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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 0-19793
 METRETEK TECHNOLOGIES, INC.
 Exact name of Registrant as specified in its charter
 Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    84-1169358(I.R.S. Employer
Identification No.)
 303 East Seventeenth Avenue, Suite 660, Denver, CO 80203  (Address of principal executive offices, including zip code)
 (303) 785-8080
  Title of each class
    
    Name of each exchange on which registeredCommon Stock, par value $.01 per share
    
    American Stock Exchange
 None
 o þ
 o þ
 þ o
 o
  o þ o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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METRETEK TECHNOLOGIES, INC.
 Form 10-K
For the Fiscal Year Ended December 31, 2006
 TABLE OF CONTENTS
 PageCautionary Note Regarding Forward-Looking Statements
    
    
    1PART IItem 1.
    
    Business
    
    
    2Item 1A.
    
    Risk Factors
    
    
    15Item 1B.
    
    Unresolved Staff Comments
    
    
    28Item 2.
    
    Properties
    
    
    28Item 3.
    
    Legal Proceedings
    
    
    29Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    30PART IIItem 5.
    
    Market for
Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    31Item 6.
    
    Selected Financial Data
    
    
    32Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    34Item 7A.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    51Item 8.
    
    Financial Statements and Supplementary Data
    
    
    51Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    51Item 9A.
    
    Controls and Procedures
    
    
    52Item 9B.
    
    Other Information
    
    
    54PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    55Item 11.
    
    Executive Compensation
    
    
    55Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    55Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    55Item 14.
    
    Principal Accountant Fees and Services
    
    
    55PART IVItem 15.
    
    Exhibits and Financial Statement Schedules
    
    
    56Signatures
    
    
    60Index to Financial Statements
    
    
    F-1Exhibit Index
    
    
    X-1




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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
  
    
    our prospects, including our future revenues, expenses, net income, margins,
profitability, cash flow, liquidity, financial condition and results of operations;
    
    our products and services and our markets, including market position, market share,
market demand and benefits to customers;
    
    our ability to successfully develop, operate and grow our operations and businesses;
    
    our business plans, strategies, goals and objectives;
    
    the sufficiency of our capital resources, including our cash and cash equivalents,
funds generated from operations, available borrowings under our credit arrangements and
other capital resources, to meet our future working capital, capital expenditure, debt
service and business growth needs;
    
    industry trends and customer preferences;
    
    the nature and intensity of our competition, and our ability to successfully compete in our markets;
    
    business acquisitions, combinations, sales, alliances, ventures and other similar
business transactions and relationships;
    
    the effects on our business, financial condition and results of operations of
litigation and other claims and proceedings that arise from time to time; and
    
    future economic, business, market and regulatory conditions.
   1




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PART I
 
 Item 1. Business
 Background
  
    
    PowerSecure, Inc., based in Wake Forest, North Carolina, designs, engineers, sells
and manages distributed generation systems marketed primarily to industrial and
commercial users of electricity, and also provides energy management, engineering,
consulting and other related products and services.
    
    Southern Flow Companies, Inc., which we refer to as Southern Flow, based in
Lafayette, Louisiana, provides a wide variety of natural gas measurement services
principally to producers and operators of natural gas production facilities.
    
    Metretek, Incorporated, which we refer to as Metretek Florida, based in Melbourne,
Florida, provides data collection, telemetry and other types of machine to machine,
commonly referred to as M2M, connectivity solutions for energy utility applications
such as automatic meter reading and pressure recording as well as for vehicle traffic
control applications.
   www.metretek.com
 Business Strategy
   
    
    In 2000, we formed PowerSecure to develop and operate our distributed generation
business.
 2




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
    
    In 2001, we acquired Industrial Automation, Inc., a process control and switchgear
design and manufacturing firm, as part of PowerSecures growth strategy.
    
    In 2003, we commenced the development of the InvisiConnect®series of
products, which are M2M connection solutions for wireless network technology, to
enhance the product, service and technology offerings of Metretek Florida.
    
    Since 2004, we have significantly increased our ownership of equity interests in MM 1995-2.
    
    In November 2004, we acquired the minority interest in PowerSecure.
    
    In 2005 and 2006, PowerSecure launched three new complementary energy service
businesses for the purpose of expanding its business to include providing technical
engineering services, management consulting and lighting efficiency services.
    
    In 2006, PowerSecure launched a business unit focused on marketing the services of
all of PowerSecures businesses to federal customers, primarily in conjunction with
PowerSecures utility alliances.
    
    In late 2006, PowerSecure acquired the business of Reids Trailer, Inc., which
builds trailers for the transportation of goods and equipment, an important element in
PowerSecures mobile distributed generation equipment business strategy.
  PowerSecure, Inc.
   Distributed Generation Background.
 3




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
    
    designing and engineering the distributed generation system;
    
    negotiating with the utility to establish the electricity inter-connect and to take
advantage of preferred rates;
    
    acquiring and installing the generators and other system equipment and controls;
    
    designing, engineering, constructing and installing the switchgear and process controls; and
    
    providing ongoing monitoring and servicing of the system.


Technology.




4



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®
 Staffing.
 Remote Monitoring and Maintenance and System Management
 Sales and Marketing.
   Engineering and Management Services 5
         Energy Efficiency
 Backlog.
 Southern Flow Companies, Inc.
    6
        
    
    providing dependable integrated measurement services;
    
    maintaining local offices in proximity to our customer base; and
    
    retaining experienced and competent personnel.
 Metretek, Incorporated
  
    
    electronic field devices, which are intelligent data recording and communication
devices that are installed in the field to automatically communicate with, and retrieve
data from, existing customer meters or other network devices;
    
    a communication link, which is typically a telephone wire-line or cellular/PCS
connection (analog, digital, circuit switched or Internet Protocol based); and
    
    DC2000, InvisiConnect® or PowerSpring® software, which
provides automated data collection, management and presentation of information
retrieved from field devices.
 Overview of Business and Solutions.
 ® ®
  Markets ®
 7




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Marketing and Customer Service
 www.metretekfl.com
 ®
 Backlog
 MM 1995-2
  Customers
  Competition
 8
         
    
    large and well established providers of data collection and telemetry
solutions, including AMR systems, such as Itron, Inc., Elster Metering, ABB,
Badger Meter, Inc., Sensus Metering Systems, Inc., Neptune Technology Group,
Inc. and other smaller entities such as Comverge, Inc., Cellnet Technology,
Inc. and Nertec, Inc.;
    
    numerous and diverse entities in the M2M market segments, including
Telenetics Corporation, Airlink Communications Inc., Sierra Wireless, Inc.,
Wavecom S.A. and Enfora L.P.;
    
    providers of natural gas volume correctors such as Mercury Instruments,
Inc., Eagle Research Corp., Instromet and Galvanic Applied Sciences Inc.;
    
    large manufacturers of power generation equipment with substantial
distribution networks, such as Caterpillar Inc., Cummins Inc. (including Onan),
Detroit Diesel Corporation, Kohler Co. and Generac Power Systems, Inc.;
    
    large, well established and diversified companies like Schlumberger, Eaton,
Emerson Electric Co., ABB, General Electric, Siemens and Honeywell
International Inc. that have divisions or subsidiaries devoted to our markets;
    
    in-house services provided by utilities and major oil and gas companies;
    
    large, well established and diversified oil and gas companies like Duke
Energy Corporation, Williams Energy and Hanover Compressor Company; and
    
    numerous other prospective competitors that may offer energy and data
management information and technology.
  
    
    the performance and features functionality and benefits of our, and of our
competitors, products and services;
    
    the value to our customers for the price they pay for our products and
services;
    
    the timing and market acceptance of new products and services and
enhancements to existing products and services developed by us and by our
competitors;
    
    our responsiveness to customers needs;
    
    the ease of use of products and services;
    
    the quality and reliability of our, and of our competitors, products and services;
    
    reputation;
    
    sales and marketing efforts;
    
    our ability to develop and maintain our strategic relationships; and
    
    the price of our, and of our competitors, products and services.
 9




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10




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Regulation
  Regulation of Natural Gas
 Regulation of Electricity.
 Regulation of International Operations
 Regulation of Environment.
 Regulation of Communication Services. ® ®
 11




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Employees
  Research and Development
    Raw Materials
  12




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Intellectual Property
 ®
   
    
    the technological and creative skills of our personnel;
    
    the development of new products, services and technologies;
    
    frequent product, service and technology enhancements;
    
    name recognition;
    
    customer training; and
    
    reliable product and service support.
    Segment Information
  
    
    distributed generation;
 13




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
    
    natural gas measurement services; and
    
    automated data collection and telemetry.
  Available Information
 www.metretek.com http://www.sec.gov
 Executive Officers of the Registrant
  Name
    
    Age
    
    PositionsW. Phillip Marcum
    
    
    63
    
    
    Chairman of the Board, President, Chief Executive
Officer and DirectorA. Bradley Gabbard
    
    
    52
    
    
    Executive Vice President, Chief Financial Officer,
Treasurer and DirectorGary J. Zuiderveen
    
    
    48
    
    
    Vice President, Controller, Principal Accounting Officer
and SecretarySidney Hinton
    
    
    44
    
    
    President and Chief Executive Officer of PowerSecureJohn Bernard
    
    
    52
    
    
    President and Chief Executive Officer of Southern FlowJoseph L. Harley, Jr
    
    
    55
    
    
    President and Chief Executive Officer of Metretek FloridaDaniel J. Packard
    
    
    61
    
    
    President and Chief Executive Officer of MGT
  W. Phillip Marcum
 A. Bradley Gabbard
 Gary J. Zuiderveen
 14




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Sidney Hinton
 John Bernard
 Joseph L. Harley, Jr.
 Daniel J. Packard
 
 Item 1A. Risk Factors
  Risks Related to our Business and Industry
 Our operating results may fluctuate, which makes our operating results difficult to predict
and could cause our operating results to fall short of expectations, which could adversely
affect the trading price of our common stock.
  
    
    the size, timing and terms of sales and orders, including large customer orders, such as
the significant orders from a single customer received by PowerSecure in late 2005 and
early 2006, and the effects of customers delaying, deferring or canceling purchase orders
or making smaller purchases than expected;
    
    the effects of hurricanes and other weather conditions on the demand requirements of our
customers;
    
    our ability to obtain adequate supplies of key components and materials for our products
on a timely and cost-effective basis;
    
    our ability to implement our business plans and strategies and the timing of such
implementation;
    
    the pace of development of our new businesses, including the new PowerSecure businesses,
and the growth of their markets, which may involve significant development expenses;
    
    the timing, pricing and market acceptance of our new products and services;
    
    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;
 15




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
    
    the life cycles of our products and services;
    
    budgeting cycles of utilities and other major customers;
    
    general economic and political conditions;
    
    the resolution of pending and any future litigation and regulatory proceedings and claims;
    
    economic conditions in the energy industry, especially in the natural gas and electricity sectors;
    
    the effects of governmental regulations and regulatory changes in our markets;
    
    changes in the prices charged by our suppliers;
    
    changes in the lead-times required for our suppliers to provide products, goods or services;
    
    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.
    Our recent growth and operating results have resulted from significant purchase commitments
from one customer, and if we suffer any cancellation, reduction or delay in these large
purchase commitments from this customer or if we do not receive additional significant
purchase commitments in the future, our business and operating results could be materially
and adversely affected.
  
    
    the loss of one or more large customers;
    
    any cancellation of orders by, or any reduction or delay in sales to, these customers;
 16




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
    
    the failure of large purchase commitments to be renewed or to recur;
    
    our inability to successfully develop relationships with additional customers; or
    
    future price concessions that we may have to make to these customers.
 We do not have long-term or recurring commitments with most of our customers and may be
unable to retain existing customers, attract new customers or replace departing customers
with new customers that can provide comparable revenues.
  Price increases in some of the key components in our products could materially and adversely
affect our operating results and cash flows.
  We depend on sole source and 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 materially and adversely affect our business.
  PowerSecures business is subject to the risk of changes in tariff structures, which changes
could materially and adversely affect PowerSecures business as well as our financial
condition and results of operations.
  17




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PowerSecures business is subject to the risk of changes in environmental requirements,
which changes could materially and adversely affect PowerSecures business as well as our
financial condition and results of operations.
  Some of PowerSecures long-term turn-key contracts subject us to risks.
  Severe, adverse weather conditions, such as hurricanes, can cause a severe disruption in the
business of Southern Flow by significantly reducing the short and mid-term demand
requirements of its customers.
  Because some of our business and product offerings have limited histories and their business
strategies are still being developed and are unproven, limited information is available to
evaluate their future prospects.
   
    
    anticipate and adapt to the changing regulatory climate for energy and technology
products, services and technology;
    
    attract customers to our new businesses;
    
    anticipate and adapt to the changing energy markets and end-user preferences;
    
    attract, retain and motivate qualified personnel;
    
    respond to actions taken by our competitors;
    
    integrate acquired businesses, technologies, products and services;
 18




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
    
    generate revenues, gross margins, cash flow and profits from sales of new products
and services; and
    
    implement an effective marketing strategy to promote awareness of our new
businesses, products and services.
  Changes in our product mix could materially and adversely affect our business.
  We may not be able to maintain our recent levels of growth and profitability.
  We are subject to lawsuits, claims and proceedings from time to time, and in the future we
could become subject to new lawsuits, and if any of those lawsuits are material and are
successfully prosecuted against us, our business, financial condition and results of
operations could be materially and adversely affected.
  We extend product warranties which could adversely affect our operating results
  19




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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.
   Many of our products and services experience long and variable sales cycles, which could
have a negative impact on our results of operations for any given quarter or year.
  20




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If we are unable to develop new and enhanced products and services that achieve market
acceptance in a timely manner, our operating results and competitive position could be
harmed.
  
    
    the changing requirements of customers;
    
    the accurate prediction of market requirements;
    
    the timely completion and introduction of new products and services;
    
    the quality, price and performance of new products and services;
    
    the availability, quality, price and performance of competing products, services and technologies;
    
    our customer service and support capabilities and responsiveness;
    
    the successful development of our relationships with existing and potential customers; and
    
    changes in technology, industry standards or end-user preferences.
  Rapid technological changes may prevent us from remaining current with our technological
resources and maintaining competitive product and service offerings.
  
