant part of our consolidated results, contributing
$1,254,000 to our income from continuing operations during fiscal 2004, a
substantial increase from $469,000 in fiscal 2003.

     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 and developments of companies, businesses and
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. In recent 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 the third quarter of 2004, our Board of Directors approved a plan to
discontinue the contract manufacturing business operated by MCM and to sell or
otherwise dispose of all of the related contract manufacturing assets. Contract
manufacturing operations had previously been included in our Metretek Florida
operating segment. We made our determination to exit the contract manufacturing
business as the result of recent unacceptable losses in that business that
adversely affected our consolidated financial results as well as industry and
market factors and projections of our contract manufacturing operations that
were not favorable in the foreseeable future. The discontinuance of contract
manufacturing operations is intended to allow Metretek Florida to focus on its
telemetry and AMR business lines, including the operations related to its new
InvisiConnect(TM) technology.

     In connection with this discontinuance, on December 30, 2004 we completed
the sale of our contract manufacturing business and most of the related assets
to InstruTech Florida. The assets of the discontinued operations not included in
the sale to InstruTech Florida, which consist principally of receivables and
inventory, are being liquidated through collections of receivables and through
subsequent sales of inventory to others, including InstruTech Florida. The
success of this sale depends upon our ability to receive payments from the
promissory note issued by InstruTech Florida and repayments from the bridge loan
advance in connection with that sale, and our ability to recover the value of
our remaining contract manufacturing inventory from sales therof.

     We recorded a loss on discontinued operations of MCM during fiscal 2004 of
$4,819,000, including a $3,356,000 loss from the disposal of the contract
manufacturing assets. The contract manufacturing assets have been written down
to our best estimate of their fair value less costs to sell. The write-down
amounts included in the loss from disposal of contract manufacturing business
total $2,835,000. The remaining $521,000 loss from disposal of the contract
manufacturing business represents accrued severance and shutdown costs.

     Overall during fiscal 2004, our consolidated revenues declined by
$1,297,000 compared to fiscal 2003. This decline was principally due to the
$4,093,000 decline in revenues at Metretek Florida, which was partially offset
by increased revenues at Southern Flow and PowerSecure, as well as an increase
in other revenues. Total segment profits were down $1,048,000, due principally
to a decline in segment profits at Metretek Florida of $956,000.

     The substantial declines in revenues and segment profitability experienced
by Metretek Florida in fiscal 2004, as compared to fiscal 2003, were principally
due to the occurrence of two significant but one-time only projects involving
sales of field devices in fiscal 2003 with revenues of $4,258,000. Southern
Flow's revenues and segment profits showed substantial improvement in fiscal
2004, as compared to fiscal 2003, as a result of generally improved market
conditions and strong natural gas wellhead prices. Southern Flow's revenues
increased by $954,000 and its segment profits increased by $321,000.
PowerSecure's revenues for fiscal 2004 increased by 9%


                                       19

<PAGE>

compared to fiscal 2003. However, PowerSecure segment profit for fiscal 2004
declined slightly compared to fiscal 2003 as the result of increased general,
administrative and sales expenses, partially offset by higher gross profit
margins.

     During fiscal 2004, we recorded a net loss from discontinued operations of
$4,819,000 compared to a net loss from discontinued operations of $980,000
during fiscal 2003. Fiscal 2004 loss from discontinued operations increased over
fiscal 2003 primarily as a result of the $3,356,000 charge for the loss on the
discontinuance of our contract manufacturing operations discussed above, but
also as a result of increasing losses of MCM, which contributed to our decision
to discontinue the operations of MCM.

     Also during fiscal 2004, we recorded a deemed distribution on our Series B
Preferred Stock of $1,244,000 compared to $890,000 during fiscal 2003. The
fiscal 2004 deemed distribution increased over fiscal 2003 due to a $593,000
non-cash inducement to Preferred Stockholders who converted a total of 2,750
shares of Series B Preferred Stock (including accrued and unpaid dividends) in
connection with or after the Private Placement discussed below. However, because
the Series B Preferred Stock was redeemed pursuant to its terms on December 9,
2004, no further deemed dividend will accrue after such date.

     After the loss from discontinued operations of MCM, the non-cash preferred
stock deemed distribution and allocation of undistributed earnings to
participating preferred stock, our net loss attributable to common shareholders
in fiscal 2004 increased to $4,487,000 as compared to a $339,000 net loss
attributable to common shareholders in fiscal 2003. The primary reason for this
decrease was the charge for the loss from disposal of MCM, the non-cash deemed
dividend inducement to the converting Preferred Stockholders in connection with
the Private Placement and the decline in the performance of Metretek Florida.

     During fiscal 2004, we took substantial steps to improve our balance sheet
and liquidity. In May 2004, we completed a private placement to institutional
and accredited investors of 3,510,548 shares of our Common Stock and warrants to
purchase 702,109 shares of our Common Stock, raising gross proceeds of
$10,883,000 (the "Private Placement"). We received net cash proceeds of
$9,829,000 from the Private Placement, after deducting transaction expenses
including the placement agent's fee. The net proceeds from the Private Placement
were used principally to meet our December 2004 mandatory redemption obligations
related to our Series B Preferred Stock, with the remainder being used for other
business commitments and initiatives.

     In addition, certain holders of our outstanding shares of Series B
Preferred Stock converted a total of 2,750 shares of Preferred Stock, including
accrued and unpaid dividends thereon. As a result of the conversion of these
shares of Series B Preferred Stock, our maximum aggregate redemption obligation
at December 9, 2004 was reduced from $10.3 million to approximately $6.2
million, and the deemed distribution on the Series B Preferred Stock was reduced
for future periods as a result of the reduction in the number of shares of
Series B Preferred Stock outstanding. See "--Liquidity and Capital Resources"
below in this Item for further discussion concerning the Private Placement and
the conversion of Series B Preferred Stock.

     Also, during fiscal 2004, we acquired additional equity interests in our
unconsolidated affiliate MM 1995-2 at a purchase price of $956,000. We financed
the acquisition of the additional equity interests through a $961,000 term loan
from a commercial bank to a newly formed majority owned subsidiary, Conquest
Acquisition, of which we guaranteed $625,000. The additional equity interests in
MM 1995-2 contributed significantly to the increase in our equity income during
fiscal 2004. We expect cash distributions from MM 1995-2 to Conquest Acquisition
will be sufficient to fund the monthly payments on the term loan, as well as
provide cash for other business commitments and initiatives.

     The terms of our Series B Preferred Stock required us to redeem all shares
of our Series B Preferred Stock that remained outstanding on December 9, 2004 at
a redemption price equal to the liquidation preference of $1,000 per share plus
accumulated and unpaid dividends. Our total redemption obligation was
approximately $6.2 million, of which $5.3 million had been paid through December
31, 2004 and the remainder will be paid as we receive the requisite certificates
and documentation.

     Another important factor in our liquidity relates to the settlement of the
Class Action lawsuit. On June 11, 2004, the Denver Court granted final approval
of the Heins Settlement, which became effective on July 26, 2004. Under the
Heins Settlement, we commenced payments on a four-year $3 million promissory
note on June 30, 2004. See "--Liquidity and Capital Resources" below in this
Item.

     Our Credit Facility between Wells Fargo and Metretek Florida was amended
during both the third and fourth quarters of 2004 to establish less restrictive
financial covenants for the remainder of fiscal 2004 and to


                                       20

<PAGE>

establish financial covenants for 2005 reflecting Metretek Florida's projected
financial results and condition resulting from its operations without the
discontinued contract manufacturing business

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;

     -    warranty reserve;

     -    valuation of goodwill and other intangible assets;

     -    deferred tax valuation allowance; and

     -    costs of exit or disposal activities and similar nonrecurring charges.

     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 the
SEC's Staff Accounting Bulletin No. 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 turn-key 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 generally provide for payment of costs incurred, but may result in an
adjustment to profit already recognized in a prior period.


                                       21

<PAGE>

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

     Revenues on PowerSecure's shared savings distributed generation projects
are recognized as the energy savings are realized by the customer at their site.

     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 and establish
necessary reserves on an account-by-account basis. In addition, we also provide
for a general reserve for all accounts receivable. If the financial condition of
our customers were to deteriorate in the future, resulting in an impairment of
their ability to make payments, additional allowances may be required.

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

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

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


                                       22

<PAGE>

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 most recent annual testing of the
impairment of goodwill as of October 1, 2004. As a result of the test, we
concluded that no impairment of goodwill existed as of October 1, 2004.

     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.

     Costs of Exit or Disposal Activities and Similar Nonrecurring Charges. We
record a liability for costs associated with exit or disposal activities equal
to the fair value of the liability when the liability is incurred. Such costs
associated with a discontinued operation are reported in results of discontinued
operations. Costs of an exit or disposal activity that do not involve a
discontinued operation are included in income (loss) from continuing operations
before income taxes in our consolidated statement of operations.


                                       23

<PAGE>

RESULTS OF OPERATIONS

     The following table sets forth information related to our primary business
segments and is intended to assist in understanding our results of operations
for the periods presented. During the third quarter of 2004, our Board of
Directors approved a plan to discontinue the business of MCM and sell all of its
manufacturing assets. The operations of the discontinued MCM disposal group have
been reclassified to discontinued operations for all periods presented in our
consolidated statements of operations. The following table excludes revenues and
costs and expenses of the discontinued MCM operations.

<TABLE>
<CAPTION>
                           YEARS ENDED DECEMBER 31,
                         ---------------------------
                           2004      2003      2002
                         -------   -------   -------
                           (ALL AMOUNTS REPORTED IN
                                  THOUSANDS)
<S>                      <C>       <C>       <C>
REVENUES:
   Southern Flow         $12,759   $11,805   $12,288
   PowerSecure            18,630    17,122     8,228
   Metretek Florida        3,312     7,405     5,886
   Other                     476       142        51
                         -------   -------   -------
      Total              $35,177   $36,474   $26,453
                         =======   =======   =======

GROSS PROFIT:
   Southern Flow         $ 3,393   $ 2,993   $ 3,308
   PowerSecure             5,707     4,902     1,944
   Metretek Florida        1,704     2,751     3,212
                         -------   -------   -------
      Total              $10,804   $10,646   $ 8,464
                         =======   =======   =======

SEGMENT PROFIT (LOSS):
   Southern Flow         $ 1,940   $ 1,619   $ 1,954
   PowerSecure             1,342     1,574      (388)
   Metretek Florida         (247)      709       474
   Other                  (2,428)   (2,247)   (4,070)
                         -------   -------   -------
      Total              $   607   $ 1,655   $(2,030)
                         =======   =======   =======
</TABLE>

     We have three reportable segments. 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 are natural gas measurement
services, distributed generation and automated energy data management.

     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, 2004, the 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.

     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


                                       24

<PAGE>

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 contract manufacturing
operations. During fiscal 2004, we discontinued that contract manufacturing
business.

          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, fees earned from managing our 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.

          During the third quarter of 2004, our Board of Directors approved a
plan to discontinue the contract manufacturing business of MCM and all of its
manufacturing assets were sold in December 2004. The operations of the
discontinued MCM disposal group have been reclassified to discontinued
operations for all periods presented in our consolidated statements of
operations. The following discussion regarding revenues and costs and expenses
for fiscal 2004 compared to fiscal 2003 and fiscal 2003 compared to fiscal 2002
excludes revenues and costs and expenses of the discontinued MCM operations.

          FISCAL 2004 COMPARED TO FISCAL 2003

          Revenues. Our revenues are derived almost entirely from the sales of
products and services by our subsidiaries. Our consolidated revenues for fiscal
2004 decreased $1,297,000, or 4%, compared to fiscal 2003. The decrease in our
consolidated revenues was due a decrease in revenues by Metretek Florida, which
was partially offset by increases in revenues by Southern Flow and by
PowerSecure as well as an increase in fee income from managing the operations of
MM 1995-2.

          Metretek Florida's revenues decreased $4,093,000, or 55%, during
fiscal 2004 compared to fiscal 2003, consisting of a decrease in Metretek
Florida's domestic sales of field devices, data collection software products,
and communications solutions products. The decrease in Metretek Florida's sales
of field devices, data collection software products and communications solutions
products was due to significant revenues generated from two large projects in
fiscal 2003, which resulted in the recognition of approximately $4,258,000 in
sales, for which there were no comparable projects in fiscal 2004. 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 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.

          Southern Flow's revenues increased $954,000, or 8%, during fiscal
2004, as compared to fiscal 2003. The increase in Southern Flow's revenues was
primarily attributable to a generally improved market for its services due
principally to a higher level of natural gas prices.

          PowerSecure's revenues increased $1,508,000, or 9%, during fiscal 2004
compared to fiscal 2003. The increase in PowerSecure's revenues during fiscal
2004 compared to fiscal 2003 was due to an increase of $977,000 in revenues from
shared savings projects, professional services, monitoring and other service
related revenues, due to an increased marketing focus on such projects and
services, and an increase of $531,000 distributed generation turn-key system
project sales and services. The increase in PowerSecure's overall distributed
generation turn-key project sales and services was attributable to a 138%
increase in the total number of projects, although the average project size
decreased by 57%, resulting from a substantially increased number of sales of
distributed generation systems that excluded a generator from the package, such
as sales of PowerSecure's QuickPower system. As PowerSecure has increased the
marketing of its systems and expanded the scope of its offerings and of its
geographic marketing, it has experienced a major increase in the number of
projects. However, many of the systems it sold in fiscal 2004 were systems where
the customer acquired or leased its own generator, the single biggest component
in a complete distributed generation system, from another source. In addition,
the average size of complete turn-key distributed generation projects was
smaller in fiscal 2004 than in fiscal 2004, attributable to fewer very large
projects. There is no assurance, however, that these recent trends in the number
or size of PowerSecure projects will continue in fiscal 2005 or thereafter, due
to quarterly and annual fluctuations, as discussed below under "--Quarterly
Fluctuations". PowerSecure's revenues are influenced by the number, size and
timing of various


                                       25

<PAGE>

projects and have fluctuated significantly in the past and are expected to
continue to fluctuate significantly in the future.

          Other revenues increased $334,000 during fiscal 2004, as compared to
fiscal 2003. This increase was comprised principally of an increase in fee
revenues earned from managing MM 1995-2, which operates four water processing
and deep injection facilities in northeastern Colorado. The increase in fee
revenues was due to higher levels of natural gas production activity in its
operating area.

          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
                                      -----------------------   --------------
                                           2004      2003           $       %
                                         -------   -------       -------   ---
<S>                                   <C>          <C>          <C>        <C>
COSTS AND EXPENSES:                        (IN THOUSANDS)
Costs of Sales and Services
   Southern Flow                         $ 9,365   $ 8,812       $   553     6%
   PowerSecure                            12,924    12,220           704     6%
   Metretek Florida                        1,608     4,654        (3,046)  -65%
                                         -------   -------       -------
      Total                               23,897    25,686        (1,789)   -7%

General and administrative                 6,835     6,105           730    12%
Selling, marketing and service             2,112     1,601           511    32%
Depreciation and amortization                579       515            64    12%
Reserarch and development                    667       627            40     6%
Interest, finance charges and other          480       285           195    68%
Income taxes                                  48        57            (9)  -16%
</TABLE>

          Costs of sales and services include materials, personnel and related
overhead costs incurred to purchase, assemble and install products and provide
services. The overall 7% decrease in cost of sales and services for fiscal 2004,
compared to fiscal 2003, was attributable entirely to decreased activity at
Metretek Florida.

          The 6% increase in Southern Flow's costs of sales and services in
fiscal 2004 reflected the 8% increase in its revenues. Southern Flow's gross
profit margin increased to 26.6% for fiscal 2004, compared to 25.4% during
fiscal 2003, reflecting generally improved market conditions.

          The 6% increase in PowerSecure's costs of sales and services in fiscal
2004 over fiscal 2003 was a combined result of the 9% increase in PowerSecure's
revenues, cost efficiencies in project installation and construction, and a
higher percentage of revenues from smaller but higher margin projects and
service related revenues. As a result, PowerSecure's gross profit margin
increased to 30.6% during fiscal 2004, as compared to 28.6% during fiscal 2003.

          The 65% decrease in Metretek Florida's costs of sales and services in
fiscal 2004 was a direct result of the 55% decrease in Metretek Florida's
revenues. Metretek Florida's gross profit margin increased to 51.4% for fiscal
2004, compared to 37.1% for fiscal 2003. The primary cause of this increase in
Metretek Florida's gross profit margin was a change in the mix of products sold,
due to a significant decrease in lower margin sales of OEM products to a single
customer in fiscal 2003 for which there were no comparable sales during fiscal
2004.

          General and administrative expenses include personnel and related
overhead costs for the support and administrative functions. The 12% increase in
general and administrative expenses in fiscal 2004, as compared to fiscal 2003,
was primarily due to increases in corporate costs and increases in overhead
costs associated with the development and growth of PowerSecure's business
necessitating an expansion of PowerSecure's workforce. The increase in corporate
costs included additional personnel costs, director expenses, insurance costs,
and professional expenses associated with our investor awareness program and
costs incurred in connection with analyzing and documenting our internal
accounting control systems as required by the Sarbanes-Oxley Act of 2002. These
general and administrative expense increases were partially offset by a
reduction in legal expenses associated with the Class Action lawsuit during
fiscal 2004 compared to fiscal 2003.

          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 32% increase in


                                       26

<PAGE>

selling, marketing and service expenses in fiscal 2004, as compared to fiscal
2003, was due entirely to increased personnel, commission costs and business
development expenses associated with the development and expansion of the
business of PowerSecure during fiscal 2004.

          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 12% increase in depreciation and
amortization expenses in fiscal 2004, as compared to fiscal 2003, primarily
reflects an increase in depreciable equipment at PowerSecure, including
depreciation of two shared savings projects placed in service during 2004, as
well as amortization of the premium paid for our additional investment in MM
1995-2 in early 2004.

          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 6% increase in research and development expenses in fiscal 2004,
as compared to fiscal 2003, primarily reflects additional personnel and
associated costs at Metretek Florida that were specifically directed toward
further development of our new InvisiConnect(TM) suite of M2M products.

          Interest, finance charges and other expenses include interest and
finance charges on our Credit Facility as well as other non-operating expenses.
The 68% increase in interest, finance charges and other expenses in fiscal 2004,
as compared to fiscal 2003, reflects interest on the $3 million Heins Settlement
Note under which we commenced payments on June 30, 2004, additional bank finance
charges and interest on borrowings related to PowerSecure's line of credit,
which commenced in September 2003, as well as additional interest costs related
to two PowerSecure shared savings project loans and the term loan used to
finance our additional equity interest in our unconsolidated affiliate, all of
which commenced in fiscal 2004.

          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 16% decrease
in income taxes in fiscal 2004, as compared to fiscal 2003, was entirely due to
reduced state income tax expense accrued by Southern Flow in Louisiana,
Oklahoma, Alabama, and Mississippi.

          FISCAL 2003 COMPARED TO FISCAL 2002

          Revenue. Our consolidated revenues for fiscal 2003 increased by more
than $10 million, or 38%, over our consolidated revenues for fiscal 2002 to
$36.5 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. The number of projects that PowerSecure completed or had in
process during fiscal 2003 increased by 110% over the number of projects it
completed or had in process during fiscal 2002. PowerSecure's average revenue
per project for completed and in-process projects was essentially unchanged
during fiscal 2003 compared to fiscal 2002, although the size of the projects
varied significantly. PowerSecure's fiscal 2003 revenues also included $288,000
of service related revenues, as compared to $350,000 during fiscal 2002. As
discussed below under "Quarterly Fluctuations", PowerSecure's revenues are
influenced by the number, size and timing of various projects and have
fluctuated significantly in the past and are expected to continue to fluctuate
significantly in the future.

          The 26% increase in Metretek Florida's revenues in fiscal 2003
compared to fiscal 2002 was due to an increase of $2,798,000 in sales of field
devices, data collection software products, and communications solutions
products. The increase in 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. 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.

          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


                                       27

<PAGE>

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.

          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          $        %
                                         -------   -------      -------   ----
<S>                                   <C>          <C>          <C>       <C>
COSTS AND EXPENSES:                        (IN THOUSANDS)
Costs of Sales and Services
   Southern Flow                         $ 8,812   $ 8,980      $  (168)    -2%
   PowerSecure                            12,220     6,284        5,936     94%
   Metretek Florida                        4,654     2,674        1,980     74%
                                         -------   -------      -------
      Total                               25,686    17,938        7,748     43%
General and administrative                 6,105     5,710          395      7%
Selling, marketing and service             1,601     1,555           46      3%
Depreciation and amortization                515       576          (61)   -11%
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                          --       183         (183)  -100%
Income taxes                                  57        46           11     24%
</TABLE>

          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 74% increase in Metretek Florida's costs of sales and services in
fiscal 2003 was likewise a direct result of the 26% increase in Metretek
Florida's revenues. Metretek Florida's overall gross profit margin decreased to
37.1% for fiscal 2003, compared to 54.6% for fiscal 2002. The primary cause of
this decrease in Metretek Florida's gross profit margin was a change in the mix
of products sold, represented by a significant increase in lower margin sales of
OEM products to a single customer in fiscal 2003 compared to fiscal 2002.

          The 7% 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 Southern Flow during fiscal 2003 attributable to increases
in professional fees, salaries and wages.

          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.


                                       28

<PAGE>

          The 11% decrease in depreciation and amortization expenses in fiscal
2003, as compared to fiscal 2002, primarily reflects reductions at Metretek
Florida partially offset by additional depreciation expense at PowerSecure due
to the acquisition of additional depreciable equipment during fiscal 2003 and
late in fiscal 2002.

          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.

          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 $183,000 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, Alabama and Mississippi.

QUARTERLY FLUCTUATIONS

          Our 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 obtain adequate supplies of key components and
          materials for our products on a timely and cost-effective basis;

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

     -    the timing, pricing and market acceptance of our new products and
          services such as Metretek Florida's new M2M offerings;

     -    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;

     -    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;


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<PAGE>

     -    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 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 four 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, 2004, the vast majority
of PowerSecure's revenues constituted non-recurring revenues.

          Metretek Florida has historically derived most of its revenues from
sales of its products and services to the utility industry. Metretek Florida has
experienced variability in its 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 addition, Metretek Florida has only a limited operating history
with its new M2M and telemetry business, and its operating results in this new
business may fluctuate significantly as it develops this business.

          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.

LIQUIDITY AND CAPITAL RESOURCES

          Capital Requirements. We require capital primarily to finance our:

               -    operations;

               -    inventory;

               -    accounts receivable;

               -    research and development efforts;

               -    property and equipment acquisitions, including investments
                    in shared savings projects;

               -    software development;

               -    debt service requirements;

               -    liabilities of our discontinued MCM operations; and

               -    business and technology acquisitions and other growth
                    transactions.

          In addition, pursuant to the terms of our Series B Preferred Stock, we
were required to redeem all shares of our Series B Preferred Stock that remained
outstanding on December 9, 2004. See "--Preferred Stock Redemption" below.


                                       30

<PAGE>

          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, borrowings on shared savings projects,
borrowings on a term loan to fund our acquisition of additional interests in our
unconsolidated affiliate, and proceeds from private and public sales of equity.
As of December 31, 2004, we had working capital of $5,117,000, including
$2,951,000 in cash and cash equivalents, compared to working capital of
$5,964,000 on December 31, 2003, which included $2,102,000 in cash and cash
equivalents.

          Net cash used in operating activities was $1,869,000 in fiscal 2004,
consisting of approximately $2,012,000 of cash provided by continuing
operations, before changes in assets and liabilities, approximately $2,439,000
of cash used by changes in working capital and other asset and liability
accounts, and approximately $1,442,000 of cash used by discontinued operations
of MCM. This compares to net cash provided by operating activities of $529,000
in fiscal 2003, consisting of approximately $2,473,000 of cash provided by
continuing operations, before changes in assets and liabilities, approximately
$1,140,000 of cash used by changes in working capital and other asset and
liability accounts, and approximately $804,000 of cash used by discontinued
operations of MCM.

          Net cash used in investing activities was $3,308,000 in fiscal 2004,
as compared to net cash used in investing activities of $295,000 in fiscal 2003.
During fiscal 2004, we purchased additional equity interests in our
unconsolidated affiliate for $956,000 and used $2,230,000 to purchase equipment
items, including $1,777,000 used to purchase equipment for three shared savings
distributed generation projects. Net cash used in investing activities during
fiscal 2003 was attributable to the purchase of equipment at PowerSecure and
Southern Flow.

