<PAGE>

                     SECURITIES AND EXCHANGE COMMISSION

                            WASHINGTON, DC 20549




                                  FORM 10-Q

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





For the quarter ended March 31, 2004            Commission   File  No. 0-20600
                      --------------                                   -------


                           ZOLTEK COMPANIES, INC.
                           ----------------------
           (Exact name of registrant as specified in its charter)

Missouri                                              43-1311101
--------                                              ----------
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                        Identification No.)

3101 McKelvey Road, St. Louis, Missouri               63044
---------------------------------------               -----
(Address of principal executive offices)              (Zip Code)

Registrant's telephone number, including area code:  (314) 291-5110

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

Yes  x   No
    ---    ---

Indicate by check mark whether the Registrant is an accelerated filer
(as defined in Rule 12b-2 of the Act).
Yes      No  x
    ---     ---

Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of the latest practicable date: As of May 17,
2004, 16,354,338 shares of Common Stock, $.01 par value, were outstanding.



<PAGE>
<PAGE>

PART I.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

<TABLE>
                                                    ZOLTEK COMPANIES, INC.

                                                  CONSOLIDATED BALANCE SHEET
                                                  --------------------------
                                  (Amounts in thousands, except share and per share amounts)
                                                          (Unaudited)

<CAPTION>
                                                                                                MARCH 31,       SEPTEMBER 30,
ASSETS                                                                                            2004              2003
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                            <C>              <C>
Current assets:
     Cash and cash equivalents.................................................................$    2,052       $      838
     Accounts receivable, less allowance for doubtful accounts of $763 and
       $931, respectively......................................................................    11,474           10,380
     Inventories...............................................................................    27,437           26,978
     Other current assets......................................................................       845            1,483
                                                                                               ----------       ----------
          Total current assets.................................................................    41,808           39,679
Property and equipment, net....................................................................    79,652           77,373
Other assets...................................................................................     3,346            2,403
                                                                                               ----------       ----------
          Total assets.........................................................................$  124,806       $  119,455
                                                                                               ==========       ==========


<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                            <C>              <C>
Current liabilities:
     Current maturities of long-term debt......................................................$   14,866       $      933
     Trade accounts payable....................................................................    13,592           11,892
     Notes payable.............................................................................     2,307            2,916
     Note payable to related party.............................................................     1,150                -
     Accrued expenses and other liabilities....................................................     4,076            5,148
                                                                                               ----------       ----------
          Total current liabilities............................................................    35,991           20,889
Other long-term liabilities....................................................................       822              509
Long-term debt, less current maturities........................................................    22,657           33,541
                                                                                               ----------       ----------
          Total liabilities....................................................................    59,470           54,939
                                                                                               ----------       ----------
Commitments and contingencies (Notes 2 and 8)


Shareholders' equity:
     Preferred stock, $.01 par value, 1,000,000 shares authorized,
       no shares issued or outstanding.........................................................         -                -
     Common stock, $.01 par value, 50,000,000 shares authorized,
       16,354,338 and 16,307,338 shares issued and outstanding, respectively...................       163              163
     Additional paid-in capital................................................................   115,693          109,290
     Retained deficit..........................................................................   (40,041)         (32,505)
     Accumulated other comprehensive loss......................................................   (10,479)         (12,432)
                                                                                               ----------       ----------
          Total shareholders' equity...........................................................    65,336           64,516
                                                                                               ----------       ----------
          Total liabilities and shareholders' equity ..........................................$  124,806       $  119,455
                                                                                               ==========       ==========


                     The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

                                     2

<PAGE>
<PAGE>


<TABLE>
                                                      ZOLTEK COMPANIES, INC.

                                               CONSOLIDATED STATEMENT OF OPERATIONS
                                               ------------------------------------
                                          (Amounts in thousands, except per share data)
                                                           (Unaudited)


<CAPTION>
                                                                        THREE MONTHS ENDED MARCH 31,   SIX MONTHS ENDED MARCH 31,
                                                                        ----------------------------   --------------------------
                                                                             2004         2003             2004          2003
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>          <C>               <C>          <C>
Net sales................................................................$    15,927  $    15,944       $    29,258  $    32,903
Cost of sales, excluding available unused capacity costs.................     14,360       14,810            26,540       29,712
Available unused capacity costs..........................................      1,259        1,431             2,686        2,757
Application and development costs........................................        757          910             1,504        1,780
Selling, general and administrative expenses.............................      2,058        2,528             4,186        5,217
                                                                         -----------  -----------       -----------  -----------
     Operating loss......................................................     (2,507)      (3,735)           (5,658)      (6,563)
Other income (expense):
     Interest expense....................................................       (778)        (455)           (1,384)        (933)
     Amortization of financing fees and warrant discount.................       (290)           -              (341)           -
     Interest income.....................................................          -           14                12           34
     Other, net..........................................................       (158)         (15)               24          (34)
                                                                         -----------  -----------       -----------  -----------
         Loss before income taxes........................................     (3,733)      (4,191)           (7,347)      (7,496)
Income tax expense (benefit).............................................        111           91               189          (43)
                                                                         -----------  -----------       -----------  -----------
Net loss.................................................................$    (3,844) $    (4,282)      $    (7,536) $    (7,453)
                                                                         ===========  ===========       ===========  ===========

Net loss per share:
     Basic and diluted loss per share....................................$     (0.23) $     (0.26)      $     (0.46) $     (0.46)
                                                                         ===========  ===========       ===========  ===========


Weighted average common shares outstanding...............................     16,341       16,297            16,326       16,297














                      The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>


                                     3

<PAGE>
<PAGE>

<TABLE>
                                                    ZOLTEK COMPANIES, INC.

                                             CONSOLIDATED STATEMENT OF CASH FLOWS
                                             ------------------------------------
                                                    (Amounts in thousands)
                                                         (Unaudited)

<CAPTION>
                                                                                                SIX MONTHS ENDED MARCH 31,
                                                                                                --------------------------
                                                                                                 2004              2003
----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>              <C>
Cash flows from operating activities:
      Net loss................................................................................$    (7,536)     $    (7,453)
      Adjustments to reconcile net loss to net cash used by operating activities:
           Depreciation and amortization......................................................      2,968            3,133
           Amortization of financing fees and warrants........................................        341                -
           Foreign currency transaction (gains) losses........................................        120              (60)
           Other, net.........................................................................        (37)             (25)
           Changes in assets and liabilities:
                 (Increase) decrease in accounts receivable...................................       (482)           1,017
                 Decrease in inventories......................................................        600              890
                 (Increase) decrease in prepaid expenses and other assets.....................         45               33
                 Increase (decrease) in trade accounts payable................................        749             (722)
                 Decrease in accrued expenses and other liabilities...........................     (1,798)            (161)
                 Increase (decrease) in other long-term liabilities...........................        352             (574)
                                                                                              -----------      -----------
                      Total adjustments.......................................................      2,858            3,531
                                                                                              -----------      -----------
Net cash used by operating activities.........................................................     (4,678)          (3,922)
                                                                                              -----------      -----------

Cash flows from investing activities:
      Payments for purchase of property and equipment.........................................     (3,055)            (716)
      Proceeds from sale of property and equipment............................................        247              104
                                                                                              -----------      -----------
Net cash used by investing activities.........................................................     (2,808)            (612)
                                                                                              -----------      -----------

Cash flows from financing activities:
      Proceeds from exercise of stock options.................................................        124                -
      Proceeds from issuance of convertible debt..............................................     12,000                -
      Proceeds from issuance of notes payable.................................................      7,198           12,187
      Proceeds from issuance of note payable to related party.................................      1,150                -
      Payment of financing fees...............................................................       (966)               -
      Repayment of notes payable and long-term debt...........................................    (10,835)          (7,968)
                                                                                              -----------      -----------
Net cash provided by financing activities.....................................................      8,671            4,219
                                                                                              -----------      -----------
Effect of exchange rate changes on cash.......................................................         29               10
                                                                                              -----------      -----------
Net increase (decrease) in cash...............................................................      1,214             (307)
Cash and cash equivalents at beginning of period..............................................        838              685
                                                                                              -----------      -----------
Cash and cash equivalents at end of period....................................................$     2,052      $       378
                                                                                              ===========      ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Net cash paid during the period for:
      Interest................................................................................$     1,420      $       910
      Income taxes............................................................................$         -      $         -






                    The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>


                                     4

<PAGE>
<PAGE>

                           ZOLTEK COMPANIES, INC.

                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 ------------------------------------------

1.   BASIS OF PRESENTATION AND ACCOUNTING POLICIES

The accompanying unaudited interim consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements and should be read in conjunction with the Company's 2003 Annual
Report to Shareholders, which includes consolidated financial statements and
notes thereto for the fiscal year ended September 30, 2003. In the opinion
of management, all normal recurring adjustments and estimates considered
necessary for a fair presentation have been included. Certain
reclassifications have been made to conform prior year's data to the current
presentation. The results for the period ended March 31, 2004 are not
necessarily indicative of the results which may be expected for the fiscal
year ending September 30, 2004.

The unaudited interim consolidated financial statements include the accounts
and transactions of the Company and its wholly-owned subsidiaries.
Adjustments resulting from the translation of financial statements of the
Company's foreign subsidiaries are reflected as other comprehensive income
(loss) within shareholders' equity. Gains and losses from foreign currency
transactions are included in the statement of operations. All significant
inter-company transactions and balances have been eliminated upon
consolidation.

