##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, DC 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the three months ended March 31, 2009
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from to  to
 Commission File No. 0-20600
 
 ZOLTEK COMPANIES, INC.
  Missouri
    
    43-1311101(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)3101 McKelvey Road, St. Louis, Missouri
    
    63044(Address of principal executive offices)
    
    (Zip Code)
  þ o
 o o
  Large Accelerated Filer þ
    
    Accelerated Filer o
    
    Non-accelerated Filer o
    
    Smaller Reporting Company o
 o þ




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##### 



ZOLTEK COMPANIES, INC.
INDEX
 PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements (Unaudited)
    
    
    3Condensed Consolidated Balance Sheet  March 31, 2009 and September 30, 2008
    
    
    3Condensed Consolidated Statement of Operations  Three Months and Six Months Ended
March 31, 2009 and 2008
    
    
    4Condensed Consolidated Statement of Changes in Shareholders Equity  Six Months Ended March
31, 2009
    
    
    5Condensed Consolidated Statement of Cash Flows  Six Months Ended March 31, 2009 and
2008
    
    
    6Notes to Condensed Consolidated Financial Statements (Unaudited)
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4. Controls and Procedures
    
    
    26PART II. OTHER INFORMATION
    
    
    27Item 1. Legal Proceedings
    
    
    27Item 4. Submission of Matters to a Vote of Security Holders
    
    
    27Item 6. Exhibits
    
    
    27SIGNATURES
    
    
    28EXHIBIT INDEX
    
    
    29Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 ZOLTEK COMPANIES, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEET
 March 31,
    
    
    September 30,2009
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    16,476
    
    
    $
    29,224Restricted cash
    
    
    
    
    
    
    23,500Accounts receivable, less allowance for doubtful accounts of $1,299
and $1,754, respectively
    
    
    31,470
    
    
    
    42,690Inventories, net
    
    
    50,089
    
    
    
    45,659Other current assets
    
    
    12,808
    
    
    
    9,432Total current assets
    
    
    110,843
    
    
    
    150,505Property and equipment, net
    
    
    236,572
    
    
    
    288,894Other assets
    
    
    471
    
    
    
    765Total assets
    
    $
    347,886
    
    
    $
    440,164Liabilities and Shareholders EquityCurrent liabilities:Legal liabilities
    
    $
    
    
    
    $
    29,083Credit lines
    
    
    11,464
    
    
    
    5,174Current maturities of long-term debt
    
    
    7,224
    
    
    
    7,427Trade accounts payable
    
    
    9,478
    
    
    
    15,093Accrued expenses and other liabilities
    
    
    7,377
    
    
    
    9,278Construction payables
    
    
    2,664
    
    
    
    8,450Total current liabilities
    
    
    38,207
    
    
    
    74,505Long-term debt, less current maturities
    
    
    1,690
    
    
    
    3,562Hungarian grant, long-term
    
    
    7,424
    
    
    
    10,882Deferred tax liabilities
    
    
    10,847
    
    
    
    4,521Other long-term liabilities
    
    
    17
    
    
    
    28Total liabilities
    
    
    58,185
    
    
    
    93,498Commitments and contingencies (see Note 7)
    
    
    
    
    
    
    Shareholders equity:Preferred stock, $.01 par value, 1,000,000 shares authorized,
no shares issued or outstanding
    
    
    
    
    
    
    Common stock, $.01 par value, 50,000,000 shares authorized, 34,405,692 and
34,389,428 shares issued and outstanding at March 31, 2009 and
September 30, 2008, respectively
    
    
    344
    
    
    
    344Additional paid-in capital
    
    
    493,025
    
    
    
    491,175Accumulated other comprehensive (loss) income
    
    
    (48,094
    )
    
    
    11,730Accumulated deficit
    
    
    (155,574
    )
    
    
    (156,583
    )Total shareholders equity
    
    
    289,701
    
    
    
    346,666Total liabilities and shareholders equity
    
    $
    347,886
    
    
    $
    440,164
   3




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ZOLTEK COMPANIES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months ended March 31,
    
    
    Six months ended March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    36,006
    
    
    $
    49,581
    
    
    $
    74,635
    
    
    $
    89,653Cost of sales
    
    
    26,888
    
    
    
    35,556
    
    
    
    55,253
    
    
    
    64,869Gross profit
    
    
    9,118
    
    
    
    14,025
    
    
    
    19,382
    
    
    
    24,784Application and development costs
    
    
    1,726
    
    
    
    2,062
    
    
    
    3,448
    
    
    
    3,958Selling, general and administrative expenses
    
    
    5,341
    
    
    
    3,653
    
    
    
    10,408
    
    
    
    7,725Operating income
    
    
    2,051
    
    
    
    8,310
    
    
    
    5,526
    
    
    
    13,101Other income (expense):Interest income
    
    
    105
    
    
    
    847
    
    
    
    324
    
    
    
    2,039Gain on foreign currency transactions
    
    
    1,073
    
    
    
    119
    
    
    
    1,251
    
    
    
