##### 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 June 30, 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
 Yes o No 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 INFORMATIONItem 1. Financial Statements (Unaudited)Condensed Consolidated Balance Sheets  June 30, 2009 and September 30, 2008

3Condensed Consolidated Statements of Operations  Three Months and Nine Months Ended June 30, 2009 and 2008

4Condensed Consolidated Statement of Changes in Shareholders Equity  Nine Months Ended June 30, 2009

5Condensed Consolidated Statement of Comprehensive Income (Loss)   Three Months and Nine Months Ended June 30, 2009 and 2008

5Condensed Consolidated Statements of Cash Flows  Nine Months Ended June 30, 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

26Item 4. Controls and Procedures

27PART II. OTHER INFORMATIONItem 1. Legal Proceedings

28Item 6. Exhibits

28SIGNATURES

29EXHIBIT INDEX

30Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 ZOLTEK
COMPANIES, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 June 30,
    
    
    September 30,2009
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    17,246
    
    
    $
    29,224Restricted cash
    
    
    
    
    
    
    23,500Accounts receivable, less allowance for doubtful accounts of $1,734
and $1,754, respectively
    
    
    29,402
    
    
    
    42,690Inventories, net
    
    
    51,802
    
    
    
    45,659Other current assets
    
    
    10,975
    
    
    
    9,432Total current assets
    
    
    109,425
    
    
    
    150,505Property and equipment, net
    
    
    253,659
    
    
    
    288,894Other assets
    
    
    407
    
    
    
    765Total assets
    
    $
    363,491
    
    
    $
    440,164Liabilities and Shareholders EquityCurrent liabilities:Legal liabilities
    
    $
    
    
    
    $
    29,083Credit lines
    
    
    11,750
    
    
    
    5,175Current maturities of long-term debt
    
    
    6,145
    
    
    
    7,426Trade accounts payable
    
    
    8,593
    
    
    
    15,093Accrued expenses and other liabilities
    
    
    6,511
    
    
    
    9,278Construction payables
    
    
    693
    
    
    
    8,450Total current liabilities
    
    
    33,692
    
    
    
    74,505Long-term debt, less current maturities
    
    
    1,117
    
    
    
    3,562Hungarian grant, long-term
    
    
    10,030
    
    
    
    10,882Deferred tax liabilities
    
    
    8,636
    
    
    
    4,521Other long-term liabilities
    
    
    21
    
    
    
    28Total liabilities
    
    
    53,496
    
    
    
    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, 34,394,441 and
34,389,428 shares issued and outstanding at June 30, 2009 and
September 30, 2008, respectively
    
    
    344
    
    
    
    344Additional paid-in capital
    
    
    493,560
    
    
    
    491,175Accumulated other comprehensive (loss) income
    
    
    (26,905
    )
    
    
    11,730Accumulated deficit
    
    
    (157,004
    )
    
    
    (156,583
    )Total shareholders equity
    
    
    309,995
    
    
    
    346,666Total liabilities and shareholders equity
    
    $
    363,491
    
    
    $
    440,164
   3




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ZOLTEK
COMPANIES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months ended June 30,
    
    
    Nine months ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net sales
    
    $
    30,306
    
    
    $
    44,950
    
    
    $
    104,941
    
    
    $
    134,603Cost of sales, excluding available unused capacity costs
    
    
    21,515
    
    
    
    31,320
    
    
    
    75,020
    
    
    
    96,181Available unused capacity costs
    
    
    2,631
    
    
    
    
    
    
    
    4,382
    
    
    
    Gross profit
    
    
    6,160
    
    
    
    13,630
    
    
    
    25,539
    
    
    
    38,422Application and development costs
    
    
    2,063
    
    
    
    1,982
    
    
    
    5,513
    
    
    
    5,939Selling, general and administrative expenses
    
    
    4,322
    
    
    
    4,377
    
    
    
    14,726
    
    
    
    12,103Operating (loss) income
    
    
    (225
    )
    
    
    7,271
    
    
    
    5,300
    
    
    
    20,380Other income (expense):Interest income
    
    
    18
    
    
    
    543
    
    
    
    343
    
    
    
    2,581Gain (loss) on foreign currency transactions
    
    
    842
    
    
    
    (2,081
    )
    
    
    2,092
    
    
    
    (2,011
    )Other, net
    
    
    51
    
    
    