2.   FINANCING

2004 Refinancing
----------------

In January 2004, the Company issued and sold convertible debentures in the
aggregate principal amount of $7.0 million to institutional private equity
and other investors (including $250,000 to each of Mr. Rumy and Mr.
McDonnell who are members of the Company's Board of Directors). The
convertible debentures have a stated maturity of 30 months and bear interest
at 6% per annum and are convertible at any time into common stock shares at
$5.40 per share for each investor other than Messrs. Rumy and McDonnell and
$5.42 per share for each of Messrs. Rumy and McDonnell. The Company also
issued to the investors five-year warrants to purchase an aggregate of
323,994 shares of common stock of the Company at an exercise price of $5.40
per share for each investor other than Messrs. Rumy and McDonnell and $5.42
per share for each of Messrs. Rumy and McDonnell. The fair value of the
warrants and beneficial conversion feature, at the time of issuance, was
estimated to be $2.0 million is being amortized as non-cash interest expense
over the term of the convertible debentures. Proceeds from the issuance of
these convertible debentures are being used for working capital purposes.

As part of the Company's refinancing, the bank lender to the Company's
Hungarian subsidiary amended certain financial covenants and extended the
maturity date of its loan to December 31, 2004. In connection with such
actions, the bank required that the Company make arrangements to settle
intercompany accounts payable by Zoltek U.S. operations to its Hungarian
subsidiary in the amount of approximately $2.8 million. The bank was
unwilling to keep open its offer to restructure Zoltek Rt.'s loans until
after the Company's refinancing package was completed. Prior to the
refinancing, the Company did not have cash on hand or available borrowings
that would enable it to make the settlement of the intercompany accounts
required by the Hungarian bank. In order to proceed expeditiously to resolve
the Company's financing requirements, Zsolt Rumy, the Company's Chief
Executive Officer and a director of the Company, loaned the Company $1.4
million in cash and posted a $1.4 million letter of credit for the benefit
of the Company. This arrangement was approved by the Company's board of
directors and audit committee. The loan by Mr. Rumy bears interest on the
amount advanced and the notional amount of the letter of credit at a rate
per annum equal to LIBOR plus 11% with a LIBOR floor of 2%, the same
interest rate of the mortgage financing discussed below. As a result of the
Company completing the refinancing transactions making available the cash to
settle the intercompany accounts, the letter of credit has been released.
After converting $250,000 into convertible debt as part of the January 2004
financing, $1.15 million original loan remains outstanding and the Company
expects to repay it during the current fiscal year.

The Company also entered into a mortgage note with a bank in the aggregate
principal amount of $6.0 million. The note has a stated maturity of three
years and bears interest at a rate of LIBOR plus 11% (13.5% per annum as of
March 31, 2004) with a LIBOR floor of 2%. The Company will pay interest only
on a monthly basis with principal balance due at time of maturity. The loan
is collateralized by a security interest in the Company's headquarters
facility and its two U.S. carbon fiber manufacturing facilities. The
proceeds of this transaction were used to pay down debt of $6.0 million with
its U.S. bank. Of such proceeds, $0.5 million is currently


                                     5

<PAGE>
<PAGE>

held in an escrow account to be released when the Company completes certain
post-closing requirements with respect to the loan. The Company expects the
conditions will be met during 2004.

Due to the refinancing received subsequent to the Company's fiscal year end,
the Company's U.S. bank waived the financial covenant through February 13,
2005. Additionally, the expiration of the Company's revolving credit loan
was extended from January 31, 2004 to January 31, 2005. The refinancing
allows the Company to execute its 2004 business plan, which was uncertain
until the refinancing occurred.

In March 2004, the Company issued and sold convertible debentures in the
aggregate principal amount of $5.75 million to institutional private equity
investors and Mr. Dill ($750,000) who is member of the Company's board of
directors and whose funding occurred subsequent to March 31, 2004. The
convertible debentures have a stated maturity of 30 months and bear interest
at 6% per annum and are convertible at any time into common stock shares at
$6.25 per share for each investor other than Mr. Dill and $7.82 per share
for Mr. Dill. The Company also issued to the investors five-year warrants to
purchase an aggregate of 223,997 shares of common stock of the Company at an
exercise price of $7.50 per share for each investor other than Mr. Dill
whose warrants have an exercise price of $7.82 per share. The fair value of
the warrants and beneficial conversion feature, at the time of issuance, was
estimated to be $4.0 million is being amortized as non-cash interest expense
over the term of the convertible debentures. Proceeds from the issuance of
these convertible debentures are being used for working capital purposes.

The Company will require further refinancing or renegotiations of current
debt arrangements in fiscal 2005 and beyond. However, the Company can give
no assurance that it will be successful in its attempt to obtain new or
renegotiated financing and if the Company is unsuccessful, it would have a
material adverse effect on its future financial condition and its ability to
continue to pursue its current business plan.

2003 Refinancing
----------------

The Company executed an amended credit facility agreement, dated as of
February 13, 2003, with the U.S. bank. The amended credit facility agreement
is structured as a term loan in the amount of $3.5 million (due February 13,
2005) and a revolving credit loan in the amount of $5.0 million (originally
due January 31, 2004, now due January 31, 2005 - see above). The Company
repaid $5.0 million of this loan from the proceeds of the sale of
subordinated convertible debentures as discussed below. Borrowings under the
amended facility are based on a formula of eligible accounts receivable and
inventories of the Company's U.S.-based subsidiaries. The outstanding loans
under the agreement bear interest at the prime interest rate plus 2% per
annum. Total borrowings and available borrowings under the revolving credit
agreement were zero and $5.0 million at March 31, 2004, respectively.

The Company also entered into a debenture purchase agreement, dated as of
February 13, 2003, under which the Company issued and sold to 14 investors,
including certain directors, subordinated convertible debentures in the
aggregate principal amount of $8.1 million. The subordinated convertible
debentures have stated maturities of five years, bear interest at 7% per
annum and are convertible into an aggregate of 2,314,286 shares of common
stock of the Company at a conversion price of $3.50 per share. The Company
also issued to the investors five-year warrants to purchase an aggregate of
405,000 shares of common stock of the Company at an exercise price of $5.00
per share. The fair value of the warrants, at the time of issuance, was
estimated to be $376,650. Proceeds from the issuance of these convertible
debentures were used to repay existing borrowings as well as for working
capital.

Credit Facilities
-----------------

The Company's financing of its U.S. operations is separate from that of its
Hungarian operations. Availability of credit is based on the collateral
value at each operation. However, the covenants of the term loan and
revolving line of credit from a U.S. bank, which has been waived through
February 13, 2005, apply to the Company on a consolidated basis.

US Operations - The Company's current credit facility with its U.S. Bank is
described above under "2003 Refinancing." Total borrowings under the U.S.
credit facility including revolving credit and term loan were $1.1 million
at March 31, 2004, all of which has been classified as current due to the
maturity in February 2005.

Hungarian Operations - The Company's Hungarian subsidiary entered into a
credit facility with a Hungarian bank. The facility consists of a $6.0
million bank guarantee and factoring facility, a $4.0 million capital
investment facility and a $2.0 million working capital facility. All of the
Hungarian bank debt is due on December 31, 2004. Total borrowings under this
credit facility were $12.0 million at March 31, 2004.

                                     6

<PAGE>
<PAGE>

In March 2003, the Company's Hungarian subsidiary entered into a credit
agreement with another Hungarian bank for $2.2 million. The facility
consists of a bank guarantee, factoring and mortgages and expires December
31, 2004. Total borrowings of the Hungarian subsidiary were $13.4 million at
March 31, 2004, of which $12.3 million have been classified as current due
to their stated maturity of December 31, 2004. Borrowings under the
Hungarian bank credit facilities cannot be used in Zoltek's U.S. operations.

3.   COMPREHENSIVE LOSS

Comprehensive loss for the three- and six-month periods ended March 31, 2004
and 2003 (unaudited) was as follows (in thousands):

<TABLE>
<CAPTION>
                                                                                      THREE MONTHS ENDED MARCH 31,
                                                                                      ----------------------------
                                                                                        2004                2003
                                                                                     -----------          ---------
<S>                                                                                  <C>                  <C>
          Net loss.................................................................  $    (3,844)         $  (4,282)
          Foreign currency translation adjustment..................................          734                 83
                                                                                     -----------          ---------
          Comprehensive loss.......................................................  $    (3,110)         $  (4,199)
                                                                                     ===========          =========

<CAPTION>
                                                                                       SIX MONTHS ENDED MARCH 31,
                                                                                       --------------------------
                                                                                        2004                2003
                                                                                     -----------          ---------
<S>                                                                                  <C>                  <C>
          Net loss.................................................................  $    (7,536)         $  (7,453)
          Foreign currency translation adjustment..................................        1,953              2,633
                                                                                     -----------          ---------
          Comprehensive loss.......................................................  $    (5,583)         $  (4,820)
                                                                                     ===========          =========
</TABLE>

4.   STOCK OPTION PLAN

At March 31, 2004, the Company had stock-based employee compensation plans.
The Company accounts for those plans under the recognition and measurement
principles of Accounting Principles Board Opinion No. 25 ("APB 25"),
Accounting for Stock Issued to Employees, and its related interpretations.
No stock-based employee compensation costs are reflected in net loss, as all
options granted under those plans had an exercise price equal to the market
value of the underlying common stock on the date of grant. During fiscal
2004, the Company granted 40,000 employee stock options with an exercise
price that equalled to the Company's stock price on the applicable date of
grant. The following table illustrates the effect on net loss and loss per
share if the Company had applied the fair value recognition provisions of
Statement of Financial Accounting Standards No. 123 ("FAS 123"), Accounting
for Stock Based Compensation, to stock-based employee compensation (in
thousands, except per share):