    
    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.
    21




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If we are unable to continue to attract and retain key personnel, our business will be
materially and adversely affected.
  We face intense competition in the markets for our products, services and technology, and if
we cannot successfully compete in those markets, our business will be materially and
adversely affected.
   Downturns in general economic and market conditions could materially and adversely affect
our business.
  22




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If we fail to effectively manage our future growth, our ability to market and sell our
products and services and to provide quality service to our customers may be adversely
affected.
  Our management of MM 1995-2, a private program, presents risks to us.
  
    
    lawsuits by investors in this program who become dissatisfied with the results of
the program;
    
    material adverse changes in the business, results of operations and financial
condition of the program due to events, conditions and factors outside of our control,
such as general and local conditions affecting the oil and gas market generally and the
revenues of the program specifically;
    
    risks inherent in managing a program and taking significant actions that affect its investors;
    
    changes in the regulatory environment relating to the program;
    
    reliance upon significant suppliers and customers by the program;
    
    hazards of oil production water disposal facilities, including environmental hazards; and
    
    changes in technology.
  We may be unable to acquire other businesses, technology or companies or engage in other
strategic transactions, or to successfully realize the benefits or avoid the difficulties of
any such strategic transactions.
  23




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
    
    difficulties in assimilating and integrating the operations, personnel,
technologies, products and services of the acquired business;
    
    the technologies, products or businesses that we acquire may not achieve expected
levels of revenue, profitability, benefits or productivity;
    
    difficulties in retaining, training, motivating and integrating key personnel;
    
    diversion of managements time and resources away from our normal daily operations;
    
    difficulties in successfully incorporating licensed or acquired technology and
rights into our product and service offerings;
    
    difficulties in maintaining uniform standards, controls, procedures and policies
within the combined organizations;
    
    difficulties in retaining relationships with customers, employees and suppliers of
the acquired company;
    
    risks of entering markets in which we have no or limited direct prior experience;
    
    potential disruptions of our ongoing businesses; and
    
    unexpected costs and unknown liabilities associated with the acquisitions.
    If we fail to adequately protect our intellectual property rights, we could lose important
proprietary technology, which could materially and adversely affect our business.
   24




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If we face claims of intellectual property infringement by third parties, we could encounter
expensive litigation, be liable for significant damages or incur restrictions on our ability
to sell our products and services.
   
    
    stop selling, incorporating or using our products and services that use the
infringed intellectual property;
    
    obtain from the owner of the infringed intellectual property right a license to sell
or use the relevant technology, which license may not be available on commercially
reasonable terms, or at all; or
    
    redesign the products and services that use the technology.
  We face some risks that are inherent in natural gas and electrical operations.
  25




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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 could suffer if we cannot maintain and expand our current strategic alliances
and develop new alliances.
  Terrorist activities and other international hostilities, including the expanding
hostilities in the Middle East, could adversely affect our business and our results of
operations.
  Risks Related to the Ownership of our Shares
 Our charter documents, 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.
  
    
    a classified board of directors in which only approximately one-third of the total
board members are elected at each annual meeting;
    
    the existence of large amounts of authorized but unissued shares of our common stock
and our preferred stock;
 26




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
    
    authority for our board of directors to issue shares of our common stock and
our preferred stock, and to determine the price, voting and other rights, preferences,
privileges and restrictions of undesignated shares of preferred stock, without any vote
by or approval of our stockholders;
    
    super-majority voting requirements to effect material amendments to our second
restated certificate and by-laws;
    
    limiting the persons who may call a special meeting of stockholders;
    
    prohibiting stockholders from acting by written consent without a meeting;
    
    a fair price provision that sets minimum price requirements for potential acquirers
under certain conditions;
    
    anti-greenmail provisions which limit our ability to repurchase shares of common
stock from significant stockholders;
    
    restrictions under Delaware law on mergers and other business combinations between
us and any 15% stockholders; and
    
    advance notice requirements for director nominations and for stockholder proposals.
  Our stockholder rights agreement makes effecting a change of control more difficult, which
may discourage offers for shares of our common stock.
  We have not in the past and we do not currently intend to pay dividends on our common stock,
and even if we change our intentions our ability to pay dividends is limited.
   The market for our common stock is volatile and subject to extreme trading price and volume
fluctuations, which could adversely affect an investment in our common stock.
  27




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
    
    actual or anticipated variations in our results of operations;
    
    announcements by us or our competitors of acquisitions, significant technical
innovations, new products or services, product improvements, significant contracts,
strategic relationships or capital commitments;
    
    the receipt, deferral or loss of significant customer orders;
    
    the introduction of new products and services by us or our competitors;
    
    the commencement of, or our involvement in, litigation or other legal or regulatory proceedings;
    
    announcements by us or our competitors of the success or status of business;
    
    conditions or trends in the energy and technology industries in general, and in the
particular markets we serve;
    
    changes in earnings or revenue guidance by us;
    
    recommendations by securities analysts;
    
    changes in, or the failure by us to meet, securities analysts estimates and expectations;
    
    the lower coverage by securities analysts and the media of issuers with securities
trading on the American Stock Exchange;
    
    changes in the market valuation of other energy or technology companies;
    
    additions or departures of key personnel;
    
    sales of our common stock by our directors, executive officers and significant stockholders; and
    
    general economic, business and market conditions.
   
 Item 1B. Unresolved Staff Comments
  
 Item 2. Properties
     28




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Item 3. Legal Proceedings
       29




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Item 4. Submission of Matters to a Vote of Security Holders
  30




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PART II
 
 Item 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 Market Information
   High
    
    LowYear Ended December 31, 2005:First Quarter
    
    $
    3.16
    
    
    $
    2.20Second Quarter
    
    
    2.90
    
    
    
    2.25Third Quarter
    
    
    5.00
    
    
    
    2.95Fourth Quarter
    
    
    9.35
    
    
    
    3.70Year Ended December 31, 2006:First Quarter
    
    $
    19.62
    
    
    $
    8.95Second Quarter
    
    
    17.18
    
    
    
    11.60Third Quarter
    
    
    17.84
    
    
    
    10.49Fourth Quarter
    
    
    16.40
    
    
    
    11.28
  Holders
  Dividends
  Equity Compensation Plans
  31




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Item 6. Selected Financial Data
  Consolidated Statement of
    
    Year Ended December 31,Operations Data:
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(In thousands, except per share amounts)Total revenues
    
    $
    120,447
    
    
    $
    47,253
    
    
    $
    35,177
    
    
    $
    36,474
    
    
    $
    26,453Costs and expensesCost of sales and services
    
    
    85,653
    
    
    
    32,750
    
    
    
    23,897
    
    
    
    25,687
    
    
    
    17,938General and administrative
    
    
    19,336
    
    
    
    8,821
    
    
    
    6,835
    
    
    
    6,105
    
    
    
    5,710Selling, marketing and service
    
    
    3,835
    
    
    
    2,595
    
    
    
    2,112
    
    
    
    1,601
    
    
    
    1,555Depreciation and amortization
    
    
    992
    
    
    
    564
    
    
    
    579
    
    
    
    515
    
    
    
    576Research and development
    
    
    794
    
    
    
    713
    
    
    
    667
    
    
    
    627
    
    
    
    552Interest, finance charges and other
    
    
    159
    
    
    
    609
    
    
    
    480
    
    
    
    285
    
    
    
    205Provision for litigation costs, net
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,764Nonrecurring charges
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    182Total costs and expenses
    
    
    110,769
    
    
    
    46,052
    
    
    
    34,570
    
    
    
    34,820
    
    
    
    28,482Income (loss) from continuing operations
before equity income minority
interest and taxes
    
    
    9,678
    
    
    
    1,201
    
    
    
    607
    
    
    
    1,654
    
    
    
    (2,029
    )Income from litigation settlements, net
    
    
    343
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity income in unconsolidated affiliate
    
    
    2,221
    
    
    
    1,690
    
    
    
    1,254
    
    
    
    469
    
    
    
    211Minority interest
    
    
    (72
    )
    
    
    (211
    )
    
    
    (238
    )
    
    
    (207
    )
    
    
    Income taxes
    
    
    (465
    )
    
    
    (46
    )
    
    
    (48
    )
    
    
    (57
    )
    
    
    (46
    )Income (loss) from continuing operations
    
    
    11,705
    
    
    
    2,634
    
    
    
    1,575
    
    
    
    1,859
    
    
    
    (1,864
    )Discontinued Operations (1):Loss on disposal
    
    
    
    
    
    
    (300
    )
    
    
    (3,356
    )
    
    
    
    
    
    
    Loss from operations
    
    
    
    
    
    
    
    
    
    
    (1,463
    )
    
    
    (980
    )
    
    
    (1,518
    )Loss on discontinued operations
    
    
    
    
    
    
    (300
    )
    
    
    (4,819
    )
    
    
    (980
    )
    
    
    (1,518
    )Net income (loss)
    
    $
    11,705
    
    
    $
    2,334
    
    
    $
    (3,244
    )
    
    $
    879
    
    
    $
    (3,382
    )Per Share Amounts (2):Income (loss) from continuing operations:Basic
    
    $
    0.78
    
    
    $
    0.21
    
    
    $
    0.03
    
    
    $
    0.11
    
    
    $
    (0.45
    )Diluted
    
    $
    0.71
    
    
    $
    0.20
    
    
    $
    0.03
    
    
    $
    0.11
    
    
    $
    (0.45
    )Net income (loss):Basic
    
    $
    0.78
    
    
    $
    0.19
    
    
    $
    (0.47
    )
    
    $
    (0.06
    )
    
    $
    (0.71
    )Diluted
    
    $
    0.71
    
    
    $
    0.18
    
    
    $
    (0.45
    )
    
    $
    (0.06
    )
    
    $
    (0.70
    )Weighted average common shares outstanding:Basic
    
    
    15,063
    
    
    
    12,287
    
    
    
    9,531
    
    
    
    6,043
    
    
    
    6,077Diluted
    
    
    16,477
    
    
    
    13,361
    
    
    
    10,036
    
    
    
    6,051
    
    
    
    6,077
 32




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##### 



Consolidated Balance
    
    December 31,Sheet Data:
    
    2006
    
    
    2005
    
    
    2004
    
    
    2003
    
    
    2002(In thousands)Cash and cash equivalents
    
    $
    15,916
    
    
    $
    2,188
    
    
    $
    2,951
    
    
    $
    2,102
    
    
    $
    885Working capital
    
    
    38,844
    
    
    
    4,911
    
    
    
    5,117
    
    
    
    5,964
    
    
    
    4,097Total assets
    
    
    89,699
    
    
    
    33,319
    
    
    
    30,211
    
    
    
    23,327
    
    
    
    19,199Long-term notes payable
    
    
    
    
    
    
    3,594
    
    
    
    6,075
    
    
    
    5,227
    
    
    
    4,691Redeemable preferred stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,422
    
    
    
    8,532Total stockholders equity
    
    
    58,000
    
    
    
    16,230
    
    
    
    12,917
    
    
    
    1,169
    
    
    
    1,165
 
 (1)
    
    During fiscal 2004, our Board of Directors approved a plan to discontinue the
business of MCM and sell all of its manufacturing assets. The operations of the
discontinued MCM disposal group have been reclassified to discontinued operations for
all periods presented. In addition, certain other amounts prior to fiscal 2006 have
been reclassified to conform to fiscal 2006 presentation. Such reclassifications had no
impact on our net income (loss) or stockholders equity.(2)
    
    Per share amounts presented for fiscal 2002 through fiscal 2004 include the
effects of preferred stock deemed distributions. Per share amounts for fiscal 2003
include the effects of allocation of earnings to participating preferred stock as
required by the provision of EITF 03-06. 33




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##### 



Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
   Overview
  
    
    PowerSecure, which designs, sells and manages distributed generation systems;
    
    Southern Flow, which provides natural gas measurement services; and
    
    Metretek Florida, which designs, manufactures and sells data collection and energy
measurement monitoring systems.
    34




---



##### 



















35




---



##### 



Critical Accounting Policies
   
    
    revenue recognition;
 36




---



##### 




    
    allowance for doubtful accounts;
    
    inventories;
    
    warranty reserve;
    
    valuation of goodwill and other intangible assets;
    
    deferred tax valuation allowance;
    
    costs of exit or disposal activities and similar nonrecurring charges; and
    
    stock-based compensation.
  Revenue Recognition
      Allowance for Doubtful Accounts
 37