          Net cash provided by financing activities was $6,027,000 in fiscal
2004, compared to net cash provided by financing activities of $983,000 in
fiscal 2003. The majority of the net cash provided by financing activities in
fiscal 2004 was attributable to $9,829,000 net proceeds from a Private Placement
of our Common Stock in May 2004, $1,213,000 proceeds from two loans to fund the
purchase of equipment for two shared savings distributed generations facilities,
$961,000 proceeds from a bank term loan used to finance the acquisition of the
additional equity interests in our unconsolidated affiliate, and $411,000
proceeds from stock option exercises. These cash proceeds were partially offset
by $5,345,000 cash payments to redeem our Series B Preferred Stock, and
$1,062,000 payments on long-term notes payable and capital lease obligations.
The net cash provided by financing activities in fiscal 2003 represented net
borrowings on our line of credit and proceeds from an equipment loan which were
partially offset by payments on our equipment loans and payments on capital
lease obligations.

          Our research and development expenses totaled $667,000 during fiscal
2004, compared to $627,000 during fiscal 2003. Virtually all of our fiscal 2004
research and development expenses were directed toward the enhancement of
Metretek Florida's business, including the development of its M2M communications
products. During fiscal 2005, we plan to continue our research and development
efforts to enhance our existing products and services and to develop new
products and services. We anticipate that our research and development expenses
in fiscal 2004 will total approximately $410,000, virtually all of which will be
directed to Metretek Florida's business.

          Our capital expenditures during fiscal 2004 were approximately
$2,277,000, including $1,777,000 of capital expenditures for three PowerSecure
shared savings distributed generation projects. In fiscal 2003, our capital
expenditures were approximately $296,000. We anticipate capital expenditures in
fiscal 2005 of approximately $4.4 million, including $4.0 million of capital
invested in shared savings distributed generation projects. The remaining
$400,000 in capital expenditures will benefit all of our key subsidiaries. We
also acquired approximately $526,000 of equipment through capital leases in
fiscal 2004, primarily for manufacturing equipment for MCM. PowerSecure's shared
savings projects are anticipated to be funded primarily through long-term
financing arrangements provided through PowerSecure's major suppliers. However,
we cannot provide any assurance that those financing arrangements will be
sufficient to allow PowerSecure to meet our objectives for its growth and
development without internal funding or will be on favorable terms.

          Project Loans. Financing in the amount of $1,213,000 for two
PowerSecure shared savings projects in fiscal 2004 has been provided through
Caterpillar Financial Services Corporation ("Caterpillar"). The project loans
are secured by the distributed generation equipment purchased from Caterpillar
as well as the revenues generated by the PowerSecure projects. The project loans
provide for 60 monthly payments of principal and interest (at a rate of 6.75%)
in the aggregate amount of approximately $24,000 per month. We expect that
monthly payments on the project loans will be funded through payments from
customers utilizing the distributed generation equipment on their sites.


                                       31

<PAGE>

          Working Capital Credit Facility. We have a $3,260,000 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
consists of separate credit agreements between Wells Fargo, as lender, and each
of Southern Flow, Metretek Florida and PowerSecure, as borrowers. At December
31, 2004, we had an aggregate borrowing base of $3,260,000 under the Credit
Facility, of which $2,621,000 had been borrowed, leaving $639,000 available to
borrow. We expect to continue to utilize at least $2 million of available
borrowings under the Credit Facility during fiscal 2005, and may at times borrow
the maximum amount available depending on our cash requirements.

          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 and the other borrowers. 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. The Credit Facility,
which constitutes our primary credit agreement, is used primarily to fund the
operations and growth of our subsidiaries, especially PowerSecure.

          Each credit agreement contains standard affirmative and negative
covenants by the borrower, including financial covenants such as minimum net
income and minimum tangible net worth 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. A failure to comply with these covenants could entitle Wells
Fargo to accelerate the underlying obligations.

          On several occasions during fiscal 2004, Metretek Florida was in
violation of certain financial covenants in its credit agreement, due primarily
to the financial results of the contract manufacturing business that has been
discontinued, and in each case it received a waiver of compliance from Wells
Fargo. The credit agreement between Wells Fargo and Metretek Florida was amended
in December 2004 to provide less restrictive financial covenants applicable to
certain financial results of Metretek Florida during fiscal 2004, and to
establish financial covenants applicable to Metretek Florida during fiscal 2005
and beyond. Also in December 2004, as a condition to receiving a waiver of a
default and to amending the Metretek Florida credit, we utilized proceeds from a
$1,000,000 certificate of deposit, in which we had previously granted to Wells
Fargo a security interest, to reduce the outstanding balance of borrowings on
the Metretek Florida credit agreement.

          Preferred Stock Redemption. The terms of our Series B Preferred Stock
required us to redeem all shares of our Series B Preferred Stock that remained
outstanding on December 9, 2004 at a redemption price equal to the liquidation
preference of $1,000 per share plus accumulated and unpaid dividends. Our total
redemption obligation was approximately $6.2 million, of which a total of
$5,345,000 had been paid through December 31, 2004.

          Term Loan. During the first quarter of 2004, we formed Conquest
Acquisition as a majority-owned subsidiary for the purpose of acquiring $956,000
of additional equity interests in our unconsolidated affiliate, MM 1995-2.
Financing of the acquired equity interests was provided by a term loan from a
commercial bank. The term loan is secured by our interests in MM 1995-2, and we
provided a guaranty of $625,000 of the term loan. The term loan provides for 60
monthly payments of principal and interest (at a rate of 5.08%) in the amount of
approximately $18,500 per month. We expect that monthly payments on the term
loan will be funded through cash distributions from MM 1995-2.

          Heins Settlement. On June 11, 2004, the Denver Court granted final
approval of the Heins Settlement, which became effective on July 26, 2004. The
Heins Settlement fully resolved all claims by the Class Action Plaintiff against
us and the other Metretek Defendants in the Heins Class Action. The Heins
Settlement includes payment of $2,375,000 from the proceeds of our directors'
and officers' insurance policy. During fiscal 2004, as part of the Heins
Settlement, we paid $375,000 and we also issued the Heins Settlement Note in the
amount of $3.0 million and commenced payments thereunder on June 30, 2004. The
Heins Settlement Note bears interest at the rate of prime plus three percent, is
payable in 16 quarterly installments of $187,500 principal plus accrued interest
each, and is guaranteed by the 1997 Trust and of our subsidiaries. This
litigation and the Heins Settlement are more fully discussed, and the
capitalized terms used in this paragraph are defined, in "Item 3. Legal
Proceedings" and in the notes to our consolidated financial statements. The loss
resulting from the amount due on the Heins Settlement, other than interest on
the Heins Settlement Note, was recorded in fiscal 2002.

          Sale and Discontinuance of Contract Manufacturing Business. During the
third quarter of 2004, our Board of Directors approved a plan to discontinue the
contract manufacturing business of Metretek Florida, operated


                                       32

<PAGE>

by MCM, and to sell all of its contract manufacturing assets. On December 30,
2004, Metretek Florida and MCM sold their contract manufacturing business and
related assets to InstruTech Florida.

          In connection with this sale, InstruTech Florida issued to Metretek
Florida a promissory note in the amount of $780,000. The promissory note, which
bears interest at the annual rate of 4.75%, is payable by InstruTech Florida in
an amount equal to and solely out of 50% of the net cash flow of InstruTech
Florida. If at least 30% of the note is not repaid prior to December 31, 2007,
then we have agreed with InstruTech Florida to negotiate in good faith whether
to extend the term of the note or whether to declare a default and cause
InstruTech Florida to return the purchased equipment to us. In addition, in
connection with the sale to InstruTech Florida, we agreed to provide working
capital in an amount of up to $150,000 in the form of a bridge loan to
InstruTech Florida for a period of six months ending June 30, 2005. Any amounts
advanced under the bridge loan are to be repaid in amounts equal to and solely
out of 75% of the monthly positive cash flow from the operations of InstruTech
Florida. InstruTech Florida has also agreed to purchase Metretek Florida's
remaining contract manufacturing inventory, which was $368,000 (net of reserves)
as of December 31, 2004, on an as needed basis at fair value. The sale agreement
may be terminated at any time prior to March 31, 2005 by mutual agreement of us
and InstruTech Florida, by InstruTech Florida if it determines that customer
purchase orders and commitments are below a commercially viable level, or if we
determine that InstruTech Florida has no reasonable chance to be commercially
successful or generate positive cash flow within the succeeding 6 to 12 month
period.

          The assets of the discontinued operations not included in the sale to
InstruTech Florida, which consist principally of receivables and inventory, are
being liquidated through collections of receivables and through subsequent sales
of inventory to contract manufacturers, including InstruTech Florida. We cannot
provide any assurance of the amounts that we will be paid under the promissory
note or the bridge loan or that we will recover from sales of inventory and
recovery of accounts receivable.

          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. We are obligated to make future payments under
the Credit Facility and other loans. In addition, we have obligations related to
our discontinued MCM operations. Finally, we are required to make certain
payments under the terms of the Heins Settlement Note, which payments commenced
June 30, 2004. The following table sets forth our contractual obligations and
commercial commitments as of December 31, 2004:

<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)           $ 2,621,000   $       --    $2,621,000    $       --      $--
   Capital Lease Obligations          11,000        4,000         7,000            --       --
   Operating Leases                1,830,000      554,000       849,000       427,000       --
   Series B Preferred Stock          894,000      894,000            --            --       --
   Heins Settlement                2,438,000      750,000     1,500,000       188,000       --
   Term Loan                         824,000      188,000       404,000       232,000       --
   Project Loans                   1,120,000      217,000       481,000       422,000       --
   Discontinued operations (3)       844,000      466,000       311,000        67,000       --
   Other Long-Term
      Obligations                    244,000       16,000       228,000            --       --
                                 -----------   ----------    ----------    ----------      ---
         Total                   $10,826,000   $3,089,000    $6,401,000    $1,336,000      $ 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,
     2004, not projected borrowings under the Credit Facility.

(3)  Represents accrued termination and shutdown costs of our discontinued MCM
     operations.


                                       33

<PAGE>

          Off-Balance Sheet Arrangements. During fiscal 2004, we did not engage
in any material off-balance sheet activities or have any relationships or
arrangements with unconsolidated entities established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes. Further, we have not guaranteed any obligations of
unconsolidated entities nor do we have any commitment or intent to provide
additional funding to any such entities.

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

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

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

     -    We may recover less than the full amounts owed to us under the
          promissory note and the bridge loan to InstruTech Florida or less than
          the full value of our contract manufacturing inventory of which we are
          disposing or less than the outstanding amounts of our accounts
          receivable from collections, reducing our expected cash flow
          therefrom.

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

     -    As our businesses grow, especially PowerSecure, our cash flow may
          fluctuate due to the timing of receipts from sales of products and
          services and the completion of projects, and despite increasing sales
          we could experience temporary shortages in liquidity as our cash flow
          is tied up in equipment and supplies, in accounts receivable and
          awaiting project completion.

     -    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 acquisition in the future
          will be dependent upon our ability to raise additional capital. As of
          the date of this report, we have not entered into any binding
          agreement or understanding committing us to any such acquisition, but
          we regularly engage in discussions related to such acquisitions.

     -    An adverse resolution to 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. In
addition, we continually evaluate opportunities to improve our credit
facilities, through increased credit availability, lower debt costs or other
more favorable terms. However, our ability to obtain additional capital or
replace or improve our credit facilities when needed or desired will depend on
many factors, including general economic and market conditions, our operating
performance and investor and lender sentiment, and thus cannot be assured. In
addition, depending on how it is structured, a


                                       34

<PAGE>

financing could require the consent of our current lender. Even if we are able
to raise additional capital, the terms of any financings could be adverse to the
interests of our stockholders. For example, the terms of a debt financing could
restrict our ability to operate our 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 those
parties who must consent to the financing. 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 January 2003, the Financial Accounting Standards Board ("FASB") issued
FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN
46"). 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 or
results of operations.

     In April 2003, the FASB issued Financial Accounting Standards ("FAS") No.
149, "Amendment of Statement 133 on Derivative Instruments and Hedging
Activities" ("FAS 149"). 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 or results of operations.

     In May 2003, the FASB issued FAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity" ("FAS 150").
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 became effective for all financial
instruments entered into or modified after May 31, 2003, and otherwise became
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 or results of operations.

     In November 2004, the FASB issued FAS No. 151, "Inventory Costs, an
amendment of ARB No 43, Chapter 4" ("FAS 151"). FAS 151 amends the guidance in
Chapter 4, "Inventory Pricing," of Accounting Research Bulletin ("ARB") No. 43,
"Restatement and Revision of Accounting Research Bulletins," to clarify the
accounting for abnormal amounts of idle facility expense, freight, handling
costs and wasted material. FAS 151 also clarifies the circumstances under which
fixed overhead costs associated with operating facilities involved in inventory
processing should be capitalized. FAS 151 is effective for fiscal years
beginning after June 15, 2005, and we will adopt FAS 151 for fiscal 2006. We are
currently evaluating impact, if any, that FAS 151 will have on our consolidated
financial position or results of operations.

     In December 2004, the FASB issued its final standard on accounting for
employee stock options, FAS No. 123 (Revised 2004), "Share-Based Payment" ("FAS
123(R)"). FAS 123(R) replaces FAS No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123"), and supersedes Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees". FAS 123(R) requires
companies to measure compensation costs for all share-based payments, including
grants of employee stock options, based on the fair value of the awards on the
grant date and to recognize such expense over the period during which an
employee is required to provide services


                                       35

<PAGE>

in exchange for the award. The pro forma disclosures previously permitted under
FAS 123 will no longer be an alternative to financial statement recognition. FAS
123(R) is effective for all awards granted, modified, repurchased or cancelled
after, and to unvested portions of previously issued and outstanding awards
vesting after, interim or annual periods beginning after June 15, 2005, which
for us will be the third quarter of fiscal 2005. We are currently evaluating the
effect of adopting FAS 123(R) on our financial position and results of
operations, and we have not yet determined whether the adoption of FAS 123(R)
will result in expenses in amounts that are similar to the current pro forma
disclosures under FAS 123.

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 attributable to common shareholders of
approximately $4,487,000 in fiscal 2004. As of December 31, 2004, we had an
accumulated deficit of approximately $58.5 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. There is no
guarantee that our future revenues will grow significantly, if at all. Moreover,
while we will no longer continue to accrue the preferred stock deemed
distribution in future fiscal years, we may continue to incur expenses in excess
of revenues, including significant costs in developing and expanding the
distributed generation business of PowerSecure and the M2M business of Metretek
Florida. 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.

     WE MAY REQUIRE A SUBSTANTIAL AMOUNT OF ADDITIONAL FUNDS TO FUND OUR 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

     We may need to obtain additional capital to fund our capital obligations
and to finance the development and expansion of our businesses. For example, we
will need substantial additional capital to expand the shared savings business
of PowerSecure, in order to fund our acquisition of capital equipment for
distributed generation systems to be owned by PowerSecure, and to finance the
development of Metretek Florida's M2M business. Further, under the Heins
Stipulation we are required to make payments on the Heins Settlement Note in the
annual amount of $750,000 plus interest through June 30, 2008. 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 depend on or ability 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. In addition, we continually evaluate opportunities to improve our
credit facilities, through increased credit availability, lower debt costs or
other more favorable terms. We cannot provide any assurance that we will be able
to raise additional capital or replace our current credit facilities when needed
or desired, or that the terms of any such financing will be favorable to us and
our stockholders.

     Our current credit arrangement is the $3,260,000 Credit Facility, which is
currently set to mature in 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, 2004, we had an aggregate loan availability
under the Credit Facility of $3,260,000, of which $2,621,000 had been borrowed,
leaving $639,000 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, our liquidity and our capital requirements.


                                       36

<PAGE>

     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 the Credit Facility and an acceleration of payment of all
outstanding debt owed, which would materially and adversely affect our financial
condition.

     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 our lender. 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, if its
consent is 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 IN THE FUTURE WE BECOME SUBJECT TO LAWSUITS, AND IF ANY OF THOSE
     LAWSUITS ARE SUCCESSFULLY PROSECUTED AGAINST US, OUR BUSINESS, FINANCIAL
     CONDITION AND RESULTS OF OPERATIONS COULD BE MATERIALLY AND ADVERSELY
     AFFECTED

     During fiscal 2004, we settled the Class Action lawsuit against us.
However, from time to time we may become 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 many
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 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 and 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 fall below
the expectations of public market analysts and investors, causing the trading
price of our Common Stock to decline.

     BECAUSE SOME OF OUR BUSINESS AND PRODUCT OFFERINGS 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, including PowerSecure's shared
savings programs and Metretek Florida's telemetry business. 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.


                                       37

<PAGE>

     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; and

     -    implement an effective marketing strategy to promote awareness of our
          new businesses, 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 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 current Credit Facility and the Heins Settlement contain
financial and operating covenants that place restrictions on our activities and
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:

     -    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.

     In addition, on several occasions during fiscal 2004, including the fourth
quarter of fiscal 2004, Metretek Florida was in violation of certain financial
covenants under its credit agreement. Although in each case we received a waiver
from the lender, there can be no assurance that such a waiver will be available
on acceptable terms in the event of a future default. If a default is declared
and not waived or cured, the entire indebtedness then owed under the Credit
Facility could be accelerated, and we may not be able to repay it. In addition,
if the Credit Facility


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<PAGE>

matures and is not renewed, we may not be able to obtain successor financing on
acceptable terms. The need to comply with the terms of our debt obligations may
also limit our ability to obtain additional financing and our flexibility in
planning for or reacting to changes in our business. 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.

     WE ARE DEPENDENT UPON THE SUCCESS OF THE BUSINESS OF INSTRUTECH FLORIDA,
     WHICH ACQUIRED OUR CONTRACT MANUFACTURING BUSINESS, FOR THE REPAYMENT AND
     RECOVERY OF SIGNIFICANT AMOUNTS RESULTING FROM THE SALE AND DISCONTINUANCE
     OF MCM'S BUSINESS.

     During the third quarter of 2004, our Board of Directors approved a plan to
discontinue the business of MCM and to sell of its contract manufacturing
assets. On December 30, 2004, Metretek Florida and MCM sold their contract
manufacturing business and most of the related assets to InstruTech Florida. In
connection with this sale, InstruTech Florida issued to Metretek Florida a
promissory note in the amount of $780,000 that is repayable solely out of 50% of
the net cash flow of InstruTech Florida, without any further recourse. If at
least 30% of the note is not repaid prior to December 31, 2007, then we have
agreed with InstruTech Florida to negotiate in good faith on whether to extend
the maturity of the note or whether InstruTech Florida should return the
purchased equipment to us. In addition, in connection with the sale to
InstruTech Florida, we agreed to provide working capital in an amount of up to
$150,000 in the form of a bridge loan to InstruTech Florida for a period of six
months ending June 30, 2005. Repayment of any amounts advanced under the bridge
loan are repayable solely from 75% of the monthly positive cash flow from
operations of InstruTech Florida. InstruTech Florida has also agreed to purchase
Metretek Florida's remaining contract manufacturing inventory, which was
$369,000 (net of reserves) as of December 31, 2004, on an as needed basis at
fair value.

     The sale agreement may be terminated at any time prior to March 31, 2005 by
mutual agreement of us and InstruTech Florida, by InstruTech Florida if it
determines that customer purchase orders and commitments are below a
commercially viable level, or by us if we determine that InstruTech Florida has
no reasonable chance to be commercially successful or generate positive cash
flow within the succeeding 6 to 12 month period. The assets of the discontinued
operations not included in the sale to InstruTech Florida, which consist
principally of receivables and inventory, are being liquidated through
collections of receivables and through subsequent sales of inventory to others,
including InstruTech Florida.

     We cannot provide any assurance of the amounts that we will be paid under
the promissory note or the bridge loan or that we will recover from inventory
sales or collections of receivables. Thus, a significant portion of the amount
we expect to recover from the discontinuance of our contract manufacturing
operations is dependent upon the success of the operations of the business of
InstruTech Florida, which is outside our control. If the amounts we receive and
recover from these discontinued operations are materially less than we expect,
it will have a material adverse effect on our financial condition, results of
operations and cash flows.

     OUR DEPENDENCE ON THIRD PARTY PARTNERS AND SUPPLIERS, INCLUDING SOLE SOURCE
     SUPPLIERS, MAY PREVENT US FROM DELIVERING ACCEPTABLE PRODUCTS OR PERFORMING
     ACCEPTABLE SERVICES ON A TIMELY BASIS

     We rely on single source suppliers and highly in demand parts for some of
the critical components we use in our products. Our business is dependent on our
ability to anticipate our needs for components and products and our suppliers'
ability to deliver such components and products in time to meet critical
manufacturing and installation schedules. Our business could be adversely
affected, for example, if PowerSecure is unable to obtain, on a timely and
cost-efficient basis, sufficient generators to meet its customers' installation
schedules. In addition, our business could be adversely affected if we
experience supply constraints or if we experience any other interruption or
delay in the supply chain which interfere with our ability to manufacture our
products or manage our inventory levels.

     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


                                       39

<PAGE>

up to several years to complete. Our utility customers typically issue requests
for quotes and proposals, establish committees to evaluate the purchase
proposals, review different technical options with vendors, analyze performance
and cost/benefit justifications and perform a regulatory review, in addition to
applying a normal budget approval process within the utility. In addition,
utilities may defer purchases of our products and services if the utilities
reduce capital expenditures as the result of mergers and acquisitions, pending
or unfavorable regulatory decisions, poor revenues due to weather conditions,
rising interest rates or general economic downturns, among other factors. The
natural gas utility industry has been virtually the sole market for Metretek
Florida's products and services. However, over the last few years, the
uncertainty in the utility industry that has resulted from the regulatory
uncertainty in the current era of deregulation has caused utilities to defer
even further purchases of Metretek Florida's products and services. The
continuation of this uncertain regulatory climate will materially and adversely
affect our revenues from sales of AMRs.

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

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

     WE DO NOT HAVE LONG-TERM OR RECURRING COMMITMENTS WITH MOST OF OUR
     CUSTOMERS AND MAY BE UNABLE TO RETAIN EXISTING CUSTOMERS, ATTRACT NEW
     CUSTOMERS OR REPLACE DEPARTING CUSTOMERS WITH NEW CUSTOMERS THAT CAN
     PROVIDE COMPARABLE REVENUES

     Because we generally do not obtain firm, long-term volume purchase
commitments from our customers, many of our contracts and commitments from our
customers are short-term or non-recurring. 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. In addition,
customer orders can be canceled or rescheduled and volume levels can be reduced.
We cannot assure you that our customers will continue to use our products and
services or that we will be able to replace, in a timely or effective manner,
canceled, delayed or reduced orders with new business that generates comparable
revenues. Further, we cannot assure you that our current customers will continue
to generate consistent amounts of revenues over time. Our failure to maintain
and expand our customer relationships customers would materially and adversely
affect our business and results of operations.


                                       40

<PAGE>

     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 and use 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 that we have
recently 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 PURCHASE
     COMMITMENTS, AND ANY LOSS, CANCELLATION, REDUCTION OR DELAY IN THESE
     PURCHASE COMMITMENTS COULD HARM OUR BUSINESS AND OPERATING RESULTS

     From time to time, our subsidiaries have derived a material portion of
their revenues from one or more significant customers or purchase commitments.
For example, in fiscal 2003 Metretek Florida had a significant purchase order
from PSE&G that did not recur, which adversely affected our operating results in
fiscal 2004. In fiscal 2004, we had one customer that was responsible for
approximately 15% of our consolidated revenues. If such commitments were to be
terminated or fail to recur, our revenues and net income would significantly
decline. Our success will depend on our continued ability to develop and manage
relationships with significant customers and generate recurring revenues from
them. We cannot be sure that we will be able to retain our largest customers,
that we will be able to attract additional large customers, or that our existing
customers will continue to purchase our products and services in the same
amounts as in prior years. Our business and operating results would be adversely
affected by:

     -    the loss of one or more large customers;

     -    any reduction or delay in sales to these customers;

     -    the failure of large purchase commitments to be renewed or to recur;

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

     -    future price concessions that we may have to make to these customers.