<TABLE>
<CAPTION>
                                                                                         THREE MONTHS ENDED MARCH 31,
                                                                                         ----------------------------
                                                                                            2004              2003
                                                                                        -----------       -----------
                                                                                                 (UNAUDITED)
<S>                                                                                     <C>               <C>
         Reported net loss..............................................................$    (3,844)      $    (4,282)
         Total stock-based employee compensation expense determined under
           fair value based method for all awards, net of tax effects...................        (92)             (135)
                                                                                        -----------       -----------
         Pro forma net loss.............................................................$    (3,936)      $    (4,417)
                                                                                        ===========       ===========
         Reported basic and diluted loss per share......................................$      (.23)      $      (.26)
                                                                                        ===========       ===========
         Pro forma basic and diluted loss per share.....................................$      (.24)      $      (.27)
                                                                                        ===========       ===========

<CAPTION>
                                                                                          SIX MONTHS ENDED MARCH 31,
                                                                                          --------------------------
                                                                                            2004              2003
                                                                                        -----------       -----------
                                                                                                 (UNAUDITED)
<S>                                                                                     <C>               <C>
         Reported net loss..............................................................$    (7,536)      $    (7,453)
         Total stock-based employee compensation expense determined under
           fair value based method for all awards, net of tax effects...................       (105)             (186)
                                                                                        -----------       -----------
         Pro forma net loss.............................................................$    (7,641)      $    (7,639)
                                                                                        ===========       ===========
         Reported basic and diluted loss per share......................................$     (0.46)      $     (0.46)
                                                                                        ===========       ===========
         Pro forma basic and diluted loss per share.....................................$     (0.47)      $     (0.47)
                                                                                        ===========       ===========
</TABLE>

                                     7

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5.   SEGMENT INFORMATION

The Company's strategic business units are based on product categories and
have been presented as three reportable segments: Carbon Fibers, Technical
Fibers and Specialty Products. Effective in the fourth quarter of fiscal
year 2003, the Company began reporting the former Carbon Fibers segment as
two reportable segments: Carbon Fibers and Technical Fibers. The Company
made this change based on the current economic characteristics of these two
operating segments. Segment information for the second quarter of fiscal
2003 has been reclassified to reflect this change.

The Carbon Fibers segment manufactures low-cost carbon fibers used as
reinforcement material in composites, carbon fiber composite products and
filament winding equipment used in the composite industry. The Technical
Fibers segment manufactures aircraft brakes and oxidized acrylic fibers for
heat/fire barrier applications. These two segments also facilitate
development of product and process applications to increase the demand for
carbon fibers and technical fibers and aggressively market carbon fibers and
technical fibers. The Carbon Fibers and Technical Fibers segments are
located geographically in the United States and Hungary. The Specialty
Products segment manufactures and markets acrylic and nylon products and
fibers primarily to the textile industry and is located in Hungary. With the
exception of the Technical Fibers segment, none of the segments are
substantially dependent on sales from one customer or a small group of
customers.

Management evaluates the performance of its operating segments on the basis
of operating income (loss) contribution to the Company. The following table
presents financial information on the Company's operating segments as of and
for the second quarter ended March 31, 2004 and 2003 (amounts in thousands):

<TABLE>
<CAPTION>
                                                                         THREE MONTHS ENDED MARCH 31, 2004
                                                                         ---------------------------------
                                                                                    (Unaudited)
                                                                                                       Corporate
                                                                                                     Headquarters
                                                          Technical       Carbon      Specialty           and
                                                           Fibers         Fibers      Products       Eliminations       Total
                                                        ------------   -----------   -----------     ------------    -----------
<S>                                                     <C>            <C>           <C>             <C>             <C>
Net sales............................................   $      3,663   $     4,697   $     7,567     $         -     $    15,927
Net sales - intersegment.............................            316           183             -            (499)              -
Cost of sales, excluding available unused capacity...          3,450         3,918         7,366            (374)         14,360
Available unused capacity expenses...................              -         1,259             -               -           1,259
Operating (loss) income..............................            260        (1,370)         (887)           (510)         (2,507)
Depreciation and amortization expense................            197           689           496              23           1,405
Capital expenditures.................................            114         2,539            12             (80)          2,585

<CAPTION>
                                                                             THREE MONTHS ENDED MARCH 31, 2003
                                                                             ---------------------------------
                                                                                       (Unaudited)
                                                                                                       Corporate
                                                                                                     Headquarters
                                                          Technical       Carbon      Specialty           and
                                                           Fibers         Fibers      Products       Eliminations       Total
                                                        ------------   -----------   -----------     ------------    -----------
<S>                                                     <C>            <C>           <C>             <C>             <C>
Net sales............................................   $      3,576   $     3,045   $     9,323     $         -     $    15,944
Net sales - intersegment.............................            425           992             -          (1,417)              -
Cost of sales, excluding available unused capacity...          3,189         4,117         8,763          (1,259)         14,810
Available unused capacity expenses...................              -         1,431             -               -           1,431
Operating (loss) income..............................            112        (2,141)         (812)           (894)         (3,735)
Depreciation and amortization expense................            360           904           238              60           1,562
Capital expenditures.................................            120           171            68              12             371




                                     8

<PAGE>
<PAGE>



<CAPTION>
                                                                           SIX MONTHS ENDED MARCH 31, 2004
                                                                           -------------------------------
                                                                                     (Unaudited)

                                                                                                       Corporate
                                                                                                     Headquarters
                                                          Technical       Carbon      Specialty           and
                                                           Fibers         Fibers      Products       Eliminations       Total
                                                        ------------   -----------   -----------     ------------    -----------
<S>                                                     <C>            <C>           <C>             <C>             <C>
Net sales............................................   $      6,484   $     7,769   $    15,005     $         -     $    29,258
Net sales - intersegment.............................            776           991             -          (1,767)              -
Cost of sales, excluding available unused capacity...          6,235         7,436        14,355          (1,486)         26,540
Available unused capacity expenses...................              -         2,686             -               -           2,686
Operating (loss) income..............................            428        (3,299)       (1,491)         (1,296)         (5,658)
Depreciation and amortization expense................            353         1,791           774              50           2,968
Capital expenditures.................................            204         2,663           228             (40)          3,055

<CAPTION>
                                                                              SIX MONTHS ENDED MARCH 31, 2003
                                                                              -------------------------------
                                                                                       (Unaudited)
                                                                                                       Corporate
                                                                                                     Headquarters
                                                          Technical       Carbon      Specialty           and
                                                           Fibers         Fibers      Products       Eliminations       Total
                                                        ------------   -----------   -----------     ------------    -----------
<S>                                                     <C>            <C>           <C>             <C>             <C>
Net sales............................................   $      6,857   $     6,928   $    19,118     $         -     $    32,903
Net sales - intersegment.............................              -         3,000             -          (3,000)              -
Cost of sales, excluding available unused capacity...          5,889         8,780        17,871          (2,828)         29,712
Available unused capacity expenses...................              -         2,757             -               -           2,757
Operating (loss) income..............................            277        (3,944)       (1,335)         (1,561)         (6,563)
Depreciation and amortization expense................            516         2,022           466             129           3,133
Capital expenditures.................................            210           344           150              12             716

<CAPTION>
                                                                                       TOTAL ASSETS
                                                                                       ------------
                                                                                       (Unaudited)
                                                                                                       Corporate
                                                                                                     Headquarters
                                                          Technical       Carbon      Specialty          and
                                                           Fibers         Fibers      Products       Eliminations        Total
                                                        ------------   -----------   -----------     ------------    -----------
<S>                                                     <C>            <C>           <C>             <C>             <C>
March 31, 2004.......................................   $     18,740   $    61,520   $    41,472     $     3,074     $   124,806
September 30, 2003...................................         22,611        66,226        32,569          (1,951)        119,455
</TABLE>


GEOGRAPHIC INFORMATION (UNAUDITED) / (AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                               REVENUES (1)
                                                                               ------------               LONG-LIVED ASSETS (2)
                                                                             SIX MONTHS ENDED             ---------------------
                                                                                 MARCH 31,               MARCH 31,   SEPTEMBER 30,
                                                                            2004          2003             2004         2003
                                                                         -----------  -----------       -----------  -----------
<S>                                                                      <C>          <C>               <C>          <C>
United States............................................................$     7,968  $     9,499       $    46,547  $    45,936
Hungary..................................................................     21,290       23,404            33,105       31,436
                                                                         -----------  -----------       -----------  -----------
Total....................................................................$    29,258  $    32,903       $    79,652  $    77,373
                                                                         ===========  ===========       ===========  ===========

<FN>
------------------------
(1)  Revenues are attributed to the entity recognizing the sale in the
     interim statements, as it is not practical to accumulate every
     customer's country of domicile on an interim basis.

(2)  Property and equipment, net of accumulated depreciation, are based on
     country location of assets.
</TABLE>



                                     9

<PAGE>
<PAGE>

6.   INVENTORIES

Inventories consist of the following (amounts in thousands):

<TABLE>
<CAPTION>
                                                                                          MARCH 31,     SEPTEMBER 30,
                                                                                            2004            2003
                                                                                          ---------       ---------
<S>                                                                                       <C>             <C>
         Raw materials.................................................................   $   5,169       $   4,859
         Work-in-process...............................................................       1,353           1,132
         Finished goods................................................................      19,245          19,057
         Supplies, spares and other....................................................       1,670           1,930
                                                                                          ---------       ---------
                                                                                          $  27,437       $  26,978
                                                                                          =========       =========
</TABLE>

The Company has undertaken steps to sell carbon fiber inventories to improve
its cash flow. The Company has decreased the actual inventory by $0.2
million but this decrease was offset by the significant increase in the
value of the Hungarian currency against the U.S. Dollar, which has increased
the carrying value of the Hungarian inventories.