    70Other, net
    
    
    (206
    )
    
    
    (344
    )
    
    
    (460
    )
    
    
    (437
    )Interest expense, excluding amortization of financing fees and
debt discount
    
    
    (377
    )
    
    
    (374
    )
    
    
    (945
    )
    
    
    (1,051
    )Amortization of financing fees and debt discount
    
    
    (1,593
    )
    
    
    (1,843
    )
    
    
    (3,557
    )
    
    
    (3,398
    )Income from operations before income taxes
    
    
    1,053
    
    
    
    6,715
    
    
    
    2,139
    
    
    
    10,324Income tax expense
    
    
    580
    
    
    
    2,404
    
    
    
    1,130
    
    
    
    3,409Net income
    
    $
    473
    
    
    $
    4,311
    
    
    $
    1,009
    
    
    $
    6,915Basic and diluted income per share
    
    $
    0.01
    
    
    $
    0.13
    
    
    $
    0.03
    
    
    $
    0.20Weighted average common shares outstanding  basic
    
    
    34,405,692
    
    
    
    33,942,747
    
    
    
    34,405,156
    
    
    
    33,848,966Weighted average common shares outstanding  diluted
    
    
    34,482,098
    
    
    
    34,041,851
    
    
    
    34,486,450
    
    
    
    34,007,284
   4




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ZOLTEK COMPANIES, INC.
 
 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
 Total
    
    
    
    
    
    
    Additional
    
    
    Accumulated OtherShareholders
    
    
    Common
    
    
    Paid-In
    
    
    Comprehensive
    
    
    AccumulatedEquity
    
    
    Stock
    
    
    Capital
    
    
    (Loss) Income
    
    
    DeficitBalance, September 30, 2008
    
    $
    346,666
    
    
    $
    344
    
    
    $
    491,175
    
    
    $
    11,730
    
    
    $
    (156,583
    )Convertible debt converted
    
    
    251
    
    
    
    
    
    
    
    251
    
    
    
    
    
    
    
    Stock option compensation expense
    
    
    1,599
    
    
    
    
    
    
    
    1,599
    
    
    
    
    
    
    
    Net income
    
    
    1,009
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,009Foreign currency translation adjustment
    
    
    (59,824
    )
    
    
    
    
    
    
    
    
    
    
    (59,824
    )
    
    
    Balance, March 31, 2009
    
    $
    289,701
    
    
    $
    344
    
    
    $
    493,025
    
    
    $
    (48,094
    )
    
    $
    (155,574
    )
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 Three months ended March 31,
    
    
    Six months ended March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Net income
    
    $
    473
    
    
    $
    4,311
    
    
    $
    1,009
    
    
    $
    6,915Foreign currency translation adjustment
    
    
    (32,364
    )
    
    
    11,200
    
    
    
    (59,824
    )
    
    
    13,275Comprehensive (loss) income
    
    $
    (31,891
    )
    
    $
    15,511
    
    
    $
    (58,815
    )
    
    $
    20,190
   5




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ZOLTEK COMPANIES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
   Six months ended March 31,2009
    
    
    2008Cash flows from operating activities:Net income
    
    $
    1,009
    
    
    $
    6,915Adjustments to reconcile net income to net cash from operating activities:Depreciation
    
    
    8,026
    
    
    
    7,162Amortization of financing fees and debt discount
    
    
    3,557
    
    
    
    3,398Deferred taxes
    
    
    590
    
    
    
    1,306Foreign currency transaction (gains) losses
    
    
    (882
    )
    
    
    205Stock option compensation expense
    
    
    1,599
    
    
    
    1,124Loss on disposal of fixed assets
    
    
    321
    
    
    
    Changes in assets and liabilities:Decrease (increase) in accounts receivable
    
    
    3,195
    
    
    
    (2,866
    )Increase in inventories
    
    
    (10,489
    )
    
    
    (13,034
    )Decrease (increase) in other current assets and other assets
    
    
    126
    
    
    
    (2,054
    )Decrease in trade accounts payable
    
    
    (2,228
    )
    
    
    (535
    )Increase in accrued expenses and other liabilities
    
    
    2,581
    
    
    
    1,719Decrease in legal liabilities
    
    
    (5,399
    )
    
    
    Net cash provided by operating activities
    
    
    2,006
    
    
    
    3,340Cash flows from investing activities:Purchases of property and equipment
    
    
    (13,054
    )
    
    
    (59,705
    )(Decrease) increase in construction payables
    
    
    (3,890
    )
    
    
    3,762Proceeds received from Hungarian grant
    
    
    
    
    
    
    3,253Change in cash restricted for letters of credit
    
    
    
    
    
    
    (9,685
    )Net cash used in investing activities
    
    
    (16,944
    )
    
    
    (62,375
    )Cash flows from financing activities:Proceeds from exercise of stock options and warrants
    
    
    
    
    
    
    943Repayment of convertible debt
    
    
    (5,150
    )
    
    
    Borrowings (repayment) of notes payable and long-term debt
    
    
    7,195
    
    
    