    (23
    )
    
    
    (409
    )
    
    
    (460
    )Interest expense, excluding amortization of financing fees and
debt discount
    
    
    (305
    )
    
    
    (288
    )
    
    
    (1,250
    )
    
    
    (1,340
    )Amortization of financing fees and debt discount
    
    
    (1,137
    )
    
    
    (1,648
    )
    
    
    (4,694
    )
    
    
    (5,045
    )(Loss) income from operations before income taxes
    
    
    (756
    )
    
    
    3,774
    
    
    
    1,382
    
    
    
    14,105Income tax expense
    
    
    673
    
    
    
    1,465
    
    
    
    1,803
    
    
    
    4,874Net (loss) income
    
    $
    (1,429
    )
    
    $
    2,309
    
    
    $
    (421
    )
    
    $
    9,231Basic and diluted (loss) income per share
    
    $
    (0.04
    )
    
    $
    0.07
    
    
    $
    (0.01
    )
    
    $
    0.27Weighted average common shares outstanding  basic
    
    
    34,396,331
    
    
    
    34,201,210
    
    
    
    34,400,731
    
    
    
    33,950,871Weighted average common shares outstanding  diluted
    
    
    34,396,331
    
    
    
    34,214,902
    
    
    
    34,400,731
    
    
    
    34,040,008
   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
    
    
    2,209
    
    
    
    
    
    
    
    2,209
    
    
    
    
    
    
    
    Cash settlement of restricted shares
    
    
    (75
    )
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    Net loss
    
    
    (421
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (421
    )Foreign currency translation adjustment
    
    
    (38,635
    )
    
    
    
    
    
    
    
    
    
    
    (38,635
    )
    
    
    Balance, June 30, 2009
    
    $
    309,995
    
    
    $
    344
    
    
    $
    493,560
    
    
    $
    (26,905
    )
    
    $
    (157,004
    )
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
 Three months ended June 30,
    
    
    Nine months ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net (loss) income
    
    $
    (1,429
    )
    
    $
    2,309
    
    
    $
    (421
    )
    
    $
    9,231Foreign currency translation adjustment
    
    
    21,189
    
    
    
    15,773
    
    
    
    (38,635
    )
    
    
    29,048Comprehensive income (loss)
    
    $
    19,760
    
    
    $
    18,082
    
    
    $
    (39,056
    )
    
    $
    38,279
   5




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ZOLTEK
COMPANIES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine months ended June 30,2009
    
    
    2008Cash flows from operating activities:Net (loss) income
    
    $
    (421
    )
    
    $
    9,231Adjustments to reconcile net income to net cash from operating activities:Depreciation
    
    
    11,994
    
    
    
    11,459Amortization of financing fees and debt discount
    
    
    4,694
    
    
    
    5,045Deferred taxes
    
    
    742
    
    
    
    1,989Foreign currency transaction (gains) losses
    
    
    (2,760
    )
    
    
    1,518Stock option compensation expense
    
    
    2,210
    
    
    
    3,507Loss on disposal of fixed assets
    
    
    282
    
    
    
    Changes in assets and liabilities:Decrease (increase) in accounts receivable
    
    
    7,984
    
    
    
    (1,962
    )Increase in inventories
    
    
    (9,590
    )
    
    
    (16,269
    )Decrease (increase) in other current assets and other assets
    
    
    1,565
    
    
    
    (3,933
    )(Decrease) increase in trade accounts payable
    
    
    (4,875
    )
    
    
    1,595Increase in accrued expenses and other liabilities
    
    
    2,754
    
    
    
    4,513Decrease in legal liabilities
    
    
    (5,583
    )
    
    
    Net cash provided by operating activities
    
    
    8,997
    
    
    
    16,693Cash flows from investing activities:Purchases of property and equipment
    
    
    (15,475
    )
    
    
    (57,130
    )Decrease in construction payables
    
    
    (6,080
    )
    
    
    (30,339
    )Proceeds received from sale of fixed assets
    
    
    115
    
    
    
    Proceeds received from Hungarian grant
    
    
    1,588
    
    
    
    3,253Increase in cash restricted for letters of credit
    
    
    
    
    
    
    (9,685
    )Net cash used in investing activities
    
    
    (19,852
    )
    