7.   NEW ACCOUNTING POLICIES

The FASB issued FASB Interpretation No. 46-R "Consolidation of Variable
Interest Entities" (FIN No. 46-R) in December 2003, which addressed the
requirements for consolidating certain variable interest entities. FIN No.
46-R applied immediately to variable interest entities created after January
31, 2003 and to variable interest entities that are considered special
purpose entities as of December 31, 2003. FIN No. 46-R applied to all other
variable interest entities as of March 31, 2004. The Company currently has
no interests in entities that are considered special purpose entities.
Additionally, the Company has no significant variable interests in
non-special purpose entities. Accordingly, the adoption of FIN No. 46-R had
no material impact on the Company's financial statements.

8.   COMMITMENTS AND CONTINGENCIES

Legal
-----

In October 2003, the Company was named as a defendant in a civil action
filed in the Court of Common Pleas for Cuyahoga County, Ohio by the former
owner of Hardcore Composites Operations, LLC ("Hardcore") alleging breach by
Hardcore and the Company of their respective obligations under a sublease,
the Company's guaranty of the sublease, and prior settlement agreement among
the parties. The former owner's action claims damages from the Company in
the amount of $300,000 for breaches by the Company of its obligations under
the guaranty and the settlement agreement and, in addition, demands $450,000
in damages from the Company and Hardcore, jointly and severally, under the
terms of the settlement agreement. The Company is vigorously defending this
matter and has asserted counterclaims. Management believes that the ultimate
resolution of this litigation will not have a material adverse effect on the
Company's results of operations or financial condition.

The Company is party to various claims and legal proceedings arising out of
the normal course of its business. In the opinion of management, the
ultimate outcome of these claims and lawsuits will not have a material
adverse effect upon the financial condition or results of operations of the
Company and its subsidiaries taken as a whole.

Sources of Supply
-----------------

As part of its growth strategy, the Company has developed its own precursor
acrylic fibers and all of its carbon fibers, excluding the aircraft brake
products, are now manufactured from this precursor. The primary source of
raw material for the precursor is ACN (acrylonitrile), which is a commodity
product with multiple sources.

The Company currently obtains most of its acrylic fiber precursor to supply
its carbon fiber operations for the aircraft brake applications from a
single supplier which is the only supplier that currently produces precursor
approved for use in aircraft brake applications. The Company believes this
supplier is a reliable source of supply at the Company's current operating
levels. However, the Company has initiated trials at an aircraft brake
manufacturer with its own precursor-based products, which might protect its
business if there were an interruption in supply from the supplier.

The major materials used by the Specialty Products Business Segment are
basic commodity products, which are widely available from a variety of
sources.



                                     10

<PAGE>
<PAGE>

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS

GENERAL
-------

The Company's mission is to commercialize the use of carbon fibers as a
low-cost but high performance reinforcement for composites used as the
primary building material in everyday commercial products. The performance
benefits of carbon fibers - light weight, high strength and stiffness - have
been demonstrated in aerospace applications for many years. Eventually
carbon fibers were introduced in high performance sporting goods, but carbon
fiber's high price and lack of availability prevented it from general
introduction into higher volume commercial applications. The Company has
developed and is implementing a strategy to manufacture and sell carbon
fibers into commercial applications at costs competitive with other
materials.

In addition to its underlying strategy to penetrate developing markets,
through the carbon fibers segment the Company is the leading supplier of
carbon fibers to the aircraft brake industry. Also, the Company participates
in traditional carbon fiber markets, such as sporting goods and conductive
thermoplastic manufacturing. The Company also manufactures and markets
oxidized acrylic fibers, an intermediate product of the carbon fiber
manufacturing process, for fire and heat resistance applications.

Outside of the carbon fiber business, the Company sells acrylic and nylon
fibers into textile markets and manufactures other specialty products in its
Hungary facility. The Company is currently developing a plan to discontinue
the nylon fiber operation and to exit from the acrylic textile business and
will utilize a significant portion of the acrylic fiber capacity to supply
precursor for its growing carbon fiber manufacturing operations. The Company
expects this plan to be initiated during fiscal 2004 and could result in a
charge to earnings but the Company believes it will have little impact on
cash flow.

The Company's strategic plan of introducing low-cost carbon fibers into high
volume potential end uses to attract significant new applications for carbon
fiber reinforced composites in automotive, infrastructure, wind energy, oil
and gas production and other industries has been well received. The Company
believes it is the lowest cost producer of carbon fibers and it is well
positioned to produce sufficient volumes of carbon fibers to satisfy
indicated future demand. The Company is participating in ongoing development
projects and expects that certain of these emerging applications will begin
to generate meaningful orders during fiscal 2004 as described below.

The Company introduced its carbon fibers strategic plan in 1995 to develop a
low-cost process to produce carbon fibers and build significant capacity
while encouraging growth of new applications. As part of its strategy to
establish availability of carbon fibers on a scale sufficient to encourage
growth of large-volume applications, the Company completed a major carbon
fiber production capacity expansion in fiscal 1998 at its Abilene, Texas
facility. While the Company succeeded in developing its infrastructure to
become the low-cost producer, the large volume applications were slower to
develop than anticipated. Since 1998 total carbon fiber usage has not grown
significantly and the aerospace applications actually declined. This
situation resulted in substantial overcapacity and destructive pricing in
the industry. Much of the new carbon fiber business was captured by the
aerospace fibers as certain manufacturers sold their aerospace-grade fibers
on the commercial markets at prices that covered their costs, undermining
the Company's commercialization strategy.

However, the market conditions have begun to change during the second
quarter of fiscal 2004. Two major aerospace programs, the Airbus A-380 and
the Boeing 7E7, have absorbed virtually all of the aerospace fiber capacity,
and resulted in the divergence of the aerospace and commercial markets for
carbon fibers. The Company's receipt of previously announced carbon fiber
orders aggregating 1.8 million pounds from Asian sporting goods
manufacturers toward the beginning of this fiscal year was an early
indication of this shift. A significant sales increase in carbon fiber
products in the second quarter of fiscal 2004 confirmed this shift. Further
causing the divergence of the two markets was the quick pace of development
of the carbon fiber wind turbine blade market. Currently Zoltek believes it
is in a unique position of having installed capacity and fiber quality that
can attract the available new business.

The Company has seen a significant increase in the demand for carbon fibers
in several different applications including aerospace. During the second
quarter of 2004, the Company experienced a significant growth in customer
demand in the carbon and technical fiber business units, as sales (excluding
inter-segment sales) increased $2.5 million over the first quarter of 2004.
The improved sales in the carbon fibers and technical fibers business units
improved the overall operating loss of the Company from a loss of $3.2
million in the first quarter of 2004 to a loss of $2.5 million in the second
quarter of 2004.

The Company has specifically targeted three significant and emerging
applications: wind energy, flame retardant bedding and home furnishings, and
automotive. Although the Company has not yet achieved the sales volume it
had expected, development of the use of carbon fibers is continuing in each
of these targeted market segments.

                                     11

<PAGE>
<PAGE>

     o   Wind energy is one of the fastest growing industries globally. The
         desire by consumers and the government support for renewable energy
         has been growing in the past decade. Of all the current
         technologies, wind generated electricity is the most competitive
         and technically viable renewable energy source. The wind turbine's
         ability to generate electricity is increased by the square of its
         blade length. With 55-60 meter (approximately 175-200 feet) long
         blades, a wind turbine can generate 3 MW of electricity at costs
         competitive with fossil fuels. All the major wind turbine
         manufacturers have announced plans to introduce such large turbines
         in 2004. The length of these blades requires the use of carbon
         fibers. The Company has put forth a significant effort to qualify
         and certify our Panex(R)-35 fibers for this application.

         The largest supplier of wind turbines has approved the Company as a
         one of two sources of carbon fiber for the production of blades and
         we expect significant carbon fiber orders from this application in
         fiscal 2004. Another significant blade manufacturer has now begun
         using our fibers. Also, the Company's Entec subsidiary has signed
         an agreement with the second largest supplier of wind turbines to
         build machinery to make the blades for the wind turbines with an
         automated process, which the Company believes will lead to
         meaningful carbon fiber sales beginning in the latter part of 2004.

     o   It is expected that consumer product safety standards that regulate
         flame-retardant bedding and furniture will begin to be enforced by
         the State of California starting in 2005. The first regulations in
         place relate to the mattress products. The Company, in cooperation
         with a major supplier to the mattress industry, has developed a
         solution for the regulations put in place by the State of
         California. So far the mattress industry is vigorously opposing the
         California regulations and is seeking to defer offering compliant
         products until the U.S. federal regulations are imposed. The
         American Home Fire Safety Act, which is expected to be the basis
         for the federal regulations, has been passed by the Senate and
         introduced in the House. The Company believes its PYRON(R) products
         will offer the best and most economical solution for this
         application as the federal standards are expected to be more
         stringent than the final version of the California regulation. In
         view of recent legal developments regarding implementation of these
         laws and rules at this time it is not clear when the industry will
         implement the introduction of the flame resistant mattresses.
         However, it is the Company's belief that the potential exposure to
         product liability eventually will force the industry to comply and
         do so across the United States. The Company is already selling its
         products to institutional mattress manufacturers, protective
         clothing manufacturers and automotive flame barrio applications and
         expects sales to grow for these applications.

     o   The Company believes that use of carbon fibers in automobiles will
         become the most significant application within 10 years. The
         performance properties of carbon fiber reinforced composites can
         reduce the weight of a car by 60% versus steel and 35% versus
         aluminum. This allows either a significant improvement in the car's
         performance and/or fuel consumption. Both are significant
         attributes for the automobile industry. The Company has been
         working with BMW under an exclusive arrangement to efficiently and
         reliably produce structural parts for automobiles. The results from
         this development work have been favorable. Accordingly, the Company
         believes that the introduction of carbon fibers in series
         production cars will occur within the next few years. The Company
         anticipates that significant orders eventually will be forthcoming
         from BMW.