     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;


                                       41

<PAGE>

     -    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, any of
these new or enhanced products, services and technology could 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 employees in the future. The loss of the services of any of our key
personnel could have a material adverse effect on our business. Although we have
entered into employment agreements with some of our executive officers, we
generally do not have employment contracts with our key employees. In addition,
we do not have key person life insurance for most of our key personnel. We
cannot assure you that we will be able to retain our current key personnel or
that we will be able attract or retain other highly qualified personnel in the
future. We have from time to time in the past experienced, and we expect in the
future to continue to experience, difficulty in hiring and retaining highly
skilled employees with appropriate qualifications. If we are unable to attract
and retain highly qualified personnel, our business could be materially and
adversely affected.

     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 competing 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 and loss of
market share, 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,


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<PAGE>

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 products and services or
marketing and support capabilities to compete successfully in the future. Our
inability to compete successfully 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. In recent years, some segments of the economy, including the
technology industry in particular, have experienced significant economic
downturns characterized by decreased product demand, price erosion, work
slowdowns and layoffs. Moreover, there is increasing uncertainty in the energy
and technology markets attributed to many factors, including international
terrorism and strife, 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 adversely affect our ability meet our capital requirement, support our
working capital requirements and growth objectives, maintain our existing
financing arrangements, or otherwise adversely affect our business, financial
condition and results of operations. 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.

     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 some of our other product and service offerings.
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 MM 1995-2, A PRIVATE PROGRAM, PRESENTS RISKS TO US

     MGT is our subsidiary that manages and holds a minority ownership interest
in MM 1995-2, a private program that owns and operates four oil and gas
production water disposal facilities. While MGT does not intend to form any new
private programs, it may from time to time increase its economic interest in the
program or initiate or manage actions intended to expand the program's assets or
activities. This program was financed by a private placement of equity interests
raising capital to acquire the assets and business operated by the program. Our
management of this program presents risks to us, including:

     -    lawsuits by investors in this program who become dissatisfied with the
          result of the program;


                                       43

<PAGE>

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

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

     -    changes in the regulatory environment relating to the program;

     -    reliance upon significant suppliers and customers by the program;

     -    hazards of oil production water disposal facilities, including
          environmental hazards; and

     -    changes in technology.

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

     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. While sales into international markets generated only approximately 2%
of our consolidated revenues in fiscal 2004 and 3% in fiscal 2003 and fiscal
2002, 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 in 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 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.

     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 revenues, including:

     -    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;

     -    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;

     -    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


                                       44

<PAGE>

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 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 to 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. If we are unable to
identify, finance or obtain the benefits of future acquisitions and alliances,
our growth may be impaired and our business may be adversely affected.

     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
          business;

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

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

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

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

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

     -    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. These financings 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 financings. Available equity or debt financings
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.


                                       45

<PAGE>

     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 in 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 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.


                                       46

<PAGE>

     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.

     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
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 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. For
example, PowerSecure is dependent upon on obtaining a timely and cost-effective
supply of generators for its distributed generation system, and from time to
time these generators are in short supply, affecting the timing and cost of the
generators. We may experience delays in production if the supply of any critical
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, which could materially and adversely affect our business and
operations.

     OUR POWERSECURE BUSINESS IS SUBJECT TO MANY BUSINESS RISKS, AND IF ANY OF
     THEM MATERIALIZE, THEY COULD MATERIALLY AND ADVERSELY AFFECT POWERSECURE'S
     BUSINESS AS WELL AS OUR FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     PowerSecure's business is dependent, in part, upon its ability to utilize
distributed generation to create favorable pricing for customers based on
existing tariff structures. If utility tariffs change in some regions, then
PowerSecure's business would become less viable in those regions. Moreover, even
if such tariffs do not change, if PowerSecure is unable to obtain the expected
benefits from those tariffs, its shared savings projects, that are dependent
upon such benefits, would be materially and adversely affected. Also,
PowerSecure presently utilizes diesel powered generators in its systems. If
regulatory requirements in certain regions are modified to make diesel no long
viable in those regions, PowerSecure's business could be adversely affected.
While PowerSecure, in such case, would utilize its efforts to find alternative
power sources, there is no assurance those alternative sources would be
economically acceptable.


                                       47

<PAGE>

     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.

     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.

     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 March 7, 2005, our executive officers, directors and 5% or greater
stockholders beneficially owned, in the aggregate, approximately 43.5% of our
outstanding Common Stock, assuming they exercise or convert all stock options
and warrants that are exercisable or convertible within 60 days of that date. As
a result, these stockholders could, as a practical matter, exercise a
significant level of control over matters requiring approval by our
stockholders, including the election of directors and the approval of mergers,
sales of substantially all of our assets and other significant corporate
transactions. The interests of these stockholders may differ from the interests
of other stockholders. In addition, this concentration of stock ownership may
have the effect of discouraging, delaying or preventing a change in control of
us.

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

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

     On March 7, 2005, 12,192,074 shares of Common Stock were outstanding. On
that date, options to purchase 1,991,019 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,


                                       48

<PAGE>

warrants to purchase 2,254,232 shares of Common Stock were outstanding. The
resale of virtually all shares underlying these options and warrants are covered
by currently effective registration statements. The exercise or conversion of
outstanding options, warrants 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 changes in the laws and regulations affecting public
companies, especially those pertaining to corporate governance and public
disclosure such as the Sarbanes-Oxley Act of 2002 and related SEC regulations,
have caused us to incur increased costs of compliance and have resulted 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 may increase our costs and
thus adversely affect our reported financial results, which could have an
adverse effect on our stock price.

     For example, in December 2004, the FASB issued FAS 123(R), which will
become effective in our third quarter of fiscal 2005. FAS 123(R) will result in
our recognition of compensation expense relating to our employee stock options.
Currently, as permitted under FAS 123, we generally do not recognize any
compensation related to stock option grants we issue under our stock option
plans. Under FAS 123(R), we are required to adopt a fair value-based method for
measuring the compensation expense related to employee stock awards that will
lead to additional compensation expense.

     These and other new rules or laws 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.

     WE MAY HAVE DIFFICULTY IMPLEMENTING, IN A TIMELY MANNER, THE INTERNAL
     CONTROLS PROCEDURES NECESSARY TO ALLOW OUR MANAGEMENT TO REPORT ON THE
     EFFECTIVENESS OF OUR INTERNAL CONTROLS.

     Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we will be
required to furnish an internal controls report of management's assessment of
the effectiveness of our internal controls as part of our Annual Report on Form
10-K for the fiscal year ended December 31, 2006. Our independent registered
public accounting firm will then be required to attest to, and report on, our
assessment. In order to issue our report, our management must document both the
design of our internal controls and the testing processes that support
management's evaluation and conclusion. Our management has begun the necessary
processes and procedures for issuing its report on our internal controls.
However, we may face significant challenges in implementing the required
processes and procedures. There can be no assurance that we will be able to
complete the work necessary for our management to issue its management report in
a timely manner, or that management will be able to report that our internal
control over financial reporting is effective.

     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;


                                       49

<PAGE>

     -    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;

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

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

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

     -    the dilutive effects 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 CHANGE OUR INTENTIONS 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 by prohibiting the payment of dividends by our subsidiaries without
the consent of the lender. 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;


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<PAGE>

     -    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;

     -    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 our 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 SHARES OF PREFERRED STOCK THAT COULD DILUTE THE INTERESTS OF
     HOLDERS OF COMMON STOCK

     Our charter currently authorizes our Board of Directors to issue up to
2,000,000 shares of Preferred Stock on terms to be fixed by the Board of
Directors. The terms of our Common Stock do not limit the issuance of shares of
Preferred Stock. The issuance of shares of Preferred Stock could dilute the
interests of holders of our Common Stock.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to certain market risks arising from transactions we enter
into in the ordinary course of business. These market risks are primarily due to
changes in interest rates, foreign exchange rates and commodity prices, which
may adversely affect our financial condition, results of operations and cash
flow.

     Our exposure to market risk resulting from changes in interest rates
relates primarily to income from our investments in short-term interest-bearing
marketable securities, which is dependent upon the interest rate of the
securities held, and to 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. However, we do not believe that changes in interest rates have had
a material impact on us in the past or will have a material impact on us in the
foreseeable future. For example, a change of 1% in the interest rate on either
our investments or our borrowings would not have a material impact on our
financial condition, results of operations or cash flow.

     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. While we are subject to some market risk from fluctuating commodity prices
in certain raw materials we use, we do not believe that our exposure to
commodity price changes is material.

     We do not use derivative financial instruments to manage or hedge our
exposure to interest rate changes or other market risks, or for trading or other
speculative purposes.


                                       51

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The information required by this Item is set forth on pages F-1 through
F-32 of this Report.

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

     On September 30, 2004, we engaged Hein & Associates LLP ("Hein") to serve
as our independent registered public accounting firm and dismissed Deloitte &
Touche LLP ("Deloitte"). The change in independent registered public accounting
firms was approved by the Audit Committee of our Board of Directors and reported
on a Current Report on Form 8-K, as amended, dated September 30, 2004. Deloitte
audited our financial statements as of and for fiscal 2003 and for all prior
fiscal years, and Hein audited our financial statements as of and for fiscal
2004.

     The audit reports of Deloitte on our consolidated financial statements as
of and for fiscal 2003 and fiscal 2002 did not contain an adverse opinion or
disclaimer of opinion, and such audit reports were not qualified or modified as
to any uncertainty, audit scope or accounting practice, except that Deloitte's
independent auditor's report on the Company's consolidated financial statements
for fiscal 2002 contained an explanatory paragraph relating to a change in
method of accounting for goodwill and other intangible assets with infinite
lives as required by Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets," which was effective January 1, 2002, and
to a change in the Company's method of accounting for contracts from the
completed-contract method to the percentage-of-completion method.

     During fiscal 2002 and fiscal 2003 and subsequent interim periods through
the date we changed independent registered public accounting firms, there were
no disagreements between us and Deloitte on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedures,
which disagreements, if not resolved to the satisfaction of Deloitte, would have
caused Deloitte to make reference to the subject matter of the disagreement in
connection with its report. In addition, during those same periods, no
reportable events, as defined in Item 304(a)(1)(v) of Regulation S-K, occurred,
and we did not consult with Hein regarding the application of accounting
principles to a specific transaction, either completed or proposed, or the type
of audit opinion that might be rendered on our consolidated financial
statements, or any other matters or reportable events as set forth in Item
304(a)(2) of Regulation S-K.

ITEM 9A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

     Our management, with the participation of 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, 2004, 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. Further, the design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations on all
control systems, no evaluation of controls can provide absolute assurance that
all errors, control issues and instances of fraud, if any, with a company have
been detected. The design of any system of controls is also based in part on
certain assumptions regarding the likelihood of future events, and there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

     No change in our internal control over financial reporting (as defined in
Rule 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the quarter
ended December 31, 2004 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.


                                       52

<PAGE>

ITEM 9B. OTHER EVENTS

     None.


                                       53

<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

     As of March 1, 2005, 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......    61   Chairman of the Board, President, Chief
                                   Executive Officer and Director
A. Bradley Gabbard.....    50   Executive Vice President, Chief Financial
                                   Officer, Treasurer and Director
Gary J. Zuiderveen.....    45   Controller, Principal Accounting Officer and
                                   Secretary
Sidney Hinton..........    42   President and Chief Executive Officer of
                                   PowerSecure
John Bernard...........    50   President and Chief Executive Officer of
                                   Southern Flow
Basil M. Briggs (1)....    69   Director
Kevin P. Collins (1)...    54   Director
Anthony D. Pell (1)....    66   Director
</TABLE>

----------
(1)  Member of the Audit Committee, the Compensation Committee and the
     Nominating and Corporate Governance 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 our subsidiaries. Mr. Marcum
currently serves on the board of directors of Key Energy Services, Inc. ("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
Executive Vice President and Chief Financial Officer 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. 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 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, 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). From
August 1997 until December 1998, Mr. Hinton was the President and Chief
Executive Officer of IllumElex Lighting Company, a national lighting company.
From 1982 until 1997, Mr. Hinton was employed in several positions with Southern
Company and Georgia Power Company.

     JOHN BERNARD has served as the President and Chief Executive Officer and a
director of Southern Flow since December 1, 2004. Mr. Bernard has served in
several managerial capacities since joining Southern Flow in


                                       54

<PAGE>

1988, including serving as the Vice President and General Manager of Southern
Flow from June 1998 through November 2004.

     BASIL M. BRIGGS has served as a director since June 1991. Mr. Briggs has
been an attorney in the Detroit, Michigan area since 1961, practicing law with
Cox, Hodgman & Giarmarco, P.C., since January 1997. Mr. Briggs was of counsel
with Miro, Weiner & Kramer, P.C., 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"), 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"), 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, 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 also serves as a
director of Key; The Penn Traffic Company, a food retailer; London Fog
Industries, Inc., an outerwear designer and distributor; Malden Mills
Industries, Inc., a synthetic fleece manufacturer; Mail Contractors of America
Inc., a trucking company; and Deluxe Pattern, Inc., a designer of automotive
components. 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 that he co-founded in November 2001. Mr.
Pell is a director of Rochdale Investment Management, Inc. He was the President
and a co-owner of Pell, Rudman & Co., 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 2007 Annual Meeting of Stockholders, are Messrs.
Marcum and Briggs. The Class II Directors, whose terms expire at the 2005 Annual
Meeting of Stockholders, are Messrs. Gabbard and Collins. The Class III
Director, whose term expires at the 2006 Annual Meeting of Stockholders, is Mr.
Pell.

     The holders of our Series B Preferred Stock, voting separately as a class,
had the right to elect one member to serve on our Board of Directors until the
Series B Preferred Stock was redeemed in December 2004. Pursuant to that right
of designation, Mr. Collins had been serving as a director. In December 2004,
after the Series B Preferred Stock was redeemed and its holders were no longer
entitled to make such a designation, the Board of Directors appointed Mr.
Collins to continue to serve on the Board, as a Class II Director. Except as
provided above, our directors are elected by the holders of the Common Stock.
Each director serves in office until his successor is duly elected and
qualified, or until his earlier death, resignation or removal. In the future,
any new members added to the Board of Directors will be distributed among the
three classes so that, as nearly as possible, each class will consist of an
equal number of directors. Our officers are appointed by our Board of Directors
and serve at its discretion, subject to their employment agreements, as
described in "Item 11. Executive Compensation."

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
American Stock Exchange (which standards are utilized by the Board of Directors
although as of the date of this Report our Common Stock is traded on the OTC
Bulletin Board and not on the American Stock Exchange).


                                       55

<PAGE>

     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)(2) 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 2004, all
reports required by Section 16(a) to be filed by such persons were timely filed,
except that one report of one transaction by Mr. Pell and one report of one
transaction by Mr. Hinton were inadvertently filed late.

CODES OF ETHICS

     We have adopted two codes of ethics, which are designed to encourage our
directors, officers and employees to act with the highest level of integrity.
These codes were attached as exhibits to our Annual Report on Form 10-K for
fiscal 2003 and are available on our website at www.metretek.com under "Investor
Info - Corporate Governance." We will provide a copy of these codes without
charge upon written request addressed to our Secretary at our principal
executive offices.

     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 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,
insider trading, protection of confidential information, and strict adherence to
all laws and regulations applicable to the conduct of our business. Directors,
officers and employees are strongly encouraged 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.

     If we make any amendment to, or grant any waiver from, a provision of our
Code of Ethics or our Code of Business Conduct and Ethics to any of our
directors, executive officers or senior financial officers, we will disclose the
nature of such amendment or waiver on our website or in a Current Report on Form
8-K.


                                       56

<PAGE>

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, by the four other most highly
compensated executive officers (based on total salary and bonus in fiscal 2004)
serving at the end of the fiscal year, and by one other former executive officer
who would have been included if he had still been an executive officer at the
end of fiscal 2004 (the "Named Executive Officers"):

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                   LONG TERM COMPENSATION
                                                                                           AWARDS
                                                                                 -------------------------
                                                 ANNUAL COMPENSATION(1)
                                         -------------------------------------                  SECURITIES
                                                                      OTHER       RESTRICTED    UNDERLYING     ALL OTHER
                                                                     ANNUAL      STOCK AWARDS     OPTIONS    COMPENSATION
NAME AND PRINCIPAL POSITION       YEAR   SALARY($)    BONUS($)    COMPENSATION      ($) (2)       (#) (3)       ($)(4)
---------------------------       ----   ---------   ---------    ------------   ------------   ----------   ------------
<S>                               <C>    <C>         <C>          <C>            <C>            <C>          <C>
W. Phillip Marcum .............   2004    $311,615   $ 50,000(5)   $60,500(6)      $110,000       50,000     $  7,638
   Chairman of the Board,         2003     295,000          0            0                0            0        7,138
      President and Chief         2002     295,000          0            0                0            0        6,471
      Executive Officer

A. Bradley Gabbard ............   2004     191,346     55,000(5)    30,250(6)        55,000       25,000        7,638
   Executive Vice                 2003     175,000     75,000            0                0            0        7,117
      Chief President and         2002     175,000          0            0                0            0        6,314
      Financial Officer

Sidney Hinton (7) .............   2004     253,850    104,186(8)    18,150(6)        33,000            0        7,638
   President and CEO,             2003     250,000    117,341(8)         0                0            0        7,138
      PowerSecure, Inc.

John Bernard (9) ..............   2004     112,098      8,000            0                0       25,000        4,547
   President and CEO,
      Southern Flow

Gary J. Zuiderveen (10) .......   2004      96,154     10,000            0                0            0        3,982
   Controller and Principal       2003      92,692     15,000            0                0            0        3,925
      Accounting Officer

Thomas R. Kellogg (11) ........   2004     126,538          0            0                0            0      214,984(12)
   Former President and           2003     175,000     21,354            0                0            0        5,990
      CEO,
      Metretek Florida
</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)  The dollar value of the restricted stock awards during fiscal 2004 is
     calculated by multiplying the total number of restricted shares by $2.20,
     the closing sale price of our Common Stock on July 15, 2004, the date of
     the awards, as reported on the OTC Bulletin Board. These dollar values do
     not reflect any adjustment for risk of forfeiture or for restrictions on
     transferability. All shares of restricted stock vest in three equal annual
     installments, commencing on January 1, 2005, subject to the executive
     remaining employed with us on the vesting dates, and further subject to
     immediate vesting upon a change in control. All awards of restricted stock
     were made under our 1998 Stock Incentive Plan, as amended and restated (the
     "1998 Stock Incentive Plan").


                                       57

<PAGE>

     As of December 31, 2004, based on $2.40, the closing sale price of our
     Common Stock on such date as reported on the OTC Bulletin Board, Mr. Marcum
     held 50,000 unvested shares of restricted stock valued at $120,000, Mr.
     Gabbard held 25,000 unvested shares of restricted stock valued at $60,000,
     and Mr. Hinton held 15,000 unvested shares of restricted stock valued at
     $36,000. The executive enjoys all the benefits of ownership of unvested
     shares of restricted stock, including the right to vote the shares and to
     receive any dividends and other distributions with respect to the shares on
     the same terms as any other shares of Common Stock, other than the right to
     transfer or dispose of the shares.

(3)  All options vest in three equal annual installments, commencing on the
     grant date, subject to immediate vesting upon a change in control. As of
     December 31, 2004, one-third of such options were vested.

(4)  Amounts paid or accrued on behalf of the Named Executive Officers in fiscal
     2004 in this column include the following:

<TABLE>
<CAPTION>
                                     Group      Long-Term
                                   Term Life   Disability
                         401(k)    Insurance    Insurance
Name                    Matching    Premiums    Premiums
----                    --------   ---------   ----------
<S>                     <C>        <C>         <C>
W. Phillip Marcum ...    $6,500       $882        $256
A. Bradley Gabbard ..     6,500        882         256
Sidney Hinton .......     6,500        882         256
John Bernard ........     3,603        688         256
Gary Zuiderveen .....     3,185        541         256
Thomas R. Kellogg ...     4,241        360         367
</TABLE>

(5)  Includes a signing bonus paid in connection with the amended and restated
     employment agreements of $50,000 for Mr. Marcum and $25,000 for Mr.
     Gabbard.

(6)  Reflects a tax "gross-up" payment intended to reimburse the executive for
     taxes payable with respect to the restricted stock grant.

(7)  Became an executive officer during fiscal 2003. Compensation includes all
     amounts paid or accrued for the entire fiscal 2003.

(8)  Bonus resulting from the bonus formula based upon PowerSecure's cash flow
     from operations, as provided in Mr. Hinton's employment agreement. See
     "--Employment Agreements, Change in Control and Termination of Employment
     Arrangements and Other Compensation Arrangements" below.

(9)  Appointed as the President and Chief Executive Officer of Southern Flow on
     December 1, 2004. Compensation includes all amounts paid or accrued for the
     entire fiscal 2004.

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

(11) His employment with us terminated effective October 6, 2004.

(12) Includes severance payments, pursuant to his employment agreement, in the
     amount of $204,167, payable over the 12 month period after his termination.
     See "--Employment Agreements, Change in Control and Termination of
     Employment Arrangements and Other Compensation Arrangements" below.

     EMPLOYMENT AGREEMENTS, CHANGE IN CONTROL AND TERMINATION OF EMPLOYMENT
     ARRANGEMENTS AND OTHER COMPENSATION ARRANGEMENTS

          W. Phillip Marcum and A. Bradley Gabbard. On November 1, 2004, we
     entered into amended and restated employment agreements 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. These amended and restated employment agreements set forth the
     basic terms of employment for each executive.

          Under these employment agreements, the employment terms of Messrs.
     Marcum and Gabbard continue through December 31, 2006 and will be
     automatically extended for successive one-year periods, unless either we or


                                       58

<PAGE>

the executive 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
$325,000 for Mr. Marcum and $200,000 for Mr. Gabbard. In addition to the base
salary, the employment agreements provide, among other things, for standard
benefits commensurate with the management levels involved. 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.

     Generally, the employment agreements with Messrs. Marcum and Gabbard
provide that if the executive's employment is terminated by us for "cause" (as
defined in the employment agreements) or as a result of the executive's death or
disability, the executive will be entitled to receive an amount equal to his
base salary through the effective date of termination, and all other amounts to
which the executive may be entitled under his employment agreement though the
effective date of termination. If the employment period expires without being
renewed, or if the executive is terminated by us without cause, or if the
executive resigns voluntarily, then the executive is entitled to receive
severance payments equal to three times annual base salary, payable at a 50%
rate over six years, for Mr. Marcum, and one and equal to one-half times annual
base salary, payable at a 100% rate over 18 months, for Mr. Gabbard, based on
his base salary at the rate in effect upon termination, and continued
participation in all our insurance plans for such additional period.

     The employment agreements also include change in control provisions
designed to provide for continuity of management in the event we undergo a
change in control. 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
executive terminates his employment for "good reason", as such terms are defined
in the employment agreements, then the executive is entitled to receive a
lump-sum severance payment equal to three times, for Mr. Marcum, and one and
one-half 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 three years for Mr. Marcum and one and
one-half years 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.

     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.

     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 currently set at
$262,500, 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. If Mr. Hinton's employment is
terminated without cause, or due to the expiration of the employment term or any
renewal


                                       59

<PAGE>

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. 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 2003, PowerSecure issued approximately 14% of its outstanding common
stock to its employees, including approximately 7% of its common stock to Mr.
Hinton. In November 2004, we issued 950,000 shares of our Common Stock to those
PowerSecure employees, including 485,401 shares of our Common Stock to Mr.
Hinton on the same terms as to all other PowerSecure employee-shareholders, in
exchange for their PowerSecure shares. See "Item 13. Certain Relationships and
Related Transactions." As a result of that stock exchange, PowerSecure has
become a wholly-owned subsidiary.

     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 from that time through the date
of his termination. Mr. Kellogg's employment agreement was for an initial term
of one year, renewable for additional one-year renewal periods. Mr. Kellogg
resigned effective October 6, 2004. In connection with his resignation, Mr.
Kellogg entered into a termination agreement and mutual release with us,
providing for the termination of his employment with us, a one year severance
equal to his annual base salary in accordance with his employment agreement,
payment of accrued but unpaid bonuses and vacation time, and an extension of his
stock options to remain exercisable for two years after the termination date.

     The base salary under Mr. Kellogg's employment agreement was set at
$175,000. In addition to the base salary, Mr. Kellogg's employment agreement
provided, among other things, for standard benefits commensurate with the
management level involved, 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 stock of MCM. Mr. Kellogg's employment agreement
also provided 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. Mr. Kellogg's
employment agreement also contained 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 had issued shares totaling 13% of its outstanding common stock to two
of its employees, each of whom terminated his employment with us during fiscal
2004, including to Mr. Kellogg as described above. Metretek Florida repurchased
all those shares in connection with the termination of their employment.
Accordingly, as of December 31, 2004, Metretek Florida owned all of the
outstanding shares of MCM.