    
    (93,901
    )Cash flows from financing activities:Proceeds from exercise of stock options and warrants
    
    
    
    
    
    
    1,497Repayment of convertible debt
    
    
    (7,850
    )
    
    
    Cash settlement of restricted shares
    
    
    (75
    )
    
    
    Borrowings (repayment) of notes payable and credit lines
    
    
    6,742
    
    
    
    (4,525
    )Net cash used in financing activities
    
    
    (1,183
    )
    
    
    (3,028
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    60
    
    
    
    44Net decrease in cash and cash equivalents
    
    
    (11,978
    )
    
    
    (80,192
    )Cash and cash equivalents at beginning of period
    
    
    29,224
    
    
    
    121,761Cash and cash equivalents at end of period
    
    $
    17,246
    
    
    $
    41,569Supplemental disclosures of cash flow information:Non-cash conversion of convertible debentures
    
    $
    251
    
    
    $
    8,477
   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
  June 30,
    
    
    September 30,2009
    
    
    2008Raw materials
    
    $
    9,172
    
    
    $
    10,749Work-in-process
    
    
    10,140
    
    
    
    14,962Finished goods
    
    
    31,681
    
    
    
    18,844Supplies and other
    
    
    809
    
    
    
    1,104$
    51,802
    
    
    $
    45,659
   7




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##### Table of Contents



3. SEGMENT INFORMATION
   Three months ended June 30, 2009Carbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalNet sales
    
    $
    25,012
    
    
    $
    4,652
    
    
    $
    642
    
    
    $
    30,306Cost of sales
    
    
    17,204
    
    
    
    3,729
    
    
    
    582
    
    
    
    21,515Available unused capacity costs
    
    
    2,392
    
    
    
    239
    
    
    
    
    
    
    
    2,631Gross profit
    
    
    5,416
    
    
    
    684
    
    
    
    60
    
    
    
    6,160Operating income (loss)
    
    
    2,284
    
    
    
    297
    
    
    
    (2,806
    )
    
    
    (225
    )Depreciation
    
    
    3,259
    
    
    
    413
    
    
    
    296
    
    
    
    3,968Capital expenditures
    
    
    2,374
    
    
    
    47
    
    
    
    
    
    
    
    2,421
 Three months ended June 30, 2008Carbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalNet sales
    
    $
    37,689
    
    
    $
    6,487
    
    
    $
    774
    
    
    $
    44,950Cost of sales
    
    
    25,121
    
    
    
    5,323
    
    
    
    876
    
    
    
    31,320Gross profit
    
    
    12,568
    
    
    
    1,164
    
    
    
    (102
    )
    
    
    13,630Operating income (loss)
    
    
    9,931
    
    
    
    651
    
    
    
    (3,311
    )
    
    
    7,271Depreciation
    
    
    3,670
    
    
    
    375
    
    
    
    252
    
    
    
    4,297Capital expenditures
    
    
    31,959
    
    
    
    439
    
    
    
    27
    
    
    
    32,425
 Nine months ended June 30, 2009Carbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalNet sales
    
    $
    86,641
    
    
    $
    16,407
    
    
    $
    1,893
    
    
    $
    104,941Cost of sales
    
    
    61,085
    
    
    
    12,363
    
    
    
    1,572
    
    
    
    75,020Available unused capacity costs
    
    
    3,594
    
    
    
    788
    
    
    
    
    
    
    
    4,382Gross profit
    
    
    21,962
    
    
    
    3,256
    
    
    
    321
    
    
    
    25,539Operating income (loss)
    
    
    13,518
    
    
    
    1,430
    
    
    
    (9,648
    )
    
    
    5,300Depreciation
    
    
    9,923
    
    
    
    1,222
    
    
    
    849
    
    
    
    11,994Capital expenditures
    
    
    14,737
    
    
    
    584
    
    
    
    154
    
    
    
    15,475
 Nine months ended June 30, 2008Carbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalNet sales
    
    $
    113,666
    
    
    $
    18,084
    
    
    $
    2,853
    
    
    $
    134,603Cost of sales
    
    
    79,552
    
    
    
    14,120
    
    
    
    2,509
    
    
    
    96,181Gross profit
    
    
    34,114
    
    
    
    3,964
    
    
    
    344
    
    
    
    38,422Operating income (loss)
    
    
    28,091
    
    
    