         In addition to BMW, the Company has worked with other auto
         companies and their vendors. Current indications are that a number
         of other applications are coming to fruition. The Company expects
         that several components made with the Company's carbon fibers will
         appear on series production cars by 2005.

With the new orders in place and indications for additional significant
orders, the Company is in process of restarting its major carbon fiber
manufacturing facility in Abilene, Texas which has been temporarily idled.
The Company expects initially to begin operation of manufacturing lines with
aggregate rated capacity of 2 million pounds per year in Abilene and the
Hungarian carbon fiber manufacturing facility currently is operating at full
capacity. Maintaining the excess capacity has been costly, but the Company
believed it has been necessary to assure customers of adequate supply and
encourage them to shift to carbon fibers from other materials. With the
reactivation of the Abilene plant, unused capacity costs are expected to
diminish and, ultimately, be fully absorbed in ongoing production as all the
carbon fiber lines start operating.

The Company also moved its fiber prepreg facilities from San Diego to Salt
Lake City in the first quarter of fiscal 2004. This facility is now ready
for production and samples are being supplied to prior customers for
re-qualification.



                                     12

<PAGE>
<PAGE>

RESULTS OF OPERATIONS
---------------------

THREE MONTHS ENDED MARCH 31, 2004 COMPARED TO THREE MONTHS ENDED MARCH 31, 2003
-------------------------------------------------------------------------------

The Company's sales of $15.9 were flat for the second quarter of fiscal 2004
compared to the second quarter of fiscal 2003 as the decrease in the
specialty products unit offset the increases in technical fiber sales
(excluding intersegment) and the carbon fiber sales (excluding
intersegment). Accordingly, carbon fiber sales other than prepreg increased
$2.3 million from the second quarter of fiscal 2003. Technical fiber sales
(excluding intersegment) increased 2.4%, or $0.1 million, to $3.7 million in
the second quarter fiscal 2004 from $3.6 million in the second quarter
fiscal 2003. Technical fiber sales increased as demand improved not only in
the aircraft brake customers but also for the flame retardant market. Carbon
fiber sales (excluding intersegment) increased 54%, or $1.6 million, to $4.7
million in the second quarter of fiscal 2004 from $3.0 million in the second
quarter of fiscal 2003. The carbon fiber sales in fiscal 2004 included a
decrease of $1.6 million from 2003 related to the Company's decision to
relocate its prepreg operations from California to Utah to combine its
operations with another of the Company's facilities. The Company expects its
prepreg production will increase in the remainder of fiscal 2004. Carbon
fibers sales other than prepreg sales increased by $2.3 million in fiscal
2004 from fiscal 2003 as production and sales of the Asian orders started
during the second quarter of fiscal 2004 and the Company experienced a
general increase in the overall demand for carbon fiber from prior years.
Sales of the specialty products business segment decreased 18.9%, or $1.7
million, to $7.6 million in the second quarter of fiscal 2004 from $9.3
million in the second quarter of fiscal 2003. The reduced revenue was
primarily the result of management's decision to lower acrylic fiber
production in order to limit sales at unfavorable profit levels. The Company
expects these depressed conditions impacting the carbon fiber and acrylic
markets to continue during fiscal 2004.

The Company's cost of sales (excluding available unused capacity costs)
decreased by 3.0%, or $0.5 million, to $14.3 million in the second quarter
of fiscal 2004 from $14.8 million in the second quarter of fiscal 2003. The
cost of sales for the Company's specialty products business segment
decreased 15.9% compared to the 18.9% decrease in sales reflecting a
disproportionate reduction in sales of lower margin products. Carbon fiber
margins increased as production and sales have improved absorption of fixed
manufacturing cost.

The Company continued to incur costs related to the underutilized productive
capacity for carbon fibers at the Abilene, Texas facilities. These costs
included depreciation and other overhead associated with the unused
capacity. These costs, which were separately identified on the income
statement, were approximately $1.3 million during the second quarter of
fiscal 2004 and $1.4 million in the second quarter of fiscal 2003. The
Company believes it has been necessary to maintain available capacity to
encourage development of significant new large-scale applications. With the
increased orders in the second half of fiscal 2004, unused capacity costs
are expected to decrease significantly during that period and will be fully
absorbed in ongoing operations by the end of fiscal 2005. See additional
discussion of the Abilene facility under "-Liquidity and Capital Resources."

Application and development costs were $0.8 million in the second quarter of
fiscal 2004 and $0.9 million in the second quarter of fiscal 2003. These
costs included product and market development efforts, product trials and
sales and product development personnel and related travel. Targeted
emerging applications include automobile components, fire/heat barrier and
alternate energy technologies.

Selling, general and administrative expenses were $2.0 million in the second
quarter of fiscal 2004 compared to $2.5 million in the second quarter of
fiscal 2003. The decrease in expense was primarily due to the cost
containment measures implemented during fiscal 2003.

Operating loss was $2.5 million in the second quarter of fiscal 2004
compared to a loss of $3.7 million in second quarter of fiscal 2003 an
improvement of $1.2 million. The operating income in technical fiber
increased from income of $0.1 million in the second quarter of fiscal 2003
to income of $0.3 million in the second quarter of fiscal 2004. Carbon fiber
operating income (loss) increased from loss of $2.1 million in the second
quarter of fiscal 2003 to a loss of $1.4 million in the second quarter of
fiscal 2004. Corporate headquarters operating loss improved from a loss of
$0.8 million in the second quarter of fiscal 2003 to a loss of $0.5 million
in the second quarter of fiscal 2004. Specialty product operating loss of
$0.8 million was flat compared to 2003. The decrease in the operating loss
was a result of the improvement in the carbon fibers and technical fibers
business units and the continued reduction of operating expenses due to the
cost containment measures implemented during 2003.

Interest expense and amortization of warrants and deferred financing costs
was approximately $1.0 million in the second quarter of fiscal 2004 compared
to $0.4 million in the second quarter of fiscal 2003. The increase in
amortization resulted from the Company's refinancing transactions (see
"-Liquidity and Capital Resources"). Of that amount, $0.3 million represents
non-cash expense for amortization of warrant and deferred financing costs.

                                     13

<PAGE>
<PAGE>

Other income/expense, net, was an expense of $0.2 million in the second
quarter of 2004 compared to an expense of $15,000 for the second quarter of
fiscal 2003 due to an increase in the foreign currency transactional loss on
the Company's debt at its Hungarian subsidiary which is denominated in
Euros.

Income tax expense was $0.1 million for the second quarter of fiscal 2004
compared to an income tax expense of $0.1 million for the corresponding
period in the prior year. A valuation allowance was recorded against the
income tax benefit resulting from the pre-tax loss in both the second
quarter of fiscal 2004 and 2003.

The foregoing resulted in a net loss of $3.8 million for the second quarter
of fiscal 2004 compared to a net loss of $4.2 million for the second quarter
of fiscal 2003. Similarly, the Company reported a net loss per share of
$0.23 and $0.26 on a basic and diluted basis for the second quarter of
fiscal 2004 and 2003, respectively. The weighted average common shares
outstanding were $16.4 million for the second quarter of 2004 and $16.3
million in 2003.

SIX MONTHS ENDED MARCH 31, 2004 COMPARED TO SIX MONTHS ENDED MARCH 31, 2003
---------------------------------------------------------------------------

The Company's sales decreased 11.0%, or $3.6 million, to $29.3 million in
fiscal 2004 from $32.9 million in fiscal 2003, as decreases in the specialty
products unit and in the technical fibers unit offset an increase in the
carbon fibers unit. Technical fiber sales (excluding intersegment) decreased
7.5%, or $0.5 million, to $6.3 million in fiscal 2004 from $6.8 million in
fiscal 2003. Technical fiber sales decreased due to continued slow demand
and the timing of orders from aircraft brake customers during the first
quarter of fiscal 2004, reflecting the worldwide decline in the airline
industry activity. During the second quarter of 2004 purchases from this
segment's principal customer returned to historical levels. Carbon fiber
sales (excluding intersegment) increased 14%, or $1.0 million, to $7.9
million in fiscal 2004 from $6.9 million in fiscal 2003. The carbon fiber
sales in fiscal 2004 increased despite a decrease of $3.0 million from 2003
related to the Company's decision to relocate its prepreg operations from
California to Utah to combine its operations with another of the Company's
facilities. Carbon fibers sales, other than prepreg, increased by $4.0
million in fiscal 2004 from fiscal 2003 as production and sales of the Asian
orders started during the second quarter of fiscal 2004 and the Company
experienced a general increase in the overall demand for carbon fiber. Sales
of the specialty products business segment decreased 21.5%, or $4.1 million,
to $15.0 million in fiscal 2004 from $19.1 million in fiscal 2003. The
reduced revenue was primarily the result management's decision to lower
acrylic fiber production in order to limit sales at unfavorable profit
levels. The Company expects these depressed conditions impacting the carbon
fiber and acrylic markets to continue during fiscal 2004.

