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

                                   FORM 10-KSB

(Mark One)

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934

      FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

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

      FOR THE TRANSITION PERIOD FROM ___________ TO ___________

                         Commission File Number: 0-19793

                           METRETEK TECHNOLOGIES, INC.
                 (Name of small business issuer in its charter)

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

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

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

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

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

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

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

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

The issuer's revenues for its most recent fiscal year ended December 31, 2001
were $29,092,786.

As of March 1, 2002, the aggregate market value of the shares of the issuer's
Common Stock, the only class of voting or non-voting common equity of the
issuer, held by non-affiliates was $1,955,503, based upon $0.43, the last sale
price of the Common Stock on such date as reported on the Nasdaq National
Market.

As of March 1, 2002, 6,077,764 shares of Common Stock were outstanding.

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

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      NONE
<PAGE>

                           METRETEK TECHNOLOGIES, INC.

                                   FORM 10-KSB
                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                              Page
                                                                                                             Number
                                                                                                             ------
<S>                                                                                                          <C>
SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS...............................................................       1

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

PART II
   Item 5.      Market for Common Equity and Related Stockholder Matters.................................      16
   Item 6.      Management's Discussion and Analysis of  Financial Condition and Results of Operations...      17
   Item 7.      Financial Statements.....................................................................      40
   Item 8.      Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.....      40

PART III
   Item 9.      Directors, Executive Officers, Promoters and Control Persons; Compliance With
                            Section 16(a) of the Exchange Act............................................      41
   Item 10.     Executive Compensation...................................................................      43
   Item 11.     Security Ownership of Certain Beneficial Owners and Management...........................      46
   Item 12.     Certain Relationships and Related Transactions...........................................      50
   Item 13.     Exhibits and Reports on Form 8-K.........................................................      50

SIGNATURES...............................................................................................     S-1

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

EXHIBIT INDEX............................................................................................     X-1
</TABLE>

<PAGE>

                   SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS

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

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

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

      -     our business plans, strategies, goals and objectives;

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

      -     industry trends and customer preferences;

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

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

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

      -     our ability to successfully develop and operate our PowerSecure
            business;

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

      -     future economic, business, market and regulatory conditions.

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

<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

BACKGROUND

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

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

      -     PowerSecure, Inc. ("PowerSecure"), based in Wake Forest, North
            Carolina, which designs, engineers, sells1 and manages distributed
            generation systems marketed primarily to industrial and commercial
            users of electricity.

      -     Metretek, Incorporated ("Metretek Florida"), based in Melbourne,
            Florida, which designs, manufactures and sells electronic devices
            and systems, commonly referred to as automatic meter reading systems
            ("AMRs"), that automatically monitor, record and transmit data from
            natural gas custody transfer meters, electronic flow correctors and
            computers, and other energy measurement products and services
            including PowerSpring, our internet-based energy information
            management system.

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

      We were incorporated in Delaware on April 5, 1991 under the name "Marcum
Natural Gas Services, Inc.," and we changed our name in June 1999 to "Metretek
Technologies, Inc." Our principal executive office is located at 303 East
Seventeenth Street, Suite 660, Denver, Colorado 80203, and our telephone number
at that office 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 flow of
information and improve the availability of energy to suppliers and users of
energy. While our energy products and services have historically been aimed
primarily at the natural gas industry, we are focusing more of our current and
future products and services to other segments of the energy industry,
especially the electricity industry. The energy industry continues to experience
fundamental regulatory and structural changes and significant new trends. Our
strategy is to acquire, develop and operate businesses that are positioned to
take advantage of these changes and trends.

      In implementing our business strategy, we have made several important
acquisitions:

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

      -     In 1994, we acquired Metretek Florida.

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

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

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


                                       2
<PAGE>

      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 agreement or binding commitment
with respect to any material acquisition or disposition.

RECENT DEVELOPMENTS

      Development of PowerSecure. We formed PowerSecure in 2000 to carry out our
business plan of designing, marketing and operating distributed generation
systems for the benefit of industrial and commercial users of energy, primarily
electricity. During 2001, a major part of our business strategy was focused upon
the development of our distributed generation business, which is operated by
PowerSecure. Distribution generation acts as an alternative energy supply,
typically to electricity usage, that both provides a reliable back-up energy
source during power outages, and adds capacity during peak periods that allows
customers to take advantage of particular pricing rates, thus reducing energy
costs. The goal of PowerSecure is to provide a complete distributed generation
system to industrial and commercial users of energy, primarily electricity.
PowerSecure acts as an integrator of distributed peak generation and energy
information systems, allowing customers to make use of peak-shaving and load
interruption utility incentives.

      Acquisition by PowerSecure. On April 10, 2001, PowerSecure acquired
Industrial Automation, headquartered in North Carolina. Industrial Automation
designs, manufactures and sells process controls and switchgear that is used in
PowerSecure's distributed generation operations. This acquisition was intended
to enhance PowerSecure's technology and expertise and reduce its project
completion time. We issued 150,000 restricted shares of our Common Stock in
exchange for all of the issued and outstanding capital stock of Industrial
Automation. As a result of the acquisition, Industrial Automation has become a
wholly-owned subsidiary of PowerSecure. PowerSecure also entered into five-year
employment and non-competition agreements with each of the two former owners of
Industrial Automation. The employment and non-competition agreements include an
"earn out" that generally entitles the former owners to any net earnings of
PowerSecure arising from projects commenced by Industrial Automation prior to
the acquisition. The acquisition was accounted for as a purchase, and therefore
the results of operations of Industrial Automation have been combined with those
of PowerSecure effective April 10, 2001.

      Restructuring of PowerSpring. We formed PowerSpring in 1999 to carry out
our business objective of becoming a leading provider of internet-based energy
information products, services and technology. The goal of PowerSpring is to
provide comprehensive energy consumption data and a broad array of additional
information designed to facilitate the purchase and management of natural gas
and electricity by commercial energy users. PowerSpring is also intended to
provide commercial natural gas and electricity users with a mechanism to manage
their energy needs and reduce their energy costs. Our initial focus with
PowerSpring was the development of a website to provide a single source of
information and services for commercial energy users.

      During 2001, we completely restructured PowerSpring by discontinuing most
of its business operations and transferring its remaining operations to Metretek
Florida. Effective as of March 31, 2001, in furtherance of the discontinuance of
our PowerSpring subsidiary as an entity and the restructuring of its business,
we completed various restructuring actions including the transfer of management
and control of PowerSpring to Metretek Florida. As part of those actions, we,
PowerSpring and John A. Harpole entered into a Termination Agreement and Mutual
Release that terminated the employment of Mr. Harpole, formerly the Vice
President of PowerSpring, and set forth the terms and conditions of the
termination, which included the termination of various agreements and
instruments to which we, PowerSpring and Mr. Harpole were parties and the
transfer of the assets and business of previously-acquired Mercator Energy
Incorporated to an entity controlled by Mr. Harpole. Currently, our PowerSpring
offerings are included in the operations of Metretek Florida.

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


                                       3
<PAGE>

Flow's field services include the installation, testing, calibration, sales and
maintenance of measurement equipment and instruments. Southern Flow's chart
processing operations include analyzing, digitizing and auditing well charts and
providing custom reports as requested by the customer. Southern Flow also
provides laboratory analysis of natural gas and natural gas liquids chemical and
energy content. As part of its services to its customers, Southern Flow
maintains a proprietary database software system which calculates and summarizes
energy measurement data for its customers and allows for easy transfer and
integration of such data into customer's accounting systems. As an integral part
of these services, Southern Flow maintains a comprehensive inventory of natural
gas meters and metering parts, and derived approximately 24% of its annual
revenues from its "parts resale" business in 2001. Southern Flow provides its
services through nine division offices located throughout the Gulf of Mexico,
Southwest, Mid-Continent and Rocky Mountain regions.

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

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

      -     providing dependable integrated measurement services;

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

      -     retaining experienced and competent personnel.

POWERSECURE, INC.

      We formed PowerSecure in the fall of 2000 to engage in the business of
designing, engineering, marketing and operating 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 and the ability to take
advantage of peak-shaving and load interruption incentives. Distributed
generation is on-site power generation that supplements or bypasses the public
power grid by generating power at the customer's site. PowerSecure offers a
power supply that serves as an alternative source of energy for the customer's
business needs. PowerSecure's program covers virtually all elements of the
peak-power supply chain, including system design, installation, operation and
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, 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 recent brown-outs and
black-outs, especially those in California in 2000. Distributed generation
allows a business to improve the reliability of its energy generation by
providing a back-up power source that is available if the primary source, for
example a local utility becomes unable, for any reason, to provide power.
Distributed generation can protect businesses from the adverse effect of power
outages caused by storms, utility equipment failures and black-outs and
brown-outs resulting from instability on the utility power grids. In addition,
businesses utilizing distributed generation are able to mitigate their exposure
to energy price increases by being able to supply their own electricity through
alternative sources. Spikes in power prices, due to electricity spot price
savings, have led many businesses to seek alternative sources of power to
protect against these price spikes by "peak shaving". Peak shaving, as it
generally applies in PowerSecure's business, means utilizing the back-up power
provided by a system of distributed generation to reduce specific demand to
avoid the adverse effect of high energy prices charged by utilities during
"peak" energy use periods.

      In addition, due to the current fragmentation of the energy markets,
real-time energy information has at the same time become both more important to
have and more difficult to obtain. Many energy suppliers, especially utilities,
have complicated pricing and rate structures and tariffs that are difficult for
energy users to understand,


                                       4
<PAGE>

which further increases the difficulty of monitoring and managing energy usage
and costs. Energy deregulation, with multiple providers of energy and diverse
rate structures, adds to this complexity in managing energy usage and costs. In
order to effectively manage their energy needs, commercial and industrial users
of energy require real-time energy consumption information.

      PowerSecure provides a "turn-key" solution to these needs of industrial
and commercial users of electricity. By providing a complete and customized
program of distributed generation, combined with an energy information
management system, the PowerSecure system provides energy users with a seamless
interoperative active 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 power plant since it is designed to
supply power only to that one particular customer.

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

      -     designing and engineering the distributed generation system;

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

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

      -     designing building 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 the
generator, the source of power. While several distributed generation
technologies are available, PowerSecure currently utilizes a diesel-powered
generator. These are widely used and constitute a reliable, cost-effective
distributed generation technology, able to generate sufficient power with
reasonable efficiency at a reasonable cost. However, several new generator
technologies are emerging, and PowerSecure intends to utilize one or more of
them as they demonstrate the ability to be a commercially viable, affordable,
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 5 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 both small and large
industrial customers, as well as those in between.

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

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

      Remote Monitoring and Maintenance and System Management. PowerSecure's
remote monitoring and maintenance services are an important part of its system
because they differentiate the PowerSecure solution from that of its
competitors. PowerSecure monitors and maintains the system for its customers,
improving reliability and removing many of the hassles for its customers
associated with ownership. Distributed assets must be run periodically so that
they function properly when called upon to supply power. By installing a
communication device on the system, PowerSecure has the ability to remotely
start and run the system and to monitor its performance. In the event of a
mechanical problem or if the system is low on fuel, PowerSecure dispatches the
appropriate


                                       5
<PAGE>

technicians or local fuel service. PowerSecure manages every aspect of its
system on behalf of its customers so that the distributed generation is a
seamless operation. For those customers that already have distributed generation
systems, PowerSecure can offer valuable management services for their systems.
Specifically, PowerSecure offers contracts for fuel management services,
preventive and emergency maintenance services, and monitoring and dispatching
services. PowerSecure also coordinates the operation of the distributed
generation 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's marketing efforts
are focused on three separate types of packages. PowerSecure's initial marketing
focus was, and virtually all of its revenues through December 31, 2001 were
derived from, its "turn-key" generation system. In its turn-key program,
PowerSecure offers a complete internal distributed generation package, including
assistance in locating and arranging financing, directly to industrial and
commercial users of electricity that desire to own their own distributed
generation system. The size of turn-key distributed generation systems designed
and sold by PowerSecure has ranged from 90 KW to 8,000 KW, although PowerSecure
has the ability to design and sell even larger turn-key systems. The second
package marketed by PowerSecure involves partnering with utilities to develop,
market and manage distributed generation systems for customers of the utilities.
In the "utility partnership" model, PowerSecure partners with a utility to
combine its distributed generation package with other products or services that
the utility offers, and assists the utility in marketing PowerSecure's
distributed generation package to the utility's customers. PowerSecure has
recently commenced offering a third package, a "company-owned" distributed
generation system program, which will require significant capital to develop.
See "Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operation--Liquidity and Capital Resources." PowerSecure's
company-owned model involves the design, engineering, installation, operation
and maintenance of distributed generation systems that are owned by PowerSecure
and leased to customers on a long-term basis for monthly fees related to the
benefits received by the customer. Depending on our ability to raise sufficient
additional capital, market conditions and the preferences of industrial and
commercial users of electricity, PowerSecure believes that a significant portion
of its future business may be derived from its company-owned program, making it
less dependant upon sales of turn-key systems.

      Contracts and Backlog. As of December 31, 2001, PowerSecure had secured
contracts for distributed generation projects with an aggregate present value of
approximately $2.4 million. These contracts are scheduled to be completed by the
end of the second quarter 2002. Given the irregular sales cycle of customer
orders, PowerSecure's backlog at any given time is not necessarily an accurate
indication of its future prospects.

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

METRETEK, INCORPORATED

      We acquired Metretek Florida in March 1994. Metretek Florida was founded
in 1977 in Melbourne, Florida as a developer, manufacturer and marketer of
automated systems for remotely monitoring and recording energy consumption from
a central location. The "Metretek System" consists of three components:

      -     a solid state, electronic metering data collection product, with a
            built-in modem;

      -     a communication link; and

      -     a software system for managing the collection and presentation of
            recorded data.

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

      Metering data collection products, also known as automatic meter readers
or AMRs, are installed on existing energy meters. The AMRs are designed to
automatically collect and transmit metering data according to a schedule
predetermined and preset by the customer. The AMRs contain an electronic printed
circuit board ("PCB")


                                       6
<PAGE>

assembly, which is designed and programmed to interface with an energy meter at
the point of energy consumption. The PCB contains a microprocessor and modem, is
packaged with AC or DC power and is installed on, or in close proximity to, the
energy meter. Energy consumption data is collected, time-stamped, stored, and
then transmitted by the AMR to a central location on which Metretek Florida
software, running on a PC, or a PC network, manages the data collection and
processing as well as storing the data in a database. Communication from the
remotely located AMRs to the central software system is usually accomplished
using existing, standard voice grade telephone lines. In some instances,
cellular telephones or radios are used for communications, depending upon the
availability and expense of telephone lines and upon customer preferences.
Energy distribution companies use data from the Metretek System for multiple
purposes including system balancing, customer contract compliance, meter reading
and billing.

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

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

      -     on board microprocessor and memory for calculation (per American Gas
            Association formulas) and storage of corrected gas volumes;

      -     standard built in modem for remote interrogation, configuration, and
            data collection; and

      -     user configurable electronic outputs for control and alarm purposes.

      In addition to the AMR and corrector product lines, Metretek Florida
manufactures and markets systems consisting of remote recorders and central
system software for monitoring and recording gas pipeline pressure and for
monitoring cathodic protection systems, and distributed electrical generation
systems.

      Services. Metretek Florida provides custom software development, various
levels of technical support, and training to its customers. It also offers
a turn-key service to customers who are unable or unwilling to purchase and
operate a complete Metretek System. This turn-key service includes providing and
installing the remote recorders, collecting the data in Melbourne, Florida and
furnishing timely, accurate, properly formatted data to the customer 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.

      In 1997, Metretek Florida acquired two small printed circuit board
contract manufacturing firms located in Florida, Sigma VI and QCMI. These
strategic acquisitions facilitated Metretek Florida to obtain greater control
over the quality and timeliness of its PCB requirements and diversifying and
expanding the business of Metretek Florida outside of the utility industry. The
automated assembly equipment and experienced personnel acquired permit Metretek
Florida to offer contract manufacturing services to local electronics
manufacturers who have short run, high quality, quick turnaround requirements.
The contract manufacturing business, now operating as Metretek Contract
Manufacturing, generates incremental revenue and margin and makes staffing
during utility business peaks and valleys more manageable.

      Markets. Historically, Metretek Florida's AMR Systems have been sold to
natural gas distribution companies who use the system to remotely and
automatically monitor and record the consumption of their largest industrial and
commercial accounts. Sixty of the largest one hundred gas distribution utility
companies in North America currently use the Metretek System. In a deregulated
environment, the timely and accurate consumption data provided by the Metretek
System is of great value to the gas supply, gas control, marketing, customer
service, and billing functions within the gas distribution utility. Electronic
gas volume correctors are sold to gas distribution utility companies, gas
pipeline companies, gas producers and gatherers, and industrial consumers of
natural gas. Contract manufacturing services are marketed in the State of
Florida, primarily in Brevard County and surrounding counties.

      Marketing and Customer Service. Metretek Florida utilizes a direct sales
force and an independent distributor and sales representative organization in
the United States and the United Kingdom, and relies solely upon independent
representatives and distributors for the promotion, sales, and support of its
products outside those two countries. Metretek Florida 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


                                       7
<PAGE>

troubleshooting, and network management services.

      Metretek Florida regularly participates in utility industry conferences,
symposiums, and trade shows and maintains membership in several national and
regional utility company associations. Metretek Florida also advertises in and
contributes editorially to industry trade journals, utilizes direct mail/e-mail
and telemarketing and has a home page on the Internet (www.metretekfl.com).

      International. Outside the United States, Metretek Florida has sold AMR
Systems to gas distribution utility companies in the United Kingdom,
Netherlands, Pakistan, Australia, Argentina, Brazil, and Canada. All of the six
major gas distribution utility companies in Canada own and operate Metretek
Systems. Metretek Europe Ltd, a wholly owned subsidiary of Metretek Florida,
located in Camberley, Surrey, United Kingdom, promotes, sells, and supports
Metretek Florida products in the United Kingdom and Western Europe. Metretek
Florida also sells gas volume correctors in Canada, Columbia, Brazil, Argentina,
Australia, Taiwan, and Korea. During each of the past three years, approximately
11% of Metretek Florida's annual sales have been generated in international
markets.

      Acquisitions. Metretek Florida's business strategy includes the
acquisition of, and strategic alliances with, metering equipment manufacturers
and software application developers that can utilize or enhance the sale of
Metretek Florida's products and services. In 1997, Metretek Florida acquired
Sigma VI and QCMI, which were small printed circuit board contract manufacturing
firms. In 1998, Metretek Florida acquired substantially all of the assets and
business of American Meter pertaining to electronic gas volume correctors and
pressure recorders and non radio frequency meter reading devices traditionally
sold to the utility industry. In connection with that acquisition, American
Meter agreed not to compete with Metretek Florida in the acquired business for
five years from the closing date. Under a separate agreement, American Meter and
its affiliates have the right to continue to sell the acquired products in
certain markets by purchasing the products from Metretek Florida at certain
agreed upon prices and re-selling those products to various customer classes at
negotiated or market prices.

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

      In order to finance the initial phase of the development of PowerSpring,
we took several actions at the Metretek Technologies level to raise capital. In
September 1999, we amended our credit facility then in effect to provide the
initial financing of PowerSpring. In February 2000, we completed a $14 million
private placement of Common Stock, Series B Preferred Stock and Common Stock
Purchase Warrants, the proceeds of which were used principally to finance the
research and development of Internet technologies and systems to be used by
PowerSpring. In August 2000, we completed a call of outstanding warrants we had
issued as a dividend in 1998, resulting in total proceeds of approximately $2.6
million that provided additional funding for PowerSpring.

      The initial focus of our Internet-based business strategy was to develop
and launch a website providing the means for management of real time energy
information and the exchange of energy products. In June 2000, PowerSpring
launched its website: PowerSpring.com. During the development of PowerSpring, we
recognized that once the initial development stage was completed and the website
was launched, the further development and growth of PowerSpring would require
significant additional funds to support its growth plans, including its
continuing and growing overhead, its plans for an aggressive direct sales and
marketing effort, and its anticipated capital expense needs, including the
capital costs associated with the installation of Metretek Florida's AMR
equipment on new customer sites. Unfortunately, we believe that due primarily to
the down-turn in the public equity markets for technology stocks in general, and
Internet stocks in particular, and the resulting negative effect on private
investments in those sectors, we were unable to raise any further capital to
finance PowerSpring. By December 31, 2000, PowerSpring had abandoned plans for
any significant financings from external sources, and had enacted several
significant changes in its business model.

      During early 2001, PowerSpring was substantially downsized and laid off
almost all of its employees. By that time, the development costs of PowerSpring
had been almost entirely terminated, and management had discontinued operating
PowerSpring as an independent operating subsidiary. As a result, the
Internet-based offerings of PowerSpring, have been substantially restructured
and re-defined and have become as the web-based offering of Metretek Florida.
The PowerSpring offerings are being marketed to commercial and industrial
customers through private labeling and partnering joint ventures and programs
with natural gas and electricity utility companies and their affiliates and
through strategic relationships. We can offer no assurance or guaranty as to the


                                       8
<PAGE>

future of PowerSpring, either as an entity or as a product line, or as to the
extent of any further restructuring and modifications. In addition, we cannot
offer any assurance that the PowerSpring offerings will ever be commercially
viable or acceptable, or will ever generate substantial revenues or any profits
for us.

COMPETITION

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

      Our current and prospective competitors include:

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

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

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

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

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

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

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

            -     speed of development and implementation of new and enhanced
                  products and services;

            -     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;

            -     price of our competitors' products and services; and

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

      We believe that we currently compete favorably with respect to the above
factors. We do not typically attempt to be the low cost producer. Rather, we
endeavor to compete primarily on the business of products 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


                                       9
<PAGE>

assurance that our products and services will continue to compete favorably or
that we will be successful in facing the increasing competition for new products
and enhancements introduced by our existing competitors or new competition
entering the market.

      Many of our existing and potential competitors have better name
recognition, longer operating histories, access to larger customer bases and
greater financial, technical, sales marketing, manufacturing and other resources
than we do. This may enable our competitors to respond more quickly to new or
emerging technologies and changes in customer requirements or preferences and to
devote greater resources to the development, promotion and sale of their
products and services than we can. Our competitors may be able to undertake more
extensive marketing campaigns, adopt more aggressive pricing policies and make
more attractive offers to potential employees, customers, strategic partners and
suppliers and vendors than we can. Our competitors may develop products and
services that are equal or superior to the products and services offered by us
or that achieve greater market acceptance than our products do. In addition,
current and potential competitors have established or may establish cooperative
relationships among themselves or with third parties to improve their ability to
address the needs of our existing and prospective customers. As a result, it is
possible that new competitors may emerge and rapidly acquire significant market
share or impede our ability to acquire market share in new markets. Increased
competition could also result in price reductions, reduced gross margins and
loss of market share, and the inability to develop new businesses, which could
materially and adversely affect our business. 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.