    (8,080
    )Net cash (used for) provided by financing activities
    
    
    2,045
    
    
    
    (7,137
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    145
    
    
    
    267Net decrease in cash and cash equivalents
    
    
    (12,748
    )
    
    
    (65,905
    )Cash and cash equivalents at beginning of period
    
    
    29,224
    
    
    
    121,761Cash and cash equivalents at end of period
    
    $
    16,476
    
    
    $
    55,856Supplemental disclosures of cash flow information:Non-cash conversion of convertible debentures
    
    
    251
    
    
    
    5,670
   6




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ZOLTEK COMPANIES, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 1. ORGANIZATION AND BASIS OF PRESENTATION
  Basis of Presentation
   Adoption of New Accounting Standards
  2. INVENTORIES
  March 31,
    
    
    September 30,2009
    
    
    2008Raw materials
    
    $
    10,192
    
    
    $
    10,749Work-in-process
    
    
    9,423
    
    
    
    14,962Finished goods
    
    
    29,627
    
    
    
    18,844Supplies and other
    
    
    847
    
    
    
    1,104$
    50,089
    
    
    $
    45,659
   7




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3. SEGMENT INFORMATION
   Three months ended March 31, 2009Carbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalNet sales
    
    $
    28,914
    
    
    $
    6,490
    
    
    $
    602
    
    
    $
    36,006Cost of sales
    
    
    21,350
    
    
    
    5,180
    
    
    
    358
    
    
    
    26,888Gross profit
    
    
    7,564
    
    
    
    1,310
    
    
    
    244
    
    
    
    9,118Operating income (loss)
    
    
    4,730
    
    
    
    603
    
    
    
    (3,282
    )
    
    
    2,051Depreciation
    
    
    3,293
    
    
    
    390
    
    
    
    270
    
    
    
    3,953Capital expenditures
    
    
    4,538
    
    
    
    101
    
    
    
    81
    
    
    
    4,720
 Three months ended March 31, 2008Carbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalNet sales
    
    $
    41,857
    
    
    $
    6,564
    
    
    $
    1,160
    
    
    $
    49,581Cost of sales
    
    
    29,481
    
    
    
    5,084
    
    
    
    991
    
    
    
    35,556Gross profit
    
    
    12,376
    
    
    
    1,480
    
    
    
    169
    
    
    
    14,025Operating income (loss)
    
    
    10,335
    
    
    
    859
    
    
    
    (2,884
    )
    
    
    8,310Depreciation
    
    
    2,935
    
    
    
    467
    
    
    
    400
    
    
    
    3,802Capital expenditures
    
    
    9,577
    
    
    
    307
    
    
    
    2,341
    
    
    
    12,225
 Six months ended March 31, 2009Carbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalNet sales
    
    $
    61,630
    
    
    $
    11,755
    
    
    $
    1,250
    
    
    $
    74,635Cost of sales
    
    
    45,080
    
    
    
    9,183
    
    
    
    990
    
    
    
    55,253Gross profit
    
    
    16,550
    
    
    
    2,572
    
    
    
    260
    
    
    
    19,382Operating income (loss)
    
    
    11,236
    
    
    
    1,134
    
    
    
    (6,844
    )
    
    
    5,526Depreciation
    
    
    6,664
    
    
    
    809
    
    
    
    553
    
    
    
    8,026Capital expenditures
    
    
    12,363
    
    
    
    537
    
    
    
    154
    
    
    
    13,054
 Six months ended March 31, 2008Carbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalNet sales
    
    $
    75,976
    
    
    $
    11,597
    
    
    $
    2,080
    
    
    $
    89,653Cost of sales
    
    
    54,439
    
    
    
    8,797
    
    
    
    1,633
    
    
    
    64,869Gross profit
    
    
    21,537
    
    
    
    2,800
    
    
    
    447
    
    
    
    24,784Operating income (loss)
    
    
    18,151
    
    
    
    942
    
    
    
    (5,992
    )
    
    
    13,101Depreciation
    
    
    5,528
    
    
    
    1,009
    
    
    
    625
    
    
    
    7,162Capital expenditures
    
    
    21,639
    
    
    
    623
    
    
    
    2,443
    
    
    
    24,705
 Total AssetsCarbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalMarch 31, 2009
    
    $
    280,667
    
    
    $
    28,070
    
    
    $
    39,149
    
    
    $
    347,886September 30, 2008
    
    
    344,974
    
    
    
    32,705
    
    
    
    62,485
    
    
    
    440,164
  8




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##### Table of Contents



4. FINANCING
 Revolving Credit Facility
   Hungarian Grant
  Convertible Debt
  Three months ended December 31, 2008Numberof shares
    
    
    Conversionconverted
    
    
    price
    
    
    Equity valueMay 2006
    
    
    
    
    
    $
    
    
    
    $
    July 2006
    
    
    16,264
    
    
    
    15.40
    
    
    
    250,466October 2006
    
    
    
    
    
    
    
    
    