                                       60

<PAGE>

STOCK OPTION GRANTS

     The following table sets forth certain information with respect to stock
options granted during fiscal 2004 to the Named Executive Officers. We did not
grant any stock appreciation rights, alone or in tandem with stock options,
during fiscal 2004.

                        OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                              INDIVIDUAL GRANTS
                         ----------------------------------------------------------   POTENTIAL REALIZABLE VALUE
                            NUMBER OF                                                 AT ASSUMED ANNUAL RATES OF
                            SECURITIES        % OF TOTAL                               STOCK PRICE APPRECIATION
                            UNDERLYING     OPTIONS GRANTED    EXERCISE                   FOR OPTION TERM($)(5)
                         OPTIONS GRANTED   TO EMPLOYEES IN     PRICE     EXPIRATION   --------------------------
NAME                          (#)(1)       FISCAL YEAR (2)   ($/SH)(3)    DATE (4)         5%($)     10%($)
----                     ---------------   ---------------   ---------   ----------       -------   --------
<S>                      <C>               <C>               <C>         <C>          <C>           <C>
W. Phillip Marcum ....      50,000(4)           13.1%          $3.06       7/14/14        $96,222   $243,836
A. Bradley Gabbard ...      25,000(4)            6.5%           3.06       7/14/14         48,111    121,918
Sidney Hinton ........          --                --              --            --             --         --
John Bernard .........      25,000(4)            6.5%           3.06       9/23/14         48,111    121,918
Gary Zuiderveen ......          --                --              --            --             --         --
Thomas R. Kellogg ....          --                --              --            --             --         --
</TABLE>

----------
(1)  These options are incentive stock options granted under our 1998 Stock
     Incentive Plan, have ten year terms and vest in three equal installments,
     commencing on the grant date, subject to immediate vesting upon a change in
     control.

(2)  Based upon options to purchase an aggregate of 382,000 shares of Common
     Stock granted to employees during fiscal 2004.

(3)  The exercise price of these options is equal to or greater than the fair
     market value of the Common Stock on the date of grant, based upon the last
     sale price of the Common Stock on such date as reported on the OTC Bulletin
     Board.

(4)  These options may terminate before their terms expire due to the
     termination of the optionee's employment or the optionee's disability or
     death.

(5)  The dollar amounts in these columns set forth the hypothetical gains that
     could be achieved for the respective option grants, assuming that the
     market price of our Common Stock appreciates in value from the date of
     grant through the term of the options at the annualized rates of 5% and
     10%, respectively, contained in the table, which rates are specified by SEC
     rules and do not represent our estimate or projection of the future
     appreciation of the price of our Common Stock. There is no assurance that
     the rates of appreciation set forth in this table can be achieved or that
     the amounts reflected will be received by the optionees. In addition, the
     potential realizable value set forth in these columns is net of the option
     exercise price but before taxes associated with any exercise. Actual gains,
     if any, on option exercises will be dependent on, among other things, the
     timing of such exercises and the future performance of our Common Stock.


                                       61

<PAGE>

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, 2004.

                 AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
                        AND FISCAL YEAR-END OPTION VALUES

<TABLE>
<CAPTION>
                                                       NUMBER OF SECURITIES            VALUE OF UNEXERCISED
                            SHARES                UNDERLYING UNEXERCISED OPTIONS     IN-THE-MONEY OPTIONS AT
                           ACQUIRED      VALUE          AT FISCAL YEAR-END(#)          FISCAL YEAR-END($)(2)
                             ON        REALIZED   ------------------------------   ---------------------------
NAME                     EXERCISE(#)    ($)(1)      EXERCISABLE   UNEXERCISABLE    EXERCISABLE   UNEXERCISABLE
----                     -----------   --------     -----------   -------------    -----------   -------------
<S>                      <C>           <C>        <C>             <C>              <C>           <C>
W. Phillip Marcum ....         --           --        266,667         33,333         $200,000        $    0
A. Bradley Gabbard ...         --           --        245,833         16,667          190,000             0
Sidney Hinton ........         --           --        145,000             --          112,500             0
John Bernard .........         --           --         22,875         21,334            9,150         4,200
Gary J. Zuiderveen ...      2,000       $2,100         29,000             --           20,000             0
Thomas R. Kellogg ....         --           --        100,000             --           90,000             0
</TABLE>

----------
(1)  For purposes of this table, the value realized is calculated based upon the
     excess of the closing sale price of our Common Stock on the date of
     exercise as reported on the OTC Bulletin Board, over the exercise price of
     the option, and does not necessarily indicate that the optionee sold the
     shares of Common Stock acquired up the exercise, or if sold, the proceeds
     realized by the optionee upon such sale.

(2)  For purposes of this table and in accordance with SEC rules, the value of
     unexercised in-the-money options is calculated based upon the excess, if
     any, of $2.40, the closing sale price of our Common Stock on December 31,
     2004 as reported on the OTC Bulletin Board, and the exercise price of the
     option. 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.
     However, the actual value, if any, that an optionee may realize upon
     exercise of a stock option will be dependent upon the future performance of
     our Common Stock and the optionee's continued employment through the
     vesting period.

DIRECTOR COMPENSATION

     Directors who are also our officers or employees do not receive any
additional compensation for serving on the Board of Directors or its committees.
All directors are reimbursed for their out-of-pocket costs of attending meetings
of the Board of Directors and its committees. Directors who are not also our
officers or employees ("Non-Employee Directors") receive a monthly retainer of
$2,000 per month for their service on our Board of Directors and any committees
thereof, including attending meetings. Non-Employee Directors also receive stock
options under an annual formula ("Annual Director Options") under our 1998 Stock
Incentive 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 Stock Incentive Plan in the discretion of the Board of Directors.

     All Annual Director Options granted to Non-Employee Directors are
non-qualified stock options


                                       62

<PAGE>

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 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 March 1, 2005, options to purchase 337,511 shares of Common Stock
were outstanding to our current Non-Employee Directors, at exercise prices
ranging from $0.46 to $17.38 per share.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

     The members of the Compensation Committee of our Board of Directors are
Basil M. Briggs, Chairman, Anthony D. Pell and Kevin P. Collins. No member of
our Compensation Committee is or has ever been an officer or employee of
Metretek Technologies or any of its subsidiaries. None of our executive officers
serves as a member of the board of directors or of the compensation committee of
any other entity that has one or more executive officers serving as a member of
our Board of Directors or of our Compensation Committee.


                                       63

<PAGE>

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 March 7, 2005 (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 filings
made by such persons 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
March 7, 2005. These underlying shares, however, are not included in computing
the "Percent of Class" of any other persons. The "Percent of Class" is based
upon 12,192,074 shares of Common Stock outstanding on March 7, 2005. The
business address for all of our Named Executive Officers and directors is 303
East Seventeenth Avenue, 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)......................   2,057,938         15.9
   141 Linden Street, Suite 4
   Wellesley, Massachusetts 02482
Gruber & McBaine Capital Management, LLC (2).........   1,172,612          9.5
   50 Osgood Place, Penthouse
   San Francisco, CA 94133
Special Situations Funds (3).........................     960,328          7.6
   153 East 53rd Street
   New York, New York 10022
Sidney Hinton (4)....................................     744,101          6.0
General Motors Trust Company, as trustee for GMAM
   Investment Funds Trust II (5).....................     685,976          5.5
   767 Fifth Avenue
   New York, New York 10153
W. Phillip Marcum (6)................................     498,301          4.0
A. Bradley Gabbard (7)...............................     410,285          3.3
Anthony D. Pell (8)..................................     164,764          1.3
Basil M. Briggs (9)..................................     127,138          1.1
Kevin P. Collins (10)................................     118,165          0.9
Gary J. Zuiderveen (11)..............................      47,132          0.4
John Bernard (12)....................................      23,768          0.2
Thomas R. Kellogg (13)...............................     100,000          0.8
All directors and executive officers
   as a group (8 persons)(14)........................   2,133,654         16.2
</TABLE>

----------
(1)  Information based, in part, on Amendment No. 6 to Schedule 13D filed with
     the SEC on December 16, 2004, 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, 2004.
     Information also based, in part, on Amendment No. 3 to Schedule 13G filed
     with the SEC on February


                                       64

<PAGE>

     16, 2005 by General Motors Trust Company, as trustee for GMAM Investment
     Funds Trust II ("GMAM") and General Motors Investment Management
     Corporation ("GMIMCO"), indicating beneficial ownership as of December 31,
     2004. Includes 221,497 shares of Common Stock held by B III-A Capital
     Partners, 664,484 shares of Common Stock held by DDJ Canadian High Yield
     Fund, and 442,998 shares of Common Stock held by GMAM. 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. Also includes 728,969 shares
     of Common Stock that may be acquired upon the exercise of currently
     exercisable warrants, of which warrants to purchase 121,497 shares are
     owned by B III-A Capital Partners, warrants to purchase 364,484 shares are
     owned by DDJ Canadian High Yield Fund, and warrants to purchase 242,988
     shares are owned by GMAM.

(2)  Information based, in part, upon Schedule 13G filed with the SEC on
     February 14, 2005 by Gruber & McBaine Capital Management, LLC ("GMCM"), Jon
     D. Gruber ("Gruber"), J. Patterson McBaine ("McBaine"), Eric B. Swergold
     ("Swergold"), J. Lynn Rose ("Rose") and Lagunitas Partners LP
     ("Lagunitas"), indicating beneficial ownership as of December 31, 2004.
     Includes 161,289 shares of Common Stock that may be acquired upon the
     exercise of currently exercisable warrants, of which warrants to purchase
     112,903 shares of Common Stock are held by Lagunitas, warrants to purchase
     29,032 shares of Common Stock held by Gruber & McBaine International
     ("GMI"), warrants to purchase 9,671 shares of Common Stock are held by
     Gruber, and warrants to purchase 9,671 shares of Common Stock are held by
     McBaine. GMCM is the manager of GMI and the general partner of Lagunitas.
     Gruber and McBaine are the managers, controlling persons and portfolio
     managers of GMCM and have voting control and investment discretion over the
     securities held by Lagunitas and GMI. GMCM, Gruber, McBaine, Swergold and
     Rose constitute a group within the meaning of Rule 13d-5(b). Lagunitas is
     not a member of any group and disclaims beneficial ownership of the
     securities with respect to its ownership is reposited.

(3)  Information based, in part, upon Amendment No. 3 to Schedule 13G filed with
     the SEC on February 11, 2005 by Austin W. Marxe and David M. Greenhouse,
     indicating beneficial ownership as of December 31, 2004. 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 Special
     Situations Private Equity Fund, L.P. and members of SST Advisers, L.L.C.
     SST Advisers, L.L.C. is the general partner of and investment advisor to
     Special Situations Technology Fund, L.P. and Special Situations Technology
     Fund II, L.P. Includes 198,308 shares of Common Stock held are held by
     Special Situations Fund III, 120,522 shares of Common Stock held by Special
     Situations Private Equity Fund, 15,365 shares of Common Stock held by
     Special Situations Technology Fund, 80,187 shares of Common Stock held by
     Special Situations Technology Fund II and 65,782 shares of Common Stock
     held by Special Situations Cayman Fund. Also includes 480,164 shares of
     Common Stock that may be acquired upon the exercise of currently
     exercisable warrants, of which warrants to purchase 198,308 shares are
     owned by Special Situations Fund III, warrants to purchase 120,522 shares
     are owned by Special Situations Private Equity Fund, warrants to purchase
     15,365 shares are owned by Special Situations Technology Fund, warrants to
     purchase 80,187 shares are owned by Special Situations Technology Fund II
     and warrants to purchase 65,782 shares are owned by Special Situations
     Cayman Fund.

(4)  Includes 145,000 shares that may be acquired by Mr. Hinton upon the
     exercise of currently exercisable stock options. Also include 10,000
     restricted shares that are subject to risk of forfeiture prior to vesting.

(5)  See note (1) above. These holdings are included in the holdings of DDJ
     Capital Management, LLC.

(6)  Includes 266,667 shares that may be acquired by Mr. Marcum upon the
     exercise of currently exercisable stock options. Also include 33,333
     restricted shares that are subject to risk of forfeiture prior to vesting.


                                       65

<PAGE>

     (7)  Includes 4,187 shares owned by immediate family members of Mr. Gabbard
          and 255,833 shares that may be acquired by Mr. Gabbard upon the
          exercise of currently exercisable stock options. Also include 16,666
          restricted shares that are subject to risk of forfeiture prior to
          vesting.

     (8)  Includes 2,937 shares held by Mr. Pell's wife. Also includes 113,415
          shares that may be acquired by Mr. Pell upon the exercise of currently
          exercisable stock options.

     (9)  Includes 9,500 shares owned by Mr. Briggs' wife. Also includes 8,186
          shares that may be acquired by Mr. Briggs upon the exercise of
          currently exercisable stock options.

     (10) Includes 115,915 shares that may be acquired by Mr. Collins upon the
          exercise of currently exercisable stock options.

     (11) Includes 37,334 shares that may be acquired by Mr. Zuiderveen upon the
          exercise of currently exercisable stock options.

     (12) Includes 22,875 shares that may be acquired by Mr. Bernard upon the
          exercise of currently exercisable stock options.

     (13) Mr. Kellogg's employment with us terminated effective October 6, 2004.
          Includes 100,000 shares that may be acquired by Mr. Kellogg upon the
          exercise of currently exercisable stock options.

     (14) Includes 965,225 shares that may be acquired upon the exercise of
          currently exercisable stock options. Also include 59,999 restricted
          shares that are subject to risk of forfeiture prior to vesting. See
          note notes (5) through (12).

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.

          The following table sets forth information about the shares of 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, 2004, all of which have been approved by our stockholders:

<TABLE>
<CAPTION>
                                                                                          NUMBER OF SECURITIES
                                                                                        REMAINING AVAILABLE FOR
                                      NUMBER OF SECURITIES TO     WEIGHTED-AVERAGE       FUTURE ISSUANCE UNDER
                                      BE ISSUED UPON EXERCISE     EXERCISE PRICE OF    EQUITY COMPENSATION PLANS
                                      OF 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)         1,986,352(2)              $2.22(3)                  595,865

Equity compensation plans not
   approved by security holders                    --                    --                          --
                                            ---------                 -----                     -------
Total..............................         1,986,352(2)              $2.22                     595,865
                                            =========                 =====                     =======
</TABLE>


                                       66

<PAGE>

----------
(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)  Includes 90,000 unvested shares of restricted stock.

(3)  This calculation excludes shares subject to restricted stock awards, as
     there is no exercise price associated with these awards.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

          In March 2004, MGT, though Conquest Acquisition, repurchased
performance shares and preferred shares in MM 1995-2, of which MGT is the
managing trustee, from Odessa Exploration Incorporated, a subsidiary of Key
Energy Services, Inc. ("Key"), for an aggregate purchase price of $454,000. W.
Phillip Marcum, our Chairman of the Board, President and Chief Executive
Officer, and Kevin P. Collins, a member of our Board of Directors, are also
members of the board of directors of Key. The transaction was approved by our
Audit Committee, of which Mr. Collins is a member but abstained from voting, as
being on terms no less favorable to us than could be obtained from an
independent party.

          On November 22, 2004, we completed the issuance of 950,000 shares of
our Common Stock in exchange for the minority 13.9% interest in PowerSecure
owned by the employee-shareholders of PowerSecure. The issuance was made
pursuant to Stock Purchase Agreements ("Purchase Agreements") , dated as of
September 10, 2004, between us and the employee-shareholders of PowerSecure,
Inc. A total of 485,401 shares of our Common Stock were issued to Sidney Hinton,
the President of PowerSecure, in exchange for his PowerSecure shares on the same
terms as the shares of Common Stock were issued to the other PowerSecure
employee-shareholders.

          During fiscal 2004, Mr. Hinton's son was employed by PowerSecure in a
sales and administrative capacity and received total compensation, including
salary and bonus, of $53,154 for fiscal 2004 and received two stock option
grants for a total of 10,000 shares of our Common Stock at an exercise price of
$3.06 per share.

          We have entered into indemnification agreements with each of our
directors and certain of our executive officers. These agreements require us to
indemnify such directors against certain liabilities that may arise against them
by reason of their status or service as officers or directors, to the fullest
extent permitted by Delaware law, to advance their expenses incurred as a result
of any proceeding against them as to which they could be indemnified. We
maintain an insurance policy covering our officers and directors under which the
insurer has agreed to pay the amount of any claim made against our officers or
directors that such officers or directors may otherwise be required to pay or
for which we are required to indemnify such officers and directors, subject to
certain exclusions and conditions, up to policy limits.

          Any material transaction between us and any related party must be
approved by our Audit Committee, which is comprised solely of independent
directors.


                                       67

<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

          On September 30, 2004, we engaged Hein & Associates LLP ("Hein") to
serve as our independent registered public accounting firm and dismissed
Deloitte & Touche LLP ("Deloitte"). Deloitte audited our financial statements as
of and for fiscal 2003 and for all prior fiscal years, and Hein audited our
financial statements as of and for fiscal 2004. See "Item 9. Changes in and
Disagreements with Accountants on Accounting and Financial Disclosure."

FEES

          The aggregate fees for professional services rendered to us by
Deloitte in fiscal 2003 and 2004 prior to its dismissal and for professional
services rendered by Hein in fiscal 2004 since its engagement were as follows:

<TABLE>
<CAPTION>
                               FISCAL 2004 FEES
                             -------------------   FISCAL 2003 FEES
                               HEIN     DELOITTE       DELOITTE
                             --------   --------   ----------------
<S>                          <C>        <C>        <C>
Audit Fees (1) ...........   $100,000    $20,000       $139,000
Audit-Related Fees (2) ...     16,939     21,683              0
Tax Fees (3) .............     20,295          0              0
All Other Fees ...........          0          0              0
                             --------   --------       --------
   Total .................   $137,234    $41,683       $139,000
                             ========    =======       ========
</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 consolidated interim financial statements included in our
     Quarterly Reports on Form 10-Q.

(2)  "Audit-Related Fees" represents fees billed for professional services
     rendered by Deloitte in fiscal 2004 in connection with two registration
     statements filed by us with the SEC in connection with a private placement
     transaction, and for professional services rendered by Hein during fiscal
     2004 relating to the audit of our 401(k) plan and the audit of MM 1995-2,
     an unconsolidated affiliate.

(3)  "Tax Fees" represents fees billed for professional services rendered by
     Hein for tax compliance, tax advice and tax planning for us and for MM
     1995-2 during fiscal 2004.

          The Audit Committee has determined that the provision of non-audit
services by Hein in fiscal 2004 was compatible with maintaining their
independence. Deloitte did not provide any non-audit services during fiscal
2003.

AUDIT COMMITTEE PRE-APPROVAL POLICY

          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 registered public accounting firm. 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
our independent registered public accounting firm during fiscal 2004 were
pre-approved by the Audit Committee.


                                       68

<PAGE>

                                     PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

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

     1.   Financial Statements

          The following consolidated financial statements of Metretek
          Technologies, Inc. are included on pages F-1 to F-32 of this Report:

          Report of Independent Registered Public Accounting Firm

          Report of Independent Registered Public Accounting Firm

          Consolidated Balance Sheets as of December 31, 2004 and 2003

          Consolidated Statements of Operations for the Years Ended
             December 31, 2004, 2003 and 2002

          Consolidated Statements of Stockholders' Equity for the Years Ended
             December 31, 2004, 2003 and 2002

          Consolidated Statements of Cash Flows for the Years Ended
             December 31, 2004, 2003 and 2002

          Notes to Consolidated Financial Statements

     2.   Financial Statement Schedules

          The following schedule is filed as part of this Report:

          Schedule II - Metretek Technologies, Inc. Valuation and Qualifying
                           Accounts For the Years Ended December 31, 2004, 2003
                           and 2002

          The following consolidated financial statements of Marcum Midstream
          1995-2 Business Trust are included on pages G-1 to G-11 of this
          Report:

          Report of Independent Registered Public Accounting Firm

          Consolidated Balance Sheets as of December 31, 2004 and 2003

          Consolidated Statements of Income for the Years Ended
             December 31, 2004, 2003 and 2002

          Consolidated Statements of Shareholders' Equity for the Years Ended
             December 31, 2004, 2003 and 2002

          Consolidated Statements of Cash Flows for the Years Ended
             December 31, 2004, 2003 and 2002

          Notes to Consolidated Financial Statements

          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)     Amended and Restated Rights Agreement, dated as of November
                    30, 2001, between Metretek Technologies, Inc. and
                    Computershare Investor Services, LLC.
</TABLE>


                                       69

<PAGE>

<TABLE>
<S>                 <C>
                    (Incorporated by reference to Exhibit 4.1 to Metretek's
                    Registration Statement on Form 8-A/A, Amendment No. 5, filed
                    November 30, 2001.)

          (4.3)     Amendment No. 1, dated as of April 22, 2004, to Amended and
                    Restated Rights Agreement between Metretek Technologies,
                    Inc. and ComputerShare Investor Services, LLC. (Incorporated
                    by reference to Exhibit 10.6 to Metretek's Current Report on
                    Form 8-K filed May 6, 2004).

          (4.4)     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).

          (4.5)     Form of Securities Purchase Agreement, dated as of April 29,
                    2004, by and among Metretek Technologies, Inc. and the
                    purchasers a signatory thereto ("Investors"). (Incorporated
                    by reference to Exhibit 10.1 to Metretek's Current Report on
                    Form 8-K filed May 6, 2004).

          (4.6)     Form of Registration Rights Agreement, dated as of April 29,
                    2004, by and among Metretek Technologies, Inc. and the
                    Investors. (Incorporated by reference to Exhibit 10.2 to
                    Metretek's Current Report on Form 8-K filed May 6, 2004).

          (4.7)     Form of Warrant, dated May 3, 2004, to be issued by Metretek
                    Technologies, Inc. to the Investors. (Incorporated by
                    reference to Exhibit 10.3 to Metretek's Current Report on
                    Form 8-K filed May 6, 2004).

          (4.8)     Form of Warrant, dated May 3, 2004, to be issued by Metretek
                    Technologies, Inc. to Roth Capital Management, LLC, as
                    placement agent. (Incorporated by reference to Exhibit 10.4
                    to Metretek's Current Report on Form 8-K filed May 6, 2004).

          (4.9)     Form of Warrant, dated May 3, 2004, to be issued by Metretek
                    Technologies, Inc. to Preferred Stockholders. (Incorporated
                    by reference to Exhibit 10.5 to Metretek's Current Report on
                    Form 8-K filed May 6, 2004).

          (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)    Amended and Restated Employment Agreement, dated as of
                    November 1, 2004, by and between Metretek Technologies, Inc.
                    and W. Phillip Marcum. (Incorporated by reference to Exhibit
                    10.1 to Metretek's Current Report on Form 8-K, filed
                    November 3, 2004)*

          (10.4)    Amended and Restated Employment Agreement, dated as of
                    November 1, 2004, by and between Metretek Technologies, Inc.
                    and A. Bradley Gabbard. (Incorporated by reference to
                    Exhibit 10.2 to Metretek's Current Report on Form 8-K, filed
                    November 3, 2004)*

          (10.5)    Metretek Technologies, Inc. 1998 Stock Incentive Plan,
                    amended and restated as of June 14, 2004. (Incorporated by
                    reference to Exhibit 4.3 to Metretek's Registration
                    Statement on Form S-8, Registration No. 333-116431.)*

          (10.6)    Form of Incentive Stock Option Agreement under the Metretek
                    Technologies, Inc. 1998 Stock Incentive Plan, as amended..
                    (Incorporated by reference to Exhibit 10.1 to Metretek's
                    Current Report on Form 8-K, filed August 25, 2004)*
</TABLE>


                                       70

<PAGE>

<TABLE>
<S>                 <C>
          (10.7)    Form of Non-Qualified Stock Option Agreement under the
                    Metretek Technologies, Inc. 1998 Stock Incentive Plan, as
                    amended. (Incorporated by reference to Exhibit 10.2 to
                    Metretek's Current Report on Form 8-K, filed August 25,
                    2004)*

          (10.8)    Form of Restricted Stock Agreement under the Metretek
                    Technologies, Inc. 1998 Stock Incentive Plan, as amended.
                    (Incorporated by reference to Exhibit 10.3 to Metretek's
                    Current Report on Form 8-K, filed August 25, 2004)*

          (10.9)    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.)

          (10.10)   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.)*

          (10.11)   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.)*

          (10.12)   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.)

          (10.13)   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.)