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

      The market for distributed generation products are highly competitive and
rapidly changing and evolving. PowerSecure's competition is primarily from
existing distributors of generators, such as Caterpillar, Inc., Detroit Diesel
Corporation, Cummins Inc., Kohler and Generac Power Systems, as well as small
regional electric engineering firms that compete in certain aspects of
distributed generation production. Also, PowerSecure faces competition in some
specific portions of its distributed generation business. For example, some
small regional electric engineering firms specialize in the engineering aspects
of the distributed generation. Similarly, several well established companies
have developed microturbines used in distributed generation, such as Capstone
Turbine Corporation, Honeywell and Elliot Energy Systems, which develop gas
turbines, and NREC (Ingersoll-Rand), as well as a number of major automotive
companies. A number of companies are also developing alternative generation
technology such as fuel cells and solar cells, such as FuelCell Energy, Inc.,
Siemens, Westinghouse, Misubishi, Ballard Power Systems, Inc. and Plug Power
Inc. Several large companies also are becoming leaders in uninterruptible power
supply system technology, including American Power Conversion, Invensys, Liebert
(a subsidiary of Emerson Electric), GE Digital Energy, Lucent and MGE UPS
Systems.

      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 industrial and commercial meter reading/monitoring in
natural gas distribution utility companies, many suppliers of residential meter
reading systems also offer products for commercial and/or industrial
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 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 market
in which Metretek Florida is currently or is intending to compete. Most of
Metretek Florida's present and potential competitors have substantially greater
financial, marketing, technical and manufacturing resources, as well as greater
name recognition and experience, than Metretek Florida. Metretek Florida
competes with a large number of existing and potential competitors in these
markets, some of which do not compete in all of the same markets as Metretek
Florida. In addition, current and potential competitors may make strategic
acquisitions or establish cooperative relationships among themselves or with
third parties that increase their ability to address the needs of Metretek
Florida's prospective customers. Metretek Florida competes primarily on the
basis of product quality and reliability, applications expertise, and the


                                       10
<PAGE>

quality of its service and support.

REGULATION

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

      Regulation of Natural Gas. Our operations are affected in various degrees
by political developments and federal and state laws and regulations. In
particular, natural gas production, 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 industry legislation and agency regulation is periodically changed for a
variety of political, economic and other reasons. 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 studying various methods for 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. 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. We believe that we may benefit
from such a regulatory environment.

      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. The traditional utility
structure, consisting of a vertically integrated system operating as a natural
monopoly with rates set in relation to cost, has historically presented
utilities with little incentive to improve service quality or operating
efficiency. Customer demands and regulatory mandates by federal and state
governments are opening the electric utility market to competition, forcing
electric utilities to transform themselves from regulated monopolies into
competitive enterprises. While regulatory initiatives vary from state to state,
many involve a shift away from vertically integrated operations and
rate-of-return rate making, in which an electric utility's rates are determined
by its return on assets, to performance-based rate making, in which an electric
utility's rates and profitability are based upon its cost, efficiency, and
service quality. This deregulatory movement in the electricity industry follows
a similar deregulatory movement in the natural gas utility industry. Today, many
commercial and industrial natural gas customers can purchase natural gas
directly from producers or brokers, while utilities are required to provide
transportation of such natural gas to customers' facilities. We expect a similar
result from electricity deregulation.

      Several major electric utilities have recently entered into merger
agreements and other consolidation transactions and bought and sold generation
assets. The restructuring has also focused on opening the electric power
production industry, in certain markets, to full competition in the next few
years and ultimately providing customers access to multiple suppliers. Federal
legislation, such as the National Energy Policy Act of 1992 (the "Energy Policy
Act"), has opened utility transmission lines to independent power producers in
an effort to increase competition in the wholesale electric power generation
market. Under the Energy Policy Act, individual states have the sole authority
to mandate the transport and delivery or "wheeling" of electric power to retail
customers. As a result, many states now have legislation or final commission
orders to mandate retail wheeling and most of the other states are in various
stages of considering the implementation of retail wheeling and unbundling, both
at legislative and regulatory levels. Meanwhile, a number of other states are
also requiring utilities to "unbundle," or offer as separate services, metering,
billing and collection, and more states are formally investigating such
unbundling. Unbundling implies that a third party, such as a new power market
participant, would be free to own the electric meter that measures usage and
attaches to a commercial, industrial or residential customer's premises.
Traditionally, the owner of the meter has been the electric utility which has
also had a monopoly in providing metering, billing, and collection services.

      The changing regulatory environment means that new power market
participants will be entering into a market traditionally dominated by
established utilities. The established utilities are focused on retaining and
increasing their market share as a result of competition. Both new power market
participants and established utilities will be striving to optimize their
offerings and to distinguish themselves in the market. The same capabilities
will enable energy service providers to meet regulatory metering and forecasting
requirements, offer superior, competitively-priced services, collect customer
information and diversify by adding additional applications as available.


                                       11
<PAGE>

      Presently, 16 states and Washington, D.C. offer or will soon offer
deregulated retail access, allowing customers in those states to choose their
own suppliers of electricity power generation services, while an additional six
states are transitioning to deregulated status but the implementation has been
delayed. We believe that deregulation will 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. It is
possible that other states will enact electric deregulation in the future, but
there is no assurance. We believe that regulatory reform will result in new
opportunities for us to provide our products and services, such as AMR and other
functions typically performed by utilities, directly to end-user customers. In
addition, we believe there are a number of new business opportunities that we
will be able to develop for capitalizing on the value of the information that
can be derived from our products and services.

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

      Regulation of Environment. While various federal, state and local laws and
regulations covering the discharge of materials into the environment, or
otherwise relating to the protection of the environment, may affect our
operations as a result of their effect on natural gas development, exploration,
production, transportation and dispensing operations, our operations are not
currently subject to substantial environmental laws and regulations. We believe
we are in material compliance with those environmental laws and regulations to
which we are subject. It is not anticipated that we will be required in the near
future to expend amounts that are material in relation to our total capital
expenditures program by reason of environmental laws and regulations. However,
inasmuch as such laws and regulations are frequently changed, we are unable to
predict the ultimate effect on us and on the cost of compliance.

EMPLOYEES

      As of March 1, 2002, we had 208 full-time employees. None of our employees
is covered by a collective bargaining agreement, and we have not experienced any
work stoppage. We consider our relations with our employees to be good. We
depend upon our ability to attract, retain and motivate qualified management,
technical, sales and other personnel. If we are unable to continue to do so, our
business will be adversely affected.

RESEARCH AND DEVELOPMENT

      In the past, most of our basic research and development activities have
been conducted by Metretek Florida. Metretek Florida's research and development
is focused on enhancements to its product and service offering that address
anticipated customer requirements and potential new markets. Current research
and development projects at Metretek Florida include development of data
collection products that utilize cellular telephonic transmissions, the paging
network for communication as a less costly alternative to telephonic
communication, an Internet-based data logger, internet software applications,
and an improved electronic gas volume corrector with new set-up and
configuration software.

      We incurred $9,917,000 and $797,000 for research and development expenses
during the years ended December 31, 2000 and 2001, respectively, of which
$9,181,000 and $231,000, respectively, were attributable to PowerSpring. The
decrease is primarily due to the restructuring of PowerSpring and the virtual
termination of research and development expenses related to PowerSpring's
business in the second half of 2000. 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, but we do
not anticipate significant research and development expenditures will be devoted
in the future to PowerSpring. However, we do intend to continue to develop the
internet capabilities of PowerSecure, Metretek Florida and Southern Flow.

RAW MATERIALS

      In our business we purchase memory chips, electronic components, printed
circuit boards, specialized sub-assemblies, diesel generators, relays, electric
circuit components, fabricated sheet metal parts, machined components, aluminum,
metallic castings and various other raw materials for their products. We
currently procure, and expect to continue to procure, certain components (such
as generators) from single source manufacturers due to


                                       12
<PAGE>

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, shortages in certain components such as memory
chips, supply problems from our suppliers or our inability to develop
alternative sources of supply quickly or cost-effectively could materially
impact and delay our ability to manufacture and deliver our products and
therefore could adversely affect our business and operations. We attempt to
mitigate this risk by maintaining an inventory of such materials. In addition,
some of the raw materials used in PowerSecure's business have significant lead
times before they are available, which may affect the timing of PowerSecure's
project completions.

INTELLECTUAL PROPERTY

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

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

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

      -     the technological and creative skills of our personnel;

      -     development of new products, services and technologies;

      -     frequent product, service and technology enhancements;

      -     name recognition;

      -     customer training; and

      -     reliable product and service support.

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

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

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


                                       13
<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY

      We lease our principal executive offices, which consist of 2,925 square
feet in Denver, Colorado. We moved into these premises in December 2001 when the
lease of our previous executive offices expired. This current lease has a
monthly rental obligation of $4,388, including operating costs, and expires
December 31, 2004.

      Southern Flow leases office facilities in the following locations:
Lafayette, Belle Chasse and Shreveport, Louisiana; Jackson, Mississippi; Houston
and Victoria, Texas; Tulsa, Oklahoma; and Aztec, New Mexico. These offices have
an aggregate of approximately 64,000 square feet, total monthly rental
obligations of approximately $32,500 and terms expiring at various times through
2007. In addition, Southern Flow owns and occupies an 8,600 square foot office
building in Dallas, Texas, which is subject to a mortgage described in "Item 6.
Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

      PowerSecure leases three facilities, which are located in Greensboro and
Wake Forest, North Carolina and Atlanta, Georgia. These facilities consist of
9,584 square feet in total, have a total monthly rental obligation of $8,590.
These leases on these facilities expire between 2004 and 2006.

      Metretek Florida leases its principal business offices, located in
Melbourne, Florida and consisting of 56,271 square feet, for its executive,
manufacturing, engineering, warehouse and marketing operations. The lease has a
monthly rental obligation of $31,748, including operating costs, and expires
July 30, 2005. Metretek Florida has sub-leased 17,146 square feet of its space
for $12,325 monthly rental.

      We consider our current facilities to be suitable and adequate to meet our
current needs, although we continually monitor our facilities requirements.

ITEM 3. LEGAL PROCEEDINGS

      On January 5, 2001, Douglas W. Heins, individually and on behalf of a
class of other persons similarly situated (the "Class Action Plaintiff"), filed
a complaint (the "Class Action") in the District Court for the City and County
of Denver, Colorado (the "Denver Court") against Metretek Technologies, 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 raised $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. The Class Action alleges that the Metretek Defendants and the
Farstad Defendants (collectively, the "Class Action Defendants"), either
directly or as "controlling persons", violated certain provisions of the
Colorado Securities Act in connection with the sale of interests in the 1997
Trust, an energy program of which MGT, a wholly-owned subsidiary of Metretek
Technologies, is the managing trustee and Messrs. Marcum, Wanger and Farstad are
or were the active trustees. Specifically, the Class Action Plaintiff claims
that his and the class's damages resulted from the Class Action Defendants
allegedly negligently, recklessly or intentionally making false and misleading
statements, failing to disclose material information, and willfully
participating in a scheme or conspiracy and aiding or abetting violations of
Colorado law, which scheme and statements related to the specification of the
natural gas liquids product to be delivered under certain contracts, for the
purpose of selling the 1997 Trust's units. The damages sought in the Class
Action include compensatory and punitive damages, interest, attorneys' fees and
other costs.

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

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


                                       14
<PAGE>

      On September 28, 2001, the Denver Court granted the Class Action
Plaintiff's motion to certify a class consisting of all investors in the 1997
Trust. As of the date of this Report, a trial date had not been set and no
significant discovery had been conducted.

      On May 30, 2001, 21 individual plaintiffs including Michael Mongiello and
Charlotte Mongiello, trustees of the Mongiello Family Trust dated 8/1/90 (the
"Mongiello Plaintiffs"), filed, and subsequently served, a first amended
complaint (the "Mongiello Case") in the Superior Court in the State of
California for the County of San Diego (the "California Court) against the
Metretek Defendants, the Farstad Defendants, United Pacific Securities, Inc.,
GBS Financial Corporation, IFG Network Securities, Inc., and numerous officers,
directors, employees and brokers related to such brokerage houses (the
"California Defendants"). The Mongiello Case contains allegations against the
Metretek Defendants similar to those contained in the Class Action. The net
investment in the 1997 Trust by the Mongiello Plaintiffs is approximately
$542,000. The Mongiello Plaintiffs' claims for relief include breach of
fiduciary duty, sale of securities in violation of California blue sky laws,
fraud and deceit, negligent misrepresentation and omission, mutual mistake,
rescission, negligence, fraud on senior citizens and declaratory relief. The
Mongiello Plaintiffs seek, among other things, compensatory damages, interest,
attorneys' fees, rescission and restitution, punitive and exemplary damages, a
declaratory judgment and other damages.

      On October 5, 2001, the California Court granted the motion by the
Metretek Defendants to dismiss the claims against Metretek Technologies, Mr.
Marcum and Mr. Wanger for lack of personal jurisdiction. The California Court
also granted a similar motion dismissing the claims against the Farstad
Defendants for lack of personal jurisdiction. On November 5, 2001, MGT, MCR,
MMF, Mr. Packard and the 1997 Trust, as the remaining Metretek Defendants, filed
an answer generally denying the allegations and claims in the Mongiello Case. On
March 6, 2002, the remaining Metretek Defendants filed a motion to dismiss based
on forum nonconviens seeking to dismiss the claims of 11 of the Mongiello
Plaintiffs in favor of Colorado as a more convenient forum. The California Court
has not ruled on this motion as of the date of this Report. As of the date of
this Report, no trial date has been set and only limited discovery has been
conducted.

      In January 2002, six individual plaintiffs including Glenn Puddy (the
"Puddy Plaintiffs") served a complaint (the "Puddy Case") in the California
Court against the same defendants as in the Mongiello Case, containing
allegations, legal claims and damages similar to those in the Mongiello Case.
The Puddy Plaintiffs and the Mongiello Plaintiffs have the same legal counsel.
The net investment of the Puddy Plaintiffs in the 1997 Trust is approximately
$89,000. All of the Metretek Defendants have been dismissed from the Puddy Case
for lack of personal jurisdiction. A motion by the Puddy Plaintiffs to
consolidate the Puddy Case with the Mongiello Case, or to allow the Mongiello
Plaintiffs to amend their complaint to add the Puddy Plaintiffs as additional
plaintiffs, was denied. The Puddy Plaintiffs have indicated that they intend to
appeal these rulings.

      Because the foregoing litigation is in early stages, we cannot predict the
outcome of this litigation or the impact the resolution of these claims will
have on our business, financial position or results of operations. We intend to
vigorously defend the claims against us and the other Metretek Defendants and to
vigorously pursue appropriate cross-claims and third party complaints. However,
an adverse judgment against us in the foregoing litigation would have a material
adverse effect on our business, financial condition and results of operations.

      From time to time, we are involved in other disputes and legal actions
arising in the ordinary course of business. We intend to vigorously defend all
claims against us. Although the ultimate outcome of these claims cannot be
accurately predicted due to the inherent uncertainty of litigation, in the
opinion of management, based upon current information, no other currently
pending or overtly threatened dispute is expected to have a material adverse
effect on our business, financial condition or results of operations.

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

      No matter was submitted to our security holders during the fourth quarter
of 2001.


                                       15
<PAGE>

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      Our Common Stock is listed on the Nasdaq National Market and trades under
the symbol "MTEK." Our "Dividend Warrants", which were issued as a dividend to
stockholders on September 18, 1998, were traded on the Nasdaq SmallCap Market
under the symbol "MTEKW" until we redeemed them on August 14, 2000. The
following table sets forth, for the periods indicated, the range of the high and
low closing sales prices of our Common Stock, as reported on the Nasdaq National
Market, and of our Dividend Warrants, as reported on the Nasdaq SmallCap Market:

<TABLE>
<CAPTION>
                                                                       COMMON STOCK             DIVIDEND WARRANTS
                                                                   ------------------         ---------------------
                                                                   HIGH           LOW         HIGH             LOW
                                                                   ----           ---         ----             ---
<S>                                                               <C>           <C>           <C>            <C>
YEAR ENDED DECEMBER 31, 2000:
First Quarter ......................................              $17.63        $ 4.25        $13.63         $ 1.63
Second Quarter .....................................               11.88          5.88          7.63           2.50
Third Quarter ......................................                6.75          2.63          9.38*          0.06*
Fourth Quarter .....................................                4.31          0.88            --             --

YEAR ENDED DECEMBER 31, 2001:
First Quarter ......................................              $ 2.44        $ 1.25            --             --
Second Quarter .....................................                2.05          1.15
Third Quarter ......................................                1.49          0.70            --             --
Fourth Quarter .....................................                0.96          0.43            --             --
</TABLE>

----------
* Through August 14, 2000.

HOLDERS

      As of March 1, 2002, there were 244 holders of record of our Common Stock.
Because many of the shares of our Common Stock are held in street name by
brokers and other institutions on behalf of stockholders, we are unable to
precisely determine the total number of stockholders represented by these record
holders, but we estimate, based upon available information, that there are at
least 3,000 beneficial owners of our Common Stock.

DIVIDENDS

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

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

RECENT SALES OF UNREGISTERED SECURITIES

      On October 26, 2001, our Board of Directors authorized the amendment and
restatement of our stockholder rights plan set forth in a Rights Agreement,
dated as of December 2, 1991, with Computershare Investor Services, LLC, as
rights agent (the "Rights Agent"). Pursuant to such authorization, we entered
into an Amended and Restated Rights Agreement, dated as of November 30, 2001
(the "Restated Rights Agreement"), with the Rights Agent. The Board of Directors
determined it was desirable and in our best interests and those of our
stockholders for us to extend and renew the benefits afforded by the original
Rights Agreement and to amend certain provisions


                                       16
<PAGE>

thereof. The Restated Rights Agreement was adopted in the normal course of
updating and extending the original Rights Agreement that was scheduled to
expire on December 1, 2001 and not in response to any acquisition proposal.

      The Board of Directors originally adopted the Rights Agreement, and
subsequently authorized its extension, amendment and restatement as set forth in
the Restated Rights Agreement, in order to protect our stockholders from
coercive or otherwise unfair takeover tactics. In general terms and subject to
certain exemptions relating to past transactions, the Restated Rights Agreement
works by imposing a significant economic penalty upon any person or group that
acquires 15% or more of the outstanding shares of our Common Stock without the
approval of our Board. The Restated Rights Agreement should not interfere with
any merger or other business combination approved by our Board.

      On December 2, 1991, our Board of Directors declared a dividend of one
preferred share purchase right (a "Right") for each share of our Common Stock
outstanding on December 2, 1991 (the "Record Date"), and further authorized the
issuance of one Right for each share of Common Stock issued after the Record
Date and prior to the distribution date of the Rights. Once exercisable, each
Right entitles the registered holder to purchase one one-hundredth of a share of
our Series C Preferred Stock. The terms of our Series C Preferred Stock are such
that one one-hundredth of a share of Series C Preferred Stock is intended to be
the economic equivalent of one share of our Common Stock. The Restated Rights
Agreement extends the expiration date of our stockholder rights plan and
effectuated certain amendments to reflect prevailing stockholder rights plan
terms and to make certain adjustments as a result of the July 1998 reverse split
of our Common Stock. The amendments to the Restated Rights Agreement include the
following:

      -     extending the term of the original Rights Agreement, which was set
            to expire December 1, 2001, to November 30, 2011;

      -     reducing the number of shares of our Series C Preferred Stock
            purchasable upon exercise of a Right from four one-hundredths of a
            share (resulting from the adjustment due to the July 1998 reverse
            split of our Common Stock) to one one-hundredth of a share;

      -     reducing the purchase price of one-hundredth of a share of Series C
            Preferred Stock pursuant to each Right from $25.00 to $15.00;

      -     giving effect to, and make certain adjustments due to, the July 1998
            reverse split;

      -     reducing the redemption price of the Rights from $.04 to $.01 per
            Right;

      -     updating the original Rights Agreement to comply with current laws
            and prevailing stockholder rights plan terms; and

      -     making various other technical and conforming amendments.

      The summary description in this Report of the Restated Rights Agreement,
including the terms of the Rights and the Series C Preferred Stock, does not
purport to be complete and is qualified in its entirety by reference to all the
provisions of the Restated Rights Agreement, including the exhibits thereto
(which exhibits include the rights, privileges and preferences of the Series C
Preferred Stock) and the definitions contained therein, which has been filed
with the SEC as an exhibit to our Registration Statement on Form 8-A/A,
Amendment No. 5, registering the Rights.

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

INTRODUCTION

      The following discussion and analysis of our results of operations for the
years ended December 31, 2001 ("fiscal 2001") and 2000 ("fiscal 2000") and of
our consolidated financial condition as of December 31, 2001 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


                                       17
<PAGE>

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 "Special Note on Forward-Looking Statements" above.
Forward-looking statements are not guarantees of future performance or events,
but are subject to and qualified by known and unknown risks, uncertainties and
other factors that could cause actual results to differ materially from those
expressed, anticipated or implied by such forward-looking statements, including
those risks, uncertainties and other factors described below in this Item "--
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 file from time to time with
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.

SIGNIFICANT ACCOUNTING POLICIES

      We prepare our consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America. As
such, we are required to make certain decisions, judgments, estimates and
assumptions that we believe are reasonable based upon the information available
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the periods presented. These decisions include the selection of the appropriate
accounting principles to be applied and the assumptions on which to base
accounting estimates. In reaching such decisions, management applies judgment
based on its understanding and analysis of the relevant circumstances. Note 1 to
our consolidated financial statements contained elsewhere in this Report
provides a summary of the significant accounting policies followed in the
preparation of our consolidated financial statements. Other notes to our
consolidated financial statements describe various elements of our consolidated
financial statements and the assumptions on which specific amounts were
determined. While actual results could differ from those estimated at the time
of preparation of our consolidated financial statements, management is committed
to preparing financial statements that incorporate accounting policies,
assumptions and estimates that promote the representational faithfulness,
verifiability, neutrality and transparency of the accounting information
included in the consolidated financial statements.

RESULTS OF OPERATIONS

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

<TABLE>
<CAPTION>
                                                                            YEARS ENDED
                                                                            DECEMBER 31,
                                                                   ------------------------------
                                                                     2001                  2000
                                                                     ----                  ----
                                                                    (dollar amounts in thousands)
<S>                                                                <C>                   <C>
REVENUES:
       Southern Flow ..................................            $ 12,918              $ 11,335
       PowerSecure ....................................               8,975                    --
       Metretek Florida ...............................               6,629                 8,999
       PowerSpring ....................................                 277                 1,160
       Other ..........................................                 294                   164
                                                                   --------              --------
       Total ..........................................            $ 29,093              $ 21,658
                                                                   ========              ========
GROSS PROFIT:
       Southern Flow ..................................            $  3,390              $  2,931
       PowerSecure ....................................               1,877                   (40)
       Metretek Florida ...............................               2,321                 2,258
       PowerSpring ....................................                (111)                 (351)
                                                                   --------              --------
       Total ..........................................            $  7,477              $  4,798
                                                                   ========              ========
</TABLE>


                                       18
<PAGE>

<TABLE>
<S>                                                                <C>                   <C>
SEGMENT PROFIT (LOSS):
       Southern Flow ..................................            $  1,608              $  1,193
       PowerSecure ....................................                 403                  (243)
       Metretek Florida ...............................                (993)               (1,450)
       PowerSpring ....................................                (612)              (15,720)
       Other ..........................................              (1,791)               (1,568)
                                                                   --------              --------
       Total ..........................................            $ (1,385)             $(17,788)
                                                                   ========              ========
</TABLE>

      During fiscal 2000 and portions of fiscal 2001, we had four reportable
business segments: natural gas measurement services; distributed generation;
automated energy data management; and internet-based energy information and
services. Effective as of April 1, 2001, we restructured the business of
PowerSpring as a service offering of Metretek Florida and we terminated the
operations of PowerSpring as an independent entity; accordingly, since April 1,
2001 internet-based energy information and services has no longer been reported
as a separate business segment but has been included and reported as part of our
automated data management segment.