    1,593
    
    
    
    (9,304
    )
    
    
    20,380Depreciation
    
    
    9,200
    
    
    
    1,384
    
    
    
    875
    
    
    
    11,459Capital expenditures
    
    
    53,598
    
    
    
    1,062
    
    
    
    2,470
    
    
    
    57,130
 Total AssetsCarbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalJune 30, 2009
    
    $
    293,126
    
    
    $
    29,119
    
    
    $
    41,246
    
    
    $
    363,491September 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
  Fiscal Year 2009Three months ended December 31, 2007NumberOf Shares
    
    
    Conversion
    
    
    EquityIssuance
    
    Converted
    
    
    Price
    
    
    ValueJuly 2006
    
    
    16,264
    
    
    $
    15.40
    
    
    $
    250,46616,264
    
    
    
    
    
    
    $
    250,466
 Fiscal Year 2008Three months ended December 31, 2007
    
    
    Three months ended March 31, 2008Number
    
    
    
    
    
    
    
    
    
    
    NumberOf Shares
    
    
    Conversion
    
    
    Equity
    
    
    Of Shares
    
    
    Conversion
    
    
    EquityIssuance
    
    Converted
    
    
    Price
    
    
    Value
    
    
    Converted
    
    
    Price
    
    
    ValueMay 2006
    
    
    54,879
    
    
    $
    25.51
    
    
    $
    1,399,963
    
    
    
    75,338
    
    
    $
    25.51
    
    
    $
    1,921,872July 2006
    
    
    9,820
    
    
    
    25.51
    
    
    
    250,508
    
    
    
    9,820
    
    
    
    25.51
    
    
    
    250,508October 2006
    
    
    47,040
    
    
    
    25.51
    
    
    
    1,199,990
    
    
    
    26,133
    
    
    
    25.51
    
    
    
    666,653111,739
    
    
    
    
    
    
    $
    2,850,461
    
    
    
    111,291
    
    
    
    
    
    
    $
    2,839,033
 Three months ended June 30, 2008NumberOf Shares
    
    
    Conversion
    
    
    EquityIssuance
    
    Converted
    
    
    Price
    
    
    ValueMay 2006
    
    
    70,561
    
    
    $
    25.51
    
    
    $
    1,800,011July 2006
    
    
    9,820
    
    
    
    25.51
    
    
    
    250,508October 2006
    
    
    29,378
    
    
    
    25.51
    
    
    
    749,432109,759
    
    
    
    
    
    
    $
    2,799,951
  9




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##### Table of Contents



As of September 30, 2008
    
    
    As of June 30, 2009Number of
    
    
    
    
    
    
    
    
    
    
    NumberShares Issuable
    
    
    Conversion
    
    
    Proceeds
    
    
    of shares
    
    
    Conversion
    
    
    ProceedsOn Conversion
    
    
    price
    
    
    outstanding
    
    
    outstanding
    
    
    price
    
    
    outstandingMay 2006
    
    
    352,803
    
    
    $
    25.51
    
    
    $
    9,000,005
    
    
    
    141,125
    
    
    
    25.51
    
    
    
    3,600,099July 2006
    
    
    58,800
    
    
    
    25.51
    
    
    
    1,499,988
    
    
    
    29,516
    
    
    
    25.51
    
    
    
    752,953October 2006
    
    
    178,342
    
    
    
    25.51
    
    
    
    4,549,504
    
    
    
    101,790
    
    
    
    25.51
    
    
    
    2,596,663589,945
    
    
    
    
    
    
    $
    15,049,497
    
    
    
    272,431
    
    
    
    
    
    
    
    6,949,715
    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 were considered to have a beneficial
conversion feature.   10




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Amortization of Financing Fees and Debt Discount
  Three months ended June 30, 2009
    
    
    Nine months ended June 30, 2009Conversion
    
    
    
    
    
    
    
    
    ConversionWarrants
    
    
    Feature
    
    
    Total
    
    
    Warrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    326
    
    
    $
    482
    
    
    $
    808
    
    
    $
    1,378
    
    
    $
    2,032
    
    
    $
    3,410July 2006 issuance
    
    
    51
    
    
    
    62
    
    
    
    113
    
    
    
    209
    
    
    
    255
    
    
    
    464October 2006 issuance
    
    
    70
    
    
    