    
    16,264
    
    
    
    
    
    
    $
    250,466
 Three months ended March 31, 2008
    
    
    Three months ended December 31, 2007Number
    
    
    
    
    
    
    
    
    
    
    Numberof shares
    
    
    Conversion
    
    
    
    
    
    
    of shares
    
    
    Conversionconverted
    
    
    price
    
    
    Equity value
    
    
    converted
    
    
    price
    
    
    Equity valueMay 2006
    
    
    75,338
    
    
    $
    25.51
    
    
    $
    1,921,872
    
    
    
    54,879
    
    
    $
    25.51
    
    
    $
    1,399,963July 2006
    
    
    9,820
    
    
    
    25.51
    
    
    
    250,508
    
    
    
    9,820
    
    
    
    25.51
    
    
    
    250,508October 2006
    
    
    26,133
    
    
    
    25.51
    
    
    
    666,653
    
    
    
    47,040
    
    
    
    25.51
    
    
    
    1,199,990111,291
    
    
    
    
    
    
    $
    2,839,033
    
    
    
    111,739
    
    
    
    
    
    
    $
    2,850,461
  9




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##### Table of Contents



As of March 31, 2009Numberof shares
    
    
    Conversion
    
    
    Debtoutstanding
    
    
    price
    
    
    outstandingMay 2006
    
    
    211,682
    
    
    $
    25.51
    
    
    $
    5,400,002July 2006
    
    
    39,280
    
    
    
    25.51
    
    
    
    1,002,027October 2006
    
    
    127,302
    
    
    
    25.51
    
    
    
    3,247,462378,264
    
    
    
    
    
    
    $
    9,649,491
    Outstanding Convertible Debt Issuances
 May 2006 (1)
    
    
    July 2006 (1)
    
    
    October 2006 (1)Original principal amount of debentures
(millions)
    
    $
    20.0
    
    
    $
    2.5
    
    
    $
    7.5Per share conversion price on debenture
    
    $
    25.51
    
    
    $
    25.51
    
    
    $
    25.51Interest rate
    
    Libor plus 4
    %
    
    Libor plus 4
    %
    
    Libor plus 4
    %Term of debenture
    
    42 months
    
    
    42 months
    
    
    42 monthsWarrants issued
    
    274,406 shares
    
    
    34,370 shares
    
    
    102,835 sharesTerm of warrants
    
    60 months
    
    
    60 months
    
    
    60 monthsPer share exercise price of warrants
    
    $
    28.06
    
    
    $
    28.06
    
    
    $
    28.06Fair value per warrant at issuance
    
    $
    26.03
    
    
    $
    23.89
    
    
    $
    22.13Value per share of conversion feature at issuance
    
    $
    18.80
    
    
    $
    19.21
    
    
    $
    19.57Stock price on date of agreement
    
    $
    32.25
    
    
    $
    29.28
    
    
    $
    26.81Stock volatility at issuance
    
    
    106
    %
    
    
    111
    %
    
    
    117
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Risk-free interest rate at issuance
    
    
    4.88
    %
    
    
    4.88
    %
    
    
    4.65
    %Principal shares converted
    
    Partial
    
    
    Partial
    
    
    PartialWarrants exercised
    
    No
    
    
    No
    
    
    Partial
 
 (1)
    
    The May 2006, July 2006 and October 2006 issuances had a beneficial conversion feature.   10




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##### Table of Contents



Amortization of Financing Fees and Debt Discount
  Three months ended March 31, 2009
    
    
    Six months ended March 31, 2009Conversion
    
    
    
    
    
    
    
    
    
    
    ConversionWarrants
    
    
    Feature
    
    
    Total
    
    
    Warrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    450
    
    
    $
    664
    
    
    $
    1,114
    
    
    $
    1,051
    
    
    $
    1,551
    
    
    $
    2,602July 2006 issuance
    
    
    89
    
    
    
    108
    
    
    
    197
    
    
    
    158
    
    
    
    193
    
    
    
    351October 2006 issuance
    
    
    87
    
    
    
    100
    
    
    
    187
    
    
    
    193
    
    
    
    222
    
    
    
    415$
    626
    
    
    $
    872
    
    
    
    1,498
    
    
    $
    1,402
    
    
    $
    1,966
    
    
    
    3,368Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    
    
    
    
    190Total
    
    
    
    
    
    
    
    
    
    $
    1,593
    
    
    
    
    
    
    
    
    
    
    $
    3,558
 Three months ended March 31, 2008
    
    
    Six months ended March 31, 2008Conversion
    
    
    
    
    
    
    
    
    
    
    ConversionWarrants
    
    
    Feature
    
    
    Total
    
    
    Warrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    550
    
    
    $
    812
    
    
    $
    1,362
    
    
    $
    964
    
    
    $
    1,422
    
    
    $
    2,386July 2006 issuance
    
    
    59
    
    
    
    71
    
    
    
    130
    
    
    
    120
    
    
    
    146
    
    
    
    266October 2006 issuance
    
    
    82
    
    
    