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

      The operations of our distributed generation segment are conducted by
PowerSecure. PowerSecure commenced operations in September 2000. The primary
elements of PowerSecure's distributed generation products and services include
project design and engineering, negotiation with utilities to establish tariff
structures and power interconnects, generator acquisition and installation,
process control and switchgear design and installation, and ongoing project
monitoring and servicing. PowerSecure markets its distributed generation service
packages directly to large end-users of electricity, either on a "turn-key"
customer-owned basis or through its recently commenced "company-owned" platform,
and through outsourcing partnerships with utilities.

      The operations of our automated energy data management segment are
conducted by Metretek Florida. Metretek Florida's manufactured products fall
into three categories: remote data collection products; electronic corrector
products; and application-specific products. Metretek Florida also provides
energy data collection and management services and post-sale support services
for its manufactured products.

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

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

      YEAR ENDED DECEMBER 31, 2001 COMPARED TO YEAR ENDED DECEMBER 31, 2000

      Revenues. Our revenues are derived almost entirely from the sales of
products and services by our subsidiaries. Our consolidated revenues for fiscal
2001 increased $7,435,000, or 34.3%, compared to fiscal 2000. This increase was
primarily due to the first-time generation of revenue by PowerSecure, as well as
an increase in revenues by Southern Flow. The increased revenue generation at
those subsidiaries was partially offset by a decrease in revenues by Metretek
Florida and by PowerSpring. PowerSecure generated $8,975,000 in revenues during
fiscal 2001, its first year of revenue generating activities. Southern Flow's
fiscal 2001 revenues increased by $1,583,000, or 14.0%, over fiscal 2000,
primarily due to an increase in sales and services resulting from an improved
domestic natural gas market. During fiscal 2001, PowerSpring's revenues were
$536,000, which included approximately $255,000, recorded as other revenues,
relating to the restructuring of PowerSpring. This constitutes a decrease in
PowerSpring's revenues of $883,000, or 76.1%, compared to fiscal 2000. We do not
anticipate any material revenues by PowerSpring as an entity in future quarters
due to the disposition of the Mercator business as discussed below and the
transfer of the PowerSpring products and business to Metretek Florida. Any
future revenues attributable to PowerSpring's business will be recorded as
revenues of Metretek Florida. Metretek


                                       19
<PAGE>

Florida's fiscal 2001 revenues decreased $2,370,000, or 26.3%, compared to
fiscal 2000, consisting of a $2,091,000 decrease in domestic sales and a
$279,000 decrease in international sales. The decrease in Metretek Florida's
domestic sales was primarily due to a decrease in circuit board assembly sales
resulting from the loss of a major contract manufacturing customer that sold its
business. The decrease in international sales resulted from a decrease in demand
for products at Metretek Florida's target international market. The following
table sets forth a comparison of Metretek Florida's current domestic and
international product mix:

<TABLE>
<CAPTION>
                                                   YEAR ENDED DECEMBER 31,
                                                 --------------------------
                                                 2001                  2000
                                                 ----                  ----
                                                (dollar amounts in thousands)
<S>                                             <C>        <C>        <C>              <C>
    Remote data collection
        products and systems                    $4,656     70.2%      $4,964           55.2%
    Electronic corrector products                1,688     25.5%       1,927           21.4%
    Circuit board assembly sales                   285      4.3%       2,108           23.4%
                                                ------                ------
    Total                                       $6,629                $8,999
                                                ======                ======
</TABLE>

      Costs and Expenses. Cost of sales and services includes materials,
personnel and related overhead costs incurred to manufacture products and
provide services. Cost of sales and services in fiscal 2001 increased
$4,627,000, or 27.7%, compared to fiscal 2000. PowerSecure's costs of sales on
distributed generation projects for fiscal 2001 was $7,098,000, compared to
$40,000 in fiscal 2000, which involved only limited start-up costs and expenses.
PowerSecure's gross profit margin after costs of sales and services was 20.9%
for fiscal 2001. Southern Flow's cost of sales and services for fiscal 2001
increased $1,125,000, or 13.4%, compared to fiscal 2000, which increase is
almost entirely attributable to increased sales. Southern Flow's gross profit
margin after costs of sales and services increased slightly to 26.2% for fiscal
2001 compared to 25.9% for fiscal 2000. Metretek Florida's cost of sales and
services for fiscal 2001 decreased $2,433,000, or 36.1%, compared to fiscal
2000. This decrease was primarily due to lower circuit board assembly sales.
Circuit board assembly sales generally result in lower gross margins than that
of traditional products at Metretek Florida. As a result, although Metretek
Florida's revenues for fiscal 2001 decreased approximately 26% compared to
fiscal 2000, Metretek Florida's overall gross profit margin increased from 25.1%
to 35.0% over the same periods. PowerSpring incurred costs of sales and services
in the amount of $388,000 during fiscal 2001, compared to $1,511,000 during
fiscal 2000, reflects the restructuring and downsizing of PowerSpring.

      General and administrative expenses include personnel and related overhead
costs for support and administrative functions. General and administrative
expenses for fiscal 2001 decreased $130,000, or 2.3%, compared to fiscal 2000.
PowerSpring's general and administrative expenses for fiscal 2001 decreased
$1,279,000, or 85.1%, compared to fiscal 2000 as a result of the restructuring
and significant downsizing of the business of PowerSpring. The decrease in
general and administrative expenses at PowerSpring was partially offset by
increased expenses at PowerSecure. PowerSecure's general and administrative
expenses increased $1,145,000, or 564.1%, in fiscal 2001 compared to fiscal
2000, as a result of a full year of personnel, travel and overhead costs in
fiscal 2001 compared to only limited fourth quarter activities in fiscal 2000.

      Selling, marketing and service expenses consist of personnel and related
overhead costs, including commissions, for sales and marketing activities,
together with advertising and promotion costs. Selling, marketing and service
expenses for fiscal 2001 decreased $909,000, or 40.0%, compared to fiscal 2000.
This decrease in selling, marketing and service expenses was primarily due to
the discontinuation of independent sales activity by PowerSpring and a reduction
in sales personnel at Metretek Florida.

      Depreciation and amortization expenses include the depreciation and
amortization of real property, customer lists, goodwill, patents and capitalized
software development costs. Depreciation and amortization expenses for fiscal
2001 decreased $291,000, or 17.0%, compared to fiscal 2000. This decrease was
due almost entirely to the effects of the impairment of depreciable and
amortizable assets at PowerSpring that was recorded in the last three months of
2000. The impairment of these assets reduced depreciation and amortization
expenses of PowerSpring assets by $338,000 for fiscal 2001, compared to fiscal
2000. The reduction in depreciation and amortization expenses at PowerSpring was
partially offset by an increase of $35,000 in depreciation and amortization
expenses at PowerSecure.

      Research and development expenses include payments to third parties,
personnel and related overhead costs for product and service development,
enhancements, upgrades, testing and quality assurance. Research and development
expenses in fiscal 2001 decreased $9,121,000, or 92.0%, compared to fiscal 2000.
This decrease is due


                                       20
<PAGE>

almost exclusively to the virtual termination in research and development
expenses related to PowerSpring's business.

      Interest, finance charges and other expenses include interest and finance
charges on our credit facility as well as other non-operating expenses.
Interest, finance charges and other expenses for fiscal 2001 increased $17,000,
or 12.2%, compared to fiscal 2000. The increase resulted primarily from
increased bank borrowings required to finance PowerSecure projects that
commenced in fiscal 2001.

      Loss on impairment of assets includes the write down of property, plant,
equipment, goodwill and other intangible assets to their estimated fair value.
No impairment losses were incurred for fiscal 2001. Loss on impairment of assets
for fiscal 2000 was $3,161,000, relating to the write down of certain equipment
and goodwill of PowerSpring.

QUARTERLY FLUCTUATIONS

      Our quarterly revenues, expenses, margins, net income and other operating
results have fluctuated significantly from quarter-to-quarter and from
year-to-year in the past and are expected to continue to fluctuate significantly
in the future due to a variety of factors, many of which are outside of our
control. These factors include, without limitation, the following:

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

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

      -     the timing, pricing and market acceptance of our new products and
            services, and those of our competitors;

      -     the pace of development of our new businesses;

      -     the success of our brand building and marketing campaigns for our
            PowerSecure and PowerSpring products and services;

      -     the growth of the market for distributed generation systems and
            online energy products, services and information;

      -     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;

      -     general economic and political conditions;

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

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

      -     changes in the prices charged by our suppliers;

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

      -     changes in our operating expenses; and

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

      Because we have little or no control over most of these factors, our
operating results are difficult to predict. Any substantial adverse change in
any of these factors could negatively affect our business and results of
operations.

      Our revenues and other operating results 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. 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


                                       21
<PAGE>

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.

      PowerSecure's operations generated revenues for the first time during the
second quarter of 2001. Although PowerSecure has a limited operating history, we
expect the revenues, costs, gross margins, cash flow, net income and other
operating results of PowerSecure to vary from quarter-to-quarter for a number of
reasons, including the factors mentioned above. PowerSecure's revenues will
depend in large part upon the timing of projects being awarded to PowerSecure,
as well as 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, 2001,
virtually all of PowerSecure's revenues constituted non-recurring revenues, but
a greater proportion of PowerSecure's revenues will be from recurring sources in
future years if PowerSecure is able to successfully develop and market its
"company-owned" business platform.

      Metretek Florida historically derives substantially all of its revenues
from sales of its products and services to the utility industry. Metretek
Florida has experienced variability of operating results on both an annual and a
quarterly basis due primarily to utility purchasing patterns and delays of
purchasing decisions as a result of mergers and acquisitions in the utility
industry and changes or potential changes to the federal and state regulatory
frameworks within which the utility industry operates. The utility industry,
both domestic and foreign, is generally characterized by long budgeting,
purchasing and regulatory process cycles that can take up to several years to
complete.

      Due to all of these factors and the other risks discussed in this Report,
you should not rely on quarter-to-quarter or year-to-year comparisons of our
results of operations as an indication of our future performance. Quarterly or
annual comparisons of our operating results are not necessarily meaningful or
indicative of future performance.

LIQUIDITY AND CAPITAL RESOURCES

      We require capital primarily to finance our:

      -     operations;

      -     inventory;

      -     accounts receivable;

      -     research and development efforts;

      -     property and equipment acquisitions;

      -     software development;

      -     debt service requirements; and

      -     business and technology acquisitions and other growth transactions.

In addition, we anticipate that PowerSecure's capital requirements may increase
significantly in fiscal 2002 in order to fund its purchases of equipment and
technology to be used in its "company-owned" distributed generation systems.

      We have historically financed our operations and growth primarily through
a combination of cash on hand, cash generated from operations, borrowings under
credit facilities, and proceeds from private and public sales of equity. As of
December 31, 2001, we had working capital of $3,537,000, including $696,000 in
cash and cash equivalents, compared to working capital of $4,263,000 on December
31, 2000, which included $469,000 in cash and cash equivalents. These working
capital amounts include, and have been materially affected by, the accounting
classifications applied to certain of our notes payable and our old and new
credit facilities. The amount of our working capital has been reduced by the
current portion of the note payable (the "Scient Note") to Scient


                                       22
<PAGE>

Corporation ("Scient"). As discussed below, the amount due under the Scient Note
is in dispute, and we do not believe we owe Scient any further amounts
thereunder. However, due to the March 31, 2002 stated maturity date of the
Scient Note, the entire balance of the Scient Note ($2.5 million) is carried on
our consolidated financial statements as a current liability as of December 31,
2001, even though Scient has indefinitely stayed further payments on the Scient
Note pending resolution of the dispute. The portion of the Scient Note that was
carried as a current liability at December 31, 2000 was $1.0 million. Also, as
of December 31, 2000, the entire outstanding balance of our prior credit
facility with the National Bank of Canada ($1.0 Million) was carried on our
consolidated financial statements as a current liability, due to its 2001
maturity date. This prior credit facility was refinanced in 2001 through a new
credit facility (the "Credit Facility") with Wells Fargo Business Credit, Inc.
(the "Lender"). Since the maturity date of the new credit facility is September
30, 2004, the $1 million outstanding balance as of December 31, 2001 is
reflected as long term debt rather than a current liability.

      Net cash provided by operating activities was $615,000 in fiscal 2001,
consisting of approximately $110,000 of cash provided by operations, before
changes in assets and liabilities, and approximately $505,000 of cash provided
by changes in working capital and other asset and liability accounts. This
compares to net cash used by operating activities of $13,188,000 in fiscal 2000,
virtually all of which was attributable to the operations of PowerSpring.

      Net cash used by investing activities was $322,000 in fiscal 2001, as
compared to $1,171,000 in fiscal 2000. The majority of the net cash used by
investing activities during fiscal 2001 was attributable to capitalized software
development. The reduction in net cash used by investment activities compared to
fiscal 2000 was attributable to the acquisition of Mercator and the addition to
property, plant and equipment in fiscal 2000 totaling $1,183,000.

      Net cash used by financing activities was $66,000 in fiscal 2001, compared
to net cash provided by financing activities of $14,467,000 in fiscal 2000. The
net cash used by financing activities during fiscal 2001 primarily represented a
slight increase in borrowing on our credit facility and the proceeds from a
mortgage loan on a Southern Flow property, offset by payments on capital lease
obligations. While we did not receive any proceeds from public or private sales
of equities during fiscal 2001, virtually all of the net cash provided by
financing activities in fiscal 2000 was attributable to the net proceeds from a
$14 million equity private placement of "Units", which consisted of Common
Stock, Common Stock Purchase Warrants and Series B Preferred Stock, as well as
the proceeds from exercises of our Dividend Warrants and of employee stock
options.

      During fiscal 2002, we plan to continue, at a slightly reduced level, our
research and development efforts to enhance our existing products and services
and to develop new products and services. Our research and development expenses
totaled $797,000 during fiscal 2001. We anticipate that our research and
development expenses in fiscal 2002 will total approximately $600,000, virtually
all of which will be directed to Metretek Florida's business, including further
development and enhancement of our PowerSpring offering.

      Our capital expenditures in fiscal 2001 were approximately $657,000. We
anticipate capital expenditures in fiscal 2002 of approximately $250,000,
primarily for the purchase of equipment to be used in Southern Flow's and
PowerSecure's businesses. However, the development of PowerSecure's
"company-owned" business will require and depend upon us raising substantial
additional capital. We cannot provide any assurance we will be successful in
raising additional capital, or that the amount of any additional capital that we
are able to raise will be sufficient to allow PowerSecure to meet our objectives
for its growth and development or will be on favorable terms.

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

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

      The Credit Agreement contains standard affirmative and negative covenants
by Southern Flow, including


                                       23
<PAGE>

financial covenants by Southern Flow to maintain a minimum tangible net book
value, minimum quarterly and annual net income levels and maximum capital
expenditures through 2002. Thereafter, the Lender and Southern Flow must
renegotiate the terms of those financial covenants. The Credit Agreement
contains other standard covenants related to Southern Flow's operations,
including limitations on future indebtedness and the payment of dividends the
sale of assets and other corporate transactions by Southern Flow, without the
Lender's consent.

      Borrowings under the Credit Facility are limited to a borrowing base
consisting of the sum of 85% of Southern Flow's eligible accounts receivable
plus the lesser of 20% of Southern Flow's eligible inventory (consisting
primarily of raw materials and finished goods inventory) or $200,000. As of
December 31, 2001, Southern Flow had a borrowing base of $1,770,702 under the
Credit Facility, of which $1,025,770 had been borrowed (and of that amount,
$469,000 had been advanced to fund the business of PowerSecure), leaving
$744,932 in unused Credit Facility availability.

      Southern Flow is permitted to advance funds under the Credit Facility to
Metretek Technologies, PowerSecure and Metretek Florida, provided that total
inter-company indebtedness owing from all Guarantors to Southern Flow may not
exceed the greater of the amount of the borrowing base less $150,000 or the
cumulative net income of Southern Flow from January 1, 2001. The Credit
Facility, which constitutes our primary credit agreement, is expected to be used
primarily to fund the operations and growth of PowerSecure, but can also be used
to fund the operations of Southern Flow and Metretek Florida.

      While the Credit Facility will restrict our ability to sell or finance our
subsidiaries without the consent of the Lender, in the event that we are able to
secure debt or equity financing for a subsidiary that is a Guarantor or the sale
or merger of such subsidiary and such subsidiary repays all advances made to it
by Southern Flow, then the Lender has agreed to terminate the applicable
restrictions in the Credit Facility relating to such subsidiary as a Guarantor.

      On December 3, 2001, Southern Flow financed its Dallas, Texas real estate
by entering into a $250,000 mortgage loan agreement (the "Mortgage Loan") with
Graham Mortgage Corporation. The unpaid balance of the Mortgage Loan accrues
interest at the rate of 9.75%. Monthly principal and interest installment
payments in the amount of $2,648.41 commenced January 1, 2002, and all principal
and accrued but unpaid interest becomes due and payable on December 1, 2003. The
Mortgage Loan is secured by the Dallas, Texas land and building.

      Effective as of March 31, 2001, we completed various actions in
furtherance of the discontinuance of our PowerSpring subsidiary as an entity and
the restructuring of its business, including the transfer of management and
control of the PowerSpring offering to Metretek Florida. As part of those
actions, we, PowerSpring and John A. Harpole entered into a Termination
Agreement and Mutual Release that terminated the employment of Mr. Harpole and
set forth the terms and conditions of the termination, which included the
termination of various agreements and instruments to which we, PowerSpring and
Mr. Harpole were parties. In connection with the termination, among other
things; (i) the $741,666 promissory note made by PowerSpring to Mr. Harpole was
cancelled, and the related security agreement pursuant to which PowerSpring had
granted a security interest in its asset to Mr. Harpole was terminated, (ii)
PowerSpring agreed to pay $250,000 to Mr. Harpole over the next year; and (iii)
we reduced the exercise prices of Mr. Harpole's warrants to purchase 60,000
shares of Common Stock by $1.50 per share to a range of $3.00 to $4.00. We
recorded other income of approximately $255,000 in March 2001, which represents
the difference between the note amount of $741,666 and our costs incurred in
connection with the termination of PowerSpring.

      On September 28, 2000, we issued the Scient Note, a $2.8 million unsecured
convertible promissory note payable to Scient, in connection with Scient's
consulting services relating to our Internet-based PowerSpring business. The
Scient Note is payable in quarterly installments, was to be due March 31, 2002,
bears no interest, and is convertible at any time at Scient's discretion into
either shares of our Common Stock at the rate of $5.94 per share or shares of
PowerSpring common stock at the rate of $0.60 per share. As of December 31,
2001, the outstanding balance of the Scient Note was stated as approximately
$2.5 million and reported as such in our consolidated financial statements.
However, it is our position that, due to various offsets and issues, we do not
owe Scient any further amounts. Scient has acknowledged some of the issues that
are in dispute and has stayed any claim for payment for the time being. However,
until final resolution is reached, we cannot predict with certainty the ultimate
outcome of any dispute with Scient, including whether we will be required to
make any further payments under the Scient Note, or the effects of the
resolution of this dispute on our liquidity, financial condition or results of
operations.

      Based upon our plans and assumptions as of the date of this Report, we
currently believe that our capital


                                       24
<PAGE>

resources, including our cash and cash equivalents, amounts available under the
Credit Facility and funds expected to be generated from our operations, will be
sufficient to meet our anticipated cash needs during the next 12 months,
including our working capital needs, capital requirements and debt service
commitments, other than the development of the "company-owned" business of
PowerSecure. However, 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. We cannot provide any assurance that these sources of
liquidity will be available when needed or that our actual cash requirements
will not be greater than we currently expect. In addition, an adverse resolution
related to the dispute as to the amount we owe under the Scient Note could also
significantly increase our cash requirements beyond our available capital
resources. Accordingly, we may require additional funds to support our working
capital requirements, our operations or our other cash flow needs.

      We expect that the development and growth of PowerSecure, including
equipment and other capital costs of developing distributed generation systems
for its company-owned business package, will require us to raise significant
additional funds, beyond our current capital resources. In addition, from time
to time as part of our business plan, we engage in discussions regarding
potential acquisitions of businesses and technologies. While our ability to
finance future acquisitions will probably require us to raise additional
capital, as of the date of this Report, we have not entered into any agreement
committing us to any such acquisition. In addition, we continually evaluate our
cash flow requirements as well as our opportunity to raise additional capital in
order to improve our financial position. 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.

      Our ability to obtain additional capital when needed or desired will
depend on many factors, including general economic and market conditions, our
operating performance and investor sentiment, and thus cannot be assured. In
addition, depending on how it is structured, a capital raising financing could
require the consent of the Lender or of the holders of our Series B Preferred
Stock or both. 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 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 the Lender and to the holders of our Series B
Preferred Stock, if their consents are required. Our inability to obtain
sufficient additional capital on a timely basis on favorable terms could have a
material adverse effect on our business, financial condition and results of
operations.

RECENT ACCOUNTING PRONOUNCEMENTS

      In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("FAS") No. 133, "Accounting for
Derivative Instruments and Hedging Activities", which was amended in June 2000
by FAS No. 138, "Accounting for Certain Derivative Instruments and Certain
Hedging Activities". FAS 133, as amended, establishes methods of accounting for
derivative financial instruments and hedging activities related to those
instruments as well as other hedging activities, including hedging foreign
currency expenses. We adopted FAS 133 for fiscal 2001. Because we do not utilize
derivative financial instruments, the adoption of FAS 133 did not have a
material impact on our financial position or results of operations.

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

      In June 2001, the FASB also issued FAS No. 142 "Goodwill and Other
Intangible Assets". FAS 142 addresses accounting and reporting for intangible
assets acquired, except for those acquired in a business combination. FAS 142
presumes that goodwill and certain intangible assets have indefinite useful
lives. Accordingly, goodwill and certain intangibles will not be amortized but
rather will be tested at least annually for impairment. FAS 142 also addresses
accounting and reporting for goodwill and other intangible assets subsequent to
their acquisition. FAS 142 is effective for fiscal years beginning after
December 15, 2001. Although we have not yet fully completed out assessment of
FAS 141 and FAS 142, we expect that adoption of these new pronouncements will
result in an approximate $675,000 reduction in annual amortization expense in
fiscal 2002.


                                       25
<PAGE>

compared to fiscal 2001 associated with goodwill and customer list intangible
assets, which assets had a net book value of $7,407,931 at December 31, 2001.

      In October 2001, the FASB issued FAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets", which addresses financial
accounting and reporting for the impairment and disposal of long-lived assets.
While FAS 144 supercedes FAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", it retains many
of the fundamental provisions of FAS 121 for recognition and measurement of the
impairment of long-lived assets to be held and used and for measurement of
long-lived assets to be disposed of by sale. FAS 144 also supercedes the
accounting and reporting provisions of APB Opinion No. 30, "Reporting Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business and
Extraordinary, Unused and Infrequently Occurring Events and Transactions", for
the disposal of segments of a business. FAS 144 establishes a single accounting
model, based on the framework established in FAS 121, for long-lived assets to
be disposed of by sale. FAS 144 is effective for fiscal years beginning after
December 15, 2001. We have not yet completed our assessment of the impact of FAS
144 on our financial position or results of operations.

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. In addition, the risks, uncertainties and
other factors described below are not the only ones we face. There may be
additional risks, uncertainties and other factors that we do not currently
consider material or that are not presently known to us. If any of the following
risks were to occur, our business, affairs, assets, financial condition, results
of operations, cash flows and prospects could be materially and adversely
affected. When we say that something could have a material adverse effect on us
or on our business, we mean that it could have one or more of these effects.