    81
    
    
    
    151
    
    
    
    263
    
    
    
    303
    
    
    
    566$
    447
    
    
    $
    625
    
    
    
    1,072
    
    
    $
    1,850
    
    
    $
    2,590
    
    
    
    4,440Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    255Total
    
    
    
    
    
    
    
    
    
    $
    1,137
    
    
    
    
    
    
    
    
    
    
    $
    4,695
 Three months ended June 30, 2008
    
    
    Nine months ended June 30, 2008Conversion
    
    
    
    
    
    
    
    
    ConversionWarrants
    
    
    Feature
    
    
    Total
    
    
    Warrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    487
    
    
    $
    719
    
    
    $
    1,206
    
    
    $
    1,450
    
    
    $
    2,140
    
    
    $
    3,590July 2006 issuance
    
    
    55
    
    
    
    67
    
    
    
    122
    
    
    
    175
    
    
    
    213
    
    
    
    388October 2006 issuance
    
    
    91
    
    
    
    105
    
    
    
    196
    
    
    
    305
    
    
    
    352
    
    
    
    657$
    633
    
    
    $
    891
    
    
    
    1,524
    
    
    $
    1,930
    
    
    $
    2,705
    
    
    
    4,635Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    410Total
    
    
    
    
    
    
    
    
    
    $
    1,648
    
    
    
    
    
    
    
    
    
    
    $
    5,045
  June 30, 2009ConversionWarrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    189
    
    
    $
    280
    
    
    $
    469July 2006 issuance
    
    
    48
    
    
    
    58
    
    
    
    106October 2006 issuance
    
    
    107
    
    
    
    123
    
    
    
    230$
    344
    
    
    $
    461
    
    
    
    805Debt acquisition cost and financing fees
    
    
    
    
    
    
    
    
    
    
    154Total
    
    
    
    
    
    
    
    
    
    $
    959
 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
    
    
    Nine months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerators:Net (loss)income
    
    $
    (1,429
    )
    
    $
    2,309
    
    
    $
    (421
    )
    
    $
    9,231Denominators:Average shares outstanding  basic
    
    
    34,396
    
    
    
    34,201
    
    
    
    34,401
    
    
    
    33,951Impact of convertible debt, warrants and stock options
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    89Average shares outstanding  diluted
    
    
    34,396
    
    
    
    34,215
    
    
    
    34,401
    
    
    
    34,040Basic (loss) income per share
    
    $
    (0.04
    )
    
    $
    0.07
    
    
    $
    (0.01
    )
    
    $
    0.27Diluted (loss) income per share
    
    $
    (0.04
    )
    
    $
    0.07
    
    
    $
    (0.01
    )
    
    $
    0.27
 Bond Related to SP Systems Case
  5. DEBT
 Credit Facilities
     June 30,
    
    
    September 30,2009
    
    

2008U.S. facility (current interest rate of 3.07%  variable with Libor)
    
    
    7,985
    
    
    
    Facility with Hungarian bank (interest rate of 3.5% to 12.1%, depending on currency)
    
    
    3,765
    
    
    
    5,175Total credit lines
    
    $
    11,750
    
    
    $
    5,175
  12




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##### Table of Contents



Long-term Debt
  June 30,
    
    
    September 30,2009
    
    

2008Note payable with interest currently at 4.20% (variable with Libor, payable in monthly
installments of interest to maturity in January 2011)
    
    $
    1,117
    
    
    $
    1,184Convertible debentures final payment due November 2009 (interest rate of 5.58% 
variable with Libor)
    
    
    3,600
    
    
    
    9,000Convertible debentures final payment due January 2010 (interest rate of 5.12% 
variable with Libor)
    
    
    752
    
    
    
    1,500Convertible debentures final payment due April 2010 (interest rate of 5.75% 
variable with Libor)
    
    
    2,598
    
    
    
    4,549Total long-term debt including current maturities
    
    
    8,067
    
    
    
    16,233Less: Debt discount associated with conversion feature and warrants
    
    
    (805
    )
    
    
    (5,245
    )Less: Amounts payable within one year, net of discount of $805 and $3,729
    
    
    (6,145
    )
    