          (10.14)   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.)

          (10.15)   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.)

          (10.16)   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.)

          (10.17)   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.)

          (10.18)   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.)

          (10.19)   Fifth Amendment to Credit and Security Agreement, dated as
                    of March 29, 2004, 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 fiscal quarter ended March 31, 2004.)
</TABLE>


                                       71

<PAGE>

<TABLE>
<S>                 <C>
          (10.20)   Sixth Amendment to Credit and Security Agreement and Waiver
                    of Defaults, dated as of December 8, 2004, between Southern
                    Flow Companies, Inc. and Wells Fargo Business Credit, Inc.
                    (Incorporated by reference to Exhibit 10.2 to Metretek's
                    Current Report on Form 8-K filed December 14, 2004.)

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

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

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

          (10.24)   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.)

          (10.25)   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.)

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

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

          (10.28)   Fifth Amendment to Credit and Security Agreement and Waiver
                    of Defaults, dated as of June 3, 2004, between Metretek,
                    Incorporated and Wells Fargo Business Credit, Inc.
                    (Incorporated by reference to Exhibit 10.1 to Metretek's
                    Quarterly Report on Form 10-Q for the fiscal quarter ended
                    June 30, 2004.)

          (10.29)   Sixth Amendment to Credit and Security Agreement and Waiver
                    of Defaults, dated as of December 8, 2004, between Metretek,
                    Incorporated and Wells Fargo Business Credit, Inc.
                    (Incorporated by reference to Exhibit 10.1 to Metretek's
                    Current Report on Form 8-K filed December 14, 2004.)

          (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.)
</TABLE>


                                       72

<PAGE>

<TABLE>
<S>                 <C>
          (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)   First Amendment to Credit and Security Agreement, dated as
                    of December 8, 2004, between PowerSecure, Inc. and Wells
                    Fargo Business Credit, Inc. (Incorporated by reference to
                    Exhibit 10.3 to to Metretek's Quarterly Report on Form 10-Q
                    for the fiscal quarter ended June 30, 2004.)

          (10.34)   Employment and Non-Competition Agreement, dated as of June
                    24, 2002, 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.)*

          (10.35)   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.)*

          (10.36)   Form of Stock Purchase Agreement, dated as of September 10,
                    2004, by and between Metretek Technologies, Inc. and the
                    employee-shareholders of PowerSecure, Inc. (Incorporated by
                    reference to Exhibit 10.1 to Metretek's Current Report on
                    Form 8-K, filed September 13, 2004)*

          (10.37)   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.
                    (Incorporated by reference to Exhibit 10.39 to Metretek's
                    Annual Report on Form 10-K for the year ended December 31,
                    2003.)

          (10.38)   Order Granting Final Approval of the Partial Settlement,
                    dated June 11, 2004. (Incorporated by reference to Exhibit
                    99.1 to Metretek's Current Report on Form 8-K filed June 14,
                    2004.)

          (10.39)   Summary Sheet of Compensation of Non-Employee Directors.
                    (Filed herewith.)

          (14.1)    Metretek Technologies, Inc. Code of Ethics for Principal
                    Executive Officer and Senior Financial Officers.
                    (Incorporated by reference to Exhibit 14.1 to Metretek's
                    Annual Report on Form 10-K for the year ended December 31,
                    2003.)

          (14.2)    Metretek Technologies, Inc. Code of Business Conduct and
                    Ethics. (Incorporated by reference to Exhibit 14.2 to
                    Metretek's Annual Report on Form 10-K for the year ended
                    December 31, 2003.)

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

          (23.1)    Consent of Hein & Associates LLP (Filed herewith.)

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

          (31.1)    Certification of Chief Executive Officer pursuant to Rule
                    13a-14(a) or 15d-14(a) under the Securities Exchange Act of
                    1934, as amended, as adopted pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002 (Filed herewith.)

          (31.2)    Certification of Chief Financial Officer pursuant to Rule
                    13a-14(a) or 15d-14(a) under the Securities Exchange Act of
                    1934, as amended, as adopted pursuant to Section 302 of the
                    Sarbanes-Oxley Act of 2002 (Filed herewith.)
</TABLE>


                                       73

<PAGE>

<TABLE>
<S>                 <C>
          (32.1)    Certification of Chief Executive Officer pursuant to 18
                    U.S.C. Section 1350 and Rule 13a-14(b) or 15d-14(b) under
                    the Securities Exchange Act of 1934, as amended, as adopted
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                    (Filed herewith.)

          (32.2)    Certification of Chief Financial Officer pursuant to 18
                    U.S.C. Section 1350 and Rule 13a-14(b) or 15d-14(b) under
                    the Securities Exchange Act of 1934, as amended, as adopted
                    pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
                    (Filed herewith.)
</TABLE>

----------
     *    Management contract or compensation plan or arrangement.

(B)  ITEM 601 EXHIBITS

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

(C)  FINANCIAL STATEMENT SCHEDULES

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


                                       74

<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 21, 2005

                                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 21, 2005
-------------------------   Chief Executive Officer and Director
W. Phillip Marcum           (Principal executive officer)


/s/ A. Bradley Gabbard      Executive Vice President, Chief Financial    March 21, 2005
-------------------------   Officer, Treasurer, Secretary and Director
A. Bradley Gabbard          (Principal financial officer)


/s/ Gary J. Zuiderveen      Controller,  Principal Accounting            March 21, 2005
-------------------------   Officer and Secretary
Gary J. Zuiderveen          (Principal accounting officer)


/s/ Basil M. Briggs         Director                                     March 21, 2005
-------------------------
Basil M. Briggs


/s/ Anthony D. Pell         Director                                     March 21, 2005
-------------------------
Anthony D. Pell


/s/ Kevin P. Collins        Director                                     March 21, 2005
-------------------------
Kevin P. Collins
</TABLE>


                                       75

<PAGE>

                          INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
CONSOLIDATED FINANCIAL STATEMENTS OF
   METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

Report of Independent Registered Public Accounting Firm                      F-2

Report of Independent Registered Public Accounting Firm                      F-3

Consolidated Balance Sheets as of December 31, 2004 and 2003                 F-4

Consolidated Statements of Operations for the Years Ended
   December 31, 2004, 2003 and 2002                                          F-6

Consolidated Statements of Stockholders' Equity for the Years
   Ended December 31, 2004, 2003 and 2002                                    F-7

Consolidated Statements of Cash Flows for the Years Ended
   December 31, 2004, 2003 and 2002                                          F-8

Notes to Consolidated Financial Statements                                   F-9
</TABLE>


                                       F-1

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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

We have audited the accompanying consolidated balance sheet of Metretek
Technologies, Inc. and subsidiaries (the "Company") as of December 31, 2004, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the year then ended. Our audit 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 audit.

We conducted our audit in accordance with standards of the Public Company
Accounting Oversight Board (United States). 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
audit provides 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, 2004, and the results of their operations and their
cash flows for the year then ended, in conformity with U.S. generally accepted
accounting principles. 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.

/s/ Hein & Associates LLP
HEIN & ASSOCIATES LLP

Denver, Colorado
March 8, 2005


                                       F-2

<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Metretek Technologies, Inc.

We have audited the accompanying consolidated balance sheet of Metretek
Technologies, Inc. and subsidiaries (the "Company") as of December 31, 2003, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for the two 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 standards of the Public Company
Accounting Oversight Board (United States). 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 the results of their operations and their
cash flows for each of the two 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 3 to the consolidated financial statements, the Company
discontinued the MCM operations in December 2004. The results of MCM prior to
the disposition are included in loss on discontinued operations in the
accompanying consolidated financial statement for the two years ended December
31, 2003. Also, as disclosed in Note 1 to the consolidated financial statements,
the Company adopted EITF 03-6, "Participating Securities and the Two-Class
Method Under FASB Statement No. 128".

/s/ Deloitte & Touche LLP


Denver, Colorado
March 25, 2004 (March 11, 2005
as to the effects of the discontinued
operations described in Note 3 and
the adoption of EITF 03-6 described
in Note 1)


                                       F-3

<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                             DECEMBER 31,
                                                                      -------------------------
                                                                          2004          2003
                                                                      -----------   -----------
<S>                                                                   <C>           <C>
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                          $ 2,951,489   $ 2,101,675
   Trade receivables, net of allowance for doubtful accounts
      of $740,742 and $200,706, respectively                            8,702,437     6,613,153
   Other receivables                                                       25,850        59,864
   Inventories                                                          3,190,653     3,984,223
   Prepaid expenses and other current assets                              524,508       489,253
                                                                      -----------   -----------
      Total current assets                                             15,394,937    13,248,168
                                                                      -----------   -----------
PROPERTY, PLANT AND EQUIPMENT:
   Equipment                                                            5,052,664     3,810,632
   Vehicles                                                                61,041        66,590
   Furniture and fixtures                                                 543,127       588,869
   Land, building and improvements                                        796,182       754,167
                                                                      -----------   -----------
      Total property, plant and equipment, at cost                      6,453,014     5,220,258
   Less accumulated depreciation and amortization                       3,715,884     3,814,908
                                                                      -----------   -----------
      Property, plant and equipment, net                                2,737,130     1,405,350
                                                                      -----------   -----------
OTHER ASSETS:
   Goodwill (Notes 1 and 5)                                             8,840,148     7,617,196
   Patents and capitalized software development, net of accumulated
      amortization of $1,135,843 and $1,033,109, respectively             233,390       288,657
   Investment in unconsolidated affiliate                               2,077,301       691,100
   Note receivable (Note 3)                                               780,000
   Other assets                                                           148,010        76,070
                                                                      -----------   -----------
      Total other assets                                               12,078,849     8,673,023
                                                                      -----------   -----------
TOTAL                                                                 $30,210,916   $23,326,541
                                                                      ===========   ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       F-4

<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                              DECEMBER 31,
                                                                      ---------------------------
                                                                          2004           2003
                                                                      ------------   ------------
<S>                                                                   <C>            <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable                                                   $  3,206,094   $  1,978,226
   Accrued and other liabilities                                         5,002,536      4,530,149
   Notes payable (Note 6)                                                1,171,988        750,753
   Redeemable preferred stock - Series B (Note 4)                          893,957
   Capital lease obligations (Note 7)                                        3,477         25,411
                                                                      ------------   ------------
      Total current liabilities                                         10,278,052      7,284,539
                                                                      ------------   ------------

LONG-TERM NOTES PAYABLE (NOTE 6)                                         6,075,065      5,226,950
                                                                      ------------   ------------

NON-CURRENT CAPITAL LEASE OBLIGATIONS (NOTE 7)                               7,094         16,483
                                                                      ------------   ------------

LIABILITIES OF DISCONTINUED OPERATIONS (NOTE 3)                            843,649
                                                                      ------------   ------------

COMMITMENTS AND CONTINGENCIES (NOTE 8)

MINORITY INTEREST IN SUBSIDIARIES (NOTE 10)                                 89,792        207,280
                                                                      ------------   ------------
REDEEMABLE CONVERTIBLE PREFERRED STOCK - SERIES B,
   $.01 PAR VALUE; 1,000,000 SHARES AUTHORIZED;
   7,000 SHARES ISSUED AND OUTSTANDING AT
   DECEMBER 31, 2003; REDEMPTION
   VALUE $1,000 PER SHARE (NOTE 4)                                                      9,422,132
                                                                      ------------   ------------
STOCKHOLDERS' EQUITY (NOTE 10):
   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; 12,186,741 and 6,043,469 shares issued
      and outstanding, respectively                                        121,867         60,435
   Additional paid-in-capital                                           71,413,120     55,107,132
   Deferred compensation                                                  (132,000)
   Accumulated deficit                                                 (58,485,723)   (53,998,410)
                                                                      ------------   ------------
      Total stockholders' equity                                        12,917,264      1,169,157
                                                                      ------------   ------------
TOTAL                                                                 $ 30,210,916   $ 23,326,541
                                                                      ============   ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       F-5

<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                                        ---------------------------------------
                                                            2004          2003          2002
                                                        -----------   -----------   -----------
<S>                                                     <C>           <C>           <C>
REVENUES:
   Sales and services                                   $34,700,954   $36,332,145   $26,401,794
   Other                                                    475,969       141,591        51,137
                                                        -----------   -----------   -----------
      Total revenues                                     35,176,923    36,473,736    26,452,931
                                                        -----------   -----------   -----------

COSTS AND EXPENSES:
   Cost of sales and services                            23,897,325    25,686,448    17,938,158
   General and administrative                             6,834,960     6,105,010     5,709,894
   Selling, marketing and service                         2,112,203     1,600,684     1,555,150
   Depreciation and amortization                            578,516       514,640       576,422
   Research and development                                 667,293       626,760       551,518
   Interest, finance charges and other                      480,110       285,437       205,234
   Provision for litigation costs, net (Note 8)                  --            --     1,763,723
   Nonrecurring charges (Note 3)                                 --            --       182,496
                                                        -----------   -----------   -----------
      Total costs and expenses                           34,570,407    34,818,979    28,482,595
                                                        -----------   -----------   -----------
Income (loss) from continuing operations before
   minority interest, income taxes, and equity income       606,516     1,654,757    (2,029,664)

Minority interest (Note 10)                                (238,389)     (207,280)           --
Income taxes (Note 9)                                       (47,590)      (56,980)      (45,509)
Equity in income of unconsolidated affiliate              1,254,509       468,790       211,265
                                                        -----------   -----------   -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS                  1,575,046     1,859,287    (1,863,908)
                                                        -----------   -----------   -----------

DISCONTINUED OPERATIONS OF MCM (NOTE 3)
   Loss on disposal of MCM                               (3,355,301)           --            --
   Loss from operations of MCM                           (1,463,285)     (980,302)   (1,518,409)
                                                        -----------   -----------   -----------

LOSS ON DISCONTINUED OPERATIONS                          (4,818,586)     (980,302)   (1,518,409)
                                                        -----------   -----------   -----------
NET INCOME (LOSS)                                       $(3,243,540)  $   878,985   $(3,382,317)
                                                        ===========   ===========   ===========

PER SHARE AMOUNTS (NOTE 1):
INCOME (LOSS) FROM CONTINUING OPERATIONS:
   Basic                                                $      0.03   $      0.11   $     (0.45)
                                                        ===========   ===========   ===========
   Diluted                                              $      0.03   $      0.11   $     (0.45)
                                                        ===========   ===========   ===========

NET INCOME (LOSS):
   Basic                                                $     (0.47)  $     (0.06)  $     (0.70)
                                                        ===========   ===========   ===========
   Diluted                                              $     (0.45)  $     (0.06)  $     (0.70)
                                                        ===========   ===========   ===========

WEIGHTED AVERAGE COMMON
   SHARES OUTSTANDING:
   Basic                                                  9,531,199     6,043,469     6,077,388
                                                        ===========   ===========   ===========
   Diluted                                               10,035,730     6,051,580     6,077,388
                                                        ===========   ===========   ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       F-6

<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

<TABLE>
<CAPTION>
                                                                                       ACCUMULATED
                                     COMMON STOCK         ADDITIONAL                      OTHER
                                ----------------------     PAID-IN       DEFERRED     COMPREHENSIVE    ACCUMULATED
                                   SHARES       VALUE      CAPITAL     COMPENSATION   INCOME (LOSS)      DEFICIT        TOTAL
                                -----------   --------   -----------   ------------   -------------   ------------   -----------
<S>                             <C>           <C>        <C>           <C>            <C>             <C>            <C>
BALANCE,
   JANUARY 1, 2002                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
Net loss                                                                                                (3,243,540)   (3,243,540)
Private placement, net            3,510,548     35,105     9,793,586                                                   9,828,691
Conversion of preferredstock      1,329,173     13,292     4,413,996                                                   4,427,288
Stock issued in acquisition of
   PowerSecure minority Interest    950,000      9,500     1,492,925                                                   1,502,425
Stock option exercises              263,551      2,635       408,381                                                     411,016
Stock awards                         90,000        900       197,100    $(198,000)
Amortization of deferred
   compensation                                                            66,000                                         66,000
Preferred stock
   distribution                                                                                         (1,243,773)   (1,243,773)
                                -----------   --------   -----------    ---------       ---------     ------------   -----------
BALANCE,
   DECEMBER 31, 2004             12,186,741   $121,867   $71,413,120    $(132,000)      $             $(58,485,723)  $12,917,264
                                ===========   ========   ===========    =========       =========     ============   ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       F-7

<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                               YEAR ENDED DECEMBER 31,
                                                                       ---------------------------------------
                                                                           2004          2003          2002
                                                                       -----------   -----------   -----------
<S>                                                                    <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                   $(3,243,540)  $   878,985   $(3,382,317)
   Adjustments to reconcile net income (loss) to net cash
      provided by (used in) operating activities:
      Loss on disposal of MCM operations                                 3,355,301
      Loss from discontinued operations of MCM                           1,463,285       980,302     1,518,409
      Depreciation and amortization                                        578,516       514,640       576,422
      Provision for litigation costs                                                                 1,763,723
      Minority interest in subsidiary                                      238,389       222,280
      Loss on disposal of property, plant and equipment                        262        13,327        16,352
      Equity in income of unconsolidated affiliate                      (1,254,509)     (468,790)     (211,265)
      Distributions from unconsolidated affiliate                          807,732       332,137       101,251
      Stock compensation                                                    66,000
   Changes in operating assets and liabilities, net of acquisitions:
      Trade receivables, net                                            (2,834,777)   (2,403,211)      770,477
      Inventories                                                       (1,235,077)     (775,449)      (73,477)
      Other current assets                                                  (1,241)       14,195          (757)
      Other noncurrent assets                                              (71,940)      (18,069)         (278)
      Accounts payable                                                   1,227,868       381,356       140,656
      Accrued and other liabilities                                        476,609     1,661,378       313,450
                                                                       -----------   -----------   -----------
   Net cash provided by (used in) continuing operations                   (427,122)    1,333,081     1,532,646
   Net cash used by discontinued operations of MCM                      (1,441,705)     (804,083)   (1,436,414)
                                                                       -----------   -----------   -----------
   Net cash provided by (used in) operating activities                  (1,868,827)      528,998        96,232
                                                                       -----------   -----------   -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Investment in unconsolidated affiliate                                 (955,784)
   Capitalized software purchases or development                           (47,467)       (2,000)      (11,841)
   Purchases of property, plant and equipment                           (2,229,640)     (294,067)     (534,426)
   Minority interest acquired                                              (80,979)
   Proceeds from sale of property, plant and equipment                       5,700           800         1,500
                                                                       -----------   -----------   -----------
      Net cash used in investing activities                             (3,308,170)     (295,267)     (544,767)
                                                                       -----------   -----------   -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net proceeds from private placement                                   9,828,691
   Proceeds from stock option exercises                                    411,016
   Net borrowings on line of credit                                         75,863     1,074,390       445,258
   Proceeds from equipment and project loans                             1,212,570        30,169       238,863
   Proceeds from investment loan                                           960,784
   Principal payments on long-term notes payable                          (979,867)      (71,049)
   Distributions to minority interests                                     (55,701)
   Repurchase of common stock                                                                          (25,000)
   Payments on preferred stock redemptions                              (5,344,660)
   Payments on capital lease obligations                                   (81,885)      (50,409)      (21,819)
                                                                       -----------   -----------   -----------
      Net cash provided by financing activities                          6,026,811       983,101       637,302
                                                                       -----------   -----------   -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS                                  849,814     1,216,832       188,767

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                           2,101,675       884,843       696,076
                                                                       -----------   -----------   -----------
CASH AND CASH EQUIVALENTS AT END OF YEAR                               $ 2,951,489   $ 2,101,675   $   884,843
                                                                       ===========   ===========   ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       F-8

<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002

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 majority-owned subsidiary, Metretek Contract
     Manufacturing Company, Inc. ("MCM")), and Marcum Gas Transmission, Inc.
     ("MGT") (and its majority-owned subsidiary, Conquest Acquisition Company
     LLC ("CAC LLC")), 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 11 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.

     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.

<TABLE>
<CAPTION>
                                                           2004        2003        2002
                                                        ----------   --------   ----------
<S>                                                     <C>          <C>        <C>
Supplemental disclosures of cash flow information:
   Cash paid during the year for:

   Interest                                             $  404,030   $202,668   $  147,956
   State income taxes                                       12,958     56,980       45,509

Supplemental schedule of non-cash investing and
   financing activities:
      Capital lease obligations incurred for the
         purchase of equipment                             526,395     98,424           --
      Acquisition of minority interest in PowerSecure
         through issuance of stock                       1,202,249         --           --
      Issuance of restricted stock compensation            198,000         --           --
      Note receivable in payment for sale
         of discontinued MCM operations                    780,000         --           --
      Conversion of preferred stock                      4,427,288         --           --
      Cancellation of disputed note payable
         to vendor for non-performance                          --         --    2,471,426
</TABLE>


                                       F-9

<PAGE>

     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. Significant estimates include percentage-of-completion
     estimates, allowance for doubtful accounts receivable, inventory valuation
     reserves, and deferred tax valuation allowance.

     REVENUE RECOGNITION - Equipment and supply sales are recognized when
     delivered, and natural gas measurement revenues are recognized as services
     are provided. The Company utilizes the percentage-of-completion method of
     method of revenue recognition for PowerSecure's contracts. 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. The Company recognizes revenues
     on PowerSecure's shared savings distributed generation projects as the
     customer realizes energy savings their site.

     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.
     The December 31, 2004 balance of the allowance for doubtful accounts
     includes $587,000 provided for losses on receivables from the discontinued
     operations of the Company's MCM business (see Note 3).

     INVENTORIES - Inventories are stated at the lower of cost (determined
     primarily on a first-in, first-out basis) or market. Inventories at
     December 31, 2004 and 2003 are summarized as follows:

<TABLE>
<CAPTION>
                                     2004         2003
                                 -----------   ----------
<S>                              <C>           <C>
Raw materials and supplies       $ 3,013,759   $2,222,461
Work in process                      471,270    1,085,315
Finished goods and merchandise     1,253,894      964,246
Valuation reserve                 (1,548,270)    (287,799)
                                 -----------   ----------
Total                            $ 3,190,653   $3,984,223
                                 ===========   ==========
</TABLE>

     The raw materials and supplies inventory at December 31, 2004, includes
     $1,567,000 of inventory from the discontinued operations of the Company's
     MCM business (see Note 3), of which $1,199,000 has been reserved for losses
     expected upon disposal of that inventory.

     In November 2004, the Financial Accounting Standards Board ("FASB") issued
     Statement of Financial Accounting Standards ("FAS") No. 151, "Inventory
     Costs, an amendment of ARB No. 43, Chapter 4". FAS No. 151 amends the
     guidance in Chapter 4, "Inventory Pricing," of Accounting Research Bulletin
     No. 43, "Restatement and Revision of Accounting Research Bulletins," to
     clarify the accounting for abnormal amounts of idle facility expense,
     freight, handling costs and wasted material. FAS No. 151 also clarifies the
     circumstances under which fixed overhead costs associated with operating
     facilities involved in inventory processing should be capitalized. The
     provisions of FAS No. 151 are effective for


                                      F-10

<PAGE>

fiscal years beginning after June 15, 2005, which the Company will
be required to adopt for fiscal 2006. The Company is currently evaluating the
impact, if any, that FAS No. 151 will have on its consolidated financial
position or results of operations.

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 30
years. Property, plant and equipment includes items under capital lease with a
net book value of $10,813 and $66,406 at December 31, 2004 and 2003,
respectively.

INVESTMENT IN UNCONSOLIDATED AFFILIATE -The Company, through MGT, holds a
minority interest in Marcum Midstream 1995-2 Business Trust ("MM 1995-2") which
it acquired in early 1996. During the first quarter of 2004, the Company
acquired additional equity interests in MM 1995-2 at a purchase price of
$956,000, with an effective date of the acquisition of January 1, 2004. As a
result of this additional investment, the Company currently owns an approximate
26% economic interest in MM 1995-2. MM 1995-2 owns and operates four water
disposal well facilities in northeastern Colorado.

To facilitate the acquisition of the additional equity interests, MGT formed CAC
LLC, a majority-owned subsidiary. Financing of the acquired equity interests was
provided by a $961,000 term loan from a commercial bank to CAC LLC. The loan is
collateralized by CAC LLC's and MGT's collective interests in MM 1995-2, and the
Company has provided a guaranty of $625,000 of the term loan. The term loan
provides for 60 monthly payments of principal and interest (at a rate of 5.08%)
in the amount of approximately $18,500 per month. Cash distributions from MM
1995-2 to CAC LLC are being used to fund the monthly payments on the term loan.