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

      We have incurred net losses in each year of our operations since
inception, including net losses of approximately $22.4 million in fiscal 2000
and $2.2 million in fiscal 2001. As of December 31, 2001, we had an accumulated
deficit of approximately $49.8 million. Our losses in fiscal 2001 were due
primarily to losses incurred at Metretek Florida, costs related to PowerSpring,
the preferred stock deemed distribution, and corporate overhead costs. Although
we will not be incurring significant costs in the future related to the
development of PowerSpring, we may incur significant costs in developing and
expanding the company-owned business of PowerSecure in the near future, and we
will continue to accrue the preferred stock deemed distribution through fiscal
2004, unless we redeem the Series B Preferred Stock sooner. We may never
generate sufficient revenues to achieve profitability. Even if we do achieve
profitability, we may not be able to sustain or increase that profitability on a
quarterly or annual basis in the future. If revenue does not meet our
expectations, or if operating expenses exceed what we anticipate or cannot be
reduced, our business, financial condition and results of operations will be
materially and adversely affected.

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

      In order to finance the development and expansion of our business, we will
need to raise significant additional funds. For example, we will need
substantial additional capital to develop the company-owned business of
PowerSecure, which will require significant expenditures to acquire capital
equipment for distributed generation systems to be owned by PowerSecure. In
addition, from time to time as part of our business plan, we engage in
discussions regarding potential acquisitions of businesses and technologies.
While our ability to finance future acquisitions will probably require us to
raise additional capital, as of the date of this Report, we have not entered
into any agreement committing us to any such acquisition. Moreover,
unanticipated events, over which we have no control, could increase our
operating costs or decrease our ability to generate revenues from product and
service sales, necessitating additional capital. Also, our Series B Preferred
Stock bears a cumulative dividend at the rate of 8% per year and, if not earlier
converted into Common Stock, is subject to mandatory redemption on December 9,
2004 at a redemption price equal to the liquidation preference, which as of
December 31, 2001 was $7,000,000 plus accumulated dividends of approximately
$1,145,000. In addition, an adverse resolution related to the dispute as to the
amount we owe under the Scient Note, with a current stated balance of
approximately $2.5 million, could also significantly increase our cash
requirements beyond our available capital resources. We continually evaluate our
cash flow requirements as well as our opportunity to raise additional capital in
order to improve our financial position. We cannot provide any assurance that we
will be able to raise additional capital when needed or desired,


                                       26
<PAGE>

or that the terms of such capital will be favorable to us and our stockholders.

      Our only current credit arrangement is Southern Flow's $2 million Credit
Facility, which expires in September 2004. Under certain conditions, the Credit
Facility can be, and has been, used to fund the operations of our other
subsidiaries, primarily PowerSecure. Southern Flow's ability to borrow funds
under the Credit Facility is limited to its loan availability based upon its
accounts receivable and inventory. As of December 31, 2001, Southern Flow had a
total loan availability under the Credit Facility of approximately $1,771,000,
of which $1,026,000 had been borrowed (and of that amount, $469,000 had been
advanced to fund the business of PowerSecure), leaving $745,000 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 Southern Flow's
asset base and our capital requirements.

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

      We may seek to raise any needed or desired additional capital from the
proceeds of public or private equity or debt offerings at the Metretek
Technologies level or at the subsidiary level or both, through asset or business
sales, from traditional credit financings or from other financing sources. Our
ability to obtain additional capital when needed or desired will depend on many
factors, including general market conditions, our operating performance and
investor sentiment, and thus cannot be assured. In addition, depending on how it
is structured, raising capital could require the consent of the Lender or of the
holders of our Series B Preferred Stock or both. 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 the Lender and to the holders of our Series B
Preferred Stock, if their consents are required. Our inability to obtain
sufficient additional capital on a timely basis on favorable terms could have a
material adverse effect on our business, financial condition and results of
operations.

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

      Our operating results have fluctuated significantly from quarter to
quarter and from 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. These factors include:

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

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

      -     the timing, pricing and market acceptance of our new products and
            services, and those of our competitors;

      -     the pace of development of our new businesses;

      -     the success of our brand building and marketing campaigns for our
            PowerSecure and PowerSpring products and services;

      -     the growth of the market for distributed generation systems and
            online energy products, services and information;

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

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


                                       27
<PAGE>

      -     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 and buying cycles of our customers;

      -     general economic and political conditions;

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

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

      -     changes in the prices charged by our suppliers;

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

      -     changes in our operating expenses; and

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

      Because we have little or no control over most of these factors, our
operating results are difficult to predict. Any substantial adverse change in
any of these factors could negatively affect our business and results of
operations.

      Our revenues and other operating results 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. Because our operating
expenses are based on anticipated revenues and because a high percentage of
these are relatively fixed, a shortfall in revenues or a 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, as a result of which we would suffer significant
operating losses.

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

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

      We and some of our subsidiaries and affiliates and their officers,
directors and trustees are defendants to a pending class action filed on January
5, 2001 in the District Court for the City and County of Denver, Colorado, as
well as two related lawsuits subsequently filed in San Diego, California,
alleging violations of securities laws and making other related claims in
connection with the sale of $9.25 million in interests in Marcum Midstream
1997-1 Business Trust, which is managed by Marcum Gas Transmission, Inc.
("MGT"). These lawsuits are described above in "Item 3. Legal Proceedings." We
intend to defend the claims against us in these lawsuits vigorously. Because
these lawsuits are in early stages, it is not possible at this time to predict
the outcome of this litigation or the impact this litigation will have on us.
However, an adverse judgment against us could materially and adversely affect
our business, financial condition and results of operations.

      From time to time we are also involved in other disputes and legal actions
that arise in the ordinary course of business. Although we do not expect any
other currently pending legal proceedings to have a material adverse impact on
us, because the outcome of litigation is inherently uncertain, we cannot provide
any assurance that present or future litigation could not materially and
adversely affect our business, financial condition or results of operation.

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

      Our business strategy includes the development and expansion of new
businesses and product lines such as PowerSecure and PowerSpring. Our plans and
strategies with respect to these new businesses are based on


                                       28
<PAGE>

unproven models and are still being developed and modified. PowerSecure
commenced its operations in September 2000 and generated its first significant
revenue in the second quarter 2001. Our PowerSecure business strategy depends on
our ability to market distributed generations systems to large users of
electricity. PowerSpring was launched in June 2000 but has not generated any
significant revenue to date. Our PowerSpring business strategy depends on the
willingness of commercial users of natural gas and electricity to purchase, at a
price profitable to us, an internet-based package consisting of energy data
management equipment and energy purchasing resources. Our future success depends
in large part upon our ability to develop these new businesses so that they will
generate significant revenues, profits and cash flow through the offering of
energy products, services and information.

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

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

      -     attract customers to our new businesses;

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

      -     attract, retain and motivate qualified personnel;

      -     respond to actions taken by our competitors;

      -     integrate acquired businesses, technologies, products and services;

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

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

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

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

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

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

         The domestic utility industry is currently the focus of regulatory
reform initiatives in virtually every state. These initiatives have resulted in
significant uncertainty for industry participants and raise concerns regarding
assets that would not be considered for recovery through rate payer charges.
This regulatory climate has caused many utilities to delay purchasing decisions
that involve significant capital commitments. As a result of these purchasing
decision delays, utilities have reduced their purchases of our products and
services. While we expect some states will act on these regulatory reform
initiatives in the near future, we cannot assure you that the current regulatory
uncertainty will be resolved in the short term. In addition, new regulatory
initiatives could have a material adverse


                                       29
<PAGE>

effect on our business. Moreover, in part as a result of the competitive
pressures in the utility industry arising from the regulatory reform process,
many utilities are pursuing merger and acquisition strategies. We have
experienced considerable delays in purchase decisions by utilities that have
become parties to merger or acquisition transactions. Typically, capital
expenditure purchase decisions are put on hold indefinitely when merger
negotiations begin. If this pattern of merger and acquisition activity among
utilities continues, our business may be materially and adversely affected. In
addition, if any of the utilities that account for a significant portion of our
revenues decide to significantly reduce their purchases of our products and
services, our financial condition and results of operations may be materially
and adversely affected.

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

      Our products and services are often used by our customers to address
critical business problems. Customers generally consider a wide range of issues
before making a decision to purchase our products and service. In addition, the
purchase of our products and services generally involves a significant
commitment of capital and other resources by a customer. This commitment often
requires significant technical review, assessment of competitive products and
approval at a number of management levels within a customer's organization. Our
sales cycle may vary based on the industry in which the potential customer
operates and is difficult to predict for any particular transaction. The length
and variability of our sales cycle makes it difficult to predict whether
particular sales will be concluded in any given quarter. While our customers are
evaluating our products and before they place an order with us, we may incur
substantial sales and marketing and research and development expenses to
customize our products to the customer's needs. We may also expend significant
management efforts, increase manufacturing capacity and order long-lead-time
components or materials prior to receiving an order. Even after this evaluation
process, a potential customer may not purchase our products. As a result, these
long sales cycles may cause us to incur significant expenses without ever
receiving revenue to offset those expenses.

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

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

      -     incur additional indebtedness;

      -     create liens or other encumbrances;

      -     issue or redeem securities;

      -     make dividend payments and investments;

      -     amend our charter documents;

      -     sell or otherwise dispose of our assets;

      -     liquidate or dissolve;

      -     merge or consolidate with other companies; or

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


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

      -     limited in how we conduct our business;

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

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

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


                                       30
<PAGE>

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

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

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

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

      -     effectively use and develop leading technologies;

      -     continue to develop our technical expertise;

      -     enhance our current products and services;

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

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

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

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

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


                                       31
<PAGE>

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

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

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

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

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

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

      There is potential for a continued downturn in general economic and market
conditions, which may be worsened by recent terrorist attacks in the United
States. Various segments of the economy in general, and of the energy industry
in particular, have experienced significant economic downturns characterized by
decreased product demand, price erosion, work slowdown, and layoffs. Recently,
concerns have increased throughout the technology industry regarding negative
growth forecasts for 2002. Moreover, there is increasing uncertainty in the
energy and technology markets attributed to many factors, including global
economic conditions and strong competitive forces. Our future results of
operations may experience substantial fluctuations from period to period as a
consequence of these factors, and such conditions and other factors affecting
capital spending may affect the timing of orders from major customers. Although
we have a diverse client base, we have targeted a number of vertical markets,
such as the manufacturing and distribution industries, which have been
significantly impacted by the recent economic downturn. A continued economic
downturn coupled with decline in our revenues could affect our ability to secure
additional financing or raise additional funds to support working capital
requirements and growth objectives, maintain existing financing arrangements, or
for other purposes. As a result, any economic downturns in general or in our
targeted


                                       32
<PAGE>

markets, particularly those affecting industrial and commercial users of natural
gas and electricity, would have a material adverse effect on our business,
operating results, cash flows or financial condition.

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

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

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

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

      OUR MANAGEMENT OF PRIVATE ENERGY PROGRAMS PRESENTS RISKS TO US

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

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

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

      -     annual preferred shareholder interest repurchase commitments;

      -     changes in the regulatory environment relating to these programs;

      -     reliance upon significant suppliers and customers by these programs;

      -     hazards of energy facilities; and

      -     changes in technology.

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

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

      We market and sell some of our products and services in international
markets. Our revenues from sales into international markets were approximately
4.8% of our consolidated revenues in fiscal 2000 and 2.6% in fiscal 2001. One
component of our strategy for future growth involves the expansion of our
products and services into new international markets and the expansion of our
marketing efforts in our current international markets. This expansion will
require significant management attention and financial resources to establish
additional offices, hire additional personnel, localize and market products and
services in foreign markets and develop relationships with international service
providers. However, we have only limited experience in international operations,
including developing localized versions of our products and services and in
developing relationships with international service


                                       33
<PAGE>

providers. We cannot assure you that we will be successful in expanding our
international operations, or that revenues from international operations will be
sufficient to offset these additional costs. If revenues from international
operations are not adequate to offset the additional expense from expanding
these international operations, our business could be materially and adversely
affected.

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

      -     fluctuations in currency exchange rates;

      -     potential adverse tax consequences;

      -     adverse changes in applicable laws and regulatory requirements;

      -     import and export restrictions;

      -     export controls relating to technology;

      -     tariffs and other trade barriers;

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

      -     the impact of local economic conditions and practices;

      -     difficulties in staffing and managing foreign operations;

      -     difficulties in complying with foreign regulatory and commercial
            requirements;

      -     increased costs associated with maintaining international marketing
            efforts;

      -     political and economic instability;

      -     reduced protection for intellectual property rights;

      -     cultural and language difficulties;

      -     the potential exchange and repatriation of foreign earnings; and

      -     localization and translation of products and services.

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

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

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

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

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

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

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


                                       34
<PAGE>

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

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

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

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

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

      -     potential disruptions of our ongoing businesses; and

      -     unexpected costs and unknown liabilities associated with the
            acquisitions.

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

      In addition, to finance any future acquisitions, it may be necessary for
us to incur additional indebtedness or raise additional funds through public or
private financings. This financing may not be available to us at all, or if
available may not be available on terms satisfactory to us or to those whose
consents are required for such financing. Available equity or debt financing
available may materially and adversely affect our business and operations and,
in the case of equity financings, may significantly dilute the percentage
ownership interests of our stockholders.

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

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

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

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

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


                                       35
<PAGE>

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

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

      In recent years, there has been a significant amount of litigation in the
United States involving patents and other intellectual property rights. In the
future, we may be a party to litigation to protect our intellectual property or
as a result of an alleged infringement of others' intellectual property. These
claims and any resulting lawsuit, if successful, could subject us to significant
liability for damages and invalidation of our proprietary rights. These
lawsuits, regardless of their success, would likely be time-consuming and
expensive to resolve and would divert management time and attention. Any
potential intellectual property litigation also could force us to do one or more
of the following:

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

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

      -     redesign the products and services that use the technology.

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

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

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

      WE FACE SOME RISKS THAT ARE INHERENT IN NATURAL GAS OPERATIONS

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


                                       36
<PAGE>

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.

      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, our potential
utility customers must comply with numerous laws and regulations. The
modification or adoption of future laws and regulations could adversely affect
our business and our ability to continually modify or alter our methods of
operations at reasonable costs. We cannot provide any assurances that we will be
able, for financial or other reasons, to comply with all applicable laws and
regulations. If we fail to comply with these laws and regulations, we could
become subject to substantial penalties which could materially and adversely
affect our business.

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

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

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

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

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

      As of March 1, 2002, our executive officers, directors and 10% or greater
stockholders beneficially owned, in the aggregate, approximately 54% of our
outstanding Common Stock, assuming they exercise or convert all stock options,
warrants convertible preferred stock and other rights exercisable 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


                                       37
<PAGE>

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 1, 2002, 6,077,764 shares of Common Stock were outstanding. On
the same date, options to purchase 1,681,361 shares of Common Stock were
outstanding, and shares that may be acquired upon exercise of these stock
options are eligible for sale on the public market from time to time subject to
vesting. Also, on that date, 7,000 shares of Series B Preferred Stock
convertible into 2,673,179 shares of Common Stock, and warrants and other rights
to purchase 986,620 shares of Common Stock, were outstanding. The resale of
virtually all shares underlying these warrants and other rights are covered by a
currently effective registration statement. The exercise or conversion of
outstanding options, warranties and other rights to purchase our Common Stock
will dilute the remaining ownership of other holders of our Common Stock. In
addition, the sale in the public market of a significant number of these shares
issuable upon the exercise of options, warrants and other rights, or the
perception that such sales could occur, could cause the price of the Common
Stock to decline.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


                                       38
<PAGE>

upon dissolution of stockholders whose preferential rights are superior to those
receiving the distribution.

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

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

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

      -     actual or anticipated variations in our results of operations;

      -     announcements of technological innovations;

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

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

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

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

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

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

      -     general economic, business and market conditions;

      -     additions or departures of key personnel;

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

      -     the gain or loss of significant customer orders.

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

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

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

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


                                       39
<PAGE>

dilute the interest of holders of our Common Stock.

      OUR COMMON STOCK MAY BE DELISTED FROM TRADING ON THE NASDAQ NATIONAL
      MARKET

      Our Common Stock is listed and trades on the Nasdaq National Market. Over
the past year, the bid price for our Common Stock on the Nasdaq National Market
has declined substantially. On February 14, 2002, we received a notice from
Nasdaq that our Common Stock had failed to maintain compliance with the $1.00
minimum bid price requirement and the $5 million public float requirement for
continued listing on the Nasdaq National Market. We have until May 15, 2002 to
regain compliance with these requirements, or our Common Stock will be subject
to delisting from the Nasdaq National Market. At that time, we can either appeal
the delisting determination apply to transfer the Common Stock listing to the
Nasdaq SmallCap Market. Since our ability to fulfill the continued listing
requirements of the Nasdaq National Market are driven in large part by market
forces outside of our control, we cannot provide any assurance that we will be
able to regain compliance with these requirements in order to maintain our
listing on the Nasdaq National Market. If we are not able to maintain our
listing on the Nasdaq National Market, trading activity could decline
significantly, which could cause the trading price of our Common Stock to
decline further.

ITEM 7. FINANCIAL STATEMENTS

      The information required by this Item is set forth on pages F-1 through
F-27 of this Report.

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

      None


                                       40
<PAGE>

                                    PART III

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

DIRECTORS AND EXECUTIVE OFFICERS

      Our executive officers and directors, their ages as of March 1, 2002, and
their positions with us are as follows:

<TABLE>
<CAPTION>
NAME                               AGE           POSITION(s)
----                               ---           -----------
<S>                                <C>           <C>
W. Phillip Marcum                  57            Chairman of the Board, President, Chief Executive
                                                   Officer and Director
A. Bradley Gabbard                 47            Executive Vice President, Chief Financial Officer,
                                                   Treasurer and Director
Gary J. Zuiderveen                 42            Controller, Principal Accounting Officer and
                                                   Secretary
Basil M. Briggs(1)(2)              66            Director
Kevin P. Collins(1)(2)             51            Director
Anthony D. Pell(1)(2)              63            Director
</TABLE>

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

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

      A. BRADLEY GABBARD is a founder and has served as an executive officer and
a director since our incorporation in April 1991. He has served as our Executive
Vice President since July 1993 and as our Chief Financial Officer and Treasurer
since August 1996 and from April 1991 through July 1993. He also served as our
Secretary from June 2000 until April 2001 and as our Vice President and
Secretary from April 1991 through July 1993. Mr. Gabbard also serves as the
Chief Financial Officer of each of our subsidiaries.

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

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


                                       41
<PAGE>

      KEVIN P. COLLINS has served as a director since March 2000. Mr. Collins
has been a Managing Member of The Old Hill Company LLC, Westport, Connecticut,
which provides corporate financial and advisory services, since 1997. From 1992
to 1997, he served as a principal of JHP Enterprises, Ltd., and from 1985 to
1992, he served as Senior Vice President of DG Investment Bank, Ltd., both of
which were engaged in providing corporate finance and advisory services. Mr.
Collins has served as a director of Key since March 1996; a director of The Penn
Traffic Company, Syracuse, New York, a food retailer, since June 1999; and a
director of London Fog Industries, Inc, Eldesburg, Maryland, an outerwear
designer and distributor, since 1999. Mr. Collins also serves as the director of
one privately-held company, Avanti Petroleum, Inc., a convenience chain store.

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

      Our Board of Directors currently consists of five members divided into
three classes, designated Class I, Class II and Class III, with members of each
class holding office for staggered three-year terms. The Class I Directors,
whose terms expire at the 2004 Annual Meeting of Stockholders, are Messrs.
Marcum and Briggs. The Class II Director, whose term expires at the 2002 Annual
Meeting of Stockholders, is Mr. Gabbard. The Class III Directors, whose terms
expire at the 2003 Annual Meeting of Stockholders, are Messrs. Collins and Pell.
During March 2001, our Board of Directors decided to reduce the size of the
Board from nine members to five members, effective as of the 2001 Annual Meeting
of Stockholders. To accomplish that goal, Robert Lloyd did not seek re-election
to our Board when his term expired, and Stephen E. McGregor, Ronald G. McKee and
Albert F. Thomasson resigned their positions on the Board, thereby reducing the
size of the Board of Directors to five.

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

OTHER KEY EMPLOYEES

      Information concerning other key employees is set forth below:

      WOOD A. BREAZEALE, JR., 72, has served as the President, Chief Operating
Officer and a director of Southern Flow since May 1993. Mr. Breazeale was the
President and Chief Operating Officer of Southern Flow Companies, a division of
Homco International, Inc., and a Vice President of Homco International, Inc.,
from 1979 until we purchased the assets of the Southern Flow Companies division
of Weatherford in April 1993. Mr. Breazeale founded Southern Flow Companies in
1953.

      SIDNEY HINTON, 39, has served as the President and Chief Executive Officer
and a director of PowerSecure since its incorporation in September 2000. He also
served as the President and Chief Executive Officer of PowerSpring from May 2000
until January 2001. From February 2000 until May 2000, Mr. Hinton was an
Executive-in-Residence with Carousel Capital, Charlotte, North Carolina, a
private equity firm. From February 1999 until December 1999, he was the Vice
President of Market Planning and Research for Carolina Power & Light (now known
as Progress Energy), Raleigh, North Carolina. From August 1997 until February
1998, Mr. Hinton was the President and Chief Executive Officer of IllumElex
Lighting Company, Raleigh, North Carolina, a national lighting company. From
1982 until 1997, Mr. Hinton was employed in several positions with Southern
Company and Georgia Power Company, Atlanta, Georgia, during which time he
founded Southern Energy Solutions.

      RONALD W. MCKEE, 53, has served as the President and Chief Operating
Officer of Metretek Florida since September 1995. Mr. McKee served on our Board
of Directors from August 1997 until June 2001. He had previously served as the
Vice President of Marketing of Metretek Florida since joining Metretek Florida
in 1989. From 1970 to


                                       42
<PAGE>

1989, Mr. McKee held various sales and marketing management positions with
Rockwell International, Pittsburgh, Pennsylvania and became the general sales
and marketing manager for Rockwell International's plug valve business unit in
1987.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

      Section 16(a) of the Exchange Act ("Section 16(a)") requires our directors
and executive officers, and beneficial owners of more than 10% of our
outstanding Common Stock, to file initial reports of ownership on Form 3 and
reports of changes in ownership on Form 4 or Form 5 with the SEC, and to furnish
us with copies of all such reports that they file. Based solely upon our review
of the copies of such forms we have received, and written representations from
certain directors and executive officers that no Form 5s were required to be
filed, we believe that, during fiscal 2001, all reports required by Section
16(a) to be filed by such persons were timely filed.