The Company's cost of sales (excluding available unused capacity costs)
decreased by 10.7%, or $3.2 million, to $26.5 million in fiscal 2004 from
$29.7 million in fiscal 2003. The decrease in cost of sales (excluding
available unused capacity costs) was consistent with the decrease in sales.
The Company's specialty products business segment reported a decrease in
cost of sales of 19.7% compared to a 21.5% decrease in sales reflecting a
change in product mix. Technical fiber margins declined as well due to lower
sales volumes attributable to its principal customer's order rate described
above, which resulted in unfavorable overhead absorption. The carbon fiber
margins increased as increased production and sales have increased the
absorption of fixed manufacturing costs.

The Company continued to incur costs related to the underutilized productive
capacity for carbon fibers at the Abilene, Texas facilities. These costs
included depreciation and other overhead associated with the unused
capacity. These costs, which were separately identified on the consolidated
statement of operations, were approximately $2.6 million during fiscal 2004
and $2.8 million in fiscal 2003. The Company believes it has been necessary
to maintain available capacity to encourage development of significant new
large-scale applications. With the increased orders in the second half of
fiscal 2004, the Company expects unused capacity costs are expected to
decrease significantly during the second half of 2004 and be fully absorbed
in ongoing operations by the end of fiscal 2005. See additional discussion
of the Abilene facility under "-Liquidity and Capital Resources."

Application and development costs were $1.5 million in fiscal 2004 and $1.8
million in fiscal 2003. These costs included product and market development
efforts, product trials and sales and product development personnel and
related travel. Targeted emerging applications include automobile
components, fire/heat barrier and alternate energy technologies.

Selling, general and administrative expenses were $4.2 million in fiscal
2004 compared to $5.2 million in fiscal 2003. The decrease in expense was
primarily due to the cost containment measures implemented during fiscal
2003.

Operating loss was $5.7 million in fiscal 2004 compared to a loss of $6.7
million in fiscal 2003 an improvement of $1.0 million. The operating margin
in technical fibers increased from income of $0.3 million in fiscal 2003 to
income of $0.4 million in fiscal 2004. Carbon fibers operating loss
increased from loss of $4.0 million in fiscal 2003 to a loss of $3.3 million
in fiscal 2004. Corporate headquarters operating loss increased 16% from a
loss of $1.6 million in fiscal 2003 to a loss of $1.3 million in fiscal
2004. Specialty product operating loss decreased from a $1.3 million loss in
fiscal 2003 to loss of $1.5 million in fiscal 2004. The decrease in the
operating loss was a result of the improvement in margins of the carbon
fiber business unit and the continued reduction of operating expenses due to
the cost containment measures implemented during 2003.

                                     14

<PAGE>
<PAGE>

Interest expense and amortization of warrant and deferred financing costs
was approximately $1.7 million in fiscal 2004 compared to $0.9 million in
fiscal 2003. The increase resulted from the Company's refinancing
transactions (see "-Liquidity and Capital Resources"). Of this amount $0.3
million represented non-cash amortization expense for warrant and deferred
financing costs.

Income tax expense was $0.2 million for fiscal 2004 compared to an income
tax benefit of $0.1 million for the corresponding period in the prior year.
A valuation allowance was recorded against the income tax benefit resulting
from the pre-tax loss for both fiscal 2004 and 2003.

The foregoing resulted in a net loss from continuing operations of $7.5
million for the first half of fiscal 2004 compared to a net loss of $7.5
million for fiscal 2003. Similarly, the Company reported a net loss per
share of $0.46 and $0.46 on a basic and diluted basis for fiscal 2004 and
2003, respectively. The weighted average common shares outstanding were
16.3 million for both 2004 and 2003.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

Due to the timing of development of markets for carbon fiber products, the
Company's operating activities have used cash in each of the past three
fiscal years and during the six months ended March 31, 2004. As a result,
the Company has executed refinancing arrangements and incurred borrowings
under credit facilities, supplemented with long-term debt financing
utilizing the equity in the Company's real estate properties, to maintain
adequate liquidity to support the Company's operating and capital
activities.

Management will seek to fund its near-term operations from continued sale of
excess inventories and continued aggressive management of the Company's
working capital, as well as possible additional borrowings, private equity
and debt financing. However, management can make no assurances that these
objectives will be sufficient to fund near-term liquidity needs.

2004 Refinancing
----------------

In January 2004, the Company issued and sold convertible debentures in the
aggregate principal amount of $7.0 million to institutional private equity
and other investors (including $250,000 to each of Mr. Rumy and Mr.
McDonnell who are members of the Company's Board of Directors). The
convertible debentures have a stated maturity of 30 months and bear interest
at 6% per annum and are convertible at any time into common stock shares at
$5.40 per share for each investor other than Messrs. Rumy and McDonnell and
$5.42 per share for each of Messrs. Rumy and McDonnell. The Company also
issued to the investors five-year warrants to purchase an aggregate of
323,994 shares of common stock of the Company at an exercise price of $5.40
per share for each investor other than Messrs. Rumy and McDonnell and $5.42
per share for each of Messrs. Rumy and McDonnell. The fair value of the
warrants and beneficial conversion feature, at the time of issuance, was
estimated to be $2.0 million and is being amortized as non-cash interest
expense over the term of the convertible debentures. Proceeds from the
issuance of these convertible debentures are being used for working capital
purposes.

As part of the Company's refinancing, the bank lender to the Company's
Hungarian subsidiary amended certain financial covenants and extended the
maturity date of its loan to December 31, 2004. In connection with such
actions, the bank required that the Company make arrangements to settle
intercompany accounts payable by Zoltek U.S. operations to its Hungarian
subsidiary in the amount of approximately $2.8 million. The bank was
unwilling to keep open its offer to restructure Zoltek Rt.'s loans until
after the Company's refinancing package was completed. Prior to the
refinancing, the Company did not have cash on hand or available borrowings
that would enable it to make the settlement of the intercompany accounts
required by the Hungarian bank. In order to proceed expeditiously to resolve
the Company's financing requirements, Zsolt Rumy, the Company's Chief
Executive Officer and a director of the Company, loaned the Company $1.4
million in cash and posted a $1.4 million letter of credit for the benefit
of the Company. This arrangement was approved by the Company's board of
directors and audit committee. The loan by Mr. Rumy bears interest on the
amount advanced and the notional amount of the letter of credit at a rate
per annum equal to LIBOR plus 11% with a LIBOR floor of 2%, the same
interest rate of the mortgage financing discussed below. As a result of the
Company completing the refinancing transactions making available the cash to
settle the intercompany accounts, the letter of credit has been released.
After converting $250,000 into convertible debt as part of the January 2004
financing, $1.15 million original loan remains outstanding and the Company
expects to repay it during the current fiscal year.

The Company also entered into a mortgage note with a bank in the aggregate
principal amount of $6.0 million. The note has a stated maturity of three
years and bears interest at a rate of LIBOR plus 11% (13.5% per annum as of
March 31, 2004) with a LIBOR floor of 2%. The Company will pay interest only
on a monthly basis with principal balance due at time of maturity. The loan
is collateralized by a security interest in the Company's headquarters
facility and its two U.S. carbon fiber manufacturing facilities. The
proceeds of this transaction were used to pay down debt of $6.0 million with
its U.S. bank. Of such proceeds, $0.5 million is currently held in an escrow
account to be released when the Company completes certain post-closing
requirements with respect to the loan. The Company expects the conditions
will be met during 2004.

                                     15

<PAGE>
<PAGE>

Due to the refinancing received subsequent to the Company's fiscal year end,
the Company's U.S. bank waived the financial covenant through February 13,
2005. Additionally, the expiration of the Company's revolving credit loan
was extended from January 31, 2004 to January 31, 2005. The refinancing
allows the Company to execute its 2004 business plan, which was uncertain
until the refinancing occurred.

In March 2004, the Company issued and sold convertible debentures in the
aggregate principal amount of $5.75 million to institutional private equity
investors and Mr. Dill ($750,000) who is member of the Company's board of
directors and whose funding occurred subsequent to March 31, 2004. The
convertible debentures have a stated maturity of 30 months and bear interest
at 6% per annum and are convertible at any time into common stock shares at
$6.25 per share for each investor other than Mr. Dill and $7.82 per share
for Mr. Dill. The Company also issued to the investors five-year warrants to
purchase an aggregate of 223,997 shares of common stock of the Company at an
exercise price of $7.50 per share for each investor other than Mr. Dill
whose warrants have an exercise price of $7.82 per share. The fair value of
the warrants and beneficial conversion feature, at the time of issuance, was
estimated to be $4.0 million and are being amortized as non-cash interest
expense over the term of the convertible debentures. Proceeds from the
issuance of these convertible debentures are being used for working capital
purposes.

The Company will require further refinancing or renegotiations of current
debt arrangements in fiscal 2005 and beyond. However, the Company can give
no assurance that it will be successful in its attempt to obtain new or
renegotiated financing and if the Company is unsuccessful, it would have a
material adverse effect on its future financial condition and its ability to
continue to pursue its current business plan.