    95
    
    
    
    177
    
    
    
    213
    
    
    
    246
    
    
    
    459$
    691
    
    
    $
    978
    
    
    
    1,669
    
    
    $
    1,297
    
    
    $
    1,814
    
    
    
    3,111Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    287Total
    
    
    
    
    
    
    
    
    
    $
    1,843
    
    
    
    
    
    
    
    
    
    
    $
    3,398
  March 31, 2009ConversionWarrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    516
    
    
    $
    761
    
    
    $
    1,277July 2006 issuance
    
    
    99
    
    
    
    120
    
    
    
    219October 2006 issuance
    
    
    177
    
    
    
    204
    
    
    
    381$
    792
    
    
    $
    1,085
    
    
    
    1,877Debt acquisition cost and financing fees
    
    
    
    
    
    
    
    
    
    
    219Total
    
    
    
    
    
    
    
    
    
    $
    2,096
 September 30, 2008ConversionWarrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    1,566
    
    
    $
    2,313
    
    
    $
    3,879July 2006 issuance
    
    
    259
    
    
    
    311
    
    
    
    570October 2006 issuance
    
    
    370
    
    
    
    426
    
    
    
    796$
    2,195
    
    
    $
    3,050
    
    
    
    5,245Debt acquisition cost and financing fees
    
    
    
    
    
    
    
    
    
    
    416Total
    
    
    
    
    
    
    
    
    
    $
    5,661
 Earnings Per Share
   11




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##### Table of Contents



Three months ended
    
    
    Six months endedMarch 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerators:Net income
    
    $
    473
    
    
    $
    4,311
    
    
    $
    1,009
    
    
    $
    6,915Denominators:Average shares outstanding  basic
    
    
    34,406
    
    
    
    33,943
    
    
    
    34,405
    
    
    
    33,849Impact of convertible debt, warrants and stock options
    
    
    76
    
    
    
    99
    
    
    
    81
    
    
    
    158Average shares outstanding  diluted
    
    
    34,482
    
    
    
    34,042
    
    
    
    34,486
    
    
    
    34,007Basic income per share
    
    $
    0.01
    
    
    $
    0.13
    
    
    $
    0.03
    
    
    $
    0.20Diluted income per share
    
    $
    0.01
    
    
    $
    0.13
    
    
    $
    0.03
    
    
    $
    0.20
 Bond Related to SP Systems Case
  5. DEBT
 Credit Facilities
    March 31,
    
    
    September 30,2009
    
    
    2008Note payable with interest currently at 4.39% (variable with Libor, payable in monthly
installments of interest to maturity in January 2011)
    
    $
    1,142
    
    
    $
    1,184Line of credit U.S. facility (current interest rate of 3.25%  variable with Libor)
    
    
    7,971
    
    
    
    Facility with Hungarian bank (interest rate of 3.5% to 12.1%, depending on currency)
    
    
    3,493
    
    
    
    5,175Convertible debentures final payment due November 2009 (interest rate of 7.3% 
variable with Libor)
    
    
    5,400
    
    
    
    9,000Convertible debentures final payment due January 2010 (interest rate of 5.8% 
variable with Libor)
    
    
    1,002
    
    
    
    1,500Convertible debentures final payment due April 2010 (interest rate of 5.8% 
variable with Libor)
    
    
    3,247
    
    
    
    4,549Total long-term debt including current maturities
    
    
    22,255
    
    
    
    21,408Less: Debt discount associated with conversion feature and warrants
    
    
    (1,877
    )
    
    
    (5,245
    )Less: Amounts payable within one year, net of discount of $1,776 and $3,729
    
    
    (18,688
    )
    
    
    (12,601
    )Total long-term debt, less current maturities
    
    $
    1,690
    
    
    $
    3,562
  12




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##### Table of Contents



AnnualMarch 31,
    
    Maturities2009
    
    $
    20,4642010
    
    
    1,791Total
    
    $
    22,255
 6. STOCK OPTION COMPENSATION EXPENSE
  Stock
option awards.
  Wtd. Avg.Options
    
    
    Exercise PriceBalance, September 30, 2008
    
    
    415,587
    
    
    $
    25.52Granted
    
    
    37,500
    
    
    
    5.47Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (7,500
    )
    
    
    8.50Balance, March 31, 2009
    
    
    445,587
    
    
    $
    23.88Exercisable, March 31, 2009
    
    
    267,254
    
    
    $
    21.51
  Options Outstanding
    
    
    Options ExercisableRange of
    
    
    
    
    
    
    
    
    Wtd. Avg.
    
    
    Wtd. Avg.
    