ITEM 10. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION

      The following table sets forth the total compensation that we paid or
accrued for services rendered to us in all capacities during the last three
fiscal years by our Chief Executive Officer and by our other executive officers
(the "Named Executive Officers") whose total salary and bonus exceeded $100,000
in fiscal 2001:

                           SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                             LONG TERM
                                                                                            COMPENSATION
                                                                                            ------------
                                                                                               AWARDS
                                                                                             ----------
                                                             ANNUAL COMPENSATION(1)          SECURITIES
                                                          ---------------------------        UNDERLYING           ALL OTHER
NAME AND PRINCIPAL POSITION                      YEAR      SALARY              BONUS          OPTIONS(2)       COMPENSATION(3)
---------------------------                      ----      ------              -----          ----------       ---------------
<S>                                              <C>      <C>                <C>                <C>               <C>
W. Phillip Marcum ....................           2001     $295,000           $      0           200,000           $6,188
         President and Chief                     2000      295,000            150,000                 0            6,438
         Executive Officer                       1999      210,000                  0                              6,400

A. Bradley Gabbard ...................           2001      175,000           $      0           200,000            6,060
         Executive Vice                          2000      175,000             75,000                 0            6,170
         President and Chief                     1999      152,500                  0            12,500            5,826
         Financial Officer

Ronald W. McKee (4) ..................           2001      136,500           $      0            35,000            4,426
         President of Metretek                   2000      125,000             12,500            10,000            4,176
         Florida                                 1999      121,010                  0            12,500            4,318
</TABLE>

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

(2)   All options, other than those granted to Mr. McKee in fiscal 2001, vest in
      three equal annual installments: one-third on date of grant, one-third on
      the first anniversary of the grant and one-third on second anniversary of
      the grant. The 35,000 options granted to Mr. McKee in fiscal 2001 are
      fully vested.

(3)   Includes amounts paid or accrued on behalf of the Named Executive Officers
      in fiscal 2001 for (i) matching contributions under our 401(k) plan of
      $5,250 for Mr. Marcum, $5,139 for Mr. Gabbard, and $3,542 for Mr. McKee;
      (ii) premiums for group term life insurance of $738 for Mr. Marcum, $721
      for Mr. Gabbard, and $584 for Mr. McKee; and (iii) premiums for long-term
      disability insurance of $200 for Mr. Marcum, $200 for Mr. Gabbard, and
      $300 for Mr. McKee.

(4)   Mr. McKee resigned from our Board on June 11, 2001, but remains the
      President of Metretek Florida.


                                       43
<PAGE>

EMPLOYMENT AGREEMENTS, CHANGE IN CONTROL ARRANGEMENTS AND OTHER COMPENSATION
ARRANGEMENTS

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

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

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

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

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

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

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

STOCK OPTION GRANTS

      The following table sets forth certain information with respect to stock
options granted during fiscal 2001 to the Named Executive Officers. We did not
grant any stock appreciation rights, alone or in tandem with stock options, in
fiscal 2001.


                                       44
<PAGE>

                        OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
                                                          INDIVIDUAL GRANTS
                                            ---------------------------------------------------------------------------
                                                                       % OF TOTAL
                                                                         OPTIONS
                                            NUMBER OF SECURITIES       GRANTED TO
                                                 UNDERLYING           EMPLOYEES IN         EXERCISE         EXPIRATION
NAME                                          OPTIONS GRANTED         FISCAL YEAR(1)       PRICE(2)           DATE(3)
b                                             ---------------         --------------       --------           -------
<S>                                         <C>                       <C>                 <C>             <C>
W. Phillip Marcum ..................              200,000(4)             25.8%               $1.50        June 19, 2011

A. Bradley Gabbard .................              200,000(4)             25.8%                1.50        June 19, 2011

Ronald W. McKee ....................               35,000(5)              4.5%                1.50        June 11, 2006
</TABLE>

----------
(1)   Based upon options to purchase an aggregate of 775,000 shares of Common
      Stock granted to employees during fiscal 2001.

(2)   The exercise price of these options is 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 Nasdaq National Market.

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

(4)   These options are incentive stock options granted under our 1998 Stock
      Incentive Plan, have ten year terms and vest in three equal installments:
      one-third upon grant, one-third after one year and one-third after two
      years.

(5)   These options are non-qualified stock options granted under our 1998 Stock
      Incentive Plan, have five year terms and are fully vested as of December
      31, 2001.

STOCK OPTION EXERCISES AND VALUES

      The following table sets forth information with respect to stock options
exercised by the Named Executive Officers during fiscal 2001 and stock options
held by the Named Executive Officers on December 31, 2001. The Named Executive
Officers did not exercise any stock options during fiscal 2001.

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


<TABLE>
<CAPTION>
                                                       NUMBER OF SECURITIES                VALUE OF UNEXERCISED
                                                 UNDERLYING UNEXERCISED OPTIONS           IN-THE-MONEY OPTIONS AT
                                                        AT FISCAL YEAR-END                   FISCAL YEAR-END(1)
                                                 -----------------------------        -----------------------------
      NAME                                        EXERCISABLE    UNEXERCISABLE        EXERCISABLE     UNEXERCISABLE
                                                  -----------    -------------        -----------     -------------
<S>                                               <C>            <C>                  <C>             <C>
      W. Phillip Marcum ............               186,667          133,333               $0               $0

      A. Bradley Gabbard ...........               116,167          133,333                0                0


      Ronald W. McKee ..............                79,167            3,333                0                0

</TABLE>

----------
(1)   For purposes of this table, the "Value of Unexercised In-the-Money
      Options" is calculated based upon the difference between $0.61, the
      closing sale price of the Common Stock on December 31,


                                       45
<PAGE>

      2001, as reported on the Nasdaq National Market, and the option exercise
      price. An option is "in-the-money" if the fair market value of the
      underlying shares of Common Stock exceeds the exercise price of the
      option. Because the exercise price of all options in this table exceeded
      $0.61, none of the options were "in-the-money" on December 31, 2001.

DIRECTOR COMPENSATION

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

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

      On March 8, 2001, options to purchase 35,000 shares of Common Stock were
granted to each of Messrs. Lloyd, McGregor, Thomasson and McKee, the four
directors who voluntarily, in connection with the unanimous decision of the
Board to reduce its size, either resigned from or did not seek re-election to
the Board of Directors at the 2001 annual meeting of stockholders. These options
were granted under the 1998 Plan, are non-qualified stock options and are fully
vested and exercisable at an exercise price of $1.50 per share until June 11,
2006.

      On June 19, 2001, options to purchase 100,000 shares of Common Stock were
granted under the 1998 Plan to each of the three continuing Non-Employee
Directors: Messrs. Briggs, Collins and Pell. These options are non-qualified
stock options, vest in three equal annual increments commencing on the date of
grant and are exercisable at an exercise price of $1.50 per share for 10 years
after the date of grant.

      As of December 31, 2001, options to purchase 65,000 shares of Common Stock
were outstanding to Non-Employee Directors under the Directors' Plan and options
to purchase 458,841 shares of Common Stock were outstanding to Non-Employee
Directors under the 1998 Plan, at exercise prices ranging from $1.50 to $17.38
per share.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      The following table sets forth information regarding the beneficial
ownership of our Common Stock as of March 1, 2002 (except as indicated 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.


                                       46
<PAGE>

      The share ownership information in the following table is based upon
information supplied to us by the persons named in the table and upon public
filings with the SEC. Beneficial ownership is determined in accordance with the
rules of the SEC and generally includes either voting or investment power with
respect to securities. Unless otherwise indicated below, to our knowledge, each
person named in the table below has sole voting and investment power with
respect to the shares of Common Stock beneficially owned by such person, subject
to applicable community property laws. In computing the "Number of Shares" 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 currently exercisable or exercisable within 60
days of March 1, 2002. These underlying shares, however, are not included in
computing the "Percent of Class" of any other beneficial owner. The "Percent of
Class" is based upon 6,077,764 shares of Common Stock outstanding on March 1,
2002. The business address for all of our directors is 303 Seventeenth Street,
Suite 660, Denver, Colorado 80203.

<TABLE>
<CAPTION>
                                                                           SHARES BENEFICIALLY OWNED
                                                                   ---------------------------------------
NAME OF BENEFICIAL OWNER                                           NUMBER OF SHARES       PERCENT OF CLASS
                                                                   ----------------       ----------------
<S>                                                                <C>                    <C>
DDJ Capital Management, LLC(1) ..........................             2,060,836                  27.3
     141 Linden Street, Suite S-4
     Wellesley, Massachusetts 02482
Special Situations Funds(2) .............................               969,260                  13.8
     153 East 53rd Street
     New York, New York 10022
State Street Bank and Trust Company, as trustee(3) ......               686,944                  10.5
     225 Franklin Street
     Boston, Massachusetts 02110
Credit Suisse Asset Management, LLC(4) ..................               684,630                  10.4
     153 East 53rd Street, 57th Floor
     New York, New York, 10022
Kenneth B. Funsten(5) ...................................               669,985                  10.6
     121 Outrigger Mall
     Marina del Ray, California 90292
W. Phillip Marcum(6) ....................................               338,301                   5.4
FamCo Value Income Partners, L.P.(7) ....................               338,280                   5.4
     121 Outrigger Mall
     Marina del Ray, California 90292
American Meter Company(8) ...............................               325,054                   5.3
     300 Welsh Road
     Horsham, Pennsylvania 19044
A. Bradley Gabbard(9) ...................................               214,949                   3.9
Anthony D. Pell(10) .....................................                76,698                   1.3
Basil M. Briggs(11) .....................................                44,472                   0.7
Kevin P. Collins(12) ....................................                43,999                   0.7
All directors and executive officers
     as a group(6 persons)(13) ..........................               743,884                  11.4
</TABLE>

----------

(1)   Information based, in part, on Schedule 13G filed with the SEC on February
      14, 2002 by State Street Bank and Trust Company, as trustee for General
      Motors Employees Global Group Pension Trust (the "GM Trust") and General
      Motors Investment Management Corporation ("GMIMCO"), indicating beneficial
      ownership as of December 31, 2001. Information also based, in part, on
      Amendment No. 4 to Schedule 13D filed with the SEC on December 27, 2000,
      by DDJ Capital Management, LLC ("DDJ"), B III-A Capital Partners, L.P. ("B
      III-A Capital Partners") and GP III-A, LLC ("GP III-A"), indicating
      beneficial ownership as of December 9, 2000. The shares of Common Stock
      are owned by B III-A Capital Partners (343,475 shares), the DDJ Canadian
      High Yield Fund (1,030,417 shares) and the GM Trust (686,944 shares). GP
      III-A is the general partner of, and DDJ is the investment manager for, B
      III-A Capital Partners. DDJ is the investment advisor to the DDJ Canadian
      High Yield Fund. DDJ and GMIMCO are investment managers for the GM Trust.
      Includes 300,000 shares of Common Stock that may be acquired upon the
      exercise of currently exercisable warrants, of which warrants to purchase
      50,000 shares are owned by B III-A Capital Partners, warrants to purchase
      150,000 shares are owned by DDJ Canadian High Yield Fund, and warrants to
      purchase 100,000 shares are owned by the GM Trust. Also includes 1,160,836


                                       47
<PAGE>

      shares of Common Stock that may be acquired upon the conversion of 3,000
      shares of Series B Preferred Stock, of which 500 shares of Series B
      Preferred Stock convertible into 193,475 shares of Common Stock are owned
      by B III-A, 1,500 shares of Series B Preferred Stock convertible into
      580,417 shares of Common Stock are owned by DDJ Canadian High Yield Fund,
      and 1,000 shares of Series B Preferred Stock convertible into 386,944
      shares of Common Stock are owned by the GM Trust.

(2)   Information based, in part, upon Schedule 13G filed with the SEC on
      January 10, 2001 by Special Situations Fund III, L.P., Special Situations
      Cayman Fund, L.P., Special Situations Private Equity Fund, L.P., Special
      Situations Technology Fund, L.P., MGP Advisors Limited Partnership ("MGP
      Advisors"), AWM Investment Company, Inc. ("AWM Investment"), MG Advisors,
      L.L.C. ("MG Advisors"), SST Advisors, L.L.C. ("SST Advisors"), Austin W.
      Marxe and David M. Greenhouse, indicating beneficial ownership as of
      December 31, 2000. MGP Advisors is the general partner of and the
      investment advisor to the Special Situations Fund III. AWM Investment is
      the general partner of MGP Advisors and the general partner of and
      investment adviser to the Special Situations Cayman Fund. MG Advisers is
      the general partner of and the investment advisor to the Special
      Situations Private Equity Fund. SST Advisors is the general partner of the
      Special Situations Technology Fund. Austin W. Marxe and David M.
      Greenhouse serve as officers, directors and members or principal
      shareholders of MG Advisors, MGP Advisors, AWM Investment and SST
      Advisors. The shares of Common Stock are owned by Special Situations Fund
      III (399,820 shares), Special Situations Private Equity Fund (242,315
      shares), Special Situations Technology Fund (193,852 shares) and Special
      Situations Cayman Fund (133,273 shares). Includes 200,000 shares of Common
      Stock that may be acquired upon the exercise of currently exercisable
      warrants, of which warrants to purchase 82,500 shares are owned by Special
      Situations Fund III, warrants to purchase 50,000 shares are owned by
      Special Situations Private Equity Fund, warrants to purchase 40,000 shares
      are owned by Special Situations Technology Fund, and warrants to purchase
      27,500 shares are owned by Special Situations Cayman Fund. Also includes
      769,260 shares of Common Stock that may be acquired upon the conversion of
      2,000 shares of Series B Preferred Stock, of which 825 shares of Series B
      Preferred Stock convertible into 317,320 shares of Common Stock are owned
      by Special Situations Fund III, 500 shares of Series B Preferred Stock
      convertible into 192,315 shares of Common Stock are owned by Special
      Situations Private Equity Fund, 400 shares of Series B Preferred Stock
      convertible into 153,852 shares of Common Stock are owned by Special
      Situations Technology Fund, and 275 shares of Series B Preferred Stock
      convertible into 105,773 shares of Common Stock are owned by Special
      Situations Cayman Fund.

(3)   Information based, in part, upon Schedule 13G filed with the SEC on
      February 14, 2002 by State Street Bank and Trust Company, as trustee for
      the GM Trust, and GMIMCO. State Street Bank and Trust Company is acting as
      trustee for the GM Trust with respect to these shares, and DDJ and GMIMCO
      are investment managers for the GM Trust with respect to these shares. See
      note (1) above. Includes 100,000 shares of Common Stock that may be
      acquired upon the exercise of currently exercisable warrants. Also
      includes 386,944 shares of Common Stock that may be acquired upon the
      conversion of 1,000 shares of Series B Preferred Stock. In this table, the
      shares beneficially owned by State Street Bank and Trust Company, as
      trustee for the GM Trust, are also included in the shares beneficially
      owned by DDJ.

(4)   Credit Suisse Asset Management, LLC is the investment advisor for SEI
      Institutional Management Trust, Bost & Co., Warburg Pincus High Yield
      Fund, The Common Fund, CSAM Investment Trust - U.S. HYLD Series and SEI
      Global - High Yield Fixed Income Fund. The shares of Common Stock are
      owned by SEI Institutional Management Trust (205,388 shares), Bost & Co.
      (136,926 shares), Warburg Pincus High Yield Fund (102,695 shares), The
      Common Fund (102,695 shares), CSAM Investment Trust - U.S. HYLD Series
      (102,695 shares) and SEI Global - High Yield Fixed Income Fund (34,231
      shares). Includes 100,000 shares of Common Stock that may be acquired upon
      the exercise of currently exercisable warrants, of which warrants to
      purchase 30,000 shares are owned by SEI Institutional Management Trust,
      warrants to purchase 20,000 shares are owned by Bost & Co., warrants to
      purchase 15,000 shares are owned by Warburg Pincus High Yield Fund,
      warrants to purchase 15,000 shares owned by The Common Fund, warrants to
      purchase 15,000 shares are owned by CSAM Investment Trust - U.S. HYLD
      Series, and warrants to purchase 5,000 shares are owned by SEI Global -
      High Yield Fixed Income Fund. Also includes 384,630 shares of Common Stock
      that may be acquired upon the conversion of 1,000 shares of Series B
      Preferred Stock, of which 300 shares of Series B Preferred Stock
      convertible into 115,388 shares of Common Stock are owned by SEI
      Institutional Management Trust, 200 shares of Series B Preferred Stock
      convertible into 76,926 shares of Common Stock are owned by Bost & Co.,
      150 shares of Series B Preferred Stock convertible into 57,695 shares of
      Common Stock are owned by Warburg Pincus High Yield Fund, 150 shares of
      Series B Preferred Stock convertible into 57,965 shares of Common Stock
      are owned by The Common Fund, 150 shares of Series B Preferred Stock
      convertible into 57,965 shares of Common Stock are


                                       48
<PAGE>

      owned by CSAM Investment Trust - U.S. HYLD Series, and 50 shares of Series
      B Preferred Stock convertible into 19,231 shares of Common Stock are owned
      by SEI Global - High Yield Fixed Income Fund.

(5)   Information based, in part, upon Amendment No. 1 to Schedule 13G and upon
      Form 3 filed with the SEC on December 29, 2000 by Kenneth B. Funsten,
      indicating beneficial ownership as of December 9, 2000, and Amendment No.
      1 to Schedule 13G filed with the SEC on February 21, 2002 by FamCo Value
      Income Partners, L.P. ("FamCo VIP"), indicating beneficial ownership as of
      December 31, 2001. Kenneth B. Funsten is the president and the portfolio
      manager of Funsten Asset Management Company. Funsten Asset Management
      Company is the general partner of FamCo VIP. Mr. Funsten is a director of
      FamCo Offshore, Ltd. Mr. Funsten holds sole voting and investment power
      over the securities owned by FamCo VIP and FamCo Offshore. The shares of
      Common Stock are owned by Mr. Funsten (240,026 shares), FamCo VIP (338,280
      shares) and FamCo Offshore (91,679 shares). Includes 50,000 shares of
      Common Stock that may be acquired upon currently exercisable warrants, of
      which warrants to purchase 18,100 shares are owned by Mr. Funsten,
      warrants to purchase 27,000 shares are owned by FamCo VIP, and warrants to
      purchase 4,900 shares are owned by FamCo Offshore. Also includes 192,315
      shares of Common Stock that may be acquired upon the conversion of 500
      shares of Series B Preferred Stock, of which 181 shares of Series B
      Preferred Stock convertible into 69,618 shares of Common Stock are owned
      by Mr. Funsten, 270 shares of Series B Preferred Stock convertible into
      103,850 shares of Common Stock are owned by FamCo VIP, and 49 shares of
      Series B Preferred Stock convertible into 18,847 shares of Common Stock
      are owned by FamCo Offshore. Does not include 4,100 shares owned by an
      employee of Funsten Asset Management Company which cannot be sold or
      further added to without permission by Mr. Funsten by virtue of
      restrictions that are placed on securities transactions by employees of
      Funsten Asset Management Company, because Mr. Funsten has no investment or
      voting authority over the shares of the employee and Mr. Funsten expressly
      disclaims beneficial ownership of these shares.

(6)   Includes 186,667 shares that may be acquired by Mr. Marcum upon the
      exercise of currently exercisable stock options.

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

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

(9)   Includes 2,187 shares owned by Mr. Gabbard's minor son and 116,167 shares
      that may be acquired by Mr. Gabbard upon the exercise of currently
      exercisable stock options.

(10)  Includes 2,937 shares held by Mr. Pell's wife. Also includes 39,249 shares
      that may be acquired by Mr. Pell upon the exercise of currently
      exercisable stock options.

(11)  Includes 4,500 shares owned by Mr. Briggs' wife. Also includes 39,972
      shares that may be acquired by Mr. Briggs or his wife upon the exercise of
      currently exercisable stock options.

(12)  Includes 41,749 shares that may be acquired by Mr. Collins upon the
      exercise of currently exercisable stock options.

(13)  Includes 441,471 shares that may be acquired upon the exercise of
      currently exercisable stock options. See note (6) and notes (9) through
      (12).


                                       49
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a)   EXHIBITS

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

            (2.1)   Agreement and Plan of Merger, dated as of March 16, 2000, by
                    and between TotalPlan, Inc. and PowerSpring, Inc.
                    (Incorporated by reference to Exhibit 2.2 to Metretek's
                    Annual Report on Form 10-KSB for the fiscal year ended
                    December 31, 1999.)

            (2.2)   Agreement and Plan of Merger, dated as of March 17, 2000, by
                    and among PowerSpring, Inc., MERC Acquisition Corp.,
                    Mercator Energy Incorporated and John A. Harpole.
                    (Incorporated by reference to Exhibit 2.3 to Metretek's
                    Annual Report on Form 10-KSB for the fiscal year ended
                    December 31, 1999.)

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

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

      (3)   ARTICLES OF INCORPORATION AND BY-LAWS:

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

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

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

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

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

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

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


                                       50
<PAGE>

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

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

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

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

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

            (4.10)  Form of Common Stock Purchase Warrant issued by Metretek
                    Technologies, Inc. to John A. Harpole. (Incorporated by
                    reference to Exhibit 4.13 of Metretek's Registration
                    Statement on Form S-3, Registration No. 333-96369).

            (4.11)  Form of Common Stock Purchase Warrant issued by Metretek
                    Technologies, Inc. to National Bank of Canada. (Incorporated
                    by reference to Exhibit 4.14 of Metretek's Registration
                    Statement on Form S-3, Registration No. 333-96369).

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

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

      (10)  MATERIAL CONTRACTS:

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

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

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

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


                                       51
<PAGE>

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

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

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

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

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

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

            (10.11) Amendment No. 4 to Employment Agreement, dated as of January
                    1, 2002, by and between Metretek Technologies, Inc. and A.
                    Bradley Gabbard.*

            (10.12) Loan and Security Agreement, dated April 14, 1998, by and
                    between National Bank of Canada, Metretek Technologies,
                    Inc., Metretek, Incorporated and Southern Flow Companies,
                    Inc. (Incorporated by reference to Exhibit 10.1 to
                    Metretek's Quarterly Report on Form 10-QSB for the quarterly
                    period ended March 31, 1998.)

            (10.13) Amendment No. 1 to Loan and Security Agreement, dated as of
                    November 10, 1998, by and among National Bank of Canada,
                    Metretek Technologies, Inc., Metretek, Incorporated and
                    Southern Flow Companies, Inc. (Incorporated by reference to
                    Exhibit 10.12 to Metretek's Annual Report on Form 10-KSB for
                    the year ended December 31, 1998.)

            (10.14) Second Amendment to Loan and Security Agreement and Loan
                    Documents, dated as of September 13, 1999, by and among
                    National Bank of Canada, Metretek Technologies, Inc.,
                    Metretek, Incorporated and Southern Flow Companies, Inc.
                    (Incorporated by reference to Exhibit 10.1 to Metretek's
                    Current Report on Form 8-K filed September 14, 1999.)

            (10.15) Third Amendment to Loan and Security Agreement and Loan
                    Documents, dated as of December 9, 1999, by and among
                    National Bank of Canada, Metretek Technologies, Inc.,
                    Metretek, Incorporated and Southern Flow Companies, Inc.
                    (Incorporated by reference to Exhibit 10.1 to Metretek's
                    Current Report on Form 8-K filed December 22, 1999.)

            (10.16) Fourth Amendment to Loan and Security Agreement and Loan
                    Documents, dated as of March 22, 2000, by and among National
                    Bank of Canada, Metretek Technologies, Inc., Metretek,
                    Incorporated and Southern Flow Companies, Inc. (Incorporated
                    by reference to Exhibit 10.15 to Metretek's Annual Report on
                    Form 10-KSB for the fiscal year ended December 31, 2000.)


                                       52
<PAGE>

            (10.17) Fifth Amendment to Loan and Security Agreement and Loan
                    Documents, dated as of March 1, 2001, by and among National
                    Bank of Canada, Metretek Technologies, Inc., Metretek,
                    Incorporated and Southern Flow Companies, Inc. (Incorporated
                    by reference to Exhibit 10.16 to Metretek's Annual Report on
                    Form 10-KSB for the fiscal year ended December 31, 2000.)