2003 Refinancing
----------------

The Company executed an amended credit facility agreement, dated as of
February 13, 2003, with the U.S. bank. The amended credit facility agreement
is structured as a term loan in the amount of $3.5 million (due February 13,
2005) and a revolving credit loan in the amount of $5.0 million (originally
due January 31, 2004, now due January 31, 2005 - see above). The Company
repaid $5.0 million of this loan from the proceeds of the sale of
subordinated convertible debentures as discussed below. Borrowings under the
amended facility are based on a formula of eligible accounts receivable and
inventories of the Company's U.S.-based subsidiaries. The outstanding loans
under the agreement bear interest at the prime interest rate plus 2% per
annum. The loan agreement contains quarterly financial covenants related to
borrowings, working capital, debt coverage, current ratio and capital
expenditures (covenants have been waived through February 13, 2005 - see
above). Total borrowings and available borrowings under the revolving credit
agreement were zero and $5.0 million at March 31, 2004, respectively.

The Company also entered into a debenture purchase agreement, dated as of
February 13, 2003, under which the Company issued and sold to 14 investors,
including certain directors, subordinated convertible debentures in the
aggregate principal amount of $8.1 million. The subordinated convertible
debentures have stated maturities of five years, bear interest at 7% per
annum and are convertible into an aggregate of 2,314,286 shares of common
stock of the Company at a conversion price of $3.50 per share. The Company
also issued to the investors five-year warrants to purchase an aggregate of
405,000 shares of common stock of the Company at an exercise price of $5.00
per share. The fair value of the warrants, at the time of issuance, was
estimated to be $376,650. Proceeds from the issuance of these convertible
debentures were used to repay existing borrowings as well as for working
capital.

Credit Facilities
-----------------

The Company's financing of its U.S. operations is separate from that of its
Hungarian operations. Availability of credit is based on the collateral
value at each operation. However, the covenants of the term loan and
revolving line of credit from a U.S. bank, which have been waived through
February 13, 2005, apply to the Company on a consolidated basis.

US Operations - The Company's current credit facility with its U.S. Bank is
described above under "2003 Refinancing." Total borrowings under the U.S.
credit facility including revolving credit and term loan were $1.1 million
at March 31, 2004, all of which has been classified as current due to the
maturity in February 2005.

Hungarian Operations - The Company's Hungarian subsidiary entered into a
credit facility with a Hungarian bank. The facility consists of a $6.0
million bank guarantee and factoring facility, a $4.0 million capital
investment facility and a $2.0 million working capital facility. All of the
Hungarian bank debt is due on December 31, 2004. Total borrowings under this
credit facility were $12.0 million at March 31, 2004.

In March 2003, the Company's Hungarian subsidiary entered into a credit
agreement with another Hungarian bank for $2.2 million. The facility
consists of a bank guarantee, factoring and mortgages and expires December
31, 2004.

                                     16

<PAGE>
<PAGE>

Total borrowings of the Hungarian subsidiary were $13.4 million at March 31,
2004, of which $12.3 million has been classified as current due to their
stated maturity of December 31, 2004. Borrowings under the Hungarian bank
credit facilities cannot be used in Zoltek's U.S. operations.

Inventories
-----------

Inventories consist of the following (amounts in thousands):

<TABLE>
<CAPTION>
                                                                                          MARCH 31,     SEPTEMBER 30,
                                                                                             2004           2003
                                                                                          ---------       ---------
<S>                                                                                       <C>             <C>
         Raw materials................................................................    $   5,169       $   4,859
         Work-in-process...............................................................       1,353           1,132
         Finished goods................................................................      19,245          19,057
         Supplies, spares and other....................................................       1,670           1,930
                                                                                          ---------       ---------
                                                                                          $  27,437       $  26,978
                                                                                          =========       =========
</TABLE>

The Company has undertaken steps to sell carbon fiber inventories to improve
its cash flow. The Company has decreased the actual inventory by $0.2
million but this decrease was offset by the significant increase in the
value of the Hungarian currency against the U.S. Dollar, which has increased
the carrying value of the Hungarian inventories.

Abilene, Texas Facility
-----------------------

In the third quarter of fiscal 2001, the Company elected to temporarily idle
a significant part of the operations located at the Abilene, Texas facility.
The Company expects to resume certain levels of manufacturing at this
facility during the third quarter of 2004. Accordingly, the Company does not
believe that any impairment of its carrying value exists based on an
analysis of expected future net cash flow to be generated from this facility
over the expected remaining useful life.

Cash Used By Operating Activities
---------------------------------

Net cash used by operating activities was $4.7 million for the six months
ended March 31, 2004. The cash flows used by operating activities during the
six months ended March 31, 2004 were primarily due to the net loss of $7.5
million plus an increase in net operating assets of $2.8 million offset by
non-cash items, including depreciation and amortization of $3.4 million. The
increase in net operating assets consisted of an increase in receivables of
$0.5 million as carbon fiber sales increased during the quarter, and a $1.0
million decrease in accrued expenses and other liabilities and trade
payables, as additional cash allowed the Company to reduce its payable and
accrued expenses offset by a $0.3 million increase in long-term liabilities
and a decrease in inventories of $0.6 million.

Cash Used For Investing
-----------------------

Net cash used for investing activities for the six months ended March 31,
2004 was $2.8 million which included capital expenditures. The primary
capital expenditures consisted of the $1.7 million purchase of the Company's
Abilene nitrogen plant which was previously leased in an arrangement
accounted for as an operating lease.

Historically, cash used in investing activities has been expended for
equipment additions and the expansion of the Company's carbon fibers
production capacity. The Company expects capital expenditures to increase
slightly (excluding the one-time nitrogen plant refinancing) in connection
with the restart of the Abilene carbon fiber lines to meet the increase
demand for carbon fiber. The proceeds of recently completed financing and
borrowings under the Company's U.S. line of credit should provide for the
related funding requirements.



                                     17

<PAGE>
<PAGE>

Cash Provided By Financing Activities
-------------------------------------

Net cash provided by financing activities was $8.7 million for the six
months ended March 31, 2004. The financing transactions are described above.

A summary of significant contractual obligations is shown below. See Note 2
to the Condensed Consolidated Financial Statements for discussion of the
Company's debt agreements. The Company's financial commitments as of March
31, 2004 included the following:

<TABLE>
<CAPTION>
                                                                                  Less than                    3-5       More than
                                                                      Total         1 year     1-3 years      years       5 years
                                                                     --------     --------     ---------    ---------   ----------
         <S>                                                         <C>          <C>          <C>          <C>         <C>
         Notes payable...............................................$  2,307     $  2,307
         Note payable to related party...............................   1,150        1,150
         Convertible debentures......................................  26,175            -     $  26,175
         Long-term debt, including current maturities................  17,460       14,859         1,212    $   1,389   $        -
                                                                     --------     --------     ---------    ---------   ----------
              Total debt.............................................  47,092       18,316        27,387        1,389            -
         Operating leases............................................     333           58           174          101            -
                                                                     --------     --------     ---------    ---------   ----------
              Total debt and operating leases........................$ 47,425     $ 18,374     $  27,561    $   1,490   $        -
                                                                     ========     ========     =========    =========   ==========
</TABLE>

In fiscal 2002, as a part of the sale of the Company's interest in Hardcore
Composites, the Company continues to guarantee Hardcore Composite's lease
obligations of approximately $30,000 per month to the former owner. The
obligation relates to a lease of the Hardcore Composites manufacturing
facility, which expires in March 31, 2008.

CRITICAL ACCOUNTING POLICIES
----------------------------

Outlined below are accounting policies that Zoltek believes are key to a
full understanding of the Company's operations and financial results. All of
the Company's accounting policies are in compliance with U.S. generally
accepted accounting principles (GAAP).

Revenue recognition

The Company recognizes sales on the date title to the sold product transfers
to the customer, which approximates the shipping date. Historically, the
Company has experienced very low levels of product returns due to damaged
goods or products that do not meet customer specifications. Additionally,
the Company generally does not offer any volume or other incentives to
encourage sales.

Inventories

The Company evaluates its ending inventories for estimated excess quantities
and obsolescence. This evaluation includes analyses of sales levels by
product and projections of future demand within specific time horizons.
Inventories in excess of future demand, if any, are reserved. Remaining
inventory balances are adjusted to approximate the lower of cost on a
first-in, first-out basis or market value. Cost includes material, labor and
overhead. If future demand or market conditions are less favorable than the
Company's projections, additional inventory write-downs may be required and
would be reflected in cost of sales on the Company's consolidated statement
of operations in the period in which the revision is made.

In recent years, carbon fiber sales have been depressed by excess capacity
across the industry, distressed pricing across most existing markets and
weak economic conditions globally. These factors combined with the high
level of inventories maintained by the Company, have resulted in the Company
reducing the cost of certain carbon fiber inventories to their lower
estimated market values. If these industry conditions do not improve in a
reasonable period of time, or further deteriorate, it is possible that the
market value of certain of the Company's carbon fiber inventories may
further decrease resulting in additional charges to cost of sales.

Application and development expenses

The Company is actively pursuing the development of a number of applications
for the use of its carbon fiber and related products. The Company is
currently party to several developmental agreements with various prospective
users of these products for the purpose of accelerating the development of
various carbon fiber applications. Additionally, the Company is executing
several internal developmental strategies to further the use of carbon fiber
and consumer and industrial products made from carbon fiber. As a result,
the Company incurs certain costs for research, development and engineering
of products and manufacturing processes. These costs are expensed as
incurred and totaled approximately $1.8 million and $2.0 million in the
first six months of fiscal 2003 and 2002, respectively. Application and
development expenses are presented as an operating item on the Company's
consolidated statement of operations. Given the Company's position and
strategy within the carbon fiber industry, it is expected that similar or
greater levels of application and development expenses could be incurred in
future periods.