    
    
    
    
    
    Wtd. Avg.Exercise Prices
    
    
    
    
    Number
    
    
    Remaining Life
    
    
    Exercise Price
    
    
    Number
    
    
    Exercise Price$
    1.33-5.67
    
    
    
    
    
    39,500
    
    
    5 years
    
    $
    5.30
    
    
    
    39,500
    
    
    $
    5.306.25-9.25
    
    
    
    
    
    27,587
    
    
    7 years
    
    
    8.60
    
    
    
    27,587
    
    
    
    8.609.60-24.12
    
    
    
    
    
    113,500
    
    
    7 years
    
    
    18.29
    
    
    
    60,167
    
    
    
    14.8826.22-29.70
    
    
    
    
    
    175,000
    
    
    8 years
    
    
    29.20
    
    
    
    50,000
    
    
    
    27.9630.00-39.00
    
    
    
    
    
    90,000
    
    
    6 years
    
    
    33.43
    
    
    
    90,000
    
    
    
    33.431.33-39.00
    
    
    
    
    
    445,587
    
    
    7 years
    
    
    23.88
    
    
    
    267,254
    
    
    
    21.51
  Assumptions
    
    Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Expected life of option
    
    4  years
    
    
    4 & 4.5 years
    
    
    3 & 7.5 yearsRisk-free interest rate
    
    
    0.6
    %
    
    
    1.8
    %
    
    
    4.9
    %Volatility of stock
    
    
    78.6
    %
    
    
    66
    %
    
    
    68
    %
   13




---



##### Table of Contents



Restricted stock awards.
    7. COMMITMENTS AND CONTINGENCIES
 LEGAL
     CONCENTRATION OF CREDIT RISK
   ENVIRONMENTAL
   14




---



##### Table of Contents



SOURCES OF SUPPLY
  8. INCOME TAXES
   9. FOREIGN CURRENCY TRANSLATION
   10. NEW ACCOUNTING PRONOUNCEMENTS
     15




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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 General
 ® ®
       RESULTS OF OPERATIONS
 THREE MONTHS ENDED MARCH 31, 2009 COMPARED TO THREE MONTHS ENDED MARCH 31, 2008
   16




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17




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##### Table of Contents



SIX MONTHS ENDED MARCH 31, 2009 COMPARED TO SIX MONTHS ENDED MARCH 31, 2008
     18




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##### Table of Contents



Liquidity and Capital Resources
    19




---



##### Table of Contents



Cash Used In Operating Activities
   Cash Used In Investing Activities
   Cash Provided (Used) By Financing Activities
    20




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##### Table of Contents



Future Contractual Obligations
  Payments Due by PeriodLess than
    
    
    
    
    
    
    3-5
    
    
    OverTotal
    
    
    1 year
    
    
    1-3 years
    
    
    years
    
    
    5 yearsConvertible debentures (a)
    
    $
    9,649
    
    
    $
    9,000
    
    
    $
    649
    
    
    $
    
    
    
    $
    Other long-term debt, including current maturities (a)
    
    
    1,142
    
    
    
    
    
    
    
    1,142
    
    
    
    
    
    
    
    Total long-term debt obligations
    
    
    10,791
    
    
    
    9,000
    
    
    
    1,791
    
    
    
    
    
    
    
    Operating lease obligations (b)
    
    
    2,200
    
    
    
    677
    
    
    
    990
    
    
    
    532
    
    
    
    1Capital leases obligations
    
    
    532
    
    
    
    355
    
    
    
    177
    
    
    
    
    
    
    
    Total debt and leases
    
    
    13,523
    
    
    
    10,032
    
    
    
    2,958
    
    
    
    532
    
    
    
    1Contractual interest payments (c)
    
    
    636
    
    
    
    633
    
    
    
    3
    
    
    
    
    
    
    
    Purchase obligations (d)
    
    
    3,231
    
    
    
    3,231
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    17,390
    
    
    $
    13,896
    
    
    $
    2,961
    
    
    $
    532
    
    
    $
    1
 
 (a)
    
    Convertible debentures and long-term debt are presented on the balance sheet net of debt
discount of $1.9 million.(b)
    
    Includes four-year contract for nitrogen gas facility and equipment at approximately $470,000
per year.(c)
    
    Amounts represent the expected cash payment of interest on our debt.(d)
    
    Purchase obligations include agreements to purchase goods or services that are enforceable
and legally binding and that specify all significant terms, including fixed or minimum
quantities to be purchased, fixed, minimum or variable price provisions, and the approximate
timing of the transactions. Purchase obligations exclude agreements that are cancelable at any
time without penalty.  Conversion
    
    
    
    
    
    
    Less than
    
    
    
    
    
    
    3-5
    
    
    Overprice
    
    
    Total
    
    
    1 year
    
    
    1-3 years
    
    
    years
    
    
    5 yearsTotal contractual obligations
    
    
    
    
    
    $
    17,390
    
    
    $
    13,896
    
    
    $
    2,961
    
    
    $
    532
    
    
    $
    1May 2006 issuance
    
    $
    25.51
    
    
    
    (5,400
    )
    
    
    (5,400
    )
    
    
    
    
    
    
    
    
    
    
    July and October 2006 issuance
    
    $
    25.51
    
    
    
    (4,249
    )
    
    
    (3,600
    )
    
    
    (649
    )
    
    
    
    
    
    
    Interest payments
    
    
    