            (10.18) Sixth Amendment to Loan and Security Agreement and Loan
                    Documents, dated as of May 31, 2001, by and among National
                    Bank of Canada, Metretek Technologies, Inc., Southern Flow
                    Companies, Inc., Metretek, Incorporated and Sigma VI, Inc.
                    (Incorporated by reference to Exhibit 10.1 to Metretek's
                    Current Report on Form 8-K filed June 11, 2001.)

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

            (10.20) Employment Agreement, dated as of March 17, 2000, between
                    PowerSpring, Inc. and John A. Harpole. (Incorporated by
                    reference to Exhibit 10.17 to Metretek's Annual Report on
                    Form 10-KSB for the year ended December 31, 1999.)*

            (10.21) Stockholders Agreement, dated as of March 17, 2000, among
                    Metretek Technologies, Inc., PowerSpring, Inc. and John A.
                    Harpole. (Incorporated by reference to Exhibit 10.18 to
                    Metretek's Annual Report on Form 10-KSB for the year ended
                    December 31, 1999.)

            (10.22) Non-Negotiable Promissory Note, dated March 17, 2000, made
                    by PowerSpring, Inc. to John A. Harpole. (Incorporated by
                    reference to Exhibit 10.19 to Metretek's Annual Report on
                    Form 10-KSB for the year ended December 31, 1999.)

            (10.23) Security Agreement, dated March 17, 2000, between
                    PowerSpring, Inc. and John A. Harpole. (Incorporated by
                    reference to Exhibit 10.20 to Metretek's Annual Report on
                    Form 10-KSB for the year ended December 31, 1999.)

            (10.24) 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.)

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

            (10.26) Employment and Non-Competition Agreement, dated as of May 8,
                    2000, between PowerSpring, Inc. and Sidney Hinton.
                    (Incorporated by reference to Exhibit 10.24 to Metretek's
                    Annual Report on Form 10-KSB for the fiscal year ended
                    December 31, 2000.)*

            (10.27) 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.)*

            (10.28) 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.)*

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


                                       53
<PAGE>

            (10.30) 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.)

            (10.31) 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.)

            (10.32) 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.)

      (21)  SUBSIDIARIES OF THE SMALL BUSINESS ISSUER:

            (21.1)  Subsidiaries of Metretek Technologies, Inc.

      (23)  CONSENTS OF EXPERTS:

            (23.1)  Consent of Deloitte & Touche LLP

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

(b)   REPORTS ON FORM 8-K

      During the quarter ended December 31, 2001, Metretek Technologies, Inc.
filed the following Current Reports on Form 8-K with the Securities and Exchange
Commission:

<TABLE>
<CAPTION>
      Filing Date                Item No.               Description
      -----------                --------               -----------
<S>                              <C>                    <C>
      October 5, 2001             5,7                   New Credit Facility

      December 3, 2001            5,7                   Amended and Restated Rights Agreement
</TABLE>


                                       54
<PAGE>

                                   SIGNATURES

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

                                           METRETEK TECHNOLOGIES, INC.


                                           By: /s/ W. Phillip Marcum
                                               --------------------------------
                                               W. Phillip Marcum, President and
                                               Chief Executive Officer
                                               Date: March 27, 2002

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

<TABLE>
<CAPTION>
Signature                        Title                                             Date
---------                        -----                                             ----
<S>                              <C>                                               <C>
/s/ W. Phillip Marcum            Chairman of the Board, President,                 March 27, 2002
------------------------          Chief Executive Officer and Director
W. Phillip Marcum                 (Principal executive officer)


/s/ A. Bradley Gabbard           Executive Vice President, Chief Financial         March 27, 2002
------------------------          Officer, Treasurer, Secretary and Director
A. Bradley Gabbard                (Principal financial officer)

/s/ Gary J. Zuiderveen           Controller, Principal Accounting                  March 27, 2002
------------------------          Officer and Secretary
Gary J. Zuiderveen                (Principal accounting officer)

/s/ Basil M. Briggs              Director                                          March 27, 2002
------------------------
Basil M. Briggs

/s/ Anthony D. Pell              Director                                          March 27, 2002
------------------------
Anthony D. Pell

/s/ Kevin P. Collins             Director                                          March 27, 2002
------------------------
Kevin P. Collins
</TABLE>


                                      S-1
<PAGE>


                          INDEX TO FINANCIAL STATEMENTS

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

Independent Auditors' Report                                              F-2

Consolidated Balance Sheets as of December 31, 2001 and 2000              F-3

Consolidated Statements of Operations for the Years Ended
   December 31, 2001 and 2000                                             F-5

Consolidated Statements of Stockholders' Equity for the Years
   Ended December 31, 2001 and 2000                                       F-6

Consolidated Statements of Cash Flows for the Years Ended
   December 31, 2001 and 2000                                             F-7

Notes to Consolidated Financial Statements                                F-8
</TABLE>


                                       F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT

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

We have audited the accompanying consolidated balance sheets of Metretek
Technologies, Inc. and subsidiaries (the "Company") as of December 31, 2001 and
2000, and the related consolidated statements of operations, stockholders'
equity, and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Metretek Technologies, Inc. and
subsidiaries at December 31, 2001 and 2000, and the results of their operations
and their cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.


/s/ Deloitte & Touche LLP
-------------------------
Deloitte & Touche LLP

Denver, Colorado
March 13, 2002


                                       F-2
<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                DECEMBER 31,
                                                                        ----------------------------
ASSETS                                                                      2001            2000
<S>                                                                     <C>              <C>
CURRENT ASSETS:
  Cash and cash equivalents                                             $   696,076      $   468,813
  Trade receivables, net of allowance for doubtful accounts
    of $169,632 and $548,153, respectively                                4,980,419        4,476,841
  Other receivables                                                          14,929            7,960
  Inventories                                                             3,135,297        3,226,995
  Prepaid expenses and other current assets                                 559,562          768,474
                                                                        -----------      -----------

      Total current assets                                                9,386,283        8,949,083
                                                                        -----------      -----------

PROPERTY, PLANT AND EQUIPMENT:
  Equipment                                                               4,150,686        4,391,990
  Vehicles                                                                   50,227           49,185
  Furniture and fixtures                                                    561,664          609,472
  Land, building and improvements                                           736,388          881,859
                                                                        -----------      -----------
      Total property, plant and equipment, at cost                        5,498,965        5,932,506
  Less accumulated depreciation                                           3,318,054        2,862,990
                                                                        -----------      -----------

      Property, plant and equipment, net                                  2,180,911        3,069,516
                                                                        -----------      -----------

OTHER ASSETS:
  Customer list, net of accumulated amortization of $3,846,428 and
    $3,401,183, respectively                                              5,046,459        5,491,704
  Goodwill, net of accumulated amortization
    of $936,946 and $706,871, respectively                                2,361,472        2,344,711
  Patents and capitalized software development, net of accumulated
   amortization of $818,065 and $691,406, respectively                      489,860          117,650
  Other assets (Note 7)                                                     691,042          823,227
                                                                        -----------      -----------

      Total other assets                                                  8,588,833        8,777,292
                                                                        -----------      -----------

TOTAL                                                                   $20,156,027      $20,795,891
                                                                        ===========      ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       F-3
<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                               DECEMBER 31,
                                                                                    -------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY                                                    2001               2000
<S>                                                                                 <C>                <C>
CURRENT LIABILITIES:
  Accounts payable                                                                  $  1,405,632       $    780,173
  Accrued and other liabilities                                                        1,962,617          1,278,867
  Notes payable                                                                        2,479,172          2,419,874
  Deposits and capital lease obligations                                                   1,896            207,058
                                                                                    ------------       ------------

      Total current liabilities                                                        5,849,317          4,685,972
                                                                                    ------------       ------------

LONG-TERM NOTES PAYABLE (NOTE 6)                                                       1,268,024          1,929,759
                                                                                    ------------       ------------

COMMITMENTS AND CONTINGENCIES (NOTE 7)

REDEEMABLE PREFERRED STOCK - SERIES B,
  $.01 PAR VALUE; 1,000,000 SHARES AUTHORIZED;
  7,000 SHARES ISSUED AND OUTSTANDING;
  REDEMPTION VALUE $1,000 PER SHARE (NOTE 3)                                           7,680,217          6,903,485
                                                                                    ------------       ------------

STOCKHOLDERS' EQUITY (NOTE 9):
  Preferred stock - undesignated, $.01 par value; 2,000,000 shares authorized;
    none issued and outstanding
  Preferred stock - Series C, $.01 par value; 500,000 shares authorized; none
    issued and outstanding
  Common stock, $.01 par value; 25,000,000 shares authorized; 6,077,764 and
    5,908,067 shares issued and outstanding,
    respectively                                                                          60,778             59,081
  Additional paid-in-capital                                                          55,116,789         54,814,659
  Accumulated other comprehensive loss                                                   (65,935)            (5,926)
  Accumulated deficit                                                                (49,753,163)       (47,591,139)
                                                                                    ------------       ------------

      Total stockholders' equity                                                       5,358,469          7,276,675
                                                                                    ------------       ------------

TOTAL                                                                               $ 20,156,027       $ 20,795,891
                                                                                    ============       ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       F-4
<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                              YEAR ENDED
                                                             DECEMBER 31,
                                                    --------------------------------
                                                       2001                 2000
<S>                                                 <C>                <C>
REVENUES:
  Sales and services                                $ 28,798,771       $ 21,493,180
  Other                                                  294,015            164,570
                                                    ------------       ------------

      Total revenues                                  29,092,786         21,657,750
                                                    ------------       ------------

COSTS AND EXPENSES:
  Cost of sales and services                          21,321,934         16,695,131
  General and administrative                           5,426,352          5,556,703
  Selling, marketing and service                       1,360,296          2,268,948
  Depreciation and amortization                        1,418,571          1,709,590
  Research and development                               796,672          9,917,346
  Interest, finance charges and other                    154,253            137,454
  Loss on impairment of assets (Note 5)                       --          3,160,961
                                                    ------------       ------------

      Total costs and expenses                        30,478,078         39,446,133
                                                    ------------       ------------

OPERATING LOSS                                        (1,385,292)       (17,788,383)

MINORITY INTEREST IN LOSS                                     --            860,143

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

NET LOSS                                              (1,385,292)       (16,928,240)

PREFERRED STOCK DEEMED DISTRIBUTION                     (776,732)        (5,446,175)
                                                    ------------       ------------

NET LOSS APPLICABLE TO COMMON SHAREHOLDERS          $ (2,162,024)      $(22,374,415)
                                                    ============       ============

NET LOSS PER COMMON SHARE, BASIC AND DILUTED        $      (0.36)      $      (4.13)
                                                    ============       ============

WEIGHTED AVERAGE COMMON SHARES
  OUTSTANDING, BASIC AND DILUTED                       6,031,272          5,412,024
                                                    ============       ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       F-5
<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2001 AND 2000

<TABLE>
<CAPTION>

                                                                                  ACCUMULATED
                                            COMMON STOCK         ADDITIONAL          OTHER
                                       ----------------------      PAID-IN       COMPREHENSIVE      ACCUMULATED
                                        SHARES       VALUE         CAPITAL       INCOME (LOSS)         DEFICIT            TOTAL
<S>                                   <C>          <C>          <C>               <C>              <C>                <C>
BALANCE,
  JANUARY 1, 2000                     3,784,045    $   37,840   $  40,441,998     $      (4,098)   $ (25,216,724)     $ 15,259,016
Comprehensive loss:
  Foreign currency
    translation adjustments                                                              (1,828)                            (1,828)
  Net loss                                                                                           (16,928,240)      (16,928,240)
                                                                                                                      ------------
Total comprehensive loss                                                                                               (16,930,068)
Exercises of stock
  options and warrants                  893,929         8,940       3,185,897                                            3,194,837
Conversion of
   note payable                         105,495         1,055         598,945                                              600,000
Stock issued for royalty
  payments                               14,598           146          49,854                                               50,000
Stock issued in private
  placement, net of offering
  costs                               1,110,000        11,100      10,537,965                                           10,549,065
Preferred stock
  distribution                                                                                        (5,446,175)       (5,446,175)
                                      ---------    ----------   -------------     -------------    -------------      ------------

BALANCE,
  DECEMBER 31, 2000                   5,908,067        59,081      54,814,659            (5,926)     (47,591,139)        7,276,675

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

See accompanying notes to consolidated financial statements.


                                       F-6
<PAGE>


METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                  YEAR ENDED
                                                                                  DECEMBER 31,
                                                                         -------------------------------
                                                                             2001               2000
<S>                                                                      <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net loss                                                               $ (1,385,292)      $(16,928,240)
  Adjustments to reconcile net loss to net cash provided by
    (used in) operating activities:
    Loss from asset impairments                                                                3,160,961
    Depreciation and amortization                                           1,418,571          1,709,590
    Minority interest in PowerSpring                                                            (860,143)
    Stock based compensation expense                                                             133,200
    Royalty payments made with restricted stock                                                   50,000
    Loss on disposal of property, plant and equipment                          76,742             34,043
  Changes in operating assets and liabilities, net of acquisitions:
      Trade receivables                                                      (503,578)          (674,023)
      Inventories                                                              91,698            928,434
      Other current assets                                                    201,943           (465,940)
      Other noncurrent assets                                                 128,199           (212,141)
      Accounts payable                                                        370,902            121,272
      Accrued and other liabilities                                           216,144           (185,111)
                                                                         ------------       ------------

      Net cash provided by (used in) operating activities                     615,329        (13,188,098)
                                                                         ------------       ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to capitalized software development                              (498,869)
  Purchases of property, plant and equipment                                 (157,849)          (719,058)
  Acquisitions of businesses, net of cash acquired                                              (463,484)
  Proceeds from sale of property, plant and equipment                         334,585             11,249
                                                                         ------------       ------------

      Net cash used in investing activities                                  (322,133)        (1,171,293)
                                                                         ------------       ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Net proceeds from private placement                                                         10,549,065
  Net (payments) borrowings on old line of credit                          (1,011,541)           735,987
  Net borrowings on new line of credit                                      1,025,770
  Payments on notes payable                                                  (125,000)
  Exercise of stock options and warrants                                                       3,205,150
  Proceeds from mortgage loan                                                 250,000
  Payments on capital lease obligations                                      (205,162)           (23,656)
                                                                         ------------       ------------

      Net cash (used in) provided by financing activities                     (65,933)        14,466,546
                                                                         ------------       ------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                     227,263            107,155

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                468,813            361,658
                                                                         ------------       ------------

CASH AND CASH EQUIVALENTS AT END OF YEAR                                 $    696,076       $    468,813
                                                                         ============       ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       F-7
<PAGE>

METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 2001 AND 2000

1.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

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

      REVENUE RECOGNITION - Equipment and supply sales are recognized when
      delivered, and natural gas measurement revenues are recognized as services
      are provided. The Company uses the completed-contract method of revenue
      recognition for PowerSecure's contracts. Under the completed-contract
      method, revenue is recognized when a project or contract is completed or
      substantially completed. In December 1999, the Securities and Exchange
      Commission issued Staff Accounting Bulletin No. 101, "Revenue Recognition
      in Financial Statements" ("SAB 101"). The Company believes that its
      revenue recognition practices comply with the guidance in SAB 101.

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


                                       F-8
<PAGE>

      Supplemental statement of cash flows information is as follows:

<TABLE>
<CAPTION>
                                                                      2001             2000
<S>                                                                 <C>            <C>
         Cash paid for interest                                     $  148,475     $   48,868

         Cash paid for income taxes                                 $   34,614     $   44,671
</TABLE>

      In March 2001, a $741,666 non-negotiable promissory note payable issued in
      March 2000 in connection with the acquisition of Mercator (Note 4) was
      cancelled in connection with the termination of PowerSpring (Note 2).

      In April 2001, the Company issued 150,000 shares of its common stock in
      connection with the acquisition of Industrial Automation (Note 4).

      In September 2000, the Company issued a $2.8 million unsecured convertible
      promissory note in fulfillment of an account payable.

      A capital lease obligation of $228,816 was incurred in July 2000 when the
      Company entered into a lease for certain web-site equipment.

      In April 2000, 105,495 shares of common stock were issued upon the
      conversion of a $600,000 long-term note payable.

      A non-cash distribution to preferred stockholders in the amount of
      $161,907 and $4,915,865 in 2001 and 2000, respectively, was recognized
      upon the amortization of a discount recorded when the preferred stock was
      sold with a beneficial conversion feature (Note 3).

      ACCOUNTS RECEIVABLE - The Company performs ongoing credit evaluations of
      its customers' financial condition and generally does not require
      collateral. The Company continuously monitors collections and payments
      from its customers and regularly adjusts credit limits of customers based
      upon payment history and a customer's current credit worthiness, as judged
      by the Company. The Company maintains a provision for estimated credit
      losses.

      INVENTORIES - Inventories are stated at the lower of cost (determined on
      first-in, first-out basis) or market. Inventories at December 31, 2001 and
      2000 are summarized as follows:

<TABLE>
<S>                                                                 <C>            <C>
         Raw materials and supplies                                 $1,269,173     $1,211,219
         Work in process                                               449,524      1,459,952
         Finished goods and merchandise                              1,416,600        555,824
                                                                    ----------     ----------

         Total                                                      $3,135,297     $3,226,995
                                                                    ==========     ==========
</TABLE>

      PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated
      at cost and are generally depreciated using the straight-line method over
      their estimated useful lives, which depending on asset class ranges from 2
      to 40 years.

                                   F-9


<PAGE>

      GOODWILL AND OTHER INTANGIBLE ASSETS - Southern Flow customer lists are
      being amortized over 20 years using the straight-line method. Goodwill and
      other intangibles are being amortized over periods ranging from 10 to 20
      years using the straight-line method. 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, 2001 and 2000 are
      $478,149 and $140,684, 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.

      In June 2001, the Financial Accounting Standards Board ("FASB") issued
      Statement of Financial Accounting Standards ("FAS") No. 141, "Business
      Combinations" and FAS No. 142 "Goodwill and Other Intangible Assets."
      These pronouncements significantly modify the accounting for business
      combinations, goodwill, and intangible assets. FAS 141 eliminates the
      pooling-of-interests method of accounting for business combinations and
      further clarifies the criteria to recognize intangible assets separately
      from goodwill. The requirements of FAS 141 are effective for any business
      combination that is completed after June 30, 2001. FAS 142 states that
      goodwill and intangible assets with indefinite lives are no longer
      amortized but are reviewed for impairment annually (or more frequently if
      impairment indicators arise). Separable intangible assets that are not
      deemed to have an indefinite life will continue to be amortized over their
      estimated useful lives. The amortization provisions of FAS 142 apply to
      goodwill and intangible assets acquired after June 30, 2001. With respect
      to goodwill and intangible assets acquired prior to July 1, 2001, the
      Company is required to adopt the pronouncement January 1, 2002. The
      Company has not yet fully completed its assessment of the new
      pronouncements but it expects that adoption of the new pronouncements will
      result in a $675,000 reduction in annual amortization expense in 2002
      compared to 2001 associated with goodwill and customer list intangible
      assets with a net book value of $7,407,931 at December 31, 2001.

      ACCRUED AND OTHER LIABILITIES - Accrued and other liabilities at December
      31, 2001 and 2000 are summarized as follows:

<TABLE>
<CAPTION>
                                                                                         2001                2000
<S>                                                                                   <C>                 <C>
         Payroll, employee benefits and related liabilities                           $  589,852          $  504,449
         Deferred revenue                                                                628,226             344,355
         Sales, property and other taxes payable                                         115,915             126,102
         Insurance premiums and reserves                                                 108,541             216,870
         Advance billings and accrued costs on contracts in process                      324,858                  --
         Equipment sales deposits                                                        134,863                  --
         Other                                                                            60,362              87,091
                                                                                      ----------          ----------

         Total                                                                        $1,962,617          $1,278,867
                                                                                      ==========          ==========
</TABLE>

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

      FOREIGN CURRENCY TRANSLATION - Metretek Europe operates in Europe
      primarily using local functional currency. Accordingly, the assets and
      liabilities of Metretek Europe are translated into U.S. dollars for
      consolidated balance sheet accounts at the rate of exchange in effect at
      year end, while sales and expenses are translated into U.S. dollars for
      consolidated statements of operations accounts at the


                                      F-10
<PAGE>

      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.

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

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

      STOCK BASED COMPENSATION - The Company utilizes the intrinsic value method
      to account for employee stock options as well as stock options issued to
      independent members of the board of directors. The Company utilizes the
      fair value method to account for stock based compensation to
      non-employees.

      DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - In June 1998, the FASB
      issued FAS No. 133, "Accounting for Derivative Instruments and Hedging
      Activities", which was amended in June 2000 by FAS No. 138, "Accounting
      for Certain Derivative Instruments and Certain Hedging Activities". FAS
      133, as amended, establishes methods of accounting for derivative
      financial instruments and hedging activities related to those instruments
      as well as other hedging activities including hedging foreign currency
      expenses. The Company adopted SFAS 133 on January 1, 2001. Because the
      Company does not utilize derivative financial instruments, the adoption of
      FAS 133 had no affect on the financial position or results of operations
      of the Company.

      IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS - In accordance with FAS No.
      121, "Accounting for the Impairment of Long-Lived Assets and for
      Long-Lived Assets to be Disposed Of", the Company evaluates long-lived
      assets, including property, plant and equipment goodwill and other
      intangible 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. During the fourth
      quarter of 2000, the Company recorded an impairment loss of $3,160,961
      (Note 5).

      In October 2001, the FASB issued FAS No. 144, "Accounting for the
      Impairment or Disposal of Long-Lived Assets", which addresses financial
      accounting and reporting for the impairment and disposal of long-lived
      assets. While FAS 144 supercedes FAS No. 121, it retains many of the
      fundamental provisions of FAS No. 121 for recognition and measurement of
      the impairment of long-lived assets to be held and used and for
      measurement of long-lived assets to be disposed of by sale. FAS 144 also
      supercedes the accounting and reporting provisions of APB Opinion No. 30,
      "Reporting Results of Operations-Reporting the Effects of Disposal of a
      Segment of a Business and Extraordinary, Unused and Infrequently Occurring
      Events and Transactions", for the disposal of segments of a business. FAS
      144 establishes a single accounting model, based on the framework
      established in FAS 121, for long-lived assets to be disposed of by sale.
      FAS 144 is effective for fiscal years beginning after December 15, 2001.
      The Company has not yet completed its assessment of the impact of FAS 144
      on its financial position or results of operations.


                                      F-11

<PAGE>

      RECLASSIFICATION - Certain 2000 amounts have been reclassified to conform
      to current year presentation. Such reclassifications had no impact on the
      Company's net loss or stockholders' equity for any year presented.

2.    TERMINATION OF POWERSPRING AND RESTRUCTURING OF INTERNET-BASED BUSINESS

      In September 1999, the Company entered into a strategic relationship with
      Scient Corporation ("Scient") to assist the Company in designing and
      creating an Internet-based business to enable the Company to take its
      measurement information products, services, and data measurement
      technologies to the market of end-users of natural gas and electricity
      (the "Internet Project"). The Internet Project was developed through
      PowerSpring. Simultaneously, the Company entered into a joint venture
      agreement with Mercator Energy Incorporated ("Mercator") whereby Mercator
      provided consulting services (the "Mercator Consulting Agreement") to the
      Company.