---



##### 



Inventories
  Warranty Reserve
 Valuation of Goodwill and Other Intangible Assets
 Deferred Tax Valuation Allowance
 38




---



##### 



Costs of Exit or Disposal Activities and Similar Nonrecurring Charges.
 Stock-Based Compensation
  Results of Operations
  Years Ended December 31,2006
    
    
    2005
    
    
    2004(all amounts reported in thousands)Revenues:Southern Flow
    
    $
    16,160
    
    
    $
    13,307
    
    
    $
    12,759PowerSecure
    
    
    99,543
    
    
    
    30,200
    
    
    
    18,630Metretek Florida
    
    
    3,657
    
    
    
    3,242
    
    
    
    3,312Other
    
    
    1,087
    
    
    
    504
    
    
    
    476Total
    
    $
    120,447
    
    
    $
    47,253
    
    
    $
    35,177Gross Profit:Southern Flow
    
    $
    4,374
    
    
    $
    3,370
    
    
    $
    3,393PowerSecure
    
    
    27,225
    
    
    
    8,895
    
    
    
    5,707Metretek Florida
    
    
    2,108
    
    
    
    1,734
    
    
    
    1,704Total
    
    $
    33,707
    
    
    $
    13,999
    
    
    $
    10,804Segment Profit (Loss):Southern Flow
    
    $
    2,769
    
    
    $
    1,824
    
    
    $
    1,940PowerSecure
    
    
    10,453
    
    
    
    2,639
    
    
    
    1,342Metretek Florida
    
    
    (20
    )
    
    
    (488
    )
    
    
    (247
    )Other
    
    
    (3,523
    )
    
    
    (2,774
    )
    
    
    (2,428
    )Total
    
    $
    9,679
    
    
    $
    1,201
    
    
    $
    607
 39




---



##### 



®
  40




---



##### 



Fiscal 2006 Compared to Fiscal 2005
 Revenues.
     Costs and Expenses.
 Year Ended December 31,
    
    
    Year-over-Year Difference2006
    
    
    2005
    
    
    $
    
    
    %(In thousands)Costs and Expenses:Costs of Sales and ServicesSouthern Flow
    
    $
    11,786
    
    
    $
    9,937
    
    
    $
    1,849
    
    
    
    19
    %PowerSecure
    
    
    72,318
    
    
    
    21,305
    
    
    
    51,013
    
    
    
    239
    %Metretek Florida
    
    
    1,549
    
    
    
    1,508
    
    
    
    41
    
    
    
    3
    %Total
    
    
    85,653
    
    
    
    32,750
    
    
    
    52,903
    
    
    
    162
    %General and administrative
    
    
    19,336
    
    
    
    8,821
    
    
    
    10,515
    
    
    
    119
    %Selling, marketing and service
    
    
    3,835
    
    
    
    2,595
    
    
    
    1,240
    
    
    
    48
    %Depreciation and amortization
    
    
    991
    
    
    
    564
    
    
    
    427
    
    
    
    76
    %Reserarch and development
    
    
    794
    
    
    
    713
    
    
    
    81
    
    
    
    11
    %Interest, finance charges and
other
    
    
    159
    
    
    
    609
    
    
    
    (450
    )
    
    
    -74
    %Income taxes
    
    
    465
    
    
    
    46
    
    
    
    419
    
    
    
    911
    %
   41




---



##### 



Equity in Income of Unconsolidated Affiliate.
 42




---



##### 



Income from Litigation Settlements
 Fiscal 2005 Compared to Fiscal 2004
 Revenues.
    Costs and Expenses
 43




---



##### 



YearoverYearYear Ended December 31,
    
    
    Difference2005
    
    
    2004
    
    
    $
    
    
    %(In thousands)Costs and Expenses:Costs of Sales and ServicesSouthern Flow
    
    $
    9,937
    
    
    $
    9,365
    
    
    $
    572
    
    
    
    6
    %PowerSecure
    
    
    21,305
    
    
    
    12,924
    
    
    
    8,381
    
    
    
    65
    %Metretek Florida
    
    
    1,508
    
    
    
    1,608
    
    
    
    (100
    )
    
    
    -6
    %Total
    
    
    32,750
    
    
    
    23,897
    
    
    
    8,853
    
    
    
    37
    %General and administrative
    
    
    8,821
    
    
    
    6,835
    
    
    
    1,986
    
    
    
    29
    %Selling, marketing and service
    
    
    2,595
    
    
    
    2,112
    
    
    
    483
    
    
    
    23
    %Depreciation and amortization
    
    
    564
    
    
    
    579
    
    
    
    (15
    )
    
    
    -3
    %Reserarch and development
    
    
    713
    
    
    
    667
    
    
    
    46
    
    
    
    7
    %Interest, finance charges and other
    
    
    609
    
    
    
    480
    
    
    
    129
    
    
    
    27
    %Income taxes
    
    
    46
    
    
    
    48
    
    
    
    (2
    )
    
    
    -4
    %
          44




---



##### 



Fluctuations
  
    
    the size, timing and terms of sales and orders, including large customer orders, such as
the recent significant Publix orders at PowerSecure, as well as the effects of customers
delaying, deferring or canceling purchase orders or making smaller purchases than expected;
    
    the effects of severe weather conditions, such as hurricanes, on the demand requirements
of our customers;
    
    our ability to obtain adequate supplies of key components and materials for our products
on a timely and cost-effective basis;
    
    our ability to implement our business plans and strategies and the timing of such
implementation;
    
    the pace of development of our new businesses, including PowerSecures new businesses,
and the growth of their markets;
    
    the timing, pricing and market acceptance of our new products and services;
    
    changes in our pricing policies and those of our competitors;
    
    variations in the length of our product and service implementation process;
    
    changes in the mix of products and services having differing margins;
    
    changes in the mix of international and domestic revenues;
    
    the life cycles of our products and services;
    
    budgeting cycles of utilities and other major customers;
    
    general economic and political conditions;
    
    the effects of litigation, claims and other proceedings;
    
    the effects of governmental regulations and regulatory changes in our markets;
    
    economic conditions in the energy industry, especially in the natural gas and
electricity sectors including the effect of cyclical changes in energy prices;
    
    changes in the prices charged by our suppliers;
    
    our ability to make and obtain the expected benefits from acquisitions of technology or
businesses, and the costs related to such acquisitions;
    
    changes in our operating expenses; and
    
    the development and maintenance of business relationships with strategic partners.
   45




---



##### 



Liquidity and Capital Resources
 Capital Requirements.
 
    
    operations;
    
    inventory;
    
    accounts receivable;
    
    research and development efforts;
    
    property and equipment acquisitions, including investments in shared savings projects;
    
    software development;
    
    debt service requirements; and
    
    business and technology acquisitions and other growth transactions.
 Cash Flow.
  46




---



##### 



Project Loans
  47




---



##### 



Working Capital Credit Facility.
     Preferred Stock Redemption
 Term Loan
 Settlement Note.
 48




---



##### 



Contractual Obligations and Commercial Commitments.
 Payments Due by Period (1)Less than
    
    
    
    
    
    
    
    
    
    
    More thanTotal
    
    
    1 year
    
    
    1 - 3 Years
    
    
    4 - 5 Years
    
    
    5 YearsContractual ObligationsCredit Facility (2)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Capital Lease Obligations
    
    
    16,000
    
    
    
    6,000
    
    
    
    6,000
    
    
    
    4,000
    
    
    
    Operating Leases
    
    
    4,500,000
    
    
    
    906,000
    
    
    
    1,425,000
    
    
    
    753,000
    
    
    
    1,416,000Series B Preferred Stock
    
    
    324,000
    
    
    
    324,000
    
    
    
    
    
    
    
    
    
    
    
    Caterpillar Equipment
Line (2)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total
    
    $
    4,840,000
    
    
    $
    1,236,000
    
    
    $
    1,431,000
    
    
    $
    757,000
    
    
    $
    1,416,000
 
 (1)
    
    Does not include interest that may become due and payable on such obligations in any
future period.(2)
    
    Total repayments are based upon borrowings outstanding as of December 31, 2006, not
projected borrowings under the credit facility. Off-Balance Sheet Arrangements
 Liquidity.
 Recent Accounting Pronouncements
   49




---



##### 



50




---



##### 



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
      
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  51




---



##### 



Item 9A. Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
       Changes in Internal Control over Financial Reporting
  Limitations in Control Systems
  52




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated
Framework
    Internal ControlIntegrated Framework Internal ControlIntegrated
Framework
    
 53




---



##### 



Item 9B. Other Information
  54




---



##### 



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
   
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions
  
 Item 14. Principal Accountant Fees and Services
  55




---



##### 



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
 (a)
    
    Documents filed as a part of this report:
 1.
    
    Financial Statements
               2.
    
    Financial Statement Schedules
    3.
    
    Exhibits
  Number
    
    Description(3.1)
    
    Second Restated Certificate of Incorporation of Metretek
Technologies, Inc. (Incorporated by reference to Exhibit 4.1 to Registrant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 Registrants Registration
Statement on Form S-8, Registration No. 333-62714.)(4.1)
    
    Specimen Common Stock Certificate. (Incorporated by reference
to Exhibit 4.1 to Registrants Registration Statement on Form S-18,
Registration No. 33-44558.)(4.2)
    
    Amended and Restated Rights Agreement, dated as of November
30, 2001, between Metretek Technologies, Inc. and Computershare Investor
Services, LLC.
 56




---



##### 



Number
    
    Description(Incorporated by reference to Exhibit 4.1 to Registrants Registration
Statement on Form 8-A/A, Amendment No. 5, filed November 30, 2001.)(4.3)
    
    Amendment No. 1, dated as of April 22, 2004, to Amended and
Restated Rights Agreement between Metretek Technologies, Inc. and ComputerShare
Investor Services, LLC. (Incorporated by reference to Exhibit 10.6 to
Registrants Current Report on Form 8-K filed May 6, 2004).(4.4)
    
    Amendment No. 2, dated as of March 29, 2006, to Amended and
Restated Rights Agreement between Metretek Technologies, Inc. and ComputerShare
Investor Services, LLC. (Incorporated by reference to Exhibit 10.3 to
Registrants Current Report on Form 8-K filed March 30, 2006).(4.5)
    
    Form of Registration Rights Agreement, dated as of April 29,
2004, by and among Metretek Technologies, Inc. and the investors signatory
thereto. (Incorporated by reference to Exhibit 10.2 to Registrants Current
Report on Form 8-K filed May 6, 2004).(4.6)
    
    Form of Securities Purchase Agreement, dated as of March 29,
2006, by and among Metretek Technologies, Inc. , the selling stockholders named
therein and the investors named therein. (Incorporated by reference to Exhibit
10.4 to Registrants Current Report on Form 8-K filed March 30, 2006).(4.7)
    
    Form of Registration Rights Agreement, dated as of March 29,
2006, by and among Metretek Technologies, Inc. and the investors named therein.
(Incorporated by reference to Exhibit 10.5 to Registrants Current Report on
Form 8-K filed March 30, 2006).(10.1)
    
    1991 Stock Option Plan, as amended and restated December 5, 1996.
(Incorporated by reference to Exhibit 10.2 to Registrant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 Registrants Annual Report on
Form 10-KSB for the year ended December 31, 1996.)*(10.3)
    
    Second Amended and Restated Employment Agreement, dated as of March 20, 2006,
by and between Metretek Technologies, Inc. and W. Phillip Marcum.
(Incorporated by reference to Exhibit 10.3 to Registrants Annual Report on
Form 10-K for the fiscal year ended December 31, 2005.)*(10.4)
    
    Second Amended and Restated Employment Agreement, dated as of March 20, 2006,
by and between Metretek Technologies, Inc. and A. Bradley Gabbard.
(Incorporated by reference to Exhibit 10.4 to Registrants Annual Report on
Form 10-K for the fiscal year ended December 31, 2005.)*(10.5)
    
    Metretek Technologies, Inc. 1998 Stock Incentive Plan, amended and restated
as of June 12, 2006. (Incorporated by reference to Exhibit 4.3 to Registrants
Registration Statement on Form S-8, Registration No. 333-134938.)*(10.6)
    
    Form of Incentive Stock Option Agreement under the Metretek Technologies,
Inc. 1998 Stock Incentive Plan, as amended. (Incorporated by reference to
Exhibit 10.1 to Registrants Current Report on Form 8-K, filed August 25,
2004)*(10.7)
    
    Form of Non-Qualified Stock Option Agreement under the Metretek Technologies,
Inc. 1998 Stock Incentive Plan, as amended. (Incorporated by reference to
Exhibit 10.2 to Registrants Current Report on Form 8-K, filed August 25,
2004)*
 57




---



##### 



Number
    
    Description(10.8)
    
    Form of Restricted Stock Agreement under the Metretek Technologies, Inc. 1998
Stock Incentive Plan, as amended. (Incorporated by reference to Exhibit 10.3
to Registrants Current Report on Form 8-K, filed August 25, 2004)*(10.9)
    
    Form of Indemnification Agreement between Metretek Technologies, Inc. and
each of its directors. (Incorporated by reference to Exhibit 10.21 to
Registrants Annual Report on Form 10-KSB for the year ended December 31,
1999.)(10.10)
    