    
    
    
    (636
    )
    
    
    (633
    )
    
    
    (3
    )
    
    
    
    
    
    
    Total contractual obligations assuming
conversion on March 31, 2009
    
    
    
    
    
    $
    7,105
    
    
    $
    4,263
    
    
    $
    2,309
    
    
    $
    532
    
    
    $
    1
  Revolving Credit Facility
   21




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##### Table of Contents



Hungarian Grant
  Convertible Debt
  Three months ended December 31, 2008Numberof shares
    
    
    Conversionconverted
    
    
    price
    
    
    Equity valueMay 2006
    
    
    
    
    
    $
    
    
    
    $
    July 2006
    
    
    16,264
    
    
    
    15.40
    
    
    
    250,466October 2006
    
    
    
    
    
    
    
    
    
    
    16,264
    
    
    
    
    
    
    $
    250,466
 Three months ended March 31, 2008
    
    
    Three months ended December 31, 2007Number
    
    
    
    
    
    
    
    
    
    
    Numberof shares
    
    
    Conversion
    
    
    
    
    
    
    of shares
    
    
    Conversionconverted
    
    
    price
    
    
    Equity value
    
    
    converted
    
    
    price
    
    
    Equity valueMay 2006
    
    
    75,338
    
    
    $
    25.51
    
    
    $
    1,921,872
    
    
    
    54,879
    
    
    $
    25.51
    
    
    $
    1,399,963July 2006
    
    
    9,820
    
    
    
    25.51
    
    
    
    250,508
    
    
    
    9,820
    
    
    
    25.51
    
    
    
    250,508October 2006
    
    
    26,133
    
    
    
    25.51
    
    
    
    666,653
    
    
    
    47,040
    
    
    
    25.51
    
    
    
    1,199,990111,291
    
    
    
    
    
    
    $
    2,839,033
    
    
    
    111,739
    
    
    
    
    
    
    $
    2,850,461
  22




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##### Table of Contents



As of March 31, 2009Numberof shares
    
    
    Conversion
    
    
    Debtoutstanding
    
    
    price
    
    
    outstandingMay 2006
    
    
    211,682
    
    
    $
    25.51
    
    
    $
    5,400,002July 2006
    
    
    39,280
    
    
    
    25.51
    
    
    
    1,002,027October 2006
    
    
    127,302
    
    
    
    25.51
    
    
    
    3,247,462378,264
    
    
    
    
    
    
    $
    9,649,491
    Outstanding Convertible Debt Issuances
 May 2006 (1)
    
    

July 2006 (1)
    
    

October 2006 (1)Original principal amount of debentures
(millions)
    
    $

    20.0
    
    
    $
    2.5
    
    
    $
    7.5Per share conversion price on debenture
    
    $
    25.51
    
    
    $
    25.51
    
    
    $
    25.51Interest rate
    
    Libor plus 4
    %
    
    Libor plus 4
    %
    
    Libor plus 4
    %Term of debenture
    
    42 months
    
    
    42 months
    
    
    42 monthsWarrants issued
    
    274,406 shares
    
    
    34,370 shares
    
    
    102,835 sharesTerm of warrants
    
    60 months
    
    
    60 months
    
    
    60 monthsPer share exercise price of warrants
    
    $
    28.06
    
    
    $
    28.06
    
    
    $
    28.06Fair value per warrant at issuance
    
    $
    26.03
    
    
    $
    23.89
    
    
    $
    22.13Value per share of conversion feature at issuance
    
    $
    18.80
    
    
    $
    19.21
    
    
    $
    19.57Stock price on date of agreement
    
    $
    32.25
    
    
    $
    29.28
    
    
    $
    26.81Stock volatility at issuance
    
    
    106
    %
    
    
    111
    %
    
    
    117
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Risk-free interest rate at issuance
    
    
    4.88
    %
    
    
    4.88
    %
    
    
    4.65
    %Principal shares converted
    
    Partial
    
    
    Partial
    
    
    PartialWarrants exercised
    
    No
    
    
    No
    
    
    Partial
 
 (1)
    
    The May 2006, July 2006 and October 2006 issuances had a beneficial conversion feature.   23




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##### Table of Contents



Amortization of Financing Fees and Debt Discount
  Three months ended March 31, 2009
    
    
    Six months ended March 31, 2009Conversion
    
    
    
    
    
    
    
    
    
    
    ConversionWarrants
    
    
    Feature
    
    
    Total
    
    
    Warrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    450
    
    
    $
    664
    
    
    $
    1,114
    
    
    $
    1,051
    
    
    $
    1,551
    
    
    $
    2,602July 2006 issuance
    
    
    89
    
    
    
    108
    
    
    
    197
    
    
    
    158
    
    
    
    193
    
    
    
    351October 2006 issuance
    
    
    87
    
    
    
    100
    
    
    
    187
    
    
    
    193
    
    
    
    222
    
    
    
    415$
    626
    
    
    $
    872
    
    
    
    1,498
    
    
    $
    1,402
    
    
    $
    1,966
    
    
    