    
    (7,426
    )Total long-term debt, less current maturities
    
    $
    1,117
    
    
    $
    3,562
  AnnualJune 30,
    
    Maturities2009
    
    $
    6,9502010
    
    
    1,117Total
    
    $
    8,067
 6. STOCK OPTION COMPENSATION EXPENSE  Stock option awards
  Wtd. Avg.Options
    
    
    Exercise PriceBalance, September 30, 2008
    
    
    415,587
    
    
    $
    25.52Granted
    
    
    52,500
    
    
    
    6.31Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (50,167
    )
    
    
    18.14Balance, June 30, 2009
    
    
    417,920
    
    
    $
    23.74Exercisable, June 30, 2009
    
    
    299,587
    
    
    $
    22.73
  13




---



##### Table of Contents



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
    
    
    42,587
    
    
    6 years
    
    
    8.53
    
    
    
    42,587
    
    
    
    8.539.60-24.12
    
    
    87,500
    
    
    8 years
    
    
    19.71
    
    
    
    34,167
    
    
    
    15.9226.22-29.70
    
    
    158,333
    
    
    8 years
    
    
    29.15
    
    
    
    93,333
    
    
    
    28.7730.00-39.00
    
    
    90,000
    
    
    6 years
    
    
    33.43
    
    
    
    90,000
    
    
    
    33.431.33-39.00
    
    
    417,920
    
    
    7 years
    
    
    23.74
    
    
    
    299,587
    
    
    
    22.73
  Assumptions
    
    Fiscal 2009
    
    Fiscal 2008
    
    Fiscal 2007Expected life of option
    
    3.8 & 4 years
    
    4 & 4.5 years
    
    3 & 7.5 yearsRisk-free interest rate
    
    0.4%  0.6%
    
    1.8%
    
    4.9%Volatility of stock
    
    79%
    
    66%
    

    68%
  Restricted stock awards.
    7. COMMITMENTS AND CONTINGENCIES
 LEGAL
     14




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##### Table of Contents



CONCENTRATION OF CREDIT RISK
   ENVIRONMENTAL
  SOURCES OF SUPPLY
  8. INCOME TAXES
   9. FOREIGN CURRENCY TRANSLATION
   10. NEW ACCOUNTING PRONOUNCEMENTS
 The FASB Accounting Standards Codification TM
and the Hierarchy of Generally Accepted Accounting Principlesa replacement of FASB Statement No.
162
  15




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##### Table of Contents



Amendments to FASB Interpretation No. 46(R) Consolidation of Variable Interest
Entities Accounting for Transfers
of Financial Assetsan amendment of FASB Statement No. 140
 Subsequent Events
 Determining Fair Value When the Volume and Level
of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly
 Interim Disclosures about Fair Value of Financial Instruments. Disclosures about Fair Value of Financial Instruments Interim Financial
Reporting
  
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 General
 ® ®
   16




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##### Table of Contents



RESULTS OF OPERATIONS
 THREE MONTHS ENDED JUNE 30, 2009 COMPARED TO THREE MONTHS ENDED JUNE 30, 2008
   17




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18




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##### Table of Contents



NINE MONTHS ENDED JUNE 30, 2009 COMPARED TO NINE MONTHS ENDED JUNE 30, 2008
    19




---



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20




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##### Table of Contents



Liquidity and Capital Resources
   Cash Used In Operating Activities
   Cash Used In Investing Activities
   Cash Provided (Used) By Financing Activities
    21




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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)
    
    $
    6,950
    
    
    $
    6,950
    
    
    $
    
    
    
    $
    
    
    
    $
    Credit Lines
    
    $
    11,750
    
    
    $
    11,750
    
    
    $
    
    
    
    $
    
    
    
    $
    Other long-term debt
    
    
    1,117
    
    
    
    
    
    
    
    1,117
    
    
    
    
    
    
    
    Total long-term debt obligations
    
    
    19,817
    
    
    
    18,700
    
    
    
    1,117
    
    
    
    
    
    
    
    Operating lease obligations (b)
    
    
    2,863
    
    
    
    989
    
    
    
    1,813
    
    
    
    61
    
    
    
    Capital leases obligations
    
    
    195
    
    
    
    158
    
    
    
    37
    
    
    
    
    
    
    
    Total debt and leases
    
    
    22,875
    
    
    
    19,847
    
    
    
    2,967
    
    
    
    61
    
    
    
    Contractual interest payments (c)
    
    
    206
    
    
    
    183
    
    
    