    Prototype  Basic Plan Document for the Metretek  Southern Flow Savings and
Investment Plan. (Incorporated by reference to Exhibit 4.7 to Registrants
Registration Statement on Form S-8, Registration No. 333-42698.)*(10.11)
    
    Adoption Agreement for the Metretek  Southern Flow Savings and Investment
Plan. (Incorporated by reference to Exhibit 4.8 to Registrants Registration
Statement on Form S-8, Registration No. 333-42698.)*(10.12)
    
    Amended and Restated Employment and Non-Competition Agreement, dated as of
November 15, 2005, between PowerSecure, Inc. and Sidney Hinton. (Incorporated
by reference to Exhibit 10.1 to Registrants Current Report on Form 8-K filed
November 21, 2005)*(10.13)
    
    Employment and Non-Competition Agreement, dated as of November 15, 2005,
between Southern Flow Companies, Inc. and John Bernard. (Incorporated by
reference to Exhibit 10.2 to Registrants Current Report on Form 8-K filed
November 21, 2005)*(10.14)
    
    Employment and Non-Competition Agreement, dated as of February 6, 2006,
between EnergyLite, Inc. and Ronald W. Gilcrease (Incorporated by reference to
Exhibit 10.1 to Registrants Current Report on Form 8-K filed February 10,
2006)*(10.15)
    
    Amended Stipulation of Settlement, filed March 3, 2004, among Douglas W.
Heins on behalf of himself and all others similarly situated, and Metretek
Technologies, Inc., et. al. (Incorporated by reference to Exhibit 10.39 to
Registrants Annual Report on Form 10-K for the year ended December 31, 2003.)(10.16)
    
    Order Granting Final Approval of the Partial Settlement, dated June 11,
2004. (Incorporated by reference to Exhibit 99.1 to Registrants Current Report
on Form 8-K filed June 14, 2004.)(10.17)
    
    Summary Sheet of Compensation of Non-Employee Directors. (Filed herewith.)*(10.18)
    
    Lease Agreement, dated March 2005, between H & C Holdings, LLC and
PowerSecure, Inc. (Incorporated by reference to Exhibit 10.19 to Registrants
Annual Report on Form 10-K for the fiscal year ended December 31, 2005.)*(10.19)
    
    Credit Agreement, dated as of September 2, 2005, among First National Bank
of Colorado, Metretek Technologies, Inc., Southern Flow Companies, Inc.,
PowerSecure, Inc. and Metretek Incorporated. (Incorporated by reference to
Exhibit 10.1 to Registrants Current Report on Form 8-K filed September 9,
2005.)(10.20)
    
    Form of Security Agreement, dated as of September 2, 2005, by each of
Metretek Technologies, Inc., Southern Flow Companies, Inc., PowerSecure, Inc.
and Metretek Incorporated and First National Bank of Colorado. (Incorporated by
reference to Exhibit 10.2 to Registrants Current Report on Form 8-K filed
September 9, 2005.)(10.21)
    
    Form of Guaranty, dated as of September 2, 2005, by Metretek Technologies,
Inc. for the benefit of First National Bank of Colorado. (Incorporated by
reference to Exhibit 10.3 to Registrants Current Report on Form 8-K filed
September 9, 2005.)
 58




---



##### 



Number
    
    Description(10.22)
    
    First Modification to Loan Documents, effective as of June 30, 2006, by and
among First National Bank of Colorado, Metretek Technologies, Inc., Southern
Flow Companies, Inc., PowerSecure, Inc. and Metretek Incorporated.
(Incorporated by reference to Exhibit 10.1 to Registrants Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 2006.)(10.23)
    
    PowerSecure, Inc. Key Employee Long-Term Retention Plan. (Incorporated by
reference to Exhibit 10.2 to Registrants Quarterly Report on Form 10-K for the
fiscal quarter ended June 30, 2006.)*(14.1)
    
    Metretek Technologies, Inc. Code of Ethics for Principal Executive Officer
and Senior Financial Officers. (Incorporated by reference to Exhibit 14.1 to
Registrants Annual Report on Form 10-K for the year ended December 31, 2003.)(14.2)
    
    Metretek Technologies, Inc. Code of Business Conduct and Ethics.
(Incorporated by reference to Exhibit 14.2 to Registrants Annual Report on
Form 10-K for the year ended December 31, 2003.)(21.1)
    
    Subsidiaries of Metretek Technologies, Inc. (Filed herewith.)(23.1)
    
    Consent of Hein & Associates LLP, Independent Registered Public Accounting
Firm (Filed herewith.)(31.1)
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or
15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith.)(31.2)
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or
15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith.)(32.1)
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
and Rule 13a-14(b) or 15d-14(b) under the Securities Exchange Act of 1934, as
amended, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Filed herewith.)(32.2)
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
and Rule 13a-14(b) or 15d-14(b) under the Securities Exchange Act of 1934, as
amended, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Filed herewith.)
 
 *
    
    Indicates management contract or compensation plan or arrangement. (b)
    
    Item 601 Exhibits
  (c)
    
    Financial Statement Schedules
  59




---



##### 



SIGNATURES
  METRETEK TECHNOLOGIES, INC.By:
    /s/ W. Phillip MarcumW. Phillip Marcum, President andChief Executive Officer
Date: March 12, 2007 POWER OF ATTORNEY
   Signature
    
    Title
    
    Date/s/ W. Phillip Marcum

W. Phillip Marcum
    
    Chairman of the Board, President, Chief
Executive Officer and Director
(Principal Executive Officer)
    
    March 12, 2007/s/ A. Bradley Gabbard

A. Bradley Gabbard
    
    Executive Vice President, Chief Financial Officer,
Treasurer, Secretary and Director
(Principal Financial Officer)
    
    March 12, 2007/s/ Gary J. Zuiderveen

Gary J. Zuiderveen
    
    Vice President, Controller, Principal Accounting
Officer and Secretary
(Principal Accounting Officer)
    
    March 12, 2007/s/ Basil M. Briggs

Basil M. Briggs
    
    Director
    
    March 12, 2007/s/ Anthony D. Pell

Anthony D. Pell
    
    Director
    
    March 12, 2007/s/ Kevin P. Collins

Kevin P. Collins
    
    Director
    
    March 12, 2007
 60




---



##### 



INDEX TO FINANCIAL STATEMENTS
 CONSOLIDATED FINANCIAL STATEMENTS OF METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
 PageReport of Independent Registered Public Accounting Firm
    
    F-2Consolidated Balance Sheets as of December 31, 2006 and 2005
    
    F-3Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004
    
    F-5Consolidated Statements of Stockholders Equity for the Years Ended December 31, 2006, 2005 and 2004
    
    F-6Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004
    
    F-7Notes to Consolidated Financial Statements
    
    F-8
 F-1




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    Internal
ControlIntegrated Framework
   
 F-2




---



##### 



METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED BALANCE SHEETS
 December 31,ASSETS
    
    2006
    
    
    2005CURRENT ASSETS:Cash and cash equivalents
    
    $
    15,916,460
    
    
    $
    2,188,310Trade receivables, net of allowance for doubtful accounts
of $225,004 and $95,144, respectively
    
    
    40,255,372
    
    
    
    12,031,539Other receivables
    
    
    431,437
    
    
    
    36,669Inventories
    
    
    12,882,167
    
    
    
    3,450,267Deferred income taxes (Note 9)
    
    
    231,990
    
    
    
    Prepaid expenses and other current assets
    
    
    818,583
    
    
    
    527,269Total current assets
    
    
    70,536,009
    
    
    
    18,234,054PROPERTY, PLANT AND EQUIPMENT:Equipment
    
    
    6,524,549
    
    
    
    5,669,788Vehicles
    
    
    166,894
    
    
    
    132,988Furniture and fixtures
    
    
    568,212
    
    
    
    550,863Land, building and improvements
    
    
    1,073,625
    
    
    
    517,511Total property, plant and equipment, at cost
    
    
    8,333,280
    
    
    
    6,871,150Less accumulated depreciation and amortization
    
    
    3,889,401
    
    
    
    3,657,856Property, plant and equipment, net
    
    
    4,443,879
    
    
    
    3,213,294OTHER ASSETS:Goodwill (Notes 1 and 5)
    
    
    9,146,409
    
    
    
    8,840,148Intangible rights and capitalized software costs, net of
accumulated amortization of $1,543,024 and $1,280,019,
respectively
    
    
    1,763,970
    
    
    
    479,221Investment in unconsolidated affiliate
    
    
    3,513,501
    
    
    
    2,299,218Assets of discontinued operations (Note 3)
    
    
    144,490
    
    
    
    192,821Other assets
    
    
    151,177
    
    
    
    60,170Total other assets
    
    
    14,719,547
    
    
    
    11,871,578TOTAL
    
    $
    89,699,435
    
    
    $
    33,318,926
 See accompanying notes to consolidated financial statements.
 F-3




---



##### 





METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


December 31,LIABILITIES
AND STOCKHOLDERS EQUITY
    
    2006
    
    
    2005CURRENT LIABILITIES:Accounts payable
    
    $
    15,090,540
    
    
    $
    3,283,898Accrued and other liabilities
    
    
    16,026,867
    
    
    
    8,726,755Current income taxes payable (Note 9)
    
    
    570,217
    
    
    
    60,075Notes payable (Note 6)
    
    
    
    
    
    
    1,248,286Capital lease obligations (Note7)
    
    
    4,749
    
    
    
    3,884Total current liabilities
    
    
    31,692,373
    
    
    
    13,322,898LONG-TERM NOTES PAYABLE (Note 6)
    
    
    
    
    
    
    3,593,523NON-CURRENT CAPITAL LEASE OBLIGATIONS (Note 7)
    
    
    7,431
    
    
    
    3,210COMMITMENTS AND CONTINGENCIES (Note 8)MINORITY INTEREST IN SUBSIDIARIES (Note 1 and 5)
    
    
    
    
    
    
    169,755STOCKHOLDERS EQUITY (Note 10):Preferred stock  undesignated, $.01 par value;
2,000,000 shares authorized; none issued and outstandingPreferred stock  Series C, $.01 par value; 500,000 shares
authorized; none issued and outstandingCommon stock, $.01 par value; 25,000,000 shares
authorized; 15,808,634 and 12,577,530 shares issued
and outstanding, respectively
    
    
    158,086
    
    
    
    125,775Additional paid-in-capital
    
    
    102,287,543
    
    
    
    72,321,099Deferred compensation
    
    
    
    
    
    
    (66,000
    )Accumulated deficit
    
    
    (44,445,998
    )
    
    
    (56,151,334
    )Total stockholders equity
    
    
    57,999,631
    
    
    
    16,229,540TOTAL
    
    $
    89,699,435
    
    
    $
    33,318,926


See accompanying notes to consolidated financial statements. F-4




---



##### 



METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Year Ended December 31,2006
    
    
    2005
    
    
    2004REVENUES:Sales and services
    
    $
    119,359,925
    
    
    $
    46,748,658
    
    
    $
    34,700,954Other
    
    
    1,087,202
    
    
    
    503,894
    
    
    
    475,969Total revenues
    
    
    120,447,127
    
    
    
    47,252,552
    
    
    
    35,176,923COSTS AND EXPENSES:Cost of sales and services
    
    
    85,652,871
    
    
    
    32,749,798
    
    
    
    23,897,325General and administrative
    
    
    19,336,264
    
    
    
    8,820,560
    
    
    
    6,834,960Selling, marketing and service
    
    
    3,835,513
    
    
    
    2,595,200
    
    
    
    2,112,203Depreciation and amortization
    
    
    991,566
    
    
    
    563,889
    
    
    
    578,516Research and development
    
    
    793,705
    
    
    
    712,725
    
    
    
    667,293Interest, finance charges and other
    
    
    158,567
    
    
    
    608,963
    
    
    
    480,110Total costs and expenses
    
    
    110,768,486
    
    
    
    46,051,135
    
    
    
    34,570,407Income from continuing operations before
minority interest, income taxes, and equity income
    
    
    9,678,641
    
    
    
    1,201,417
    
    
    
    606,516Income from litigation settlements, net (Note 8)
    
    
    343,112
    
    
    
    
    
    
    
    Equity in income of unconsolidated affiliate
    
    
    2,221,185
    
    
    
    1,689,537
    
    
    
    1,254,509Minority interest (Note 5)
    
    
    (72,464
    )
    
    
    (210,875
    )
    
    
    (238,389
    )Income taxes (Note 9)
    
    
    (465,138
    )
    
    
    (45,690
    )
    
    
    (47,590
    )Income from continuing operations
    
    
    11,705,336
    
    
    
    2,634,389
    
    
    
    1,575,046Discontinued operations of MCM (Note 3)Loss on disposal of MCM
    
    
    
    
    
    
    (300,000
    )
    
    
    (3,355,301
    )Loss from operations of MCM
    
    
    
    
    
    
    
    
    
    
    (1,463,285
    )Loss on discontinued operations
    
    
    
    
    
    
    (300,000
    )
    
    
    (4,818,586
    )Net income (loss)
    
    $
    11,705,336
    
    
    $
    2,334,389
    
    
    $
    (3,243,540
    )PER SHARE AMOUNTS (NOTE 1):Income from continuing operations:Basic
    