                                     18

<PAGE>
<PAGE>

Unused capacity costs

The Company is currently not operating its continuous carbonization lines
located at the Abilene, Texas facility. As a result, the Company has elected
to categorize certain costs related to these idle assets as unused capacity
costs. Such costs totaled $2.8 million and $3.2 million for the six months
ended March 31, 2003 and 2002, respectively, and include depreciation and
other overhead expenses associated with unused capacity. The unused capacity
costs are presented as an operating item on the Company's consolidated
statement of operations. As discussed above, management currently intends to
return certain unused portions of the Abilene, Texas facility to service in
fiscal 2003. However, until the facility is operating at certain production
levels, these unused capacity costs will continue to be incurred.

Valuation of long-lived assets

Long-lived assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. If
the sum of the expected future undiscounted cash flows is less than the
carrying amount of the asset, a loss is recognized for the difference
between the fair value and the carrying value of the asset. In determining
expected future undiscounted cash flows attributable to a long-lived asset
or a group of long-lived assets, the Company must make certain judgments and
estimations including the expected market conditions and demand for products
produced by the assets, expected product pricing assumptions, and
assumptions related to the expected costs to operate the assets. These
judgments and assumptions are particularly challenging as they relate to the
Company's long-lived assets due to the developmental stage and current
market conditions of the carbon fiber industry. It is possible that actual
future cash flows related to the Company's long-lived assets may materially
differ from the Company's determination of expected future undiscounted cash
flows. Additionally, if the Company's expected future undiscounted cash
flows were less than the carrying amount of the asset being analyzed, it
would be necessary for the Company to make significant judgments regarding
the fair value of the asset due to the specialized nature of much of the
Company's carbon fiber production equipment in order to determine the amount
of the impairment charge.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to changes in interest rates primarily as a result of
borrowing activities under its credit facility. The nature and amount of the
Company's debt may vary as a result of future business requirements, market
conditions and other factors. The extent of the Company's interest rate risk
is not quantifiable or predictable because of the variability of future
interest rates and business financing requirements, but the Company does not
believe such risk is material. At March 31, 2004, the Company did not have
any interest rate swap agreements outstanding. However, a one percent
increase in the weighted average interest rate of the Company's debt would
result in a $0.3 million increase in interest expense based on the debt
levels at March 31, 2004.

The Company views as long-term its investment in Zoltek Rt., which has a
functional currency other than the U.S. dollar. As a result, the Company
does not hedge this net investment. In terms of foreign currency translation
risk, the Company is exposed to Zoltek Rt.'s functional currency, which is
the Hungarian Forint. The Company's net foreign currency investment in
Zoltek Rt. translated into U.S. dollars using period-end exchange rates was
$18.1 million and $15.1 million at March 31, 2003 and 2002, respectively.
The potential loss in value of the Company's net foreign currency investment
in Zoltek Rt. resulting from a hypothetical 10% adverse change in quoted
foreign currency exchange rate of the Hungarian Forint at March 31, 2003 and
2002 amounted to $2.8 million and $2.5 million, respectively. In addition,
Zoltek Rt. routinely sells its products to customers located primarily
throughout Europe in sales transactions that are denominated in foreign
currencies other than the Hungarian Forint. As a result, Zoltek Rt. is
exposed to foreign currency risks related to these transactions. The Company
does not currently employ a foreign currency hedging strategy related to the
sales of Zoltek Rt. and, at current sales levels, does not believe these
risks will have a material adverse impact on the Company's results of
operations or financial position.

                                    * * *

The forward-looking statements contained in this report are inherently
subject to risks and uncertainties. The Company's actual results could
differ materially from those in the forward-looking statements. Potential
risks and uncertainties consist of a number of factors, including the
Company's ability to return to operating on a profitable basis, obtain a
waiver of its debt covenants as of March 31, 2004, and otherwise comply with
its obligations under its credit agreements, refinance those agreements at
their maturity dates, increase production capacity to meet increased orders
on a timely and profitable basis, manage its excess carbon fiber production
capacity and inventory levels, continue investing in application and market
development, manufacture low-cost carbon fibers and profitably market them
at decreasing price points and penetrate existing, identified and emerging
markets, as well as other matters discussed herein.

                                     19

<PAGE>
<PAGE>

ITEM 4.  CONTROLS AND PROCEDURES

Based on their evaluation as of March 31, 2004, the Company's Chief
Executive Officer and Chief Financial Officer have concluded that the
Company's disclosure controls and procedures (as defined in Rule 13a-14(c)
and 15d-14(c) under the Securities Exchange Act of 1934, as amended) are
effective. There have been no changes in internal controls or in other
factors that could significantly affect these controls subsequent to the
date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.






                                     20

<PAGE>
<PAGE>

                           ZOLTEK COMPANIES, INC.


PART II. OTHER INFORMATION

         Item 2.  CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER
                  PURCHASES OF EQUITY SECURITIES

         In January 2004, the Company issued and sold convertible debentures
in the aggregate principal amount of $7.0 million to institutional private
equity and other investors (including $250,000 to each of Mr. Rumy and Mr.
McDonnell who are members of the Company's Board of Directors). The
convertible debentures have a stated maturity of 30 months and bear interest
at 6% per annum and are convertible into common stock shares at $5.40 per
share for each investor other than Messrs. Rumy and McDonnell and $5.42 per
share for each of Messrs. Rumy and McDonnell. The Company also issued to the
investors five-year warrants to purchase an aggregate of 323,994 shares of
common stock of the Company at an exercise price of $5.40 per share for each
investor other than Messrs. Rumy and McDonnell and $5.42 per share for each
of Messrs. Rumy and McDonnell. The fair value of the warrants and beneficial
conversion feature, at the time of issuance, was estimated to be $2.0
million and will amortized as non-cash interest expense over the term of the
warrant. The convertible debentures and warrants were issued in a private
placement exempt under Section 4(2) of the Securities Act of 1933, as
amended and rule 506 of Regulation D thereunder. Proceeds from the issuance
of these convertible debentures are being used for working capital purposes.

         In March 2004, the Company issued and sold convertible debentures
in the aggregate principal amount of $5.75 million to institutional private
equity investors and Mr. Dill ($750,000) who is member of the Company's
board of directors and whose funding occurred subsequent to March 31, 2004.
The convertible debentures have a stated maturity of 30 months and bear
interest at 6% per annum and are convertible into common stock shares at
$6.25 per share for each investor other than Mr. Dill and $7.82 per share
for Mr. Dill. The Company also issued to the investors five-year warrants to
purchase an aggregate of 223,997 shares of common stock of the Company at an
exercise price of $7.50 per share for each investor other than Mr. Dill
whose warrants have an exercise price of $7.82 per share. The fair value of
the warrants and beneficial conversion feature, at the time of issuance, was
estimated to be $4.3 million and will amortized as non-cash interest expense
over the term of the warrant. The convertible debentures and warrants were
issued in a private placement exempt under Section 4(2) of the Securities
Act of 1933, as amended and rule 506 of Regulation D thereunder. Proceeds
from the issuance of these convertible debentures are being used for working
capital purposes.

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

         The registrant's annual meeting of shareholders was held February
25, 2004, and at such meeting the shareholders considered and voted upon the
following:

                  1.       James W. Betts and John F. McDonnell were
                           reelected as directors of the registrant, with
                           the results of the voting as follows:

<TABLE>
<CAPTION>
                                                      Votes For         Votes Withheld       Abstain
                                                      ---------         --------------       -------
                           <S>                        <C>               <C>                  <C>
                           James W. Betts             15,265,056            5,025             87,695
                           John F. McDonnell          15,267,916            2,165             87,695
</TABLE>

                           The terms of the following directors of the
                           registrant continued after the meeting:

                           Linn H. Bealke, Charles A. Dill, John L. Kardos and
                           Zsolt Rumy.

         Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

                  (a)      Exhibits:

                           Exhibit 31.1: Certification of Chief Executive
                           Officer pursuant to Rule 13a-14(a) under the
                           Securities Exchange Act of 1934, as amended.

                                     21

<PAGE>
<PAGE>

                           Exhibit 31.2: Certification of Chief Financial
                           Officer pursuant to Rule 13a-14(a) under the
                           Securities Exchange Act of 1934, as amended.

                           Exhibit 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.

                           Exhibit 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.

                  (b)      Reports on Form 8-K:

                           The registrant filed the following Current
                           Reports on Form 8-K during the period ended March
                           31, 2004:

                           1.       The registrant filed a Current Report on
                                    Form 8-K on January 14, 2004, reporting
                                    pursuant to Item 5 the results of the
                                    registrant's fourth quarter and
                                    completion of the previously announced
                                    refinancing of its debt operations.

                           2.       The registrant filed a Current Report on
                                    Form 8-K on January 29, 2004, reporting
                                    pursuant to Item 5 on a renewed and
                                    expanded partnership agreement with BMW
                                    Group of Germany with respect to the
                                    development of all-carbon fiber
                                    composite parts and components for
                                    series production.

                           3.       The registrant filed a Current Report on
                                    Form 8-K on February 19, 2004, reporting
                                    pursuant to Item 12 on the Company's
                                    financial results for the quarter ended
                                    December 31, 2003.

                                  SIGNATURE
                                  ---------

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                                  Zoltek Companies, Inc.
                                                      (Registrant)


Date:  May 17, 2004                    By:         /s/ KEVIN SCHOTT
       ------------                       -------------------------------------
                                                     Kevin Schott
                                                Chief Financial Officer



                                     22