The Company utilizes the equity method to account for its investment in MM
1995-2. The minority shareholder's interest in CAC LLC at December 31, 2004, is
included in minority interest in the accompanying consolidated financial
statements.

Summarized financial information for MM 1995-2 at December 31, 2004 and 2003 and
for the three years ended December 31, 2004 are as follows:

<TABLE>
<CAPTION>
                                                   DECEMBER 31,
                                             -----------------------
                                                2004         2003
                                             ----------   ----------
<S>                                          <C>          <C>
Total current assets                         $1,766,687   $1,510,302
Property, plant and equipment, net            5,158,373    4,681,899
Total other assets                               16,537       23,801
                                             ----------   ----------
Total assets                                 $6,941,597   $6,216,002
                                             ==========   ==========

Total current liabilities                    $  812,796   $  795,599
Long-term note payable                          419,559    1,020,561
Total shareholders' equity                    5,709,242    4,399,842
                                             ----------   ----------
Total liabilities and shareholders' equity   $6,941,597   $6,216,002
                                             ==========   ==========
</TABLE>

<TABLE>
<CAPTION>
                                  YEAR ENDED DECEMBER 31,
                           ------------------------------------
                              2004         2003         2002
                           ----------   ----------   ----------
<S>                        <C>          <C>          <C>
Total revenues             $7,208,648   $5,311,822   $3,333,195
Total costs and expenses    3,299,248    2,480,899    2,153,918
                           ----------   ----------   ----------
Net income                 $3,909,400   $2,830,923   $1,179,277
                           ==========   ==========   ==========
</TABLE>


                                      F-11

<PAGE>

GOODWILL AND OTHER INTANGIBLE ASSETS - Effective January 1, 2002, the Company
adopted the provisions of FAS No. 141, "Business Combinations" and FAS No. 142
"Goodwill and Other Intangible Assets." FAS No. 141 eliminated the
pooling-of-interests method of accounting for business combinations and further
clarifies the criteria to recognize intangible assets separately from goodwill.
FAS No. 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 No. 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 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,
2004 and 2003 are $233,390 and $288,657, respectively. Patents and license
agreements are amortized using the straight-line method over the lesser of their
estimated economic lives or their legal term of existence, generally 10 to 17
years. Patent and license agreement costs have been fully amortized at December
31, 2004 and 2003.

ACCRUED AND OTHER LIABILITIES - Accrued and other liabilities at December 31,
2004 and 2003 are summarized as follows:

<TABLE>
<CAPTION>
                                                        2004         2003
                                                     ----------   ----------
<S>                                                  <C>          <C>
Payroll, employee benefits and related liabilities   $1,441,216   $1,159,067
Deferred revenue                                        408,097      436,063
Sales, property and other taxes payable                 229,366       80,282
Insurance premiums and reserves                         416,786      326,961
Accrued project costs                                   829,615    1,008,159
Advance billings on projects in progress              1,601,773      951,020
Warranty reserve                                         67,229       97,494
Accrued litigation costs                                     --      420,017
Other                                                     8,454       51,086
                                                     ----------   ----------
Total                                                $5,002,536   $4,530,149
                                                     ==========   ==========
</TABLE>

INCOME (LOSS) PER SHARE - Basic income (loss) per share is computed using the
weighted average number of shares outstanding. Diluted income (loss) per share
reflects the potential dilutions that would occur if stock options were
exercised using the average market price for the Company's stock for the period.
The Emerging Issues Task Force ("EITF") issued EITF Issue No. 03-6,
"Participating Securities and the Two-Class Method under FASB Statement No. 128,
Earnings per Share" ("EITF 03-6"). The Company adopted EITF 03-6 as of April 1,
2004, and has retroactively adjusted prior periods pursuant to its provisions.
EITF 03-6 provides guidance for the computation of earnings per share using the
two-class method for enterprises with participating securities or multiple
classes of common stock as required by Statement of Financial Accounting
Standards No. 128. The two-class method allocates undistributed earnings to each
class of common stock and participating securities for the purpose of computing
basic earnings per share. The Company's Series B Redeemable Preferred Stock was
a participating security under the provisions of EITF 03-6 for periods prior to
its redemption on December 9, 2004. No undistributed earnings are allocable to
the Company's Series B Redeemable


                                      F-12

<PAGE>

Preferred Stock for the year ended December 31, 2004 since such shares have been
redeemed effective December 9, 2004.

The following table sets forth the calculation of basic and diluted earnings per
share:

<TABLE>
<CAPTION>
                                                       YEAR ENDED DECEMBER 31,
                                               --------------------------------------
                                                   2004         2003          2002
                                               -----------   ----------   -----------
<S>                                            <C>           <C>          <C>
Income (loss) from continuing operations       $ 1,575,046   $1,859,287   $(1,863,908)
Less preferred stock
   deemed distribution (1)                      (1,243,773)    (890,191)     (851,724)
                                               -----------   ----------   -----------
Income (loss) from continuing
   operations to be allocated                      331,273      969,096    (2,715,632)
Less allocation of undistributed earnings
   to participating preferred stock                     --     (327,302)           --
                                               -----------   ----------   -----------
Income (loss) from continuing operations
   attributable to common shareholders             331,273      641,794    (2,715,632)
Loss from discontinued operations               (4,818,586)    (980,302)   (1,518,409)
                                               -----------   ----------   -----------
Net loss attributable
   to common shareholders                      $(4,487,313)  $ (338,508)  $(4,234,041)
                                               ===========   ==========   ===========
Basic weighted-average common
   shares outstanding in period                  9,531,199    6,043,469     6,077,388
   Add dilutive effects of stock options (2)       504,531        8,111            --
                                               -----------   ----------   -----------
Diluted weighted-average common
   shares outstanding in period (4)             10,035,730    6,051,580     6,077,388
                                               ===========   ==========   ===========
Basic earnings (loss) per common share:
   Income (loss) from continuing operations    $      0.03   $     0.11   $     (0.45)
   Loss from discontinued operations                 (0.50)       (0.16)        (0.25)
                                               -----------   ----------   -----------
   Basic earnings per common share (3)         $     (0.47)  $    (0.06)  $     (0.70)
                                               ===========   ==========   ===========
Diluted earnings (loss) per common share:
   Income (loss) from continuing operations    $      0.03   $     0.11   $     (0.45)
   Loss from discontinued operations                 (0.48)       (0.16)        (0.25)
                                               -----------   ----------   -----------
   Diluted earnings per common share (3)       $     (0.45)  $    (0.06)  $     (0.70)
                                               ===========   ==========   ===========
</TABLE>

(1)  The preferred stock deemed distribution for the year ended December 31,
     2004 includes a non-cash charge (expense) of $593,000, which represents the
     estimated fair market value of inducement conveyed to the converting
     Preferred Stockholders in connection with the Private Placement discussed
     further in Note 2.

(2)  The assumed conversion of stock options, convertible preferred stock and
     warrants has been excluded from weighted average shares outstanding for the
     year ended December 31, 2002 because the effect would be anti-dilutive.

(3)  Basic and diluted earnings per share for the year ended December 31, 2003
     differ from the amounts originally presented in the Company's Annual Report
     on Form 10-K dated December 31, 2003 for the effects of the allocation of
     earnings to participating preferred stock as required by the provisions of
     EITF 03-6.


                                      F-13

<PAGE>

     DEFERRED COMPENSATION - During the third quarter 2004, the Company awarded,
     subject to restrictions, 90,000 shares of common stock to certain
     executives of the Company. The stock awards vest in one-third increments
     over a three-year period. The Company recorded deferred compensation
     expense in the amount of $198,000 for the fair market value of the stock on
     the date of the award. The deferred compensation is amortized over the
     remaining vesting period. The Company amortized $66,000 of the deferred
     compensation expense during the year ended December 31, 2004.

     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 No. 148 amends FAS No. 123,
     "Accounting for Stock-Based Compensation", to provide alternative methods
     for voluntary transition to FAS 123's fair value method of accounting for
     stock-based employee compensation ("the fair value method"). FAS No. 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.

     At December 31, 2004, 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 No. 123 for the years ended December 31, 2004, 2003 and 2002:

<TABLE>
<CAPTION>
                                                 YEAR ENDED DECEMBER 31,
                                          -------------------------------------
                                              2004         2003         2002
                                          -----------   ---------   -----------
<S>                                       <C>           <C>         <C>
Net loss applicable to common
   shareholders - as reported             $(4,487,313)  $(338,508)  $(4,234,041)

Deduct: Total stock-based employee
   compensation expense determined
   under fair value based method             (193,047)    (76,437)      (34,837)
                                          -----------   ---------   -----------
Net loss applicable to common
   shareholders - pro forma               $(4,680,360)  $(414,945)  $(4,268,878)
                                          ===========   =========   ===========
Income (loss) per basic common share:
   As reported                            $     (0.47)  $   (0.06)  $     (0.70)
                                          ===========   =========   ===========
   Pro forma                              $     (0.49)  $   (0.07)  $     (0.70)
                                          ===========   =========   ===========
Income (loss) per diluted common share:
   As reported                            $     (0.45)  $   (0.06)  $     (0.70)
                                          ===========   =========   ===========
   Pro forma                              $     (0.47)  $   (0.07)  $     (0.70)
                                          ===========   =========   ===========
</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 2004, 2003 and 2002: stock price volatility of
     58%, 107% and 105%, respectively; risk-free interest rate of 3.53% in 2004
     and 3.5% in


                                      F-14

<PAGE>

     2003 and 2002; 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.

     In December 2004, the FASB issued its final standard on accounting for
     employee stock options, FAS No. 123 (Revised 2004), "Share-Based Payment"
     ("FAS No. 123(R)"). FAS No. 123(R) replaces FAS No. 123, "Accounting for
     Stock-Based Compensation" ("FAS No. 123"), and supersedes Accounting
     Principles Board Opinion No. 25, "Accounting for Stock Issued to
     Employees". FAS No. 123(R) requires companies to measure compensation costs
     for all share-based payments, including grants of employee stock options,
     based on the fair value of the awards on the grant date and to recognize
     such expense over the period during which an employee is required to
     provide services in exchange for the award. The pro forma disclosures
     previously permitted under FAS No. 123 will no longer be an alternative to
     financial statement recognition. FAS No. 123(R) is effective for all awards
     granted, modified, repurchased or cancelled after, and to unvested portions
     of previously issued and outstanding awards vesting after, interim or
     annual periods beginning after June 15, 2005, which for the Company will be
     the third quarter of fiscal 2005. The Company is currently evaluating the
     effect of adopting FAS No. 123(R) on its financial position and results of
     operations, and the Company has not yet determined whether the adoption of
     FAS No. 123(R) will result in expenses in amounts that are similar to the
     current pro forma disclosures under FAS No. 123.

     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.

     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 No.
     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 No. 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 No. 149 amends and clarifies the accounting
     for derivative instruments, including certain derivative instruments
     embedded in other contracts, and for hedging activities under FAS No. 133,
     "Accounting for Derivative Instruments and Hedging Activities." FAS No. 149
     is generally effective for contracts entered 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 No. 133 and FAS No. 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

     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


                                      F-15

<PAGE>

     Certain Costs Incurred in a Restructuring)". FAS No. 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 No. 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
     became applicable on a prospective basis to guarantees issued or modified
     after December 31, 2002; while the provisions of the disclosure
     requirements became 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 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 No. 150, "Accounting for Certain Financial
     Instruments with Characteristics of both Liabilities and Equity". FAS No.
     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 No. 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
     No. 150 had no effect on the consolidated financial position, results of
     operations or cash flows of the Company.

     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


                                      F-16

<PAGE>

     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.

     RECLASSIFICATIONS - During the third quarter of 2004, the Board of
     Directors of the Company approved a plan to discontinue the business of MCM
     and sell all of its manufacturing assets (See Note 3). The operations of
     the discontinued MCM disposal group have been reclassified to discontinued
     operations for all periods presented in the accompanying consolidated
     statements of operations. In addition, the Company has reclassified its
     equity in income of unconsolidated affiliate from other revenues to a
     separate line in the consolidated statements of operations for all periods
     presented. Finally, certain other 2003 and 2002 amounts have been
     reclassified to conform to current year presentation. Such
     reclassifications had no effect on net income or loss.

2.   PRIVATE PLACEMENT AND CONVERSION OF SERIES B PREFERRED STOCK

     In May 2004, the Company completed a private placement to institutional and
     accredited investors of 3,510,548 shares of its common stock and warrants
     to purchase 702,109 shares of its common stock (the "Private Placement"),
     raising gross proceeds of $10,883,000. The price paid in the Private
     Placement was $3.10 per unit, each unit consisting of one share of common
     stock and a warrant to purchase 0.2 shares of common stock. Roth Capital
     Partners, LLC acted as placement agent in the Private Placement.

     The Company received net cash proceeds of $9,829,000 from the Private
     Placement, after deducting transaction expenses including the placement
     agent's fee. The net proceeds from the Private Placement have been used by
     the Company principally to meet its mandatory redemption obligations
     related to its Series B Preferred Stock, par value $.01 per share ("Series
     B Preferred Stock"), which matured on December 9, 2004 (the "Mandatory
     Redemption Date"), and for other business commitments and initiatives.

     The warrants issued in the Private Placement have an exercise price of
     $3.41 per share of common stock and expire in May 2009. The warrants are
     callable by the Company commencing one year after issuance if the trading
     price of the common stock is at least two times the warrant exercise price
     for 30 consecutive trading days and certain other conditions are satisfied.
     In addition to the warrants issued to the investors, the Company issued
     warrants to purchase up to 351,055 shares of common stock to the placement
     agent, which warrants are on the same basic terms as the warrants issued to
     the investors. The Company filed a registration statement with the
     Securities and Exchange Commission (the "SEC"), covering resales of shares
     of common stock issued in the Private Placement or upon the exercise of the
     warrants.

     In addition, as a condition precedent to the closing of the Private
     Placement, certain holders of the Company's outstanding shares of Series B
     Preferred Stock converted a total of 2,500 shares of Series B Preferred
     Stock, including accrued and unpaid dividends thereon. The purpose of this
     conversion was


                                      F-17

<PAGE>

     to reduce the Company's potential preferred stock mandatory redemption
     liability at the Mandatory Redemption Date from approximately $10.3 million
     to approximately $6.6 million, a reduction of $3.7 million. Upon
     conversion, the converting Preferred Stockholders received 1,209,133 shares
     of common stock (inclusive of 55,871 additional shares of common stock
     ("Additional Shares") intended to compensate the converting Preferred
     Stockholders for dividends that they would otherwise receive on the
     converted preferred shares between the Private Placement closing date and
     the Mandatory Redemption Date) and new warrants to purchase 1,209,133
     shares of common stock. The new warrants may be exercised at a strike price
     of $3.0571 per share of common stock and expire on June 9, 2005. The strike
     price of the new warrants is the same price as the conversion price of the
     Series B Preferred Stock. The Company included both the Additional Shares
     and the shares of common stock issuable upon exercise of the new warrants
     in the registration statement filed with the SEC in connection with the
     Private Placement.

     As a result of the Preferred Stock conversion described in the immediately
     preceding paragraph, the Company recorded a second quarter of 2004 non-cash
     charge (expense) in the amount of $543,000 as an additional preferred stock
     deemed dividend. This charge represents the approximate fair market value
     of inducement conveyed to the converting Preferred Stockholders. The
     inducement amount relates principally to the estimated fair market values
     of the new warrants and the Additional Shares. See also Note 1 - "Income
     (Loss) per Share."

     During the third quarter of 2004, additional holders of the Company's
     outstanding shares of Series B Preferred Stock converted a total of 250
     shares of Series B Preferred Stock, including accrued and unpaid dividends.
     The conversion terms were identical to those terms offered to holders who
     converted their shares of Series B Preferred stock in connection with the
     Private Placement. Upon conversion, the converting Preferred Stockholders
     received 120,040 shares of common stock and new warrants to purchase
     120,040 shares of common stock at a strike price of $3.0571 per share of
     common stock. These new warrants also expire on June 9, 2005. The Company
     recorded a third quarter 2004 non-cash charge in the amount of $25,000 as
     an additional preferred stock deemed dividend, representing the fair market
     value of inducement conveyed to the converting Preferred Stockholders.

3.   DISCONTINUED OPERATIONS OF MCM AND NONRECURRING CHARGES

     During the third quarter of 2004, the Board of Directors of the Company
     approved a plan to discontinue the business of MCM and sell all of its
     manufacturing assets. The Company made its determination to exit the
     contract manufacturing business as the result of recent unacceptable losses
     in that business that have adversely affected the consolidated financial
     results of the Company, as well as industry and market factors and recent
     projections of operations that are not favorable to the Company in the
     foreseeable future. The discontinuance of the contract manufacturing
     operations will allow Metretek Florida to focus on its telemetry and
     automated meter reading business lines, including the operations related to
     its new InvisiConnect technology.

     On December 30, 2004, the Company sold the contract manufacturing assets
     and business of the MCM disposal group to InstruTech Florida, LLC
     ("InstruTech Florida"), a newly formed wholly-owned subsidiary of
     InstruTech, Inc., a Colorado-based contract manufacturer of printed circuit
     boards and other instrumentation products. InstruTech Florida issued a
     promissory note in the amount of $780,000 to the Company for the assets and
     business acquired. The note is payable only out of 50% of the net cash flow
     of InstruTech Florida and accrues interest at the rate of 4.75%. If at
     least 30% of the note is not repaid prior to December 31, 2007, the Company
     and InstruTech have agreed to negotiate in good faith whether to extend the
     term of the note or whether to declare a default and cause InstruTech to
     return the purchased equipment to the Company. In addition, InstruTech
     Florida issued an option to the


                                      F-18

<PAGE>

     Company that would allow Metretek Florida to acquire up to 19% of
     InstruTech Florida for a period of three years, or until the promissory
     note has been repaid in full.

     In connection with the sale to InstruTech Florida, the Company has agreed
     to provide up to $150,000 in the form of a bridge loan to InstruTech
     Florida for a period of six months ending June 30, 2005. Repayment of any
     amounts advanced under terms of the bridge loan are to be repaid in amounts
     equal to 75% of monthly positive cash flow from operations of InstruTech
     Florida. Through February 28, 2005, the Company has advanced $50,000 under
     terms of the bridge loan. In addition, Metretek Florida has offered use of
     Metretek Florida's facilities through June 30, 2005. InstruTech Florida has
     agreed to purchase Metretek Florida's remaining contract manufacturing
     inventory on an "as needed" basis at fair value. For a period of six months
     (subject to extension), Metretek Florida has agreed to utilize InstruTech
     Florida as its exclusive contract manufacturer.

     The sale agreement may be terminated at any time prior to March 31, 2005,
     under certain conditions, upon the following: i) by mutual agreement of the
     Company and InstruTech Florida; ii) by InstruTech Florida if it determines
     customer purchase orders and commitments are below a commercially viable
     level; or iii) by the Company if it determines that InstruTech Florida has
     no reasonable chance to be commercially successful or generate positive
     cash flow within the succeeding 6 to 12 month period.

     The Company recorded a loss in the amount of $3,355,000 on the disposal of
     MCM, including a loss of $2,835,000 on the disposal of the MCM assets. The
     remaining assets and liabilities of the MCM disposal group at December 31,
     2004, are as follows:

<TABLE>
<S>                                 <C>
Assets:
   Accounts receivable, net         $416,370
   Inventory, net                    368,265
                                    --------
                                    $784,635
                                    ========
Liabilities:
   Capital lease terminations       $580,446
   Operating lease obligations        97,738
   Employee severance obligations    165,465
                                    --------
                                    $843,649
                                    ========
</TABLE>

     The remaining assets of the MCM disposal group will be liquidated through
     collections on receivables and through subsequent sales of inventory to
     third parties, including InstruTech Florida.

     Revenues of the MCM disposal group for the years ended December 31, 2004,
     2003 and 2002 were $3,976,000, $2,369,000 and $639,000, respectively.
     Operations of the MCM disposal group had previously been included in the
     Company's Metretek Florida operating 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. The balance of unpaid termination benefits was $0 at
     both December 31, 2004 and 2003.

4.   SERIES B PREFERRED STOCK

     On February 4, 2000, the Company completed a $14,000,000 private placement
     (the "Units Private Placement") of 7,000 units ("Units"), with each Unit
     consisting of 200 shares of common stock, 1 share of Series B Preferred
     Stock and warrants ("Unit Warrants") to purchase 100 shares of common
     stock.


                                      F-19

<PAGE>

     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 Series B Preferred Stock was
     subject to a mandatory redemption date of December 9, 2004. The Unit
     Warrants expired unexercised on December 9, 2004.

     The proceeds from the sale of the Units 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
     certain Series B Preferred Stock being initially recorded at a discount of
     $141 per share from its $1,000 per share liquidation value. The
     amortization of the discount, along with the preferred stock dividend at a
     rate of 8%, was recorded as a distribution over the term of the Series B
     Preferred Stock.

     In connection with the Private Placement (see Note 2), a total of 2,750
     shares of the Series B Preferred Stock were converted to common stock
     during 2004. The remaining 4,250 shares of Series B Preferred Stock were
     redeemable on December 9, 2004 at a liquidation preference of $1,000 per
     share plus accrued and unpaid dividends at an annual rate of 8%. The total
     redemption obligation of the 4,250 Series B Preferred Stock shares at
     December 9, 2004 was $6,239,000. Through December 31, 2004, the Company had
     fully retired 3,641 of the preferred stock shares at a total redemption
     value of $5,345,000. The remaining 609 preferred stock shares with a
     redemption value of $894,000 are expected to be retired during the first
     quarter of 2005 as the holders of the remaining preferred shares present
     such shares to the Company for redemption.

5.   ACQUISITION OF MINORITY INTEREST IN POWERSECURE

     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 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.

     During the third quarter of 2004, the Company entered into agreements to
     exchange 950,000 shares of the Company's common stock for the 13.88%
     minority interest in PowerSecure. Upon approval by certain shareholders of
     the Company and the receipt of a fairness opinion, the exchanges occurred
     on November 22, 2004, at which time PowerSecure became a wholly-owned
     subsidiary of the Company. Accounting for the acquisition of the minority
     interest was based upon the fair value of the stock of the Company issued
     in the acquisition. As a result of the transaction, the Company's
     obligation to the PowerSecure's minority shareholders in the amount of
     $300,000 was eliminated, 950,000 shares of the Company's common stock was
     issued, and goodwill in the amount of $1,202,000 was recorded on the books
     of PowerSecure representing the excess of the fair value of the shares
     issued in the acquisition over the historical book basis of the minority
     interest acquired.


                                      F-20

<PAGE>

6.   DEBT

     The balance of notes payable at December 31, 2004 and 2003 consists of the
     following:

<TABLE>
<CAPTION>
                                            2004         2003
                                        -----------   ----------
<S>                                     <C>           <C>
Lines of credit                         $ 2,621,281   $2,545,418
Term loans:
   Settlement note payable                2,437,500    3,000,000
   Equipment and project loans            1,138,203      197,983
   Investment loan                          824,171
   Mortgage loan                            225,898      234,302
                                        -----------   ----------
Total notes payable                       7,247,053    5,977,703
                                        -----------   ----------

Less current maturities:
   Settlement note payable                 (750,000)    (562,500)
   Equipment and project loans             (225,027)    (179,849)
   Investment loan                         (187,769)
   Mortgage loan                             (9,192)      (8,404)
                                        -----------   ----------
Current maturities of notes payable      (1,171,988)    (750,753)
                                        -----------   ----------
Long-term maturities of notes payable   $ 6,075,065   $5,226,950
                                        ===========   ==========
</TABLE>

     LINES OF CREDIT - The lines of credit consist of a $3,260,000 credit
     facility ("Credit Facility") with Wells Fargo Business Credit, Inc. ("Wells
     Fargo") that matures in September 2006. The Credit Facility restricts the
     Company's ability to sell or finance its subsidiaries, without Wells
     Fargo's consent. The Credit Facility, which constitutes the Company's
     primary credit agreement, is used primarily to fund the operations and
     growth of its subsidiaries, especially PowerSecure.

     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, 2004, the Company had an aggregate borrowing
     base of $3,260,000 under the Credit Facility, of which $2,621,000 had been
     borrowed, leaving $639,000 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 and each of the other borrowers.
     These guarantees have been collateralized 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
     collateralized 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.