    $
    0.78
    
    
    $
    0.21
    
    
    $
    0.03Diluted
    
    $
    0.71
    
    
    $
    0.20
    
    
    $
    0.03Net income (loss):Basic
    
    $
    0.78
    
    
    $
    0.19
    
    
    $
    (0.47
    )Diluted
    
    $
    0.71
    
    
    $
    0.18
    
    
    $
    (0.45
    )WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:Basic
    
    
    15,062,888
    
    
    
    12,287,107
    
    
    
    9,531,199Diluted
    
    
    16,477,336
    
    
    
    13,360,515
    
    
    
    10,035,730
 See accompanying notes to consolidated financial statements.
 F-5




---



##### 



METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
 AdditionalCommon Stock
    
    
    Paid-In
    
    
    Deferred
    
    
    AccumulatedShares
    
    
    Value
    
    
    Capital
    
    
    Compensation
    
    
    Deficit
    
    
    TotalBALANCE,
JANUARY 1, 2004
    
    
    6,043,469
    
    
    $
    60,435
    
    
    $
    55,107,132
    
    
    
    
    
    
    $
    (53,998,410
    )
    
    $
    1,169,157Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,243,540
    )
    
    
    (3,243,540
    )Private placement, net
    
    
    3,510,548
    
    
    
    35,105
    
    
    
    9,793,586
    
    
    
    
    
    
    
    
    
    
    
    9,828,691Conversion of preferred stock
    
    
    1,329,173
    
    
    
    13,292
    
    
    
    4,413,996
    
    
    
    
    
    
    
    
    
    
    
    4,427,288Stock issued in acquisition of
PowerSecure minority Interest
    
    
    950,000
    
    
    
    9,500
    
    
    
    1,492,925
    
    
    
    
    
    
    
    
    
    
    
    1,502,425Stock option exercises
    
    
    263,551
    
    
    
    2,635
    
    
    
    408,381
    
    
    
    
    
    
    
    
    
    
    
    411,016Stock awards
    
    
    90,000
    
    
    
    900
    
    
    
    197,100
    
    
    $
    (198,000
    )Amortization of deferred
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,000
    
    
    
    
    
    
    
    66,000Preferred stock
distribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,243,773
    )
    
    
    (1,243,773
    )BALANCE,
DECEMBER 31, 2004
    
    
    12,186,741
    
    
    
    121,867
    
    
    
    71,413,120
    
    
    
    (132,000
    )
    
    
    (58,485,723
    )
    
    
    12,917,264Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,334,389
    
    
    
    2,334,389Stock warrant and option
exercises
    
    
    390,789
    
    
    
    3,908
    
    
    
    907,979
    
    
    
    
    
    
    
    
    
    
    
    911,887Amortization of deferred
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,000
    
    
    
    
    
    
    
    66,000BALANCE,
DECEMBER 31, 2005
    
    
    12,577,530
    
    
    
    125,775
    
    
    
    72,321,099
    
    
    
    (66,000
    )
    
    
    (56,151,334
    )
    
    
    16,229,540Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,705,336
    
    
    
    11,705,336Stock compensation
    
    
    
    
    
    
    
    
    
    
    712,071
    
    
    
    
    
    
    
    
    
    
    
    712,071Private placement, net
    
    
    2,012,548
    
    
    
    20,125
    
    
    
    26,200,997
    
    
    
    
    
    
    
    
    
    
    
    26,221,122Stock warrant and option
exercises
    
    
    1,218,556
    
    
    
    12,186
    
    
    
    3,053,376
    
    
    
    
    
    
    
    
    
    
    
    3,065,562Amortization of deferred
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66,000
    
    
    
    
    
    
    
    66,000BALANCE,
DECEMBER 31, 2006
    
    
    15,808,634
    
    
    $
    158,086
    
    
    $
    102,287,543
    
    
    $
    
    
    
    $
    (44,445,998
    )
    
    $
    57,999,631
 See accompanying notes to consolidated financial statements.
 F-6




---



##### 



METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Year Ended December 31,2006
    
    
    2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income (loss)
    
    $
    11,705,336
    
    
    $
    2,334,389
    
    
    $
    (3,243,540
    )Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:Loss on disposal of discontinued operations
    
    
    
    
    
    
    300,000
    
    
    
    3,355,301Loss from discontinued operations of MCM
    
    
    
    
    
    
    
    
    
    
    1,463,285Depreciation and amortization
    
    
    991,566
    
    
    
    563,889
    
    
    
    578,516Minority interest in subsidiary
    
    
    72,464
    
    
    
    210,875
    
    
    
    238,389Deferred income taxes
    
    
    278,152
    
    
    
    
    
    
    
    Loss on disposal of property, plant and equipment
    
    
    43,431
    
    
    
    13,497
    
    
    
    262Equity in income of unconsolidated affiliate
    
    
    (2,221,185
    )
    
    
    (1,689,537
    )
    
    
    (1,254,509
    )Distributions from unconsolidated affiliate
    
    
    1,811,820
    
    
    
    1,507,956
    
    
    
    807,732Stock compensation expense
    
    
    778,071
    
    
    
    66,000
    
    
    
    66,000Changes in operating assets and liabilities, net of
effect of aquisitons:Trade receivables, net
    
    
    (28,181,260
    )
    
    
    (3,209,526
    )
    
    
    (2,834,777
    )Inventories
    
    
    (9,390,219
    )
    
    
    (226,971
    )
    
    
    (1,235,077
    )Other current assets
    
    
    (686,082
    )
    
    
    (63,580
    )
    
    
    (1,241
    )Other noncurrent assets
    
    
    (91,007
    )
    
    
    87,840
    
    
    
    (71,940
    )Accounts payable
    
    
    11,718,505
    
    
    
    77,804
    
    
    
    1,227,868Accrued and other liabilities
    
    
    7,380,847
    
    
    
    3,379,151
    
    
    
    476,609Net cash (used in) provided by continuing operations
    
    
    (5,789,561
    )
    
    
    3,351,787
    
    
    
    (427,122
    )Net cash provided by (used in) discontinued operations
    
    
    48,331
    
    
    
    (610,546
    )
    
    
    (1,441,705
    )Net cash (used in) provided by operating activities
    
    
    (5,741,230
    )
    
    
    2,741,241
    
    
    
    (1,868,827
    )CASH FLOWS FROM INVESTING ACTIVITIES:Investment in unconsolidated affiliate
    
    
    (1,260,360
    )
    
    
    (58,045
    )
    
    
    (955,784
    )Additions to intangible rights and software development
    
    
    (97,677
    )
    
    
    (390,007
    )
    
    
    (47,467
    )Purchases of property, plant and equipment
    
    
    (1,356,353
    )
    
    
    (939,808
    )
    
    
    (2,229,640
    )Acquisitions, net of cash acquired
    
    
    (2,344,504
    )
    
    
    
    
    
    
    Minority interest acquired
    
    
    
    
    
    
    
    
    
    
    (80,979
    )Proceeds from sale of property, plant and equipment
    
    
    16,976
    
    
    
    
    
    
    
    5,700Net cash used in investing activities
    
    
    (5,041,918
    )
    
    
    (1,387,860
    )
    
    
    (3,308,170
    )CASH FLOWS FROM FINANCING ACTIVITIES:Net proceeds from private placement
    
    
    26,221,122
    
    
    
    
    
    
    
    9,828,691Proceeds from stock warrant and option exercises
    
    
    3,065,562
    
    
    
    911,887
    
    
    
    411,016Net (payments) borrowings on line of credit
    
    
    (1,314,200
    )
    
    
    (1,307,081
    )
    
    
    75,863Proceeds from equipment and project loans
    
    
    
    
    
    
    335,247
    
    
    
    1,212,570Proceeds from investment loan
    
    
    
    
    
    
    
    
    
    
    960,784Principal payments on long-term notes payable
    
    
    (3,375,494
    )
    
    
    (1,433,410
    )
    
    
    (979,867
    )Cash distributions to minority interests
    
    
    (381
    )
    
    
    (130,912
    )
    
    
    (55,701
    )Payments on preferred stock redemptions
    
    
    (80,735
    )
    
    
    (488,814
    )
    
    
    (5,344,660
    )Payments on capital lease obligations
    
    
    (4,576
    )
    
    
    (3,477
    )
    
    
    (81,885
    )Net cash provided by (used in) financing activities
    
    
    24,511,298
    
    
    
    (2,116,560
    )
    
    
    6,026,811NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS
    
    
    13,728,150
    
    
    
    (763,179
    )
    
    
    849,814CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    2,188,310
    
    
    
    2,951,489
    
    
    
    2,101,675CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    15,916,460
    
    
    $
    2,188,310
    
    
    $
    2,951,489
 See accompanying notes to consolidated financial statements.
 F-7




---



##### 



METRETEK TECHNOLOGIES, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE
YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
 1.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Organization
  Principles of Consolidation
 Use of Estimates
 Revenue Recognition
 F-8




---



##### 



Statement of Cash Flows
 2006
    
    2005
    
    2004Cash paid during the year for:Interest
    
    $
    122,203
    
    
    $
    577,458
    
    
    $
    404,030State income taxes
    
    
    166,985
    
    
    
    53,217
    
    
    
    12,958Supplemental schedule of non-cash investing and
financing activities:Capital lease obligations incurred for the
purchase of equipment
    
    
    13,491
    
    
    
    
    
    
    
    526,395Acquisition of minority interest in PowerSecure
through issuance of stock
    
    
    
    
    
    
    
    
    
    
    1,202,249Issuance of restricted stock award
    
    
    
    
    
    
    
    
    
    
    198,000Note receivable in payment for sale
of discontinued MCM operations
    
    
    
    
    
    
    
    
    
    
    780,000Conversion of preferred stock
    
    
    
    
    
    
    
    
    
    
    4,427,288
 Accounts Receivable
   F-9




---



##### 



Inventories
 2006
    
    
    2005Raw materials and supplies
    
    $
    1,897,846
    
    
    $
    1,636,966Work in process
    
    
    9,530,471
    
    
    
    477,616Finished goods and merchandise
    
    
    1,656,290
    
    
    
    1,501,944Valuation reserve
    
    
    (202,440
    )
    
    
    (166,259
    )Total
    
    $
    12,882,167
    
    
    $
    3,450,267
  Property, Plant and Equipment
 Investment in Unconsolidated Affiliate
  F-10




---



##### 



December 31,2006
    
    
    2005Total current assets
    
    $
    2,816,175
    
    
    $
    2,173,222Property, plant and equipment, net
    
    
    5,828,718
    
    
    
    6,180,090Total other assets
    
    
    9,833
    
    
    
    15,429Total assets
    
    $
    8,654,726
    
    
    $
    8,368,741Total current liabilities
    
    $
    1,081,382
    
    
    $
    1,151,906Long-term note payable
    
    
    341,142
    
    
    
    912,799Total shareholders equity
    
    
    7,232,202
    
    
    
    6,304,036Total liabilities and
shareholders equity
    
    $
    8,654,726
    
    
    $
    8,368,741
 Year Ended December 31,2006
    
    
    2005
    
    
    2004Total revenues
    
    $
    11,027,771
    
    
    $
    10,263,085
    
    
    $
    7,208,648Total costs and expenses
    
    
    5,099,605
    
    
    
    4,868,291
    
    
    
    3,299,248Net income
    
    $
    5,928,166
    
    
    $
    5,394,794
    
    
    $
    3,909,400
 Goodwill and Other Intangible Assets
   F-11




---



##### 



Accrued and Other Liabilities
 2006
    
    
    2005Accrued project costs
    
    $
    6,598,184
    
    
    $
    3,977,009Payroll, employee benefits and related liabilities
    
    
    4,015,533
    
    
    
    2,191,619Sales, property and franchise taxes payable
    
    
    1,536,677
    
    
    
    574,817Advance billings on projects in progress
    
    
    2,623,315
    
    
    
    634,404Preferred stock redemption obligation
    
    
    324,408
    
    
    
    405,143Deferred revenue
    
    
    553,646
    
    
    
    402,113Insurance premiums and reserves
    
    
    111,882
    
    
    
    172,713Warranty reserve
    
    
    116,102
    
    
    
    71,446Other
    
    
    147,120
    
    
    
    297,491Total
    
    $
    16,026,867
    
    
    $
    8,726,755
 Minority Interest
 Research and Developments Costs .
 Impairment or Disposal of Long-Lived Assets
 Income Taxes
 Basic and Diluted Earnings Per Share
 F-12




---



##### 



Year Ended December 31,2006
    
    
    2005
    
    
    2004Income from continuing operations
    
    $
    11,705,336
    
    
    $
    2,634,389
    
    
    $
    1,575,046Less preferred stock
deemed distribution (1)
    
    
    
    
    
    
    
    
    
    
    (1,243,773
    )Income from continuing operations
attributable to common shareholders
    
    
    11,705,336
    
    
    
    2,634,389
    
    
    
    331,273Loss from discontinued operations
    
    
    
    
    
    
    (300,000
    )
    
    
    (4,818,586
    )Net income (loss) attributable
to common shareholders
    
    $
    11,705,336
    
    
    $
    2,334,389
    
    
    $
    (4,487,313
    )Basic weighted-average common
shares outstanding in period
    
    
    15,062,888
    
    
    
    12,287,107
    
    
    
    9,531,199Add dilutive effects of stock
options and warrants
    
    
    1,414,448
    
    
    
    1,073,408
    
    
    
    504,531Diluted weighted-average common
shares outstanding in period
    
    
    16,477,336
    
    
    
    13,360,515
    
    
    
    10,035,730Basic earnings (loss) per common share:Income from continuing operations
    
    $
    0.78
    
    
    $
    0.21
    
    
    $
    0.03Loss from discontinued operations
    
    
    
    
    
    
    (0.02
    )
    
    
    (0.50
    )Basic earnings per common share
    
    $
    0.78
    
    
    $
    0.19
    
    
    $
    (0.47
    )Diluted earnings (loss) per common
share:Income from continuing operations
    
    $
    0.71
    
    
    $
    0.20
    
    
    $
    0.03Loss from discontinued operations
    
    
    
    
    
    
    (0.02
    )
    
    
    (0.48
    )Diluted earnings per common share
    
    $
    0.71
    
    
    $
    0.18
    
    
    $
    (0.45
    )
 
 (1)
    
    The preferred stock deemed distribution for the year ended December 31, 2004
includes a non-cash charge (expense) of $593,000, which represents the estimated fair
market value of inducement conveyed to the converting Preferred Stockholders in
connection with the 2004 Private Placement discussed further in Note 2. Accounting Changes and Error Corrections
 F-13




---



##### 



Financial Instruments
 Fair Value Measurements
 Financial Assets and Financial Liabilities
 Reclassifications
 2. PRIVATE PLACEMENT AND RELATED TRANSACTIONS
 2006 Private Placement
 F-14




---



##### 



2004 Private Placement
   Stock Warrant Exercises
 Series B Preferred Stock Conversion
 F-15




---



##### 



3.
    