    3,368Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    95
    
    
    
    
    
    
    
    
    
    
    
    190Total
    
    
    
    
    
    
    
    
    
    $
    1,593
    
    
    
    
    
    
    
    
    
    
    $
    3,558
 Three months ended March 31, 2008
    
    
    Six months ended March 31, 2008Conversion
    
    
    
    
    
    
    
    
    
    
    ConversionWarrants
    
    
    Feature
    
    
    Total
    
    
    Warrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    550
    
    
    $
    812
    
    
    $
    1,362
    
    
    $
    964
    
    
    $
    1,422
    
    
    $
    2,386July 2006 issuance
    
    
    59
    
    
    
    71
    
    
    
    130
    
    
    
    120
    
    
    
    146
    
    
    
    266October 2006 issuance
    
    
    82
    
    
    
    95
    
    
    
    177
    
    
    
    213
    
    
    
    246
    
    
    
    459$
    691
    
    
    $
    978
    
    
    
    1,669
    
    
    $
    1,297
    
    
    $
    1,814
    
    
    
    3,111Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    174
    
    
    
    
    
    
    
    
    
    
    
    287Total
    
    
    
    
    
    
    
    
    
    $
    1,843
    
    
    
    
    
    
    
    
    
    
    $
    3,398
  March 31, 2009ConversionWarrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    516
    
    
    $
    761
    
    
    $
    1,277July 2006 issuance
    
    
    99
    
    
    
    120
    
    
    
    219October 2006 issuance
    
    
    177
    
    
    
    204
    
    
    
    381$
    792
    
    
    $
    1,085
    
    
    
    1,877Debt acquisition cost and financing fees
    
    
    
    
    
    
    
    
    
    
    219Total
    
    
    
    
    
    
    
    
    
    $
    2,096
 September 30, 2008ConversionWarrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    1,566
    
    
    $
    2,313
    
    
    $
    3,879July 2006 issuance
    
    
    259
    
    
    
    311
    
    
    
    570October 2006 issuance
    
    
    370
    
    
    
    426
    
    
    
    796$
    2,195
    
    
    $
    3,050
    
    
    
    5,245Debt acquisition cost and financing fees
    
    
    
    
    
    
    
    
    
    
    416Total
    
    
    
    
    
    
    
    
    
    $
    5,661
 Earnings Per Share
   24




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##### Table of Contents



Three months ended
    
    
    Six months endedMarch 31,
    
    
    March 31,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerators:Net income
    
    $
    2,373
    
    
    $
    4,311
    
    
    $
    2,909
    
    
    $
    6,915Denominators:Average
shares outstanding  basic
    
    
    34,406
    
    
    
    33,943
    
    
    
    34,405
    
    
    
    33,849Impact of convertible debt, warrants and stock options
    
    
    76
    
    
    
    99
    
    
    
    81
    
    
    
    158Average
shares outstanding  diluted
    
    
    34,482
    
    
    
    34,042
    
    
    
    34,486
    
    
    
    34,007Basic income per share
    
    $
    0.07
    
    
    $
    0.13
    
    
    $
    0.08
    
    
    $
    0.20Diluted income per share
    
    $
    0.07
    
    
    $
    0.13
    
    
    $
    0.08
    
    
    $
    0.20
 Bond Related to SP Systems Case
  LEGAL
     NEW ACCOUNTING PRONOUNCEMENTS
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   25




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##### Table of Contents



* * *
 Special Note Regarding Forward-Looking Statements
   * * *
 
 Item 4. Controls and Procedures
 Evaluation of Controls and Procedures
   
    
    Commensurate with the start-up of acrylic precursor manufacturing operations at the
Zoltek de Mexico facility, located in Guadalajara, Mexico, was implementation of control
points governing internal control over financial reporting, predominantly within the
Inventory process, at the local subsidiary level.
  26




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##### Table of Contents



ZOLTEK COMPANIES, INC.
 
 PART II. OTHER INFORMATION
 
   
   1.
    
    With respect to the election of two Class I directors and the
following persons received the number of votes set opposite their respective
names:
 Votes for
    
    
    Votes withheld
    
    
    Votes abstainLinn H. Bealke
    
    
    30,176,569
    
    
    
    314,106
    
    
    
    465,321George E. Husman
    
    
    27,273,391
    
    
    
    3,217,284
    
    
    
    465,321
 2.
    
    With respect to the proposal to approve the ratification of Ernst &
Young LLP as the Companys independent registered public accounting firm:
 Votes for:
    
    
    30,765,792Votes against:
    
    
    123,821Votes withheld:
    
    
    66,383
 
    27




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##### Table of Contents



SIGNATURE
  Zoltek Companies, Inc.
(Registrant)Date:  May 11, 2009
    By:
    /s/ ZSOLT RUMYZsolt RumyChief Executive Officer  28




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##### Table of Contents



EXHIBIT INDEX
 Exhibit Number
    
    Description of Document31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934, as amended.31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934, as amended.32.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  29