    23
    
    
    
    
    
    
    
    Purchase obligations (d)
    
    
    1,618
    
    
    
    1,618
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    24,699
    
    
    $
    21,648
    
    
    $
    2,990
    
    
    $
    61
    
    
    $
    
 
 (a)
    
    Convertible debentures are presented on the balance sheet net of debt discount of $0.8
million.(b)
    
    Includes four-year contract for nitrogen gas facility and equipment at approximately $873,000
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
    
    
    
    
    
    $
    23,893
    
    
    $
    20,842
    
    
    $
    2,990
    
    
    $
    61
    
    
    $
    May 2006 issuance
    
    $
    25.51
    
    
    
    3,600
    
    
    
    3,600
    
    
    
    
    
    
    
    
    
    
    
    July and October 2006 issuance
    
    $
    25.51
    
    
    
    3,349
    
    
    
    3,349
    
    
    
    
    
    
    
    
    
    
    
    Interest payments
    
    
    
    
    
    
    136
    
    
    
    136
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations assuming
conversion on June 30, 2009
    
    
    
    
    
    $
    16,808
    
    
    $
    13,757
    
    
    $
    2,990
    
    
    $
    61
    
    
    $
    
  Revolving Credit Facility
    22




---



##### Table of Contents



Hungarian Grant
  Convertible Debt
  Fiscal Year 2009Three months ended December 31, 2007NumberOf Shares
    
    
    Conversion
    
    
    EquityIssuance
    
    Converted
    
    
    Price
    
    
    ValueJuly 2006
    
    
    16,264
    
    
    $
    15.40
    
    
    $
    250,46616,264
    
    
    
    
    
    
    $
    250,466
 Fiscal Year 2008Three months ended December 31, 2007
    
    
    Three months ended March 31, 2008Number
    
    
    
    
    
    
    
    
    
    
    NumberOf Shares
    
    
    Conversion
    
    
    Equity
    
    
    Of Shares
    
    
    Conversion
    
    
    EquityIssuance
    
    Converted
    
    
    Price
    
    
    Value
    
    
    Converted
    
    
    Price
    
    
    ValueMay 2006
    
    
    54,879
    
    
    $
    25.51
    
    
    $
    1,399,963
    
    
    
    75,338
    
    
    $
    25.51
    
    
    $
    1,921,872July 2006
    
    
    9,820
    
    
    
    25.51
    
    
    
    250,508
    
    
    
    9,820
    
    
    
    25.51
    
    
    
    250,508October 2006
    
    
    47,040
    
    
    
    25.51
    
    
    
    1,199,990
    
    
    
    26,133
    
    
    
    25.51
    
    
    
    666,653111,739
    
    
    
    
    
    
    $
    2,850,461
    
    
    
    111,291
    
    
    
    
    
    
    $
    2,839,033
 Three months ended June 30, 2008NumberOf Shares
    
    
    Conversion
    
    
    EquityIssuance
    
    Converted
    
    
    Price
    
    
    ValueMay 2006
    
    
    70,561
    
    
    $
    25.51
    
    
    $
    1,800,011July 2006
    
    
    9,820
    
    
    
    25.51
    
    
    
    250,508October 2006
    
    
    29,378
    
    
    
    25.51
    
    
    
    749,432109,759
    
    
    
    
    
    
    $
    2,799,951
 As of September 30, 2008
    
    
    As of June 30, 2009Number of
    
    
    
    
    
    
    
    
    
    
    NumberShares Issuable
    
    
    Conversion
    
    
    Proceeds
    
    
    of shares
    
    
    Conversion
    
    
    ProceedsOn Conversion
    
    
    price
    
    
    outstanding
    
    
    outstanding
    
    
    price
    
    
    outstandingMay 2006
    
    
    352,803
    
    
    $
    25.51
    
    
    $
    9,000,005
    
    
    
    141,125
    
    
    
    25.51
    
    
    
    3,600,099July 2006
    
    
    58,800
    
    
    
    25.51
    
    
    
    1,499,988
    
    
    
    29,516
    
    
    
    25.51
    
    
    
    752,953October 2006
    
    
    178,342
    
    
    
    25.51
    
    
    
    4,549,504
    
    
    
    101,790
    
    
    
    25.51
    
    
    
    2,596,663589,945
    
    
    
    
    