    DISCONTINUED OPERATIONS OF MCM
   F-16




---



##### 



4.
    
    SERIES B PREFERRED STOCK
    F-17




---



##### 



5.
    
    ACQUISITIONS AND MINORITY INTERESTS
 PowerSecure Acquisitions
   Cash
    
    $
    9,010Accounts receivable
    
    
    42,573Inventory
    
    
    41,681Equipment
    
    
    122,126Land and building
    
    
    375,000Intangible rights
    
    
    1,545,000Goodwill
    
    
    306,261Accounts payable
    
    
    (88,137
    )Net assets acquired
    
    $
    2,353,514
  CAC LLC Minority Interest
 F-18




---



##### 



PowerSecure Minority Interests
 6.
    
    DEBT
  2006
    
    
    2005Lines of credit
    
    $
    
    
    
    $
    1,314,200Term loans:Settlement note payable
    
    
    
    
    
    
    1,687,500Equipment and project loans
    
    
    
    
    
    
    1,210,604Investment loan
    
    
    
    
    
    
    629,505Total notes payable
    
    
    
    
    
    
    4,841,809Less current maturities:Settlement note payable
    
    
    
    
    
    
    (750,000
    )Equipment and project loans
    
    
    
    
    
    
    (300,453
    )Investment loan
    
    
    
    
    
    
    (197,833
    )Current maturities of notes payable
    
    
    
    
    
    
    (1,248,286
    )Long-term maturities of notes payable
    
    $
    
    
    
    $
    3,593,523
 Lines of Credit
 F-19




---



##### 



Term Loans
  F-20




---



##### 



F-21




---



##### 



7.
    
    CAPITAL LEASE OBLIGATIONS
  Year Ending December 31:2007
    
    $
    6,0582008
    
    
    2,6982009
    
    
    2,6982010
    
    
    2,6992011
    
    
    1,575Total minimum lease payments
    
    
    15,728Less: Interest included in the lease payments
    
    
    3,548Present value of minimum lease payments
    
    $
    12,180
 8.
    
    COMMITMENTS AND CONTINGENCIES AND INCOME FROM LITIGATION SETTLEMENTS
 Income from Litigation Settlements
   F-22




---



##### 



Other Matters 
    Operating Leases
 F-23




---



##### 



Year Ending December 31:2007
    
    $
    906,1552008
    
    
    784,7602009
    
    
    640,0202010
    
    
    422,1542011 and thereafter
    
    
    1,746,656Total
    
    $
    4,499,745
 Employee Benefit Plan The Company has 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, 2006, 2005
and 2004 was $320,264, $221,576 and $216,114, respectively.Employment Agreements The Company has employment agreements with certain of its executive
officers and with other key employees which provide for base salary, incentive compensation,
change-in-control provisions, non-competition provisions, severance arrangements, and other
normal employment terms and conditions.9.
    
    INCOME TAXESThe Company accounts for income taxes in accordance with FAS No. 109. Under the provisions of
FAS No. 109, a deferred tax liability or asset (net of a valuation allowance) is provided in
the financial statements by applying the provisions of applicable laws to measure the deferred
tax consequences of temporary differences that will result in net taxable or deductible
amounts in future years as a result of events recognized in the financial statements in the
current or preceding years.Income tax expense included in the consolidated statements of operations represents federal
alternative minimum tax and state income taxes in various state jurisdictions in which the
Company has taxable activities. The Companys income tax (provision) benefit is summarized as
follows:
 F-24




---



##### 



2006
    
    
    2005
    
    
    2004Current:Federal
    
    $
    (141,000
    )
    
    $
    
    
    
    $
    State
    
    
    (556,000
    )
    
    
    (46,000
    )
    
    
    (48,000
    )Total current
    
    
    (697,000
    )
    
    
    (46,000
    )
    
    
    (48,000
    )Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    State
    
    
    232,000
    
    
    
    
    
    
    
    Total deferred
    
    
    232,000
    
    
    
    
    
    
    
    Total (provision) benefit
    
    $
    (465,000
    )
    
    $
    (46,000
    )
    
    $
    (48,000
    )
  2006
    
    2005
    
    2004Federal taxes at statutory rate
    
    
    34.00
    %
    
    
    34.00
    %
    
    
    34.00
    %State taxes, net of federal benefit
    
    
    6.16
    %
    
    
    1.70
    %
    
    
    2.90
    %Permanent items
    
    
    1.81
    %Alternative minimum tax
    
    
    1.16
    %Valuation
allowance and other
    
    
    -39.31
    %
    
    
    -34.00
    %
    
    
    -34.00
    %Effective income tax rate
    
    
    3.82
    %
    
    
    1.70
    %
    
    
    2.90
    %
  2006
    
    
    2005Deferred tax assets:Net operating loss carryforwards
    
    $
    13,038,000
    
    
    $
    18,810,000Tax credit carryforwards
    
    
    45,000
    
    
    
    45,000Allowance for bad debts
    
    
    88,000
    
    
    
    37,000Other
    
    
    236,000
    
    
    
    Gross deferred tax assets
    
    
    13,407,000
    
    
    
    18,892,000Deferred tax liabilities:Differences between book and tax basis of property and
equipment and intangible assets
    
    
    2,893,000
    
    
    
    2,659,000Other
    
    
    
    
    
    
    74,000Gross deferred tax liabilities
    
    
    2,893,000
    
    
    
    2,733,000Net deferred tax asset
    
    
    10,514,000
    
    
    
    16,159,000Valuation allowance
    
    
    (10,282,000
    )
    
    
    (16,159,000
    )Deferred tax assets, net
    
    $
    232,000
    
    
    $
    
   F-25




---



##### 



At December 31, 2006, the Company had unused federal net operating losses to carry forward
against future years taxable income of approximately $43,549,000 and various state
carryforwards that expire in various amounts from 2007 to 2018. At December 31, 2006, the
Company also had unused investment tax credits, general business tax credits, and research and
development tax credit carryforwards expiring in various amounts in 2007 and 2008.10.
    
    CAPITAL STOCKStockholder Rights Plan On December 12, 1991, the Board of Directors of the Company adopted
a Stockholder Rights Plan, which was amended and restated on October 25, 2001 in order to
extend, renew and modify its terms (as amended and restated the Rights Plan), to protect
stockholder interests against takeover strategies that may not provide maximum shareholder
value. Pursuant to the Rights Plan, a dividend of one preferred stock purchase right
(Right) was issued with respect to each share of common stock outstanding on December 9,
1991, and attaches to each share of common stock issued there after by the Company. No
separate certificates representing the Rights have been issued. Each Right entitles the
holder to purchase one one-hundredth of a share of Series C. Preferred Stock of the Company at
an exercise price of $15.00 per share under certain circumstances. This portion of a
preferred share provides the holder with approximately the same dividend, voting and
liquidation rights as one share of common stock. If any person or group (referred to as an
Acquiring Person) becomes the beneficial owner of, or announces a tender offer that would
result in the Acquiring Person becoming the beneficial owner of, 15% or more of the Companys
common stock (subject to certain exceptions), then each Right, other than Rights held by the
Acquiring Person which become void, will become exercisable for common stock of the Company,
or of the Acquiring Person in the case where the Acquiring Person acquires the Company,
having a then current market value of twice the exercise price of the Right. At the option of
the Board of Directors, the Rights may be redeemed for $0.01 per Right or exchanged for shares
of Company common stock at the exchange rate of one share per Right, in each case subject to
adjustment. Until a Right is exercised, the holder thereof, as such has no rights as a
stockholder of the Company. The Rights will expire on November 30, 2011, unless such date is
extended prior thereto by the Board of Directors.11.
    
    SHARE-BASED COMPENSATIONAs of January 1, 2006, the Company adopted FAS No. 123 (Revised 2004), Share-Based Payment
(FAS 123(R)), using the modified prospective transition method, which requires measurement
of compensation cost for all stock-based awards at the fair value on date of grant and
recognition of compensation over the service period for awards expected to vest. The fair
value of restricted stock awards is determined based on the number of shares granted and the
quoted price of the Companys common stock on the date of the grant, and the fair value of
stock options is determined using the Black-Scholes valuation model. Such value is recognized
as expense over the service period, net of estimated forfeitures.Prior to January 1, 2006, the Company accounted for stock-based compensation using the
intrinsic value method prescribed in Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, and related interpretations. Under APB Opinion
No. 25, no compensation expense was recognized for stock options issued to employees because
the grant price equaled or was above the market price on the date of grant for options issued
by the Company.
 F-26




---



##### 



Stock Options
    F-27




---



##### 



WeightedAverageWeighted
    
    
    Remaining
    
    
    AggregateAverage
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Exercise Price
    
    
    Term (years)
    
    
    ValueBalance, December 31, 2005
    
    
    2,289,143
    
    
    $
    2.98Granted
    
    
    328,500
    
    
    
    12.79Exercised
    
    
    (513,632
    )
    
    
    2.51Canceled
    
    
    
    
    
    
    Forfeited
    
    
    (18,667
    )
    
    
    6.49Balance, December 31, 2006
    
    
    2,085,344
    
    
    $
    4.61
    
    
    
    6.55
    
    
    $
    7.71Exercisable, December 31, 2006
    
    
    1,545,677
    
    
    $
    3.07
    
    
    
    5.78
    
    
    $
    9.25
     F-28




---



##### 



Year Ended December 31,2005
    
    
    2004Net income (loss)  as reported
    
    $
    2,334,389
    
    
    $
    (4,487,313
    )Deduct: Total stock-based employee
compensation expense determined
under fair value based method
    
    
    (971,944
    )
    
    
    (193,047
    )Net income (loss)  pro forma
    
    $
    1,362,445
    
    
    $
    (4,680,360
    )Income (loss) per basic common share:As reported
    
    $
    0.19
    
    
    $
    (0.47
    )Pro forma
    
    $
    0.11
    
    
    $
    (0.49
    )Income (loss) per diluted common share:As reported
    
    $
    0.18
    
    
    $
    (0.45
    )Pro forma
    
    $
    0.10
    
    
    $
    (0.47
    )
 The weighted average grant date fair value of stock options issued during the years ended
December 31, 2005 and 2004 was $2.07 and $1.03, respectively. 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 2005 and 2004: expected stock price
volatility of 50% and 58%, respectively; risk-free interest rate of 4.19% and 3.53%,
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.Stock Awards During the third quarter 2004, the Company awarded, subject to restrictions, a
total of 90,000 shares of common stock to certain executives of the Company. The stock awards
vested in one-third increments and are fully vested at December 31, 2006. The Company
recorded deferred compensation expense in the amount of $198,000 for the fair market value of
the stock on the date of the award. The deferred compensation was amortized over the vesting
period. Net income (loss) for each of the years ended December 31, 2006, 2005 and 2004
includes $66,000 of compensation costs related to restricted stock awards that vested during
the period. All of the stock award compensation expense is included in general and
administrative expenses for each respective reporting period.12.
    