     The Credit Facility between Wells Fargo and Southern Flow was amended in
     the first quarter 2004 to provide for new financial covenants applicable to
     certain financial results of Southern Flow during fiscal 2004. The Credit
     Facility between Wells Fargo and Metretek Florida was amended during both
     the third and fourth quarters of 2004 to establish less restrictive
     financial covenants for the remainder of fiscal 2004 and to establish
     financial covenants for 2005 reflecting Metretek Florida's projected


                                      F-21

<PAGE>

     financial results and condition resulting from its operations without the
     discontinued contract manufacturing business.

     TERM LOANS - In connection with the settlement of the class action
     litigation more fully described in Note 8, the Company issued a term note
     payable in the amount of $3.0 million (the "Settlement Note"). The
     Settlement Note bears interest at the rate of prime plus three percent
     (7.25% at December 31, 2004) is payable in 16 quarterly installments, each
     of $187,500 principal plus accrued interest. The Settlement Note is
     guaranteed by all of the Company's subsidiaries. The Company commenced
     payments on the Settlement Note on June 30, 2004. At December 31, 2004 and
     2003, the principal balance due on the Settlement Note was $2,437,500 and
     $3,000,000, respectively.

     During the first quarter of 2004, the Company acquired additional equity
     interests in MGT's unconsolidated affiliate, which acquisition was financed
     through a $961,000 term loan from a commercial bank to CAC LLC (the
     "Investment Loan"). The Investment Loan is collateralized by CAC LLC's and
     MGT's collective interests in MM 1995-2, and the Company has provided a
     guaranty of $625,000 of the loan. The Investment Loan provides for 60
     monthly payments of principal and interest (at a rate of 5.08%). Cash
     distributions from MM 1995-2 to CAC LLC have been used to fund the monthly
     payments on the Investment Loan. At December 31, 2004, the principal
     balance due on the Investment Loan was $824,171.

     During 2004, PowerSecure completed two shared-savings distributed
     generation projects. Caterpillar Financial Services Corporation provided
     $1,213,000 to finance these projects (the "PowerSecure Project Loans"). The
     PowerSecure Project Loans are collateralized by the equipment purchased
     from Caterpillar as well as the revenues generated by the projects. The
     PowerSecure Project Loans provide for 60 monthly payments of principal and
     interest (at an annual rate of 6.75%) in the aggregate amount of
     approximately $24,000 per month. Monthly payments on the PowerSecure
     Project Loans are funded through payments from customers utilizing the
     distributed generation equipment on their sites. At December 31, 2004, the
     principal balance due on the PowerSecure Project Loans was $1,120,069.

     During 2003, PowerSecure financed the acquisition of certain construction
     equipment with proceeds of a loan from Caterpillar Financial Services
     Corporation (the "PowerSecure Equipment Loan"). The PowerSecure Equipment
     Loan is collateralized by the equipment purchased from Caterpillar. 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, 2004 and 2003, the principal balance due on the PowerSecure
     Equipment Loan was $18,134 and $25,470, respectively.

     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"). Monthly principal payments in the amount of $6,635 plus
     interest commenced March 1, 2003. The outstanding balance on the Metretek
     Equipment Loan in the amount of $99,528 was repaid December 1, 2004. The
     principal balance due on the Metretek Equipment Loan at December 31, 2003
     was $172,513.

     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 collateralized 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. At


                                      F-22

<PAGE>

     December 31, 2004 and 2003, the principal balance due on the Mortgage Loan
     was $ 225,898 and $234,302, respectively.

7.   CAPITAL LEASE OBLIGATIONS

     Capital lease obligations at December 31, 2004 consist of an equipment
     lease at Metretek Technologies payable in monthly installments, including
     interest, at 11.13%. 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 Metretek Florida
     capital lease obligations have been reclassified to liabilities of
     discontinued operations in the accompanying consolidated balance sheet at
     December 31, 2004. The scheduled annual payments on the Metretek
     Technologies capital lease obligation are as follows:

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
------------------------
<S>                                             <C>
2005                                            $ 4,480
2006                                              4,480
2007                                              3,360
                                                -------
Total minimum lease payments                     12,320
Less: Interest included in the lease payments     1,749
                                                -------
Present value of minimum lease payments         $10,571
                                                =======
</TABLE>

8.   COMMITMENTS AND CONTINGENCIES

     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"), 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 was 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 a result of contractual, market and operational
     difficulties, the 1997 Trust ceased operations in 1998.

     The Class Action alleged that the Metretek Defendants and the Farstad
     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.

     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


                                      F-23

<PAGE>

     of Settlement, which revises certain terms of the settlement (as revised,
     the "Heins Settlement"). The Company recorded a loss in the amount of
     $3,505,000 in the fourth quarter of 2002 in connection with the Heins
     Settlement which is reflected as a component of the "Provision for
     litigation costs, net" in the accompanying consolidated statement of
     operations for the year ended December 31, 2002.

     The Heins Settlement was granted final approval by the Denver Court on June
     11, 2004 and became effective on July 26, 2004. The Heins Settlement
     creates a settlement fund (the "Heins Settlement Fund") for the benefit of
     the Class. In settlement of the Interpleader Action discussed below,
     $2,375,000 in proceeds of the Company's directors' and officers' insurance
     policy (the "Policy") was used in the Heins Settlement. Pursuant to the
     Heins Settlement, the Company has paid $375,000, and has issued a note
     payable to the Heins Settlement Fund in the amount of $3.0 million (the
     "Heins Settlement Note"), and commenced payments thereunder on June 30,
     2004. The Heins Settlement Note bears 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 is guaranteed by the 1997
     Trust and all of the Company's subsidiaries.

     The Company is vigorously pursuing cross-claims and third party claims
     ("Other Party Claims"), including claims against the Farstad Defendants and
     against attorneys, consultants and a brokerage firm (the "Other Parties")
     involved in the transactions underlying the claims in the Class Action,
     seeking recovery of damages and contribution, among other things, from the
     Other Parties. Some of the Other Parties have asserted counterclaims
     against the Company, which the Company is aggressively defending and
     believes are without merit. Out of any net recovery from the resolution of
     any of these claims, which is calculated by deducting the Company's
     litigation expenses and any counterclaims against the Company that result
     in a recovery by Other Parties related to the Other Parties' liability to
     the Class (but is calculated without deducting any other counterclaims
     successfully asserted against the Company by the Other Parties), 50% would
     be allocated to offset the Company's obligations under the Heins Settlement
     Note, and the remaining 50% would be allocated to the Heins Settlement Fund
     as additional settlement funds. The Company cannot provide any assurance
     that it will be successful on any of these Other Party Claims or the Other
     Party counterclaims or, even if successful, on the amount, if any, or the
     timing of any recovery from any of these claims.

     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


                                      F-24

<PAGE>

     $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, 2004, 2003 and 2002 totaled $1,048,892, $1,327,828
     and $1,292,958, respectively.

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

<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31:
------------------------
<S>                        <C>
2005                       $  554,000
2006                          448,000
2007                          401,000
2008                          260,000
2009                          167,000
                           ----------
Total                      $1,830,000
                           ==========
</TABLE>

     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, 2004, 2003 and 2002 was
     $216,114, $188,336 and $176,973, 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.

9.   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, 2004, 2003 and 2002
     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,
     2004 and 2003.


                                      F-25

<PAGE>

     The components of the Company's deferred tax assets and liabilities at
     December 31, 2004 and 2003 are shown below:

<TABLE>
<CAPTION>
                                                             2004           2003
                                                        ------------   ------------
<S>                                                     <C>            <C>
Deferred tax assets:
   Net operating loss carryforwards                     $ 17,150,000   $ 16,420,000
   Tax credit carryforwards                                   45,000         45,000
   Allowance for bad debts                                   252,000         68,000
   Lease termination costs                                   231,000
                                                        ------------   ------------
      Total deferred tax assets                           17,678,000     16,533,000
                                                        ------------   ------------
Deferred tax liabilities:
   Excess of income tax depreciation and amortization
      over financial statement amounts                     1,427,000      1,066,000
   Other                                                     135,000        117,000
                                                        ------------   ------------
      Total deferred tax liabilities                       1,562,000      1,183,000
                                                        ------------   ------------
Net deferred tax asset                                    16,116,000     15,350,000
Valuation allowance                                      (16,116,000)   (15,350,000)
                                                        ------------   ------------
Total                                                   $          0   $          0
                                                        ============   ============
</TABLE>

     At December 31, 2004, the Company had unused net operating losses to carry
     forward against future years' taxable income of approximately $50,442,000
     expiring in various amounts from 2006 to 2017. At December 31, 2004, 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
     ($33,000, net of current limitation). Such carryforwards expire in 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 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. Utilization of the Company's
     net operating loss carryforwards may be further limited as a result of the
     Private Placement in discussed in Note 2.

10.  CAPITAL STOCK

     MINORITY INTEREST - The Company, through MGT, owns a 73.75% interest in CAC
     LLC. CAC LLC was formed in January 2004 to acquire additional interests in
     the Company's unconsolidated affiliate, MM 1995-2. The minority
     shareholder's interest in the income of CAC LLC at for the year ended
     December 31, 2004 was $145,071 and is included in minority interest in the
     accompanying consolidated financial statements. Distributions to CAC LLC's
     minority interest shareholder during the year ended December 31, 2004 were
     $55,701.

     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 Company acquired the minority interest shares
     held by the PowerSecure employees in November 2004 (see Note 5). The
     minority interest in the income of PowerSecure for the period from January
     1, 2004 to


                                      F-26

<PAGE>

     November 22, 2004 was $92,896. The minority interest in the income of
     PowerSecure for the year ended December 31, 2003, was $207,280. These
     amounts are included in minority interest in the accompanying consolidated
     financial statements. There were no distributions to PowerSecure's minority
     interest shareholders during the years ended December 31, 2004 or 2003.

     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. On June 14, 2004, 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 2,750,000
     shares of common stock of the Company.


                                      F-27

<PAGE>

     The following table summarizes the Company's stock option activity since
January 1, 2002:

<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, 2002      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
Granted                   389,500      3.11
Exercised                (240,332)     1.52     (7,500)     2.00    (15,719)     2.00
Expired                   (11,334)     6.53     (7,500)     2.00     (2,188)     2.00
Forfeited                 (21,000)     2.26
                       ----------              -------              -------
Outstanding at
   December 31, 2004    1,775,850     $2.24     15,000     $2.00    105,502     $2.00
                       ==========              =======              =======
Exercisable at
   December 31:
   2004                 1,432,434     $2.09     15,000     $2.00    105,502     $2.00
                       ==========              =======              =======
   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
                       ==========              =======              =======
</TABLE>

     The weighted average grant date fair values of options granted during the
     years ended December 31, 2004, 2003 and 2002 were $1.03, $0.42 and $0.29
     per share, respectively. During the year ended December 31, 2004, incentive
     stock options to purchase 382,000 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, 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. The following table summarizes information about all of the
     Company's stock options outstanding at December 31, 2004:


                                      F-28

<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 $1.49          10,000            $0.47                 7.95
 $1.50 to $1.74       1,173,500             1.50                 5.90
 $1.75 to $2.99         180,000             2.06                 3.55
 $3.00 to $4.49         382,000             3.11                 9.56
$4.50 to $17.38         150,852             5.90                 4.49
---------------       ---------            -----                 ----
 $0.46 - $17.38       1,896,352            $2.22                 6.31
===============       =========            =====                 ====
</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.

11.  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.


                                      F-29

<PAGE>

     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, 2004, the 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.

     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. During the third quarter of 2004,
     the Board of Directors of the Company approved a plan to discontinue the
     business of MCM and sell all of its manufacturing assets. See Note 3.

     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, revenues and expenses from managing MM 1995-2,
     results of insignificant operations and, as it relates to segment profit or
     loss, income and expense (including nonrecurring charges) not allocated to
     reportable segments. The table information excludes the revenues,
     depreciation, and losses of the discontinued MCM operations for all periods
     presented.


                                      F-30

<PAGE>

                    SUMMARIZED SEGMENT FINANCIAL INFORMATION
                       (all amounts reported in thousands)

<TABLE>
<CAPTION>
                                   2004      2003      2002
                                 -------   -------   -------
<S>                              <C>       <C>       <C>
REVENUES:
   Southern Flow                 $12,759   $11,805   $12,288
   PowerSecure                    18,630    17,122     8,228
   Metretek Florida                3,312     7,405     5,886
   Other                             476       142        51
                                 -------   -------   -------
      Total                      $35,177   $36,474   $26,453
                                 =======   =======   =======
SEGMENT PROFIT (LOSS):
   Southern Flow                 $ 1,940   $ 1,619   $ 1,954
   PowerSecure                     1,342     1,574      (388)
   Metretek Florida                 (247)      709       474
   Other                          (2,428)   (2,247)   (4,070)
                                 -------   -------   -------
      Total                      $   607   $ 1,655   $(2,030)
                                 =======   =======   =======
CAPITAL EXPENDITURES:
   Southern Flow                 $   163   $   103   $   122
   PowerSecure                     1,967       124        41
   Metretek Florida                  144        65       372
                                       3         4        11
   Other                              --        --        --
                                 -------   -------   -------
      Total                      $ 2,277   $   296   $   546
                                 =======   =======   =======
DEPRECIATION AND AMORTIZATION:
   Southern Flow                 $   127   $   129   $   135
   PowerSecure                       130        66        47
   Metretek Florida                  289       298       371
   Other                              33        22        23
                                 -------   -------   -------
      Total                      $   579   $   515   $   576
                                 =======   =======   =======
TOTAL ASSETS:
   Southern Flow                 $ 9,589   $ 9,339   $ 9,285
   PowerSecure                    12,836     5,701     2,318
   Metretek Florida                5,262     7,098     6,842
   Other                           2,524     1,189       754
                                 -------   -------   -------
      Total                      $30,211   $23,327   $19,199
                                 =======   =======   =======
</TABLE>

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

<TABLE>
<CAPTION>
                    2004          2003          2002
                -----------   -----------   -----------
<S>             <C>           <C>           <C>
United States   $34,362,625   $35,335,902   $25,591,131
Canada              388,068       627,564       418,173
Europe              338,301       376,090       156,482
South America        60,262        44,980       120,741
Asia                 10,865                      88,900
Other                16,802        89,200        77,504
                -----------   -----------   -----------
Total           $35,176,923   $36,473,736   $26,452,931
                ===========   ===========   ===========
</TABLE>


                                      F-31

<PAGE>

12.  UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL DATA

     Summarized quarterly consolidated financial information (unaudited) for the
     years ended December 31, 2004 and 2003 is as follows (in thousands, except
     per share amounts):

<TABLE>
<CAPTION>
                                                       QUARTER
                                          ----------------------------------
                 2004                      FIRST   SECOND    THIRD    FOURTH
                 ----                     ------   ------   -------   ------
<S>                                       <C>      <C>      <C>       <C>
Total revenues                            $8,415   $8,372   $ 9,181   $9,208
Operating income (loss)                       58      174       (33)     407
Minority interest                            (74)     (67)      (60)     (37)
Income taxes                                 (12)     (12)      (12)     (12)
Equity income                                368      253       270      364
Income from continuing operations            340      348       165      722
Loss on discontinued operations             (335)    (305)   (3,870)    (309)
Net income (loss)                         $    5   $   43   $(3,705)  $  413

Net income (loss) per common share
   attributable to common shareholders,
   basic and diluted (1):
      Continuing operations               $ 0.01   $(0.04)  $  0.00   $ 0.05
      Discontinued operations              (0.05)   (0.03)    (0.35)   (0.03)
                                          ------   ------   -------   ------
      Income (loss) per common share      $(0.04)  $(0.07)  $ (0.35)  $ 0.02
                                          ======   ======   =======   ======
</TABLE>

<TABLE>
<CAPTION>
                                                         QUARTER
                                           -----------------------------------
                 2003                       FIRST    SECOND    THIRD    FOURTH
                 ----                      ------   -------   -------   ------
<S>                                        <C>      <C>       <C>       <C>
Total revenues                             $6,724   $10,418   $11,723   $7,609
Operating income (loss)                      (304)      606       679      674
Minority interest                             (11)      (51)      (59)     (86)
Income taxes                                  (21)      (12)      (12)     (12)
Equity income                                 135       112        81      140
Income (loss) from continuing operations     (201)      655       689      716
Income (loss) on discontinued operations     (443)      110      (332)    (315)
Net income (loss)                          $ (644)  $   765   $   357   $  401

Net income (loss) per common share
   attributable to common shareholders,
   basic and diluted (1):
      Continuing operations                $(0.07)  $  0.05   $  0.05   $ 0.05
      Discontinued operations               (0.07)     0.02     (0.05)   (0.05)
                                           ------   -------   -------   ------
      Income (loss) per common share       $(0.14)  $  0.07   $  0.00   $ 0.00
                                           ======   =======   =======   ======
</TABLE>

(1)  Per share amounts for all quarters presented include the effects of
     preferred stock deemed distributions. Per share amounts for all quarters
     except for the fourth quarter 2004 include the effects of allocation of
     earnings, if applicable, to participating preferred stock as required by
     the provisions of EITF 03-06. The preferred stock deemed distribution for
     the second and third quarters of 2004 includes charges of $593,000 in the
     aggregate which represents the estimated fair market value of inducement
     conveyed to preferred stockholders who converted their shares to common
     stock in connection with the Company's private placement in the second
     quarter of 2004.

                                    * * * * *


                                      F-32

<PAGE>

                                                                     SCHEDULE II

                           METRETEK TECHNOLOGIES, INC.

                        VALUATION AND QUALIFYING ACCOUNTS
                  YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                   ADDITIONS:
                                      BALANCE AT   CHARGED TO                    BALANCE AT
                                       BEGINNING    OPERATING   DEDUCTIONS:        END OF
DESCRIPTION                            OF PERIOD    EXPENSES    WRITE-OFFS (1)     PERIOD
-----------                           ----------   ----------   --------------   ----------
<S>                                   <C>          <C>          <C>              <C>
Allowance for doubtful accounts:
   Year ended December 31, 2004 ...      $201        $  892        $(352)(1)       $  741
   Year ended December 31, 2003 ...       281            54         (134)(1)          201
   Year ended December 31, 2002 ...       170           177          (66)(1)          281

Inventory reserve:
   Year ended December 31, 2004 ...      $288        $1,614        $(354)(2)       $1,548
   Year ended December 31, 2003 ...       395           152         (259)(2)          288
   Year ended December 31, 2002 ...       413           144         (162)(2)          395
</TABLE>

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

(2)  Represents amounts written off against reserve, less recoveries.

<PAGE>


MARCUM MIDSTREAM 1995-2 BUSINESS TRUST AND SUBSIDIARY

TABLE OF CONTENTS
-------------------------------------------------------------------------------

                                                                           PAGE

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM                   G - 2

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2004 AND 2003              G - 3

CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED
   DECEMBER 31, 2004, 2003 AND 2002                                       G - 4

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR
   THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002                       G - 5

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
   DECEMBER 31, 2004, 2003 AND 2002                                       G - 6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                                G - 7



                                     G - 1
<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


Board of Trustees
Marcum Midstream 1995-2 Business Trust
Denver, CO


We have audited the accompanying consolidated balance sheets of Marcum Midstream
1995-2 Business Trust and subsidiary (the "Trust") as of December 31, 2004 and
2003, and the related consolidated statements of income, shareholders' equity,
and cash flows for each of the years in the three year period ended December
31, 2004. These financial statements are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). 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, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Marcum Midstream
1995-2 Business Trust and subsidiary as of December 31, 2004 and 2003, and the
results of their operations and their cash flows for each of the years in the
three year period ended December 31, 2004, in conformity with U.S. generally
accepted accounting principles in the United States of America.


/s/ Hein & Associates LLP

HEIN & ASSOCIATES LLP

Denver, Colorado
February 4, 2005


                                     G - 2
<PAGE>



MARCUM MIDSTREAM 1995-2 BUSINESS TRUST AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2004 AND 2003
-------------------------------------------------------------------------------


<TABLE>
<CAPTION>
ASSETS                                                                2004              2003
<S>                                                               <C>               <C>
CURRENT ASSETS:
  Cash and cash equivalents                                        $  617,815        $  603,267
  Trade receivables (net of allowance for doubtful accounts
    $9,777 and $0, respectively)                                    1,148,872           907,035
                                                                   ----------        ----------
        Total current assets                                        1,766,687         1,510,302
                                                                   ----------        ----------

PROPERTY, PLANT AND EQUIPMENT, AT COST:
  Wells and storage tanks                                           5,141,545         4,682,575
  Equipment                                                         2,077,762         1,636,247
  Land and improvements                                             1,149,060         1,118,568
                                                                   ----------        ----------
    Total                                                           8,368,367         7,437,390
  Less accumulated depletion and depreciation                       3,209,994         2,755,491
                                                                   ----------        ----------
        Property, plant and equipment, net                          5,158,373         4,681,899
                                                                   ----------        ----------

OTHER ASSETS:
  Deferred loan charges (net of accumulated amortization
   of $16,788 and $10,857, respectively)                                4,037             9,968
  Intangible assets (net of accumulated amortization
   of $7,500 and $6,167, respectively)                                 12,500            13,833
                                                                   ----------        ----------
        Total other assets                                             16,537            23,801
                                                                   ----------        ----------

TOTAL                                                              $6,941,597        $6,216,002
                                                                   ==========        ==========

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
  Accounts payable                                                 $  105,373        $  103,132
  Administration fee                                                    4,708            14,125
  Management fee                                                       80,371            81,417
  Operator fee                                                          6,444            19,333
  Note payable (Note 3)                                               601,002           568,628
  Accrued expenses                                                     14,898             8,964
                                                                   ----------        ----------
        Total current liabilities                                     812,796           795,599
                                                                   ----------        ----------
LONG-TERM NOTE PAYABLE (Note 3)                                       419,559         1,020,561

COMMITMENTS AND CONTINGENCIES (Note 4)

SHAREHOLDERS' EQUITY                                                5,709,242         4,399,842
                                                                   ----------        ----------

TOTAL                                                              $6,941,597        $6,216,002
                                                                   ==========        ==========
</TABLE>

See notes to consolidated financial statements.


                                     G - 3
<PAGE>

MARCUM MIDSTREAM 1995-2 BUSINESS TRUST AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
-------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                    2004              2003              2002
<S>                                             <C>               <C>               <C>
REVENUE:
  Disposal fees and mineral product sales        $7,202,537        $5,285,104        $3,331,199
  Interest and other                                  6,111            26,718             1,996
                                                 ----------        ----------        ----------

        Total revenue                             7,208,648         5,311,822         3,333,195
                                                 ----------        ----------        ----------

COSTS AND EXPENSES:
  Cost of operations                              1,899,622         1,587,581         1,322,168
  Depreciation and amortization                     455,836           386,921           286,598
  Deferred payment (Note 7)                                                             300,000
  General and administrative costs                  354,590            45,409             3,000
  Administration fee                                 56,500            56,500            56,500
  Management fee                                    360,127           214,255            83,248
  Operator fee                                       77,332            77,332            58,582
  Interest and finance charges                       95,241           112,901            43,822
                                                 ----------        ----------        ----------

        Total costs and expenses                  3,299,248         2,480,899         2,153,918
                                                 ----------        ----------        ----------

NET INCOME                                       $3,909,400        $2,830,923        $1,179,277
                                                 ==========        ==========        ==========

</TABLE>

See notes to consolidated financial statements.




                                     G - 4
<PAGE>

MARCUM MIDSTREAM 1995-2 BUSINESS TRUST AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
-------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                 PERFORMANCE           PREFERRED
                                                 SHAREHOLDERS         SHAREHOLDERS            TOTAL
<S>                                              <C>                 <C>                 <C>
BALANCE, JANUARY 1, 2002                          $ 1,392,040         $ 1,622,602         $ 3,014,642

Cash distributions paid or payable                   (637,500)           (337,500)           (975,000)

Deferred distributions (Note 6)                       300,000                                 300,000

Net income                                            732,937             446,340           1,179,277
                                                  -----------         -----------         -----------

BALANCE, DECEMBER 31, 2002                          1,787,477           1,731,442           3,518,919

Cash distributions paid or payable                   (825,000)           (825,000)         (1,650,000)

Payment of deferred distributions (Note 6)           (300,000)                               (300,000)

Net income                                          1,608,923           1,222,000           2,830,923
                                                  -----------         -----------         -----------

BALANCE, DECEMBER 31, 2003                          2,271,400           2,128,442           4,399,842

Cash distributions paid                            (1,050,000)         (1,550,000)         (2,600,000)

Net income                                          1,933,497           1,975,903           3,909,400

Conversion of 100 performance shares
  into 113 preferred shares                        (3,154,897)          3,154,897
                                                  -----------         -----------         -----------

BALANCE, DECEMBER 31, 2004                        $                   $ 5,709,242         $ 5,709,242
                                                  ===========         ===========         ===========
</TABLE>


See notes to consolidated financial statements.