      The initial focus of the Internet Project was to develop and launch a web
      site providing the means for management of real time energy information
      and the exchange of energy products for industrial and commercial
      end-users of energy. In June 2000, PowerSpring launched its web site:
      PowerSpring.com. During the development of PowerSpring, the Company
      recognized that once the initial development stage was completed and the
      web site was launched, the further development and growth of PowerSpring
      would require significant additional funds to support its growth plans,
      including its continuing and growing overhead, its plans for an aggressive
      direct sales and marketing effort, and its anticipated capital expense
      needs, including the capital costs associated with the installation of
      Metretek Florida's AMR equipment on new customer sites. In order to
      develop and expand PowerSpring, the Company attempted to raise significant
      additional funds from the proceeds of private equity and venture capital
      funding at the PowerSpring level. However, due to various factors, the
      Company was unable to raise any further capital to finance PowerSpring and
      was therefore required to re-think its Internet-based business strategy.
      In December 2000, PowerSpring abandoned plans for any significant
      financings from external sources, and enacted several significant changes
      in its business model.

      As part of these changes, the PowerSpring product and marketing strategy
      was redefined, and the concept of aggressively marketing the PowerSpring
      program directly to multitudes of industrial and commercial end-users of
      energy and of procuring natural gas and electricity for consumers was
      abandoned. The Company commenced developing and marketing the PowerSpring
      product line to commercial and industrial customers exclusively through
      private labeling and partnering joint ventures and programs with natural
      gas and electricity utility companies and their affiliates. The
      PowerSpring product line consists primarily of an Internet-based software
      platform that provides utility companies with an immediate web-enabled
      Internet energy portal specifically designed for industrial and commercial
      customers. This PowerSpring software platform can be privately labeled for
      individual utility companies enabling customers as well as employees and
      affiliates to have access to near real time energy consumption data and
      timely energy industry news and information.

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


                                      F-12
<PAGE>

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

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

3.    PRIVATE PLACEMENT

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

      Each share of Series B Preferred Stock is mandatorily redeemable on
      December 9, 2004 at a liquidation preference of $1,000 per share plus
      accrued and unpaid dividends, accrues dividends at 8% annually payable
      quarterly in arrears, and became convertible at any time after June 9,
      2000 at the option of the holder at an initial conversion price of $5.9334
      per share of common stock, which constitutes an initial conversion rate
      (based upon the initial liquidation preference of $1,000) per share of
      168.54 shares of common stock of the Company. Pursuant to the terms of the
      Series B Preferred Stock, the conversion price of the Series B Preferred
      Stock was adjusted downward on December 9, 2000 to $3.0571 per share of
      common stock, which price was the average closing bid price of the
      Company's common stock for the 30 trading days immediately preceding that
      date. This downward adjustment in the conversion price of the Series B
      Preferred Stock resulted in a conversion rate, as of December 31, 2001, of
      384.36 shares of common stock per share of Series B Preferred Stock issued
      on December 9, 1999, and 379.64 shares of common stock per share of Series
      B Preferred Stock issued on February 4, 2000. The Series B Preferred Stock
      is also subject to certain anti-dilution provisions. In addition, the
      Company has the right to redeem the Series B Preferred Stock on or after
      December 9, 2000, if the Company's common stock is trading at 200% of the
      conversion price of the Series B Preferred Stock.

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


                                      F-13
<PAGE>

      The proceeds from the sale of the Units, including the 1,450 Units issued
      on December 9, 1999, were allocated to common stock, the Unit Warrants,
      and the Series B Preferred Stock based on the relative fair value of each
      on the date of issuance. This allocation process resulted in the Series B
      Preferred Stock issued on February 4, 2000 being initially recorded at a
      discount of $141 per share from its $1,000 per share liquidation value.
      This discount is being recorded as a distribution over the term of the
      Series B Preferred Stock. Another discount resulted from the increase in
      the fair market value of a share of the Company's common stock from the
      date the Company offered to sell 5,550 Units to February 4, 2000, the date
      the Units were issued. This increase caused the conversion feature of the
      Series B Preferred Stock to be "in the money" on February 4, 2000. The
      discount of $859 per share related to the "in the money" conversion
      feature was recorded as a distribution between February 4 and June 9,
      2000, the date the Series B Preferred Stock was first convertible into
      common stock of the Company.

      The primary purpose of the Units Private Placement was to raise capital to
      enable the Company to develop the Internet-based business of PowerSpring
      and to repay outstanding indebtedness.

4.    ACQUISITIONS

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

      Industrial Automation, founded in 1991 and headquartered in Greensboro,
      North Carolina, is in the business of designing and marketing process
      controls used in distributed generation operations. This acquisition
      enhanced PowerSecure's technology and time to market in the field of
      distributed generation.

      PowerSecure also entered into five-year employment and non-competition
      agreements with each of the two former owners of Industrial Automation.
      The employment and non-competition agreements include an "earn out" that
      generally entitles the former owners to any net earnings of PowerSecure
      arising from projects commenced by Industrial Automation prior to the
      acquisition. The acquisition was accounted for as a purchase, and
      therefore the results of operations of Industrial Automation have been
      combined with those of the Company effective April 10, 2001. The entire
      purchase price amount, including costs of the acquisition, was allocated
      to goodwill. Pro forma results of operations for the years ended December
      31, 2001 and 2000 assuming the acquisition had occurred on January 1, 2001
      and 2000 have not been included herein as the effects of the acquisition
      were not material to the Company's results of operations.

      On March 17, 2000, the Company acquired Mercator through a merger with a
      wholly-owned subsidiary of PowerSpring. Mercator was a Denver-based
      natural gas services and brokerage company that acts as an independent
      broker-agent for both producers and users. This acquisition provided
      PowerSpring with Mercator's expertise in the area of energy procurement,
      an important element in the Company's initial Internet business strategy.

      In consideration for the acquisition of Mercator, the Company delivered to
      the sole shareholder of Mercator, $408,334 in cash, a $741,666
      non-negotiable promissory note payable by PowerSpring over two years and
      secured by a general security interest in the assets of PowerSpring, and
      2,500,000 shares of common stock of PowerSpring, valued at $750,000 based
      on the Board of Directors determination of


                                      F-14

<PAGE>

      fair value. Subsequent to the acquisition of Mercator, the Company owned
      87.5% of the outstanding shares of PowerSpring common stock, and Mercator
      became a wholly-owned subsidiary of PowerSpring. PowerSpring and Metretek
      Technologies entered into a stockholder's agreement with the former owner
      of Mercator that addressed certain rights related to PowerSpring common
      stock, including a right for the former owner of Mercator to put his
      shares of PowerSpring common stock back to PowerSpring at an appraised
      value over three years if PowerSpring had not completed an initial public
      offering or had not sold its business within two years.

      The acquisition was accounted for as a purchase with the operating results
      of Mercator included in the consolidated statements of operations from the
      date of acquisition. The purchase price of the Mercator acquisition was
      allocated as follows:

<TABLE>
<S>                                                           <C>
                  Property, plant and equipment               $   14,000
                  Goodwill                                     1,993,000
                                                              ----------
                                                              $2,007,000
                                                              ==========
</TABLE>

      In connection with the restructuring or PowerSpring's Internet-based
      business strategy (Note 2), the unamortized goodwill balance at December
      31, 2000 of $1,842,385 was determined to be impaired and was written off
      at that time.

      Pro forma results of operations for the twelve months ended December 31,
      2000 assuming the acquisition had occurred on January 1, 2000 has not been
      included herein as the effects of the acquisition were not material to the
      Company's results of operations.

      In connection with the acquisition of Mercator, PowerSpring also entered
      into a two-year employment agreement with the former owner of Mercator
      that included an option to purchase 60,000 shares of common stock of the
      Company exercisable, at $17.88 per share, and an option to purchase
      200,000 shares of PowerSpring common stock, exercisable at $.30 per share.

      In September 1999, the Company had entered into a consulting and joint
      venture agreement with Mercator, under which Mercator provided energy
      procurement consulting services to the Company. In connection with the
      acquisition of Mercator, the consulting and joint venture agreement and a
      related stock option agreement were terminated.

5.    IMPAIRMENT LOSS

      Due to the restructuring of the Company's Internet-based business
      described in Note 2, certain long-term assets of PowerSpring were
      considered to be impaired. Accordingly, during the fourth quarter of 2000,
      the Company reported a non-cash impairment loss of $3,160,961 related to a
      write-down of goodwill and equipment of PowerSpring. The impaired
      equipment was written down to its fair value based on the estimated
      recoverable value of the assets at December 31, 2000. The impairment loss
      related to the write down of equipment was $1,318,576. The disposal of the
      PowerSpring equipment in 2001 did not result in any additional material
      losses during the year ended December 31, 2001. In addition, the
      unamortized goodwill balance of $1,842,385 relating to the acquisition of
      Mercator (Note 4) at December 31, 2000, was determined to have no future
      value to the Company and, therefore, the entire amount was written off at
      that time.


                                      F-15

<PAGE>

6.    DEBT

      The balance of notes payable at December 31, 2001 and 2000 consisted of
      the following:

<TABLE>
<CAPTION>
                                                       2001               2000
<S>                                                 <C>               <C>
         Term loans:
              Note payable to Scient                $ 2,471,426       $ 2,596,426
              Note payable to Mercator                       --           741,666
              Mortgage loan                             250,000                --
         Lines of credit                              1,025,770         1,011,541
                                                    -----------       -----------
         Total notes payable                          3,747,196         4,349,633
                                                    ===========       ===========

         Less current maturities:
              Lines of credit                                --        (1,011,541)
              Note payable to Scient                 (2,471,426)       (1,000,000)
              Note payable to Mercator                       --          (408,333)
              Mortgage loan                              (7,746)               --
                                                    -----------       -----------
         Current maturities of notes payable         (2,479,172)       (2,419,874)
                                                    -----------       -----------

         Long-term maturities of notes payable      $ 1,268,024       $ 1,929,759
                                                    ===========       ===========
</TABLE>

      On September 24, 2001, Southern Flow entered into a Credit and Security
      Agreement (the "Credit Agreement") with Wells Fargo Business Credit, Inc.
      (the "Lender"), providing for a $2,000,000 credit facility (the "Credit
      Facility"). Amounts borrowed under the Credit Facility bear interest at
      prime plus one percent (5.75% at December 31, 2001). The Credit Facility
      contains minimum interest charges and unused credit line and termination
      fees, and matures on September 30, 2004. The Credit Facility refinanced
      the Company's prior credit facility with National Bank of Canada.

      The obligations of Southern Flow under the Credit Agreement have been
      guaranteed by the Company along with PowerSecure and Metretek Florida
      (collectively, the "Guarantors"). These guarantees have been secured by a
      guaranty agreement ("Guaranty") and a security agreement ("Security
      Agreement") entered into by each of the Guarantors. The Security
      Agreements grant to the Lender 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 Southern Flow.

      The Credit Agreement contains standard affirmative and negative covenants
      by Southern Flow, including financial covenants by Southern Flow to
      maintain a minimum tangible net book value, minimum quarterly and annual
      net income levels and maximum capital expenditures through 2002.
      Thereafter, the Lender and Southern Flow must renegotiate the terms of
      those financial covenants. The Credit Agreement contains other standard
      covenants related to Southern Flow's operations, including prohibitions on
      the payment of dividends, the sale of assets and other corporate
      transactions by Southern Flow, without the Lender's consent.

      Borrowings under the Credit Facility are limited to a borrowing base
      consisting of the sum of 85% of Southern Flow's eligible accounts
      receivable plus the lesser of 20% of Southern Flow's eligible inventory
      (consisting primarily of raw materials and finished goods inventory) or
      $200,000. As of December 31, 2001, Southern Flow had a borrowing base of
      $1,770,702 under the Credit Facility, of which $1,025,770 had been
      borrowed, leaving $744,932 in unused Credit Facility availability.



                                      F-16

<PAGE>

      Southern Flow is permitted to advance funds under the Credit Facility to
      the Company, PowerSecure and Metretek Florida, provided that total
      inter-company indebtedness owing from all Guarantors to Southern Flow may
      not exceed the greater of the amount of the borrowing base less $150,000
      or the cumulative net income of Southern Flow from January 1, 2001. The
      Credit Facility, which constitutes the Company's primary credit agreement,
      is expected to be used primarily to fund the operations and growth of
      PowerSecure, as well as the operations of Southern Flow and Metretek
      Florida.

      While the Credit Facility will restrict the ability of the Company to sell
      or finance its subsidiaries without the consent of the Lender, in the
      event that the Company is able to secure debt or equity financing for a
      subsidiary that is a Guarantor or the sale or merger of such subsidiary
      and such subsidiary repays all advances made to it by Southern Flow, then
      the Lender has agreed to terminate the applicable restrictions in the
      Credit Facility relating to such subsidiary as a Guarantor.

      On December 3, 2001, Southern Flow entered into a $250,000 loan agreement
      (the "Mortgage Loan") with a mortgage lender. The unpaid balance of the
      Mortgage Loan accrues interest at the rate of 9.75%. Monthly principal and
      interest installment payments in the amount of $2,648.41 commence January
      1, 2002, and all principal and accrued but unpaid interest shall become
      due and payable on December 1, 2003. The Mortgage Loan is secured by land
      and a building owned by Southern Flow in Dallas, Texas.

      On September 28, 2000, the Company issued a $2.8 million unsecured
      convertible promissory note to Scient in fulfillment of our account
      payable to Scient. The convertible note is payable in quarterly
      installments, due March 31, 2002 and is convertible at any time at
      Scient's discretion into either shares of the Company's common stock at
      the rate of $5.94 per share or shares of PowerSpring common stock at the
      rate of $0.60 per share. At December 31, 2001, the outstanding balance of
      the unsecured note included in current maturities of notes payable was
      approximately $2.5 million. However, management of the Company believes
      that, due to various offsets and issues, the Company does not owe Scient
      any further amounts. Scient has acknowledged some of the issues that are
      in dispute and has stayed any claim for payment for the time being.
      However, until final resolution is reached, the Company cannot determine
      if the amount actually payable to Scient will be less than the balance
      accrued or how the actual payment terms, if any, may be different from
      that stated above.

      On March 17, 2000, in partial consideration for the acquisition of
      Mercator (Note 4), the Company issued a $741,666 non-negotiable promissory
      note payable to the prior owner of Mercator, due in two installments on
      March 17, 2001 and 2002. In connection with the termination of PowerSpring
      (Note 2), the promissory note was terminated effective March 31, 2001.

7.    COMMITMENTS AND CONTINGENCIES

      ASSETS SUBJECT TO DISPOSAL - During 1998, the Company decided to
      discontinue the operations of MGT, a directly owned subsidiary of the
      Company. MGT had been formed by the Company in 1991 to acquire or finance
      the acquisition of natural gas assets through privately financed programs,
      and then to manage and maintain a small ownership interest in those
      programs. The decision to discontinue MGT was based on the declining
      prospects of MGT's markets and to enable the Company to focus on its other
      operations. As part of the discontinuation of MGT, one of the programs in
      which MGT participated was liquidated, MGT sold one-third of its interests
      in two other programs, and the assets of the two remaining programs have
      been offered for sale. The remaining net assets of MGT consist primarily
      of its remaining equity interest in those two programs. Subsequent to its
      decision to discontinue MGT but prior to the ultimate disposal of MGT, the
      Company and MGT became a defendant in legal proceedings related to one of
      those programs, as described more fully below. Partially as a result of
      this litigation, the Company has been unable to complete the disposition
      of all the


                                      F-17
<PAGE>

      remaining net assets of MGT as it had originally planned. At present, the
      Company expects to complete the disposition of MGT's remaining net assets
      as soon as practical after resolution of the legal proceedings discussed
      below. The balance of the remaining net assets of MGT at December 31, 2001
      and 2000, is $370,903 and $545,454, respectively. The reduction in net
      assets of MGT resulted from distributions from one of the programs.
      Because the timing of both the resolution of the legal proceedings and the
      ultimate disposal of the assets is uncertain, the Company has classified
      the remaining net assets of MGT as an other asset in the accompanying
      consolidated balance sheet.

      As part of its continuing obligation to manage one of the two remaining
      programs, MGT has an annual commitment to offer to repurchase, for an
      amount not to exceed $452,000 in the aggregate, preferred shareholder
      interests in that program from interested shareholders. Through December
      31, 2001, preferred shareholder interests repurchased under this
      repurchase commitment total $4,263.

      Management believes that the net recoverable value that will be received
      upon ultimate disposal of the remaining net assets of MGT (exclusive of
      the effects of a material adverse resolution to the pending litigation
      discussed below in this note) exceeds the carrying value of these assets,
      including the cost to hold these assets until disposition, at December 31,
      2001 and 2000.

      LEGAL PROCEEDINGS - On January 5, 2001, Douglas W. Heins, individually and
      on behalf of a class of other persons similarly situated (the "Class
      Action Plaintiff"), filed a complaint (the "Class Action") in the District
      Court for the City and County of Denver, Colorado (the "Denver Court")
      against the Company, Marcum Midstream 1997-1 Business Trust (the "Trust"),
      Marcum Midstream-Farstad, LLC ("MMF"), MGT, MCR, W. Phillip Marcum,
      Richard M. Wanger, and Daniel J. Packard (the foregoing, collectively, the
      "Metretek Defendants"), Farstad Gas & Oil, LLC ("Farstad LLC") and
      Farstad, 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 Class Action alleges that
      the Metretek Defendants and the Farstad Defendants (collectively, the
      "Class Action Defendants"), either directly or as "controlling persons",
      violated certain provisions of the Colorado Securities Act in connection
      with the sale of interests in the Trust, an energy program of which MGT is
      the managing trustee and Messrs. Marcum, Wanger and Farstad are or were
      the active trustees. Specifically, the Class Action Plaintiff alleges that
      his and the Class's damages resulted from the Class Action Defendants
      negligently, recklessly or intentionally making false and misleading
      statements, failing to disclose material information, willfully
      participating in a scheme or conspiracy, and aiding or abetting violations
      of Colorado law, which scheme and statements related to the specification
      of the natural gas liquids product to be delivered under certain
      contracts, for the purpose of selling the Trust's units. The Trust raised
      $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. The damages sought in the
      Class Action include compensatory and punitive damages, interest,
      attorneys' fees, costs and injunctive relief.

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

      On May 24, 2001, the Metretek Defendants filed answers to the Class
      Action, generally denying the allegations and claims therein and setting
      forth cross-claims against the Farstad Defendants.


                                      F-18

<PAGE>

      The Metretek Defendants have filed additional cross-claims and third party
      complaints against the Farstad Defendants alleging fraud, negligent
      misrepresentation and contractual indemnification and contribution, among
      other claims. The Farstad Defendants have filed answers generally denying
      these claims and have asserted cross-claims and third party counterclaims
      against the Metretek Defendants. The Metretek Defendants have denied the
      allegations in the Farstad Defendants' cross-claims and third-party claims
      against them.

      On September 28, 2001, the Denver Court granted the Class Action
      Plaintiff's motion to certify a class consisting of all investors in the
      Trust. As of December 31, 2001, a trial date had not been set and no
      significant discovery had been conducted.

      On May 30, 2001, 21 individual plaintiffs including Michael Mongiello and
      Charlotte Mongiello, trustees of the Mongiello Family Trust dated 8/1/90
      (the "Mongiello Plaintiffs") filed, and subsequently served, a first
      amended complaint (the "Mongiello Case") in the Superior Court in the
      State of California for the County of San Diego (the "California Court")
      against the Metretek Defendants, the Farstad Defendants, United Pacific
      Securities, Inc., GBS Financial Corporation, IFG Network Securities, Inc.,
      and numerous officers, directors, employees and brokers related to such
      brokerage houses (the "California Defendants"). The Mongiello Case
      contains allegations similar to those contained in the Class Action. The
      net investment by the Mongiello Plaintiffs in the Trust is approximately
      $542,000. The Mongiello Plaintiffs' claims for relief include breach of
      fiduciary duty, sale of securities in violation of California blue sky
      laws, fraud and deceit, negligent misrepresentation and omission, mutual
      mistake, rescission, negligence, fraud on senior citizens and declaratory
      relief. The Mongiello Plaintiffs seek, among other things, compensatory
      damages, interest, attorneys' fees, rescission and restitution, punitive
      and exemplary damages, prejudgment interest, a declaratory judgment and
      other damages.

      On October 5, 2001, the California Court granted the motion by the
      Metretek Defendants to dismiss the claims against the Company, Mr. Marcum
      and Mr. Wanger for lack of personal jurisdiction. The California Court
      also dismissed the claims against the Farstad Defendants for lack of
      personal jurisdiction. On November 5, 2001, the MGT, MCR, MMF, Mr. Packard
      and the Trust filed an answer generally denying the allegations and claims
      in the Mongiello Case. As of December 31, 2001, no trial date had been set
      and only limited discovery has been conducted. On March 6, 2002, the
      remaining Metretek Defendants filed a motion to dismiss based on forum
      nonconviens seeking to dismiss the claims of 11 of the Mongiello
      Plaintiffs in favor of Colorado as a more convenient forum.

      In January 2002, six individual plaintiffs including Glenn Puddy (the
      "Puddy Plaintiffs") served a complaint (the "Puddy Case") in the
      California against the same California Defendants containing allegations,
      legal claims and damages similar to those in the Mongiello Case. The net
      investments of the Puddy Plaintiffs in the Trust is approximately $89,000.
      The Puddy Plaintiffs and the Mongiello Plaintiffs have the same legal
      counsel.

      All of the Metretek Defendants have been dismissed from the Puddy Case for
      lack of personal jurisdiction. A motion by the Puddy Plaintiffs to
      consolidate the Puddy Case with the Mongiello Case or to amend the
      Mongiello Case to add the Puddy Plaintiffs was denied. The Puddy
      Plaintiffs have indicated they intend to appeal those rulings.

      Because the foregoing litigation is in the early stages, the Company
      cannot predict the outcome of this litigation or the impact the resolution
      of these claims will have on the business, financial position or results
      of operations of the Company. The Company intends to vigorously defend the
      claims against it

                                      F-19


<PAGE>

      and the other Metretek Defendants, and intends to vigorously pursue
      appropriate cross-claims and third party complaints.

      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 outstanding claims against it. Although the ultimate
      outcome of these claims cannot be predicted with certainty due to the
      inherent uncertainty of litigation, in the opinion of management of the
      Company, based upon current information, none of the other currently
      pending or overtly threatened disputes is expected to have a material
      adverse effect on the business, financial condition or results of
      operations of the Company.

      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, 2001 and 2000 totaled $1,109,071 and $1,136,360,
      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>
           2002                                                       $  912,629
           2003                                                          869,401
           2004                                                          742,131
           2005                                                          460,830
           2006                                                          205,941
                                                                      ----------

         Total                                                        $3,190,932
                                                                      ==========
</TABLE>

      EMPLOYEE BENEFIT PLANS - The Company has adopted a defined contribution
      savings and investment plan (the "401(k) Plan") under Section 401(k) of
      the Internal Revenue Code. All employees age 21 or older with at least one
      year of service are eligible to participate in the 401(k) Plan. The 401(k)
      Plan provides for discretionary contributions by employees of up to 15% of
      their eligible compensation. The Company may make discretionary matching
      contributions up to 50% of participant contributions, 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, 2001 and 2000 was $177,917
      and $190,531, respectively.

      LICENSE AGREEMENT - Metretek Florida has a commitment to pay in cash or
      restricted shares of common stock of the Company a 5% royalty on sales of
      certain royalty-bearing products of Metretek Florida with a minimum annual
      royalty of $50,000 through the year 2002. Royalty expense of $50,000 has
      been recognized in each of 2001 and 2000 under the license agreement. In
      fulfillment of commitments under make-up provisions of the license
      agreement, the Company issued 19,697 restricted shares of common stock of
      the Company in lieu of cash during the year ended December 31, 2001, with
      no additional royalty expense being recognized.