    
    $
    15,049,497
    
    
    
    272,431
    
    
    
    
    
    
    
    6,949,715
   23




---



##### Table of Contents



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 were considered to have a beneficial
conversion feature.   24




---



##### Table of Contents



Amortization of Financing Fees and Debt Discount
  Three months ended June 30, 2009
    
    
    Nine months ended June 30, 2009Conversion
    
    
    
    
    
    
    
    
    ConversionWarrants
    
    
    Feature
    
    
    Total
    
    
    Warrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    326
    
    
    $
    482
    
    
    $
    808
    
    
    $
    1,378
    
    
    $
    2,032
    
    
    $
    3,410July 2006 issuance
    
    
    51
    
    
    
    62
    
    
    
    113
    
    
    
    209
    
    
    
    255
    
    
    
    464October 2006 issuance
    
    
    70
    
    
    
    81
    
    
    
    151
    
    
    
    263
    
    
    
    303
    
    
    
    566$
    447
    
    
    $
    625
    
    
    
    1,072
    
    
    $
    1,850
    
    
    $
    2,590
    
    
    
    4,440Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    65
    
    
    
    
    
    
    
    
    
    
    
    255Total
    
    
    
    
    
    
    
    
    
    $
    1,137
    
    
    
    
    
    
    
    
    
    
    $
    4,695
 Three months ended June 30, 2008
    
    
    Nine months ended June 30, 2008Conversion
    
    
    
    
    
    
    
    
    ConversionWarrants
    
    
    Feature
    
    
    Total
    
    
    Warrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    487
    
    
    $
    719
    
    
    $
    1,206
    
    
    $
    1,450
    
    
    $
    2,140
    
    
    $
    3,590July 2006 issuance
    
    
    55
    
    
    
    67
    
    
    
    122
    
    
    
    175
    
    
    
    213
    
    
    
    388October 2006 issuance
    
    
    91
    
    
    
    105
    
    
    
    196
    
    
    
    305
    
    
    
    352
    
    
    
    657$
    633
    
    
    $
    891
    
    
    
    1,524
    
    
    $
    1,930
    
    
    $
    2,705
    
    
    
    4,635Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    124
    
    
    
    
    
    
    
    
    
    
    
    410Total
    
    
    
    
    
    
    
    
    
    $
    1,648
    
    
    
    
    
    
    
    
    
    
    $
    5,045
  June 30, 2009ConversionWarrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    189
    
    
    $
    280
    
    
    $
    469July 2006 issuance
    
    
    48
    
    
    
    58
    
    
    
    106October 2006 issuance
    
    
    107
    
    
    
    123
    
    
    
    230$
    344
    
    
    $
    461
    
    
    
    805Debt acquisition cost and financing fees
    
    
    
    
    
    
    
    
    
    
    154Total
    
    
    
    
    
    
    
    
    
    $
    959
 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
   25




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##### Table of Contents



Three months ended
    
    
    Nine months endedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Numerators:Net (loss)income
    
    $
    (1,429
    )
    
    $
    2,309
    
    
    $
    (421
    )
    
    $
    9,231Denominators:Average shares outstanding  basic
    
    
    34,396
    
    
    
    34,201
    
    
    
    34,401
    
    
    
    33,951Impact of convertible debt, warrants and stock options
    
    
    
    
    
    
    14
    
    
    
    
    
    
    
    89Average shares outstanding  diluted
    
    
    34,396
    
    
    
    34,215
    
    
    
    34,401
    
    
    
    34,040Basic (loss) income per share
    
    $
    (0.04
    )
    
    $
    0.07
    
    
    $
    (0.01
    )
    
    $
    0.27Diluted (loss) income per share
    
    $
    (0.04
    )
    
    $
    0.07
    
    
    $
    (0.01
    )
    
    $
    0.27
 Bond Related to SP Systems Case
  LEGAL
    NEW ACCOUNTING PRONOUNCEMENTS
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    26




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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.
  27




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##### Table of Contents



ZOLTEK COMPANIES, INC.
 
 PART II. OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 6.
    
    Exhibits
   28




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##### Table of Contents



SIGNATURE
  Zoltek Companies, Inc.
(Registrant)Date:  August 10, 2009
    By:
    /s/ ZSOLT RUMYZsolt RumyChief Executive Officer  29




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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.
  30