                                     G - 5
<PAGE>


MARCUM MIDSTREAM 1995-2 BUSINESS TRUST AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                         2004                 2003                2002
<S>                                                                  <C>                 <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                          $ 3,909,400         $ 2,830,923         $ 1,179,277
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Depreciation and amortization                                         455,836             386,921             286,598
    Changes in other assets and liabilities:
      Trade receivables, net                                             (241,837)           (159,380)           (338,678)
      Accounts payable                                                      2,241             (19,578)             75,776
      Administration fee                                                   (9,417)               --                  --
      Management fee                                                       (1,046)             47,441              20,724
      Operator fee                                                        (12,889)               --                 6,250
      Accrued expenses                                                      5,934               2,387               3,658
      Prepaid expenses and other                                            5,931               8,391             (17,296)
                                                                      -----------         -----------         -----------

           Net cash provided by operating activities                    4,114,153           3,097,105           1,216,309
                                                                      -----------         -----------         -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of assets                                               --                 2,650                --
  Asset acquisitions and renovations                                     (589,047)               --            (2,650,218)
  Other capital expenditures                                             (341,930)           (219,847)            (28,895)
                                                                      -----------         -----------         -----------

           Net cash used in investing activities                         (930,977)           (217,197)         (2,679,113)
                                                                      -----------         -----------         -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from note payable                                                 --                  --             2,300,000
  Payments on note payable                                               (568,628)           (537,997)           (172,814)
  Distributions to preferred shareholders                              (1,550,000)           (825,000)           (337,500)
  Distributions paid or payable to performance shareholders            (1,050,000)           (825,000)           (637,500)
  Deferred performance shareholder distributions                             --              (300,000)            300,000
                                                                      -----------         -----------         -----------

           Net cash provided by (used in) financing activities         (3,168,628)         (2,487,997)          1,452,186
                                                                      -----------         -----------         -----------

NET INCREASE (DECREASE) IN CASH
  AND CASH EQUIVALENTS                                                     14,548             391,911             (10,618)

CASH AND CASH EQUIVALENTS AT
  BEGINNING OF YEAR                                                       603,267             211,356             221,974
                                                                      -----------         -----------         -----------

CASH AND CASH EQUIVALENTS AT END OF YEAR                              $   617,815         $   603,267         $   211,356
                                                                      ===========         ===========         ===========

</TABLE>

See notes to consolidated financial statements.


                                     G - 6
<PAGE>



MARCUM MIDSTREAM 1995-2 BUSINESS TRUST AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002
-------------------------------------------------------------------------------


1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      ORGANIZATION - The accompanying consolidated financial statements includes
      the accounts of Marcum Midstream 1995-2 Business Trust and its
      wholly-owned subsidiary, Marcum Midstream 1995-2 EC Holding, LLC ("MM95-2
      EC Holding"), collectively referred to as the "Trust". The Trust commenced
      operations on February 8, 1996. The Trust owns and operates four oil field
      production water disposal facilities located in northeastern Colorado.
      MM95-2 EC Holding was formed by the Trust in July 2002 for the purpose of
      acquiring additional operating assets.

      Marcum Gas Transmission, Inc. ("MGT"), a wholly-owned subsidiary of
      Metretek Technologies, Inc., is the managing trustee of the Trust, and
      Conquest Oil Company ("Conquest") operates certain Trust assets under an
      operating agreement with the Trust. Collectively, MGT and Conquest or
      their affiliates own 135.78, or 60.08%, of the 226 outstanding preferred
      shares of the Trust at December 31, 2004.

      In November 2004, all of the performance shares outstanding, including
      those held by MGT and Conquest or their affiliates, were converted to
      preferred shares of the Trust at an exchange ratio of 1.13 preferred share
      for each performance share. At December 31, 2004, there are no longer any
      performance shares outstanding.

      PRINCIPLES OF CONSOLIDATION - The consolidated financial statements
      include the accounts of the Trust and its subsidiary. All intercompany
      accounts and transactions have been eliminated in consolidation.

      REVENUE RECOGNITION - Revenues from disposal fees are recognized upon
      delivery and acceptance of water to be disposed. Revenues from mineral
      product sales are recognized upon delivery to the customer.

      INCOME TAXES - For federal and state income tax purposes, the Trust is
      treated as a partnership and is not subject to federal or state income
      taxes. Accordingly, no provision for federal income taxes is included in
      the financial statements of the Trust and the tax effects of its
      activities accrue to the shareholders. The Trust's tax returns, the
      qualification of the Trust as a partnership for federal income tax
      purposes, and the amount of taxable income or loss are subject to
      examination by federal and state taxing authorities. If such examinations
      result in changes to the Trust's taxable income, the tax liability of the
      shareholders could change accordingly.

      STATEMENTS OF CASH FLOWS - The Trust considers all investments with an
      original maturity of three months or less at time of purchase to be cash
      equivalents. Supplemental statement of cash flow information is as
      follows:


<TABLE>
<CAPTION>

                                                            2004           2003          2002
<S>                                                     <C>             <C>            <C>
           Cash paid for interest                       $    73,880     $ 104,510      $ 41,356
           Non-cash transaction --
             Conversion of performance shares
             to preferred shares of the Trust           $ 3,154,897     $       -      $      -
</TABLE>


                                     G - 7
<PAGE>

      RECEIVABLES AND CREDIT POLICIES - Trade receivables consist of
      uncollateralized customer obligations due under normal trade terms
      requiring payment within 30 days of the invoice date. The Trust reviews
      trade receivables periodically and reduces the carrying amount by a
      valuation allowance that reflects management's best estimate of the amount
      that may not be collectible.

      PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment is stated at
      cost. The majority of the Trust operating assets are depreciated based
      upon a units-of-production method while equipment and land improvements
      are depreciated on the straight-line basis over estimated useful lives
      ranging from 5 to 15 years. Estimated asset retirement obligations are not
      material.

      OTHER INTANGIBLES - Other intangible assets are being amortized on the
      straight-line basis over 15 years.

      USE OF ESTIMATES - The preparation of the Trust's 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 amounts reported in these financial statements and
      accompanying notes. Actual results could differ from those estimates.

      MAJOR CUSTOMERS - Revenues from mineral product sales are currently
      generated from purchases by one customer, however management believes
      other customers would purchase such products at substantially the same
      volumes and at prevailing market prices in the event the current customer
      discontinued purchasing from the Trust. In addition, two other customers
      have historically generated the majority of the Trust's disposal fee
      revenues.

2.    ASSET ACQUISITIONS

      In the fourth quarter of 2004, the Trust acquired additional operating
      assets and operations. The assets and operations acquired have been
      included in the consolidated financial statements of the Trust since the
      date of acquisition. The aggregate purchase price for the acquired assets
      was $500,000, and was financed from cash generated by operations of the
      Trust. The following table summarizes the estimated fair values of the
      assets acquired at the date of acquisition.


           Intangibles                                 $ 395,600
           Equipment                                     104,400
                                                       ---------
                                                       $ 500,000
                                                       =========


      Subsequent to the acquisition and through December 31, 2004, the Trust
      incurred $89,000 in renovation costs to enhance the operating efficiency
      of the assets in anticipation of future growth in customer demand.

      In the fourth quarter of 2002, the Trust, through MM95-2 EC Holding,
      acquired additional operating assets and operations. The assets and
      operations acquired have been included in the consolidated financial
      statements of the Trust since the date of acquisition.

      The aggregate purchase price for the assets acquired was $2,510,000,
      including direct costs of the acquisition. Of the total acquisition cost
      incurred, $2,300,000 represented cash paid to the seller, which was
      financed through a term loan with a commercial lender (see Note 3). The
      assets acquired included equipment and intangibles. The Trust did not
      directly assume any liabilities of the seller in the acquisition. In
      addition, other assets of the seller including cash, accounts receivable
      earned by the



                                     G - 8
<PAGE>

      seller prior to the acquisition, trademarks, and certain miscellaneous
      equipment items were excluded from the acquisition.

      The following table summarizes the estimated fair values of the assets
      acquired at the date of acquisition.


           Intangibles and storage tanks                    $1,656,000
           Equipment                                           338,000
           Land and improvements                               506,000
           Non-compete agreement                                10,000
                                                            ----------
                                                            $2,510,000
                                                            ==========


      Subsequent to the acquisition and through December 31, 2003, the Trust
      incurred $231,000 in renovation costs to enhance the operating efficiency
      of the assets acquired in anticipation of future growth in customer
      demand.

3.    NOTE PAYABLE

      In connection with the Trust's acquisition of operating assets in the
      third quarter of 2002, the Trust, through MM95-2 EC Holding, entered into
      a Term Loan Agreement (the "Loan Agreement") with Wells Fargo Bank West,
      National Association (the "Lender") for a $2,300,000 note payable. The
      proceeds of the note were used to acquire the operating assets from the
      seller (see Note 2). The Loan Agreement provides for monthly principal and
      interest payments on the note to the Lender in the amount of $53,542
      through the maturity date, August 22, 2006. Interest accrues on the unpaid
      balance of the note at a fixed annual rate of 5.55% per year. The Loan
      Agreement contains various financial and other affirmative and negative
      covenants and the note is collateralized by a first priority interest in
      virtually all of the assets acquired. Fees incurred in connection with
      obtaining the Loan Agreement in the amount of $20,825 have been deferred
      and are being amortized using the interest-method over the term of the
      Loan Agreement. The obligations contained in the Loan Agreement have been
      guaranteed by the Trust. At December 31, 2004, scheduled principal
      payments on the note payable over the remaining term of the note are as
      follows:

                       Years Ended
                       December 31,
                       ------------
                         2005                              $ 601,002
                         2006                                419,559
                                                          ----------
                                                          $1,020,561
                                                          ==========


      The Trust also has a revolving line of credit with the Lender under which
      the Trust may borrow up to $100,000 to fund working capital requirements.
      Borrowings on the line of credit bear interest at the Lender's prime rate
      (5.25% at December 31, 2004) and all borrowings plus accrued but unpaid
      interest on the line of credit are due May 11, 2005. There are no
      compensating balance arrangements and borrowings under the line of credit
      are unsecured. The Trust has not borrowed any amounts on the line of
      credit through December 31, 2004.


                                     G - 9
<PAGE>

4.    COMMITMENTS AND CONTINGENCIES

      In December 2002, after the Trust completed its acquisition of certain
      operating assets in the third quarter of 2002 (see Note 2), the Trust
      discovered certain contamination of the soils under the site. Shortly
      thereafter, the Trust filed a complaint against the seller in Colorado
      State District Court, for enforcement of seller indemnifications in the
      asset purchase agreement. The Trust engaged an environmental engineering
      firm to evaluate the extent of the contamination, and that firm concluded
      that approximately 1% of the property area had been contaminated. The
      environmental firm developed, and with their assistance the Trust
      commenced, a remediation plan that the firm advised should bring the
      assets back into compliance with applicable environmental requirements.
      The seller entered into a Stipulation to Hold Case in Abeyance wherein the
      Trust will not move forward in the lawsuit provided that the seller funds
      all of the expenses of the remediation plan, plus the Trust's legal fees
      and costs. The seller posted a letter of credit with his bank in favor of
      the Trust in the amount of the expected remediation costs.

      In August of 2004, under the direction of the environmental engineering
      firm the remediation plan was revised to facilitate what was believed to
      be a more timely and final solution. This plan was completed and the Trust
      accepted from the seller full reimbursement for the work in an amount
      equal to approximately $108,000. The seller, having reimbursed the Trust
      for 100% of all remediation costs caused the Trust to lift the Stipulation
      to Hold Case in Abeyance and withdraw the lawsuit filed by the Trust.

      Over a future period covering approximately two years the Trust, at its
      expense, will continue a soil vapor extraction process implemented by the
      environmental engineering firm overseeing the remediation. Trust
      management believes the contamination can be successfully abated over the
      additional time with no material adverse effects to the financial position
      or results of operations of the Trust. However, the nature of
      environmental contamination matters is inherently uncertain, and Trust
      management cannot provide any guarantee or assurance that all
      environmental contamination has been identified, that the continuing
      remediation efforts will be successful. Additional contamination, either
      currently undetected or undetectable or arising in the future, could later
      be discovered.

5.    TRUST GENERAL AND ADMINISTRATIVE COSTS

      During the year ended December 31, 2004, the shareholders of the Trust
      approved an Amended and Restated Declaration of Trust. The Amended and
      Restated Declaration of Trust authorized certain changes to fees relating
      to operations of the Trust. During the year ended December 31, 2004, in
      accordance with the Declaration of Trust and the Amended and Restated
      Declaration of Trust, the Trust incurred $202,000 of Active Trustee and
      Trust Officer consulting and retainer fees and compensation, and personal
      debt guarantee fees paid to MGT, Conquest, or their affiliates. Also
      during the year ended December 31, 2004, the Trust reimbursed Conquest
      $63,107 for acquisition costs that were incurred by Conquest prior to the
      Trust's fourth quarter 2004 acquisition of operating assets described in
      Note 2.

6.    CASH DISTRIBUTIONS AND PROFIT ALLOCATIONS

      Cash distributions and profit and loss allocations are determined by terms
      set forth in the Declaration of Trust, as amended and restated during the
      year ended December 31, 2004. Generally, the Trust currently distributes
      all cash provided by operating activities less amounts paid for
      acquisitions and capital expenditures, and debt service requirements.





                                     G - 10
<PAGE>

      Upon the approval of and in accordance with the Amended and Restated
      Declaration of Trust in 2004, all of the performance shares outstanding,
      including those held by MGT and Conquest or their affiliates, were
      converted to preferred shares of the Trust at an exchange ratio of 1.13
      preferred share for each performance share. At December 31, 2004, there
      are no longer any performance shares outstanding. All profits and cash
      distributions are now allocated to preferred shareholders in amounts equal
      to their percentage ownership of the preferred shares of the Trust.

      Prior to the approval of the Amended and Restated Declaration of Trust in
      2004, all cash available for distribution subsequent to December 27, 1999
      had been allocated 50% to the preferred shareholders and 50% to the
      performance shareholders. Profits realized and losses incurred by the
      Trust were allocated among the preferred and performance shareholders,
      first, to the performance shareholders to the extent of any cash
      distributed or distributable to such shareholders, and second, to
      preferred shareholders.

      During the year ended December 31, 2002, the Trust temporarily deferred
      $300,000 of the cash distributions allocated to the performance
      shareholders in order to allow the Trust to expedite capital improvements
      and to maintain sufficient cash reserves for debt service payments. The
      deferred distributions payable to the performance shareholders at December
      31, 2002 were subsequently paid to the performance shareholders of the
      Trust in January 2003.

7.    OTHER RELATED PARTY TRANSACTIONS

      Pursuant to the Amended and Restated Declaration of Trust, MGT, as
      managing trustee, is entitled to compensation for services rendered to the
      Trust. The compensation includes an annual Trust administration fee equal
      to 1% of the total subscriptions of preferred shareholders and an annual
      Trust management fee of 5% of Trust revenues, paid quarterly in arrears.
      The Trust management fee is reduced to 4% for any quarter that Trust
      revenues during the prior four consecutive calendar quarters do not exceed
      $3 million. Conquest, as operator, is reimbursed for all direct operating
      expenses incurred, which costs are included in cost of operations in the
      accompanying statements of income, and is paid an annual operator fee of
      $75,000, adjusted upward or downward annually based on changes in the
      consumer price index. Accounts payable at December 31, 2004 includes a
      liability in the amount of $30,000 payable to Conquest for unreimbursed
      direct operating expenses.

      In December 1999, Conquest and MGT agreed to share equally all future fees
      received from the Trust. These fees include the administration fee,
      management fee, and operator fee.

      In September 2003, the Trust entered into a License Agreement (the
      "Agreement") with an entity wholly owned by the principals of the
      Operator. The Agreement runs "month-to-month" and provides the Trust with
      an alternative source to service the accounts of customers of the Trust.
      The Trust is obligated to pay a monthly fee of $5,000 for rights under the
      Agreement. During the year ended December 31, 2004, the Trust earned a net
      $2,759 under the Agreement, which is included in interest and other
      revenues in the consolidated statements of income.

      As part of the Trust's acquisition of assets and commencement of
      operations in 1996, a deferred payment totaling $900,000 was to be paid by
      the Trust to Conquest or their affiliates in $300,000 annual installments
      from future operations of the Trust, provided that certain performance
      levels were achieved. During the year ended December 31, 2002, the Trust
      paid the final $300,000 deferred payment installment due under the initial
      asset purchase agreement. There are no additional deferred payments to be
      made subsequent to December 31, 2002.


                                    * * * * *


                                     G - 11
<PAGE>

                           METRETEK TECHNOLOGIES, INC.

                                    FORM 10-K
                      FOR THE YEAR ENDED DECEMBER 31, 2004

                                  EXHIBIT LIST

<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)     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.)

(4.3)     Amendment No. 1, dated as of April 22, 2004, to Amended and Restated
          Rights Agreement between Metretek Technologies, Inc. and ComputerShare
          Investor Services, LLC. (Incorporated by reference to Exhibit 10.6 to
          Metretek's Current Report on Form 8-K filed May 6, 2004).

(4.4)     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).

(4.5)     Form of Securities Purchase Agreement, dated as of April 29, 2004, by
          and among Metretek Technologies, Inc. and the purchasers a signatory
          thereto ("Investors"). (Incorporated by reference to Exhibit 10.1 to
          Metretek's Current Report on Form 8-K filed May 6, 2004).

(4.6)     Form of Registration Rights Agreement, dated as of April 29, 2004, by
          and among Metretek Technologies, Inc. and the Investors. (Incorporated
          by reference to Exhibit 10.2 to Metretek's Current Report on Form 8-K
          filed May 6, 2004).

(4.7)     Form of Warrant, dated May 3, 2004, to be issued by Metretek
          Technologies, Inc. to the Investors. (Incorporated by reference to
          Exhibit 10.3 to Metretek's Current Report on Form 8-K filed May 6,
          2004).

(4.8)     Form of Warrant, dated May 3, 2004, to be issued by Metretek
          Technologies, Inc. to Roth Capital Management, LLC, as placement
          agent. (Incorporated by reference to Exhibit 10.4 to Metretek's
          Current Report on Form 8-K filed May 6, 2004).

(4.9)     Form of Warrant, dated May 3, 2004, to be issued by Metretek
          Technologies, Inc. to Preferred Stockholders. (Incorporated by
          reference to Exhibit 10.5 to Metretek's Current Report on Form 8-K
          filed May 6, 2004).
</TABLE>

<PAGE>

<TABLE>
<S>       <C>
(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)    Amended and Restated Employment Agreement, dated as of November 1,
          2004, by and between Metretek Technologies, Inc. and W. Phillip
          Marcum. (Incorporated by reference to Exhibit 10.1 to Metretek's
          Current Report on Form 8-K, filed November 3, 2004)*

(10.4)    Amended and Restated Employment Agreement, dated as of November 1,
          2004, by and between Metretek Technologies, Inc. and A. Bradley
          Gabbard. (Incorporated by reference to Exhibit 10.2 to Metretek's
          Current Report on Form 8-K, filed November 3, 2004)*

(10.5)    Metretek Technologies, Inc. 1998 Stock Incentive Plan, amended and
          restated as of June 14, 2004. (Incorporated by reference to Exhibit
          4.3 to Metretek's Registration Statement on Form S-8, Registration No.
          333-116431.)*

(10.6)    Form of Incentive Stock Option Agreement under the Metretek
          Technologies, Inc. 1998 Stock Incentive Plan, as amended..
          (Incorporated by reference to Exhibit 10.1 to Metretek's Current
          Report on Form 8-K, filed August 25, 2004)*

(10.7)    Form of Non-Qualified Stock Option Agreement under the Metretek
          Technologies, Inc. 1998 Stock Incentive Plan, as amended.
          (Incorporated by reference to Exhibit 10.2 to Metretek's Current
          Report on Form 8-K, filed August 25, 2004)*

(10.8)    Form of Restricted Stock Agreement under the Metretek Technologies,
          Inc. 1998 Stock Incentive Plan, as amended. (Incorporated by reference
          to Exhibit 10.3 to Metretek's Current Report on Form 8-K, filed August
          25, 2004)*

(10.9)    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.)

(10.10)   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.)*

(10.11)   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.)*

(10.12)   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.)

(10.13)   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.)
</TABLE>

<PAGE>

<TABLE>
<S>       <C>
(10.14)   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.)

(10.15)   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.)

(10.16)   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.)

(10.17)   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.)

(10.18)   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.)

(10.19)   Fifth Amendment to Credit and Security Agreement, dated as of March
          29, 2004, 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 fiscal quarter ended
          March 31, 2004.)

(10.20)   Sixth Amendment to Credit and Security Agreement and Waiver of
          Defaults, dated as of December 8, 2004, between Southern Flow
          Companies, Inc. and Wells Fargo Business Credit, Inc. (Incorporated by
          reference to Exhibit 10.2 to Metretek's Current Report on Form 8-K
          filed December 14, 2004.)

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

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

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

(10.24)   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.)
</TABLE>

<PAGE>

<TABLE>
<S>       <C>
(10.25)   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.)

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

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

(10.28)   Fifth Amendment to Credit and Security Agreement and Waiver of
          Defaults, dated as of June 3, 2004, between Metretek, Incorporated and
          Wells Fargo Business Credit, Inc. (Incorporated by reference to
          Exhibit 10.1 to Metretek's Quarterly Report on Form 10-Q for the
          fiscal quarter ended June 30, 2004.)

(10.29)   Sixth Amendment to Credit and Security Agreement and Waiver of
          Defaults, dated as of December 8, 2004, between Metretek, Incorporated
          and Wells Fargo Business Credit, Inc. (Incorporated by reference to
          Exhibit 10.1 to Metretek's Current Report on Form 8-K filed December
          14, 2004.)

(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)   First Amendment to Credit and Security Agreement, dated as of December
          8, 2004, between PowerSecure, Inc. and Wells Fargo Business Credit,
          Inc. (Incorporated by reference to Exhibit 10.3 to to Metretek's
          Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
          2004.)

(10.34)   Employment and Non-Competition Agreement, dated as of June 24, 2002,
          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.)*

(10.35)   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.)*

(10.36)   Form of Stock Purchase Agreement, dated as of September 10, 2004, by
          and between Metretek Technologies, Inc. and the employee-shareholders
          of PowerSecure, Inc.
</TABLE>

<PAGE>

<TABLE>
<S>       <C>
          (Incorporated by reference to Exhibit 10.1 to Metretek's Current
          Report on Form 8-K, filed September 13, 2004)*

(10.37)   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. (Incorporated by reference to
          Exhibit 10.39 to Metretek's Annual Report on Form 10-K for the year
          ended December 31, 2003.)

(10.38)   Order Granting Final Approval of the Partial Settlement, dated June
          11, 2004. (Incorporated by reference to Exhibit 99.1 to Metretek's
          Current Report on Form 8-K filed June 14, 2004.)

(10.39)   Summary Sheet of Compensation of Non-Employee Directors. (Filed
          herewith.)

(14.1)    Metretek Technologies, Inc. Code of Ethics for Principal Executive
          Officer and Senior Financial Officers. (Incorporated by reference to
          Exhibit 14.1 to Metretek's Annual Report on Form 10-K for the year
          ended December 31, 2003.)

(14.2)    Metretek Technologies, Inc. Code of Business Conduct and Ethics.
          (Incorporated by reference to Exhibit 14.2 to Metretek's Annual Report
          on Form 10-K for the year ended December 31, 2003.)

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

(23.1)    Consent of Hein & Associates LLP (Filed herewith.)

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

(31.1)    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or
          15d-14(a) under the Securities Exchange Act of 1934, as amended, as
          adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
          (Filed herewith.)

(31.2)    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or
          15d-14(a) under the Securities Exchange Act of 1934, as amended, as
          adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
          (Filed herewith.)

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

(32.2)    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section
          1350 and Rule 13a-14(b) or 15d-14(b) under the Securities Exchange Act
          of 1934, as amended, as adopted pursuant to Section 906 of the
          Sarbanes-Oxley Act of 2002 (Filed herewith.)
</TABLE>

----------
*    Management contract or compensation plan or arrangement.