8.    INCOME TAXES

      No tax expense or benefit has been recognized during the years ended
      December 31, 2001 and 2000 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, 2001 and 2000.


                                      F-20
<PAGE>

      The components of the Company's deferred tax assets and liabilities at
      December 31, 2001 and 2000 are shown below:

<TABLE>
<CAPTION>
                                                                       2001               2000
<S>                                                                <C>                <C>
         Deferred tax assets:
           Net operating loss carryforwards                        $ 13,221,000       $ 12,173,000
           Tax credit carryforwards                                      45,000            120,000
           Allowance for bad debts                                       58,000            186,000
           Excess of financial statement impairment losses
              over income tax amounts                                                      515,000
                                                                   ------------       ------------
                  Total deferred tax assets                          13,324,000         12,994,000
                                                                   ------------       ------------
         Deferred tax liabilities
           Excess of income tax depreciation and amortization
             over financial statement amounts                           536,000
           Other                                                         43,000             41,000
                                                                   ------------       ------------
                  Total deferred tax liabilities                        579,000             41,000
                                                                   ------------       ------------

         Net deferred tax asset                                      12,745,000         12,953,000
         Valuation allowance                                        (12,745,000)       (12,953,000)
                                                                   ------------       ------------

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

      At December 31, 2001, the Company had unused net operating losses to carry
      forward against future years' taxable income of approximately $38,886,000
      expiring in various amounts from 2002 to 2015. At December 31, 2001, 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 ($132,000, net of current limitation). Such carryforwards expire
      in 2002 through 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.

9.    CAPITAL STOCK

      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


                                      F-21
<PAGE>

      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.

      The following table summarizes the Company's stock option activity since
      January 1, 2000:

<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, 2000                 191,959        $ 3.57         92,500       $   2.00         268,500       $ 2.00

Granted                           141,575         11.82
Forfeited                          (1,181)         2.74
Exercised                         (37,002)         3.17        (27,500)          2.00         (54,341)        2.00
                                ---------                       ------                        -------

Outstanding at
  December 31, 2000               295,351          7.58         65,000           2.00         214,159         2.00

Granted                         1,187,500          1.55
Forfeited                         (78,835)        14.45                                        (1,814)        2.00
                                ---------                       ------                        -------

Outstanding at
  December 31, 2001             1,404,016        $ 2.10         65,000       $   2.00         212,345       $ 2.00
                                =========                       ======                        =======

Exercisable at
  December 31:
  2001                            784,099        $ 2.47         65,000       $   2.00         210,259       $ 2.00
                                =========                       ======                        =======

  2000                            186,851        $ 7.58         65,000       $   2.00         210,518       $ 2.00
                                =========                       ======                        =======
</TABLE>

      The weighted average grant date fair values of options granted during the
      years ended December 31, 2001 and 2000 were $1.07 and $0.45 per share,
      respectively. During the year ended December 31, 2001, incentive stock
      options to purchase 775,000 shares of common stock were granted to
      employees and non-qualified stock options to purchase 412,500 shares of
      common stock were granted to non-employee


                                      F-22

<PAGE>

      directors of the Company. During the year ended December 31, 2000,
      incentive stock options to purchase 199,500 shares were granted to
      employees and non-qualified stock options to purchase 22,075 common stock
      shares were granted to non-employee directors of the Company. The
      following table summarizes information about all of the Company's stock
      options outstanding at December 31, 2001:

<TABLE>
<CAPTION>
            RANGE OF                                         WEIGHTED AVERAGE          WEIGHTED AVERAGE
        EXERCISE PRICES           NUMBER OF SHARES            EXERCISE PRICE        REMAINING LIFE (YEARS)
        ---------------           ----------------            ---------------       ----------------------
<S>                               <C>                        <C>                    <C>
         $1.50 to $2.50               1,513,340                  $1.65                      7.02
         $2.51 to $6.00                  90,675                   4.70                      7.51
        $6.01 to $17.38                  77,346                   7.42                      7.55
        ---------------               ---------                  -----                      ----

         $1.50 - $17.38               1,681,361                  $2.08                      7.07
        ===============               =========                  =====                      ====
</TABLE>

      Pursuant to FAS 123, "Accounting for Stock-Based Compensation" the Company
      has elected to continue using the intrinsic value method of accounting for
      stock-based awards granted to employees and non-employee directors in
      accordance with APB Opinion No. 25, and related interpretations, in
      accounting for its stock option plans. Accordingly, no compensation cost
      has been recognized for its stock option plans. FAS 123 requires
      disclosure of pro forma net income (loss) and earnings (loss) per share
      had the fair value method been adopted. If the fair value method of
      accounting for stock options had been applied for the years ended December
      31, 2001 and 2000, the Company's net loss and net loss per share would
      have been changed the pro forma amounts indicated below:

<TABLE>
<CAPTION>
                                                                                             YEAR ENDED DECEMBER 31,
                                                                                          2001                    2000
<S>                                                                                  <C>                     <C>
         Net loss applicable to common shareholders - as reported                    $ (2,162,024)           $ (22,374,415)
         Net loss applicable to common shareholders - pro forma                      $ (3,437,351)           $ (23,996,171)
         Loss per basic and diluted Common Share - as reported                       $      (0.36)           $       (4.13)
         Loss per basic and diluted Common Share - pro forma                         $      (0.57)           $       (4.43)
</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 2001 and 2000: stock price volatility of 94% and
      99%, respectively; risk-free interest rate of 4.25% and 5.75%,
      respectively; dividend rate of $0.00 per year; and an expected life of 4
      years for options granted to employees and 10 years for options granted to
      directors.

      WARRANT DIVIDEND AND REDEMPTION - On September 18, 1998, the Company
      distributed 886,442 common stock purchase warrants (the "Warrants") as a
      dividend to stockholders of the Company on the basis of one Warrant for
      each four shares of common stock outstanding on September 10, 1998, the
      record date for the Warrant dividend. The Warrants were issued pursuant to
      the provisions of the Warrant Agency Agreement, dated as of September 10,
      1998 (the "Warrant Agreement"), between the Company and Computershare
      Trust Company, Inc. (formerly known as American Securities Transfer &
      Trust, Inc.) (the "Warrant Agent"). Each Warrant was exercisable, for a
      five-year period, for one share of common stock at an exercise price of
      $4.00. The Warrants were subject to redemption by the Company, at $.01 per
      Warrant, in the event the common stock traded at or above $6.50 per share
      for 20 consecutive trading days. The registration statement and prospectus
      covering the common stock issuable upon exercise of the Warrants also
      covered the resale of up to 155,081 Warrants by a selling security holder.
      No accounting recognition was given to the Warrant dividend.


                                      F-23

<PAGE>

      On July 14, 2000, the Company sent a written Notice of Redemption to all
      holders of its Warrants issued under the Warrant Agreement. Pursuant to
      the Notice of Redemption and the Warrant Agreement, the Company redeemed
      all Warrants that remained outstanding and unexercised at 5:00 p.m.,
      Denver, Colorado time, on August 14, 2000 (the "Redemption Date"), the
      date fixed for the redemption of the Warrants. Until 5:00 p.m., Denver,
      Colorado time, on the Redemption Date, each Warrant was exercisable for
      one share of Common Stock at an exercise price of $4.00 per share. A total
      of 694,046 Warrants were exercised for 694,046 shares of common stock,
      after the Notice of Redemption was given, resulting in net proceeds to the
      Company after fees and expenses, of approximately $2.6 million. These
      expenses included the fees and expenses of Stifel, Nicolaus & Company,
      Inc., which served as the dealer manager in connection with the redemption
      of the Warrants. The Company used the net proceeds from the Warrant
      exercises primarily to fund the development of PowerSpring. On the
      Redemption Date, the 145,629 Warrants that were not exercised ceased to be
      exercisable and holders thereof became entitled only to the redemption
      price of $.01 per Warrant. As of December 31, 2001, 28,634 Warrants
      remained outstanding and un-redeemed.

      DEBT CONVERSION - On May 4, 1998, the Company acquired substantially all
      of the assets and business of a subsidiary of American Meter Company
      pertaining to electronic correctors and non-radio-frequency meter reading
      devices in the natural gas and electric utility industry. Part of the
      consideration for this purchase was a $600,000 convertible subordinated
      promissory note issued by the Company. In April 2000, American Meter
      Company converted the note into 105,495 shares of common stock under the
      terms of the note. Until it was converted, the note bore interest on the
      unpaid principal balance at a fixed rate equal to 7.5% per annum, payable
      quarterly in arrears, and was due and payable on May 4, 2002.

      POWERSPRING STOCK OPTION PLAN - On March 13, 2000, the Board of Directors
      of PowerSpring adopted, and PowerSpring's then sole stockholder approved,
      the PowerSpring, Inc. 2000 Stock Incentive Plan (the "PowerSpring Stock
      Plan"). The PowerSpring Stock Plan authorizes the PowerSpring Board of
      Directors to grant non-qualified stock options, incentive stock options,
      stock appreciation rights, restricted stock, performance awards and other
      stock-based awards to officers, directors, employees, consultants and
      advisors of PowerSpring and its subsidiaries for up to 6,000,000 shares of
      PowerSpring common stock. As of December 31, 2001, options exercisable for
      a total of 3,475,500 shares of PowerSpring common stock had been granted
      and were outstanding at exercise prices ranging from $0.30 to $0.60.

      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


                                      F-24

<PAGE>

      of the Right. At the option of the Board of Directors, the Rights may be
      redeemed for $0.01 per Right or exchanged for shares of Company common
      stock at the exchange rate of one share per Right, in each cases subject
      to adjustment. Until a Right is exercised, the holder thereof, as such has
      no rights as a stockholder of the Company. The Rights will expire on
      November 30, 2011, unless such date is extended prior thereto by the Board
      of Directors.

      METRETEK FLORIDA STOCK WARRANTS - In 1994, in connection with the
      Company's acquisition of Metretek Florida the Company issued warrants to
      purchase shares of Company common stock to the holders of then outstanding
      warrants to purchase Metretek Florida capital stock, which warrants had
      been previously issued by Metretek Florida in connection with the issuance
      by Metretek Florida of its common stock and debentures, as well as in
      connection with remuneration to certain Metretek Florida stockholders for
      loans provided to Metretek Florida and to a venture capital company as
      remuneration for services rendered. At December 31, 2001, warrants to
      purchase a total of 36,620 shares of Company common stock exerciseable at
      prices ranging from $44.48 to $88.96 per share were outstanding. The
      Metretek Florida stock warrants are exercisable over periods expiring at
      various dates through 2004. No accounting recognition was given to these
      stock warrants, all of which were granted prior to guidance set forth in
      Emerging Issues Task Force Issue No. 96-13, "Accounting for Derivative
      Financial Instruments Indexed to, and Potentially Settled in, a Company's
      Own Stock."

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

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

      In connection with an amendment to its credit facility in September 1999,
      the Company issued to the lender a warrant (the "Lender Warrant") to
      purchase 20,000 shares of common stock of the Company is exercisable until
      September 2002 at an exercise price of $5.00 per share. The commercial
      lender has registration rights with respect to the common stock issuable
      upon the exercise of the Lender Warrant.

      In connection with the Company's Internet-based business project (Note 2),
      the Company issued to Scient a warrant (the "Scient Warrant") to purchase
      125,000 shares of common stock of the Company exercisable until September
      2002, at exercise prices split between $5.00 and $10.00 per share. Scient
      has registration rights with respect to the common stock issuable upon the
      exercise of the Scient Warrant.

      Pursuant to the Mercator Consulting Agreement (Notes 2 and 4), the Company
      issued to Mercator a warrant (the "Harpole Warrant") to purchase 60,000
      shares of common stock of the Company, which was transferred to Mr.
      Harpole, the sole shareholder of Mercator. The Harpole Warrant vests in
      three tranches from the date of issuance through March 2001, with exercise
      prices ranging between $3.00 and $4.00 per share, and expires in September
      2002. Mr. Harpole has registration rights with respect to the common stock
      issuable upon the exercise of the Harpole Warrant.

      Compensation expense for the fair value of the Scient, Harpole and Lender
      Warrants was recognized over the period in which the services were being
      performed or the remaining term of the Loan


                                      F-25

<PAGE>

      Agreement. Compensation expense associated with the warrants in the amount
      of $133,200 has been recognized in the consolidated statement of
      operations during the year ended December 31, 2000.

      In addition to the warrants described above, warrants to purchase 45,000
      shares of common stock at exercise prices ranging from $2.47 to $14.50 per
      share were outstanding at December 31, 2001. These warrants expire at
      various dates ranging from 2002 through 2004. The Company issued these
      warrants in prior years for consulting and other advisory services
      rendered to the Company by the warrant holders.

10.   SEGMENT AND RELATED INFORMATION

      In accordance with FAS No. 131, "Disclosures about Segments of an
      Enterprise and Related Information," the Company defines operating
      segments as components of an enterprise for which discrete financial
      information is available and is reviewed regularly by the chief operating
      decision-maker, or decision-making group, to evaluate performance and make
      operating decisions. The Company's reportable segments are strategic
      business units that offer different products and services. They are
      managed separately because each business requires different technology and
      marketing strategies.

      The Company's reportable business segments include: natural gas
      measurement services; distributed generation; automated energy data
      management; and Internet-based energy information and services.

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

      The operations of the Company's distributed generation segment are
      conducted by PowerSecure. PowerSecure commenced operations in September
      2000. The primary elements of PowerSecure's distributed generation
      products and services include: project design and engineering, negotiation
      with utilities to establish tariff structures and power interconnects,
      generator acquisition and installation, process control and design, switch
      gear acquisition and installation, assistance in obtaining third-party
      project financing, and ongoing project monitoring and servicing.
      PowerSecure markets its distributed generation service package primarily
      through outsourcing partnerships with utilities.

      The operations of the Company's automated energy data management segment
      are conducted by Metretek Florida. Metretek Florida's manufactured
      products fall into three categories: remote data collection products;
      electronic corrector products; and application-specific products. Metretek
      Florida also provides energy data collection and management services and
      post-sale support services for its manufactured products.

      The operations of the Company's Internet-based energy information and
      services segment were conducted by PowerSpring through March 31, 2001.
      PowerSpring commenced limited revenue generating operations in the second
      quarter of 2000. Effective April 1, 2001, PowerSpring's business was
      restructured and transferred to Metretek Florida. Subsequent to April 1,
      2001, the Company commenced to include and report the Internet-based
      energy information business of PowerSpring with Metretek Florida's
      automated data management segment.

      The accounting policies of the reportable segments are the same as those
      described in Note 1 of the Notes to Consolidated Financial Statements. The
      Company evaluates the performance of its operating


                                      F-26

<PAGE>

      segments based on income (loss) before income taxes, nonrecurring items
      and interest income and expense. Intersegment sales are not significant.

      Summarized financial information concerning the Company's reportable
      segments is shown in the following table. The "Other" column includes
      corporate related items, results of insignificant operations and, as it
      relates to segment profit, income and expense not allocated to reportable
      segments. Amounts are reported in thousands.

<TABLE>
<CAPTION>
                                                                                           INTERNET-BASED
                                            NATURAL GAS                      AUTOMATED         ENERGY
                                            MEASUREMENT     DISTRIBUTED     ENERGY DATA     INFORMATION
                                             SERVICES        GENERATION      MANAGEMENT     AND SERVICES       OTHER       TOTAL
<S>                                         <C>             <C>             <C>            <C>                <C>         <C>
         2001
         Revenues                             $12,918          $ 8,975         $ 6,629        $    277       $    294    $ 29,093
         Segment profit (loss)                  1,608              403            (993)           (612)        (1,791)     (1,385)
         Total assets                           9,487            1,672           7,500                          1,497      20,156
         Capital expenditures                     116              141             400                                        657
         Depreciation and amortization            610               36             546             135             92       1,419

         2000
         Revenues                             $11,335                          $ 8,999         $ 1,160       $    164    $ 21,658
         Segment profit (loss)                  1,193          $  (243)         (1,450)        (15,720)        (1,568)    (17,788)
         Total assets                           9,690                8           7,519           2,666            913      20,796
         Capital expenditures                     114                8              25           3,145              1       3,293
         Depreciation and amortization            609                1             612             472             16       1,710
</TABLE>

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

<TABLE>
<CAPTION>
                                                     2001                2000
<S>                                               <C>                <C>
         United States                            $28,332,145        $20,608,834
         United Kingdom                               228,198            655,363
         Canada                                       366,755            361,066
         Australia                                     40,246             19,308
         Argentina                                     58,875             13,179
         Other                                         66,567
                                                  -----------        -----------

         Total                                    $29,092,786        $21,657,750
                                                  ===========        ===========
</TABLE>



                                      F-27


<PAGE>

                           METRETEK TECHNOLOGIES, INC.

                                   FORM 10-KSB
                      FOR THE YEAR ENDED DECEMBER 31, 2001

                                  EXHIBIT LIST

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

      (2.1)       Agreement and Plan of Merger, dated as of March 16, 2000, by
                  and between TotalPlan, Inc. and PowerSpring, Inc.
                  (Incorporated by reference to Exhibit 2.2 to Metretek's Annual
                  Report on Form 10-KSB for the fiscal year ended December 31,
                  1999.)

      (2.2)       Agreement and Plan of Merger, dated as of March 17, 2000, by
                  and among PowerSpring, Inc., MERC Acquisition Corp., Mercator
                  Energy Incorporated and John A. Harpole. (Incorporated by
                  reference to Exhibit 2.3 to Metretek's Annual Report on Form
                  10-KSB for the fiscal year ended December 31, 1999.)

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

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

(3)   ARTICLES OF INCORPORATION AND BY-LAWS:

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

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

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

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

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

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

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


                                      X-1
<PAGE>

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

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

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

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

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

      (4.10)      Form of Common Stock Purchase Warrant issued by Metretek
                  Technologies, Inc. to John A. Harpole. (Incorporated by
                  reference to Exhibit 4.13 of Metretek's Registration Statement
                  on Form S-3, Registration No. 333-96369).

      (4.11)      Form of Common Stock Purchase Warrant issued by Metretek
                  Technologies, Inc. to National Bank of Canada. (Incorporated
                  by reference to Exhibit 4.14 of Metretek's Registration
                  Statement on Form S-3, Registration No. 333-96369).

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

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

(10)  MATERIAL CONTRACTS:

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

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

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

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



                                      X-2
<PAGE>

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

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

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

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

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

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

      (10.11)     Amendment No. 4 to Employment Agreement, dated as of January
                  1, 2002, by and between Metretek Technologies, Inc. and A.
                  Bradley Gabbard.*

      (10.12)     Loan and Security Agreement, dated April 14, 1998, by and
                  between National Bank of Canada, Metretek Technologies, Inc.,
                  Metretek, Incorporated and Southern Flow Companies, Inc.
                  (Incorporated by reference to Exhibit 10.1 to Metretek's
                  Quarterly Report on Form 10-QSB for the quarterly period ended
                  March 31, 1998.)

      (10.13)     Amendment No. 1 to Loan and Security Agreement, dated as of
                  November 10, 1998, by and among National Bank of Canada,
                  Metretek Technologies, Inc., Metretek, Incorporated and
                  Southern Flow Companies, Inc. (Incorporated by reference to
                  Exhibit 10.12 to Metretek's Annual Report on Form 10-KSB for
                  the year ended December 31, 1998.)

      (10.14)     Second Amendment to Loan and Security Agreement and Loan
                  Documents, dated as of September 13, 1999, by and among
                  National Bank of Canada, Metretek Technologies, Inc.,
                  Metretek, Incorporated and Southern Flow Companies, Inc.
                  (Incorporated by reference to Exhibit 10.1 to Metretek's
                  Current Report on Form 8-K filed September 14, 1999.)

      (10.15)     Third Amendment to Loan and Security Agreement and Loan
                  Documents, dated as of December 9, 1999, by and among National
                  Bank of Canada, Metretek Technologies, Inc., Metretek,
                  Incorporated and Southern Flow Companies, Inc. (Incorporated
                  by reference to Exhibit 10.1 to Metretek's Current Report on
                  Form 8-K filed December 22, 1999.)

      (10.16)     Fourth Amendment to Loan and Security Agreement and Loan
                  Documents, dated as of March 22, 2000, by and among National
                  Bank of Canada, Metretek Technologies, Inc., Metretek,
                  Incorporated and Southern Flow Companies, Inc. (Incorporated
                  by reference to Exhibit 10.15 to Metretek's Annual Report on
                  Form 10-KSB for the fiscal year ended December 31, 2000.)



                                      X-3
<PAGE>

      (10.17)     Fifth Amendment to Loan and Security Agreement and Loan
                  Documents, dated as of March 1, 2001, by and among National
                  Bank of Canada, Metretek Technologies, Inc., Metretek,
                  Incorporated and Southern Flow Companies, Inc. (Incorporated
                  by reference to Exhibit 10.16 to Metretek's Annual Report on
                  Form 10-KSB for the fiscal year ended December 31, 2000.)

      (10.18)     Sixth Amendment to Loan and Security Agreement and Loan
                  Documents, dated as of May 31, 2001, by and among National
                  Bank of Canada, Metretek Technologies, Inc., Southern Flow
                  Companies, Inc., Metretek, Incorporated and Sigma VI, Inc.
                  (Incorporated by reference to Exhibit 10.1 to Metretek's
                  Current Report on Form 8-K filed June 11, 2001.)

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

      (10.20)     Employment Agreement, dated as of March 17, 2000, between
                  PowerSpring, Inc. and John A. Harpole. (Incorporated by
                  reference to Exhibit 10.17 to Metretek's Annual Report on Form
                  10-KSB for the year ended December 31, 1999.)*

      (10.21)     Stockholders Agreement, dated as of March 17, 2000, among
                  Metretek Technologies, Inc., PowerSpring, Inc. and John A.
                  Harpole. (Incorporated by reference to Exhibit 10.18 to
                  Metretek's Annual Report on Form 10-KSB for the year ended
                  December 31, 1999.)

      (10.22)     Non-Negotiable Promissory Note, dated March 17, 2000, made by
                  PowerSpring, Inc. to John A. Harpole. (Incorporated by
                  reference to Exhibit 10.19 to Metretek's Annual Report on Form
                  10-KSB for the year ended December 31, 1999.)

      (10.23)     Security Agreement, dated March 17, 2000, between PowerSpring,
                  Inc. and John A. Harpole. (Incorporated by reference to
                  Exhibit 10.20 to Metretek's Annual Report on Form 10-KSB for
                  the year ended December 31, 1999.)

      (10.24)     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.)

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

      (10.26)     Employment and Non-Competition Agreement, dated as of May 8,
                  2000, between PowerSpring, Inc. and Sidney Hinton.*
                  (Incorporated by reference to Exhibit 10.24 to Metretek's
                  Annual Report on Form 10-KSB for the fiscal year ended
                  December 31, 2000.)

      (10.27)     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.)*

      (10.28)     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.)*

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



                                      X-4
<PAGE>

      (10.30)     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.)

      (10.31)     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.)

      (10.32)     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.)

(21)  SUBSIDIARIES OF THE SMALL BUSINESS ISSUER:

      (21.1)      Subsidiaries of Metretek Technologies, Inc.

(23)  CONSENT OF EXPERTS:

      (23.1)      Consent of Deloitte & Touche LLP

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



                                      X-5