    SEGMENT AND RELATED INFORMATIONIn 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; and automated energy data collection
and telemetry.
 F-29




---



##### 



Natural Gas Measurement Services
 Distributed Generation
    Automated Energy Data Collection and Telemetry TM
 F-30




---



##### 



F-31




---



##### 



Summarized
Segment Financial Information
 2006
    
    
    2005
    
    
    2004Revenues:Southern Flow
    
    $
    16,160
    
    
    $
    13,307
    
    
    $
    12,759PowerSecure
    
    
    99,543
    
    
    
    30,200
    
    
    
    18,630Metretek Florida
    
    
    3,657
    
    
    
    3,242
    
    
    
    3,312Other
    
    
    1,087
    
    
    
    504
    
    
    
    476Total
    
    $
    120,447
    
    
    $
    47,253
    
    
    $
    35,177Segment profit (loss) (1):Southern Flow
    
    $
    2,769
    
    
    $
    1,824
    
    
    $
    1,940PowerSecure
    
    
    10,453
    
    
    
    2,639
    
    
    
    1,342Metretek Florida
    
    
    (20
    )
    
    
    (488
    )
    
    
    (247
    )Other
    
    
    (3,523
    )
    
    
    (2,774
    )
    
    
    (2,428
    )Total
    
    $
    9,679
    
    
    $
    1,201
    
    
    $
    607Capital expenditures:Southern Flow
    
    $
    136
    
    
    $
    131
    
    
    $
    163PowerSecure
    
    
    1,214
    
    
    
    1,107
    
    
    
    1,967Metretek Florida
    
    
    76
    
    
    
    87
    
    
    
    144Other
    
    
    28
    
    
    
    5
    
    
    
    3Total
    
    $
    1,454
    
    
    $
    1,330
    
    
    $
    2,277Depreciation and
amortization:Southern Flow
    
    $
    121
    
    
    $
    130
    
    
    $
    127PowerSecure
    
    
    689
    
    
    
    273
    
    
    
    130Metretek Florida
    
    
    107
    
    
    
    132
    
    
    
    289Other
    
    
    75
    
    
    
    29
    
    
    
    33Total
    
    $
    992
    
    
    $
    564
    
    
    $
    579Total assets:Southern Flow
    
    $
    12,049
    
    
    $
    10,182
    
    
    $
    9,589PowerSecure
    
    
    58,666
    
    
    
    16,644
    
    
    
    12,836Metretek Florida
    
    
    4,033
    
    
    
    3,663
    
    
    
    5,262Other
    
    
    14,951
    
    
    
    2,830
    
    
    
    2,524Total
    
    $
    89,699
    
    
    $
    33,319
    
    
    $
    30,211
 
 (1)
    
    Segment profit (loss) represents income from continuing operations before equity
income in our unconsolidated affiliate, minority interest, income taxes and income from
litigation settlements. F-32




---



##### 



2006
    
    
    2005
    
    
    2004United States
    
    $
    120,184,611
    
    
    $
    46,548,607
    
    
    $
    34,362,625Canada
    
    
    78,589
    
    
    
    258,671
    
    
    
    388,068Europe
    
    
    43,758
    
    
    
    290,989
    
    
    
    338,301South America
    
    
    138,574
    
    
    
    117,563
    
    
    
    60,262Asia
    
    
    
    
    
    
    
    
    
    
    10,865Other
    
    
    1,595
    
    
    
    36,722
    
    
    
    16,802Total
    
    $
    120,447,127
    
    
    $
    47,252,552
    
    
    $
    35,176,923
 13. UNAUDITED QUARTERLY CONSOLIDATED FINANCIAL DATA
  F-33




---



##### 



Quarter2006
    
    First
    
    
    Second
    
    
    Third
    
    
    FourthTotal revenues
    
    $
    14,832
    
    
    $
    36,243
    
    
    $
    33,445
    
    
    $
    35,927Operating income (loss)
    
    
    68
    
    
    
    3,729
    
    
    
    2,434
    
    
    
    3,447Income from litigation settlements
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    343Equity income
    
    
    730
    
    
    
    521
    
    
    
    627
    
    
    
    343Minority interest
    
    
    (72
    )
    
    
    
    
    
    
    
    
    
    
    Income taxes
    
    
    (88
    )
    
    
    (23
    )
    
    
    (151
    )
    
    
    (203
    )Income from continuing operations
    
    
    638
    
    
    
    4,227
    
    
    
    2,910
    
    
    
    3,930Loss on discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    638
    
    
    $
    4,227
    
    
    $
    2,910
    
    
    $
    3,930Basic earnings per common share:Income from continuing operations
    
    $
    0.05
    
    
    $
    0.27
    
    
    $
    0.19
    
    
    $
    0.25Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Basic earnings per common share
    
    $
    0.05
    
    
    $
    0.27
    
    
    $
    0.19
    
    
    $
    0.25Diluted earnings per common share:Income from continuing operations
    
    $
    0.04
    
    
    $
    0.25
    
    
    $
    0.17
    
    
    $
    0.23Loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Diluted earnings per common share
    
    $
    0.04
    
    
    $
    0.25
    
    
    $
    0.17
    
    
    $
    0.23
 Quarter2005
    
    First
    
    
    Second
    
    
    Third
    
    
    FourthTotal revenues
    
    $
    7,811
    
    
    $
    14,036
    
    
    $
    10,177
    
    
    $
    15,229Operating income (loss)
    
    
    (451
    )
    
    
    615
    
    
    
    (195
    )
    
    
    1,232Equity income
    
    
    557
    
    
    
    365
    
    
    
    419
    
    
    
    349Minority interest
    
    
    (71
    )
    
    
    (46
    )
    
    
    (52
    )
    
    
    (42
    )Income taxes
    
    
    (13
    )
    
    
    
    
    
    
    (3
    )
    
    
    (30
    )Income from continuing operations
    
    
    22
    
    
    
    934
    
    
    
    169
    
    
    
    1,509Loss on discontinued operations
    
    
    (300
    )
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    $
    (278
    )
    
    $
    934
    
    
    $
    169
    
    
    $
    1,509Basic earnings (loss) per common share:Income from continuing operations
    
    $
    
    
    
    $
    0.08
    
    
    $
    0.01
    
    
    $
    0.12Loss from discontinued operations
    
    
    (0.02
    )
    
    
    
    
    
    
    
    
    
    
    Basic earnings (loss) per common share
    
    $
    (0.02
    )
    
    $
    0.08
    
    
    $
    0.01
    
    
    $
    0.12Diluted earnings (loss) per common share:Income from continuing operations
    
    $
    
    
    
    $
    0.07
    
    
    $
    0.01
    
    
    $
    0.11Loss from discontinued operations
    
    
    (0.02
    )
    
    
    
    
    
    
    
    
    
    
    Diluted earnings (loss) per common share
    
    $
    (0.02
    )
    
    $
    0.07
    
    
    $
    0.01
    
    
    $
    0.11
  F-34




---



##### 



SCHEDULE II
 METRETEK TECHNOLOGIES, INC.
 VALUATION AND QUALIFYING ACCOUNTS
Years Ended December 31, 2006, 2005 and 2004
(In thousands)
 Additions:Balance at
    
    Charged to
    
    
    
    
    
    Balance atBeginning
    
    Operating
    
    Deductions:
    
    End ofDescription
    
    of Period
    
    Expenses
    
    Write-offs
    
    PeriodAllowance for doubtful accounts:Year ended December 31, 2006
    
    $
    95
    
    
    $
    146
    
    
    $
    (16
    ) (1)
    
    $
    225Year ended December 31, 2005
    
    
    741
    
    
    
    12
    
    
    
    (658
    ) (1)
    
    
    95Year ended December 31, 2004
    
    
    201
    
    
    
    892
    
    
    
    (352
    ) (1)
    
    
    741Inventory reserve:Year ended December 31, 2006
    
    $
    166
    
    
    $
    55
    
    
    $
    (19
    )(2)
    
    $
    202Year ended December 31, 2005
    
    
    1,548
    
    
    
    161
    
    
    
    (1,543
    )(2)
    
    
    166Year ended December 31, 2004
    
    
    288
    
    
    
    1,614
    
    
    
    (354
    ) (2)
    
    
    1,548
 
 (1)
    
    Represents amounts written off as uncollectible, less recoveries.(2)
    
    Represents amounts written off against reserve, less recoveries.




---



##### 



MARCUM MIDSTREAM 1995-2 BUSINESS TRUST AND SUBSIDIARY
 TABLE OF CONTENTS
 PageREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    
    G - 2CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2006 AND 2005
    
    G - 3CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED
DECEMBER 31, 2006, 2005 AND 2004
    
    G - 4CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY FOR
THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
    
    G - 5CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED
DECEMBER 31, 2006, 2005 AND 2004
    
    G - 6NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
    
    G - 7
 G-1




---



##### 



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 G-2




---



##### 



MARCUM MIDSTREAM 1995-2 BUSINESS TRUST AND SUBSIDIARY
 
 CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2006 AND 2005
 2006
    
    
    2005ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    1,580,890
    
    
    $
    734,040Trade receivables (net of allowance for doubtful accounts
$9,454 and $9,777, respectively)
    
    
    1,209,618
    
    
    
    1,439,182Prepaid expenses
    
    
    25,667
    
    
    
    Total current assets
    
    
    2,816,175
    
    
    
    2,173,222PROPERTY, PLANT AND EQUIPMENT, AT COST:Wells and storage tanks
    
    
    6,048,244
    
    
    
    6,008,642Equipment
    
    
    2,612,685
    
    
    
    2,496,013Land and improvements
    
    
    1,662,041
    
    
    
    1,483,892Total
    
    
    10,322,970
    
    
    
    9,988,547Less accumulated depletion and depreciation
    
    
    4,494,252
    
    
    
    3,808,457Property, plant and equipment, net
    
    
    5,828,718
    
    
    
    6,180,090OTHER ASSETS:Deferred loan charges (net of accumulated amortization
of $0 and $21,439, respectively)
    
    
    
    
    
    
    4,263Intangible assets (net of accumulated amortization
of $10,167 and $8,834, respectively)
    
    
    9,833
    
    
    
    11,166Total other assets
    
    
    9,833
    
    
    
    15,429TOTAL
    
    $
    8,654,726
    
    
    $
    8,368,741LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    245,712
    
    
    $
    530,713Administration fee
    
    
    14,125
    
    
    
    4,708Management fee
    
    
    132,361
    
    
    
    54,980Operator fee
    
    
    31,833
    
    
    
    8,528Note payable (Note 3)
    
    
    571,656
    
    
    
    540,862Accrued expenses
    
    
    85,695
    
    
    
    12,115Total current liabilities
    
    
    1,081,382
    
    
    
    1,151,906LONG-TERM NOTE PAYABLE (Note 3)
    
    
    341,142
    
    
    
    912,799COMMITMENTS AND CONTINGENCIES (Note 4)SHAREHOLDERS EQUITY
    
    
    7,232,202
    
    
    
    6,304,036TOTAL
    
    $
    8,654,726
    
    
    $
    8,368,741
  G-3




---



##### 



MARCUM MIDSTREAM 1995-2 BUSINESS TRUST AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
 2006
    
    
    2005
    
    
    2004REVENUE:Disposal fees and mineral product sales
    
    $
    10,945,690
    
    
    $
    10,239,782
    
    
    $
    7,202,537Interest and other
    
    
    82,081
    
    
    
    23,303
    
    
    
    6,111Total revenue
    
    
    11,027,771
    
    
    
    10,263,085
    
    
    
    7,208,648COSTS AND EXPENSES:Cost of operations
    
    
    3,279,631
    
    
    
    2,778,138
    
    
    
    1,899,622Depreciation and amortization
    
    
    687,128
    
    
    
    601,020
    
    
    
    455,836Well development costs
    
    
    
    
    
    
    360,096
    
    
    
    General and administrative costs
    
    
    330,408
    
    
    
    391,799
    
    
    
    354,590Administration fee
    
    
    56,500
    
    
    
    56,500
    
    
    
    56,500Management fee
    
    
    547,285
    
    
    
    511,989
    
    
    
    360,127Operator fee
    
    
    127,332
    
    
    
    102,332
    
    
    
    77,332Interest and finance charges
    
    
    71,321
    
    
    
    66,417
    
    
    
    95,241Total costs and expenses
    
    
    5,099,605
    
    
    
    4,868,291
    
    
    
    3,299,248NET INCOME
    
    $
    5,928,166
    
    
    $
    5,394,794
    
    
    $
    3,909,400
 G-4
       MARCUM MIDSTREAM 1995-2 BUSINESS TRUST AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
 Performance
    
    
    PreferredShareholders
    
    
    Shareholders
    
    
    TotalBALANCE, JANUARY 1, 2004
    
    $
    2,271,400
    
    
    $
    2,128,442
    
    
    $
    4,399,842Cash distributions paid or payable
    
    
    (1,050,000
    )
    
    
    (1,550,000
    )
    
    
    (2,600,000
    )Net income
    
    
    1,933,497
    
    
    
    1,975,903
    
    
    
    3,909,400Conversion of 100 performance shares
into 113 preferred shares
    
    
    (3,154,897
    )
    
    
    3,154,897
    
    
    
    BALANCE, DECEMBER 31, 2004
    
    
    
    
    
    
    5,709,242
    
    
    
    5,709,242Cash distributions paid
    
    
    
    
    
    
    (4,800,000
    )
    
    
    (4,800,000
    )Net income
    
    
    
    
    
    
    5,394,794
    
    
    
    5,394,794BALANCE, DECEMBER 31, 2005
    
    
    
    
    
    
    6,304,036
    
    
    
    6,304,036Cash distributions paid
    
    
    
    
    
    
    (5,000,000
    )
    
    
    (5,000,000
    )Net income
    
    
    
    
    
    
    5,928,166
    
    
    
    5,928,166BALANCE, DECEMBER 31, 2006
    
    
    
    
    
    $
    7,232,202
    
    
    $
    7,232,202
 G-5
       MARCUM MIDSTREAM 1995-2 BUSINESS TRUST AND SUBSIDIARY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
 2006
    
    
    2005
    
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    $
    5,928,166
    
    
    $
    5,394,794
    
    
    $
    3,909,400Adjustments to reconcile net income to net cash
provided by operating activities:Depreciation and amortization
    
    
    687,128
    
    
    
    601,020
    
    
    
    455,836Changes in other assets and liabilities:Trade receivables, net
    
    
    229,564
    
    
    
    (290,310
    )
    
    
    (241,837
    )Accounts payable
    
    
    (285,001
    )
    
    
    425,340
    
    
    
    2,241Administration fee
    
    
    9,417
    
    
    
    
    
    
    
    (9,417
    )Management fee
    
    
    77,381
    
    
    
    (25,391
    )
    
    
    (1,046
    )Operator fee
    
    
    23,305
    
    
    
    2,084
    
    
    
    (12,889
    )Accrued expenses
    
    
    73,580
    
    
    
    (2,783
    )
    
    
    5,934Prepaid expenses and other
    
    
    (21,404
    )
    
    
    7,206
    
    
    
    5,931Net cash provided by operating activities
    
    
    6,722,136
    
    
    
    6,111,960
    
    
    
    4,114,153CASH FLOWS FROM INVESTING ACTIVITIES:Asset acquisitions and development
    
    
    (175,804
    )
    
    
    (1,231,640
    )
    
    
    (589,047
    )Other capital expenditures
    
    
    (158,619
    )
    
    
    (397,195
    )
    
    
    (341,930
    )Net cash used in investing activities
    
    
    (334,423
    )
    
    
    (1,628,835
    )
    
    
    (930,977
    )CASH FLOWS FROM FINANCING ACTIVITIES:Proceeds from note payable
    
    
    
    
    
    
    1,004,658
    
    
    
    Payments on note payable
    
    
    (540,863
    )
    
    
    (571,558
    )
    
    
    (568,628
    )Distributions to preferred shareholders
    
    
    (5,000,000
    )
    
    
    (4,800,000
    )
    
    
    (1,550,000
    )Distributions paid or payable to performance
shareholders
    
    
    
    
    
    
    
    
    
    
    (1,050,000
    )Net cash used in financing activities
    
    
    (5,540,863
    )
    
    
    (4,366,900
    )
    
    
    (3,168,628
    )NET INCREASE IN CASH AND CASH EQUIVALENTS
    
    
    846,850
    
    
    
    116,225
    
    
    
    14,548CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR
    
    
    734,040
    
    
    
    617,815
    
    
    
    603,267CASH AND CASH EQUIVALENTS AT END OF YEAR
    
    $
    1,580,890
    
    
    $
    734,040
    
    
    $
    617,815
  G-6




---



##### 



MARCUM MIDSTREAM 1995-2 BUSINESS TRUST AND SUBSIDIARY
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2006, 2005 AND 2004
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Organization
   Principles of Consolidation
 Revenue Recognition
 Statements of Cash Flows
 2006
    
    2005
    
    2004Cash paid for interest
    
    $
    67,058
    
    
    $
    61,939
    
    
    $
    73,880Non-cash transaction 
Conversion of performance shares
to preferred shares of the Trust
    
    $
    
    
    
    $
    
    
    
    $
    3,154,897
 Receivables and Credit Policies
 G-7




---



##### 



Property, Plant and Equipment
 Other Intangibles
 Income Taxes
 Use of Estimates
 Major Customers
 2. ASSET ACQUISITION
  Intangibles
    
    $
    395,600Equipment
    
    
    104,400$
    500,000
  3. NOTE PAYABLE
  G-8




---



##### 



Years Ended December 31,2007
    
    
    571,6562008
    
    
    341,142$
    912,798
 4. COMMITMENTS AND CONTINGENCIES
   G-9




---



##### 



5. TRUST GENERAL AND ADMINISTRATIVE COSTS
  6. CASH DISTRIBUTIONS AND PROFIT ALLOCATIONS
    G-10




---



##### 



7. OTHER RELATED PARTY TRANSACTIONS
     G-11




---



##### 



METRETEK TECHNOLOGIES, INC.
 Form 10-K
For the Year Ended December 31, 2006
 EXHIBIT LIST
 Number
    
    Description(3.1)
    
    Second Restated Certificate of Incorporation of Metretek
Technologies, Inc. (Incorporated by reference to Exhibit 4.1 to Registrant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 Registrants Registration
Statement on Form S-8, Registration No. 333-62714.)(4.1)
    
    Specimen Common Stock Certificate. (Incorporated by reference
to Exhibit 4.1 to Registrants Registration Statement on Form S-18,
Registration No. 33-44558.)(4.2)
    
    Amended and Restated Rights Agreement, dated as of November
30, 2001, between Metretek Technologies, Inc. and Computershare Investor
Services, LLC. (Incorporated by reference to Exhibit 4.1 to Registrants
Registration Statement on Form 8-A/A, Amendment No. 5, filed November 30,
2001.)(4.3)
    
    Amendment No. 1, dated as of April 22, 2004, to Amended and Restated Rights
Agreement between Metretek Technologies, Inc. and ComputerShare Investor
Services, LLC. (Incorporated by reference to Exhibit 10.6 to Registrants
Current Report on Form 8-K filed May 6, 2004).(4.4)
    
    Amendment No. 2, dated as of March 29, 2006, to Amended and Restated Rights
Agreement between Metretek Technologies, Inc. and ComputerShare Investor
Services, LLC. (Incorporated by reference to Exhibit 10.3 to Registrants
Current Report on Form 8-K filed March 30, 2006).(4.5)
    
    Form of Registration Rights Agreement, dated as of April 29, 2004, by and
among Metretek Technologies, Inc. and the investors signatory thereto.
(Incorporated by reference to Exhibit 10.2 to Registrants Current Report on
Form 8-K filed May 6, 2004).(4.6)
    
    Form of Securities Purchase Agreement, dated as of March 29, 2006, by and
among Metretek Technologies, Inc. , the selling stockholders named therein and
the investors named therein. (Incorporated by reference to Exhibit 10.4 to
Registrants Current Report on Form 8-K filed March 30, 2006).(4.7)
    
    Form of Registration Rights Agreement, dated as of March 29, 2006, by and
among Metretek Technologies, Inc. and the investors named therein.
(Incorporated by reference to Exhibit 10.5 to Registrants Current Report on
Form 8-K filed March 30, 2006).(10.1)
    
    1991 Stock Option Plan, as amended and restated December 5, 1996.
(Incorporated by reference to Exhibit 10.2 to Registrant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 Registrants Annual Report on
Form 10-KSB for the year ended December 31, 1996.)*
 X-1




---



##### 



Number
    
    Description(10.3)
    
    Second Amended and Restated Employment Agreement, dated as of March 20,
2006, by and between Metretek Technologies, Inc. and W. Phillip Marcum.
(Incorporated by reference to Exhibit 10.3 to Registrants Annual Report on
Form 10-K for the fiscal year ended December 31, 2005.)*(10.4)
    
    Second Amended and Restated Employment Agreement, dated as of March 20,
2006, by and between Metretek Technologies, Inc. and A. Bradley Gabbard.
(Incorporated by reference to Exhibit 10.4 to Registrants Annual Report on
Form 10-K for the fiscal year ended December 31, 2005.)*(10.5)
    
    Metretek Technologies, Inc. 1998 Stock Incentive Plan, amended and restated
as of June 12, 2006. (Incorporated by reference to Exhibit 4.3 to Registrants
Registration Statement on Form S-8, Registration No. 333-134938.)*(10.6)
    
    Form of Incentive Stock Option Agreement under the Metretek Technologies,
Inc. 1998 Stock Incentive Plan, as amended. (Incorporated by reference to
Exhibit 10.1 to Registrants Current Report on Form 8-K, filed August 25,
2004)*(10.7)
    
    Form of Non-Qualified Stock Option Agreement under the Metretek
Technologies, Inc. 1998 Stock Incentive Plan, as amended. (Incorporated by
reference to Exhibit 10.2 to Registrants Current Report on Form 8-K, filed
August 25, 2004)*(10.8)
    
    Form of Restricted Stock Agreement under the Metretek Technologies, Inc.
1998 Stock Incentive Plan, as amended. (Incorporated by reference to Exhibit
10.3 to Registrants Current Report on Form 8-K, filed August 25, 2004)*(10.9)
    
    Form of Indemnification Agreement between Metretek Technologies, Inc. and
each of its directors. (Incorporated by reference to Exhibit 10.21 to
Registrants Annual Report on Form 10-KSB for the year ended December 31,
1999.)(10.10)
    
    Prototype  Basic Plan Document for the Metretek  Southern Flow Savings and
Investment Plan. (Incorporated by reference to Exhibit 4.7 to Registrants
Registration Statement on Form S-8, Registration No. 333-42698.)*(10.11)
    
    Adoption Agreement for the Metretek  Southern Flow Savings and Investment
Plan. (Incorporated by reference to Exhibit 4.8 to Registrants Registration
Statement on Form S-8, Registration No. 333-42698.)*(10.12)
    
    Amended and Restated Employment and Non-Competition Agreement, dated as of
November 15, 2005, between PowerSecure, Inc. and Sidney Hinton. (Incorporated
by reference to Exhibit 10.1 to Registrants Current Report on Form 8-K filed
November 21, 2005)*(10.13)
    
    Employment and Non-Competition Agreement, dated as of November 15, 2005,
between Southern Flow Companies, Inc. and John Bernard. (Incorporated by
reference to Exhibit 10.2 to Registrants Current Report on Form 8-K filed
November 21, 2005)*(10.14)
    
    Employment and Non-Competition Agreement, dated as of February 6, 2006,
between EnergyLite, Inc. and Ronald W. Gilcrease (Incorporated by reference to
Exhibit 10.1 to Registrants Current Report on Form 8-K filed February 10,
2006)*(10.15)
    
    Amended Stipulation of Settlement, filed March 3, 2004, among Douglas W.
Heins on behalf of himself and all others similarly situated, and Metretek
Technologies, Inc., et. al. (Incorporated by reference to Exhibit 10.39 to
Registrants Annual Report on Form 10-K for the year ended December 31, 2003.)(10.16)
    
    Order Granting Final Approval of the Partial Settlement, dated June 11,
2004. (Incorporated by reference to Exhibit 99.1 to Registrants Current Report
on Form 8-K filed June 14, 2004.)
 X-2




---



##### 



Number
    
    Description(10.17)
    
    Summary Sheet of Compensation of Non-Employee Directors. (Filed herewith.)*(10.18)
    
    Lease Agreement, dated March 2005, between H & C Holdings, LLC and
PowerSecure, Inc. (Incorporated by reference to Exhibit 10.19 to Registrants
Annual Report on Form 10-K for the fiscal year ended December 31, 2005.)*(10.19)
    
    Credit Agreement, dated as of September 2, 2005, among First National Bank
of Colorado, Metretek Technologies, Inc., Southern Flow Companies, Inc.,
PowerSecure, Inc. and Metretek Incorporated. (Incorporated by reference to
Exhibit 10.1 to Registrants Current Report on Form 8-K filed September 9,
2005.)(10.20)
    
    Form of Security Agreement, dated as of September 2, 2005, by each of
Metretek Technologies, Inc., Southern Flow Companies, Inc., PowerSecure, Inc.
and Metretek Incorporated and First National Bank of Colorado. (Incorporated by
reference to Exhibit 10.2 to Registrants Current Report on Form 8-K filed
September 9, 2005.)(10.21)
    
    Form of Guaranty, dated as of September 2, 2005, by Metretek Technologies,
Inc. for the benefit of First National Bank of Colorado. (Incorporated by
reference to Exhibit 10.3 to Registrants Current Report on Form 8-K filed
September 9, 2005.)(10.22)
    
    First Modification to Loan Documents, effective as of June 30, 2006, by and
among First National Bank of Colorado, Metretek Technologies, Inc., Southern
Flow Companies, Inc., PowerSecure, Inc. and Metretek Incorporated.
(Incorporated by reference to Exhibit 10.1 to Registrants Quarterly Report on
Form 10-Q for the fiscal quarter ended June 30, 2006.)(10.23)
    
    PowerSecure, Inc. Key Employee Long-Term Retention Plan. (Incorporated by
reference to Exhibit 10.2 to Registrants Quarterly Report on Form 10-K for the
fiscal quarter ended June 30, 2006.)*(14.1)
    
    Metretek Technologies, Inc. Code of Ethics for Principal Executive Officer
and Senior Financial Officers. (Incorporated by reference to Exhibit 14.1 to
Registrants Annual Report on Form 10-K for the year ended December 31, 2003.)(14.2)
    
    Metretek Technologies, Inc. Code of Business Conduct and Ethics.
(Incorporated by reference to Exhibit 14.2 to Registrants Annual Report on
Form 10-K for the year ended December 31, 2003.)(21.1)
    
    Subsidiaries of Metretek Technologies, Inc. (Filed herewith.)(23.1)
    
    Consent of Hein & Associates LLP, Independent Registered Public Accounting
Firm (Filed herewith.)(31.1))
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or
15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith.)(31.2)
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or
15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith.)(32.1)
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
and Rule 13a-14(b) or 15d-14(b) under the Securities Exchange Act of 1934, as
amended, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Filed herewith.)
 X-3




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##### 



Number
    
    Description(32.2)
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
and Rule 13a-14(b) or 15d-14(b) under the Securities Exchange Act of 1934, as
amended, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Filed herewith.)
 
 *
    
    Indicates management contract or compensation plan or arrangement. X-4