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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-K

                 Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For the fiscal year ended September 30, 2000     Commission File Number 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 Identification No.)
  incorporation or organization)

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

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

Securities registered pursuant to Section 12(b) of the Act:  None

Securities registered pursuant to Section 12(g) of the Act:  Common Stock,
                                                             par value $.01
                                                             (Title of class)

         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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

         State the aggregate market value of the voting stock held by
non-affiliates of the registrant as of December 28, 2000: $29,185,583

         Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of December 28, 2000: 16,201,338
shares of Common Stock, par value $.01 per share.

                     DOCUMENTS INCORPORATED BY REFERENCE
         The following documents are incorporated by reference into the
indicated Part of this Report:

         Document                                   Part of Form 10-K
         --------                                   -----------------

Proxy Statement for the 2001
Annual Meeting of Shareholders                             III



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                                     PART I

Item 1.  Business
------   --------

         This Annual Report on Form 10-K for the year ended September 30, 2000
and the documents incorporated by reference herein contain forward-looking
statements which are inherently subject to risks and uncertainties. See
"--Special Note Regarding Forward Looking Statements."

OVERVIEW

         Zoltek Companies, Inc. (the "Company" or "Zoltek") is an applied
technology and advanced materials company. The Company's primary focus is
the manufacturing and marketing of carbon fibers. The most significant
current application for carbon fibers produced by the Company is for
aircraft brake manufacturers who use the Company's fibers as base materials
for the carbon/carbon brake systems used in most newly designed aircraft.
While this market is quite stable and the Company estimates its growth at 15
to 25% per year, the Company believes a much more significant market is the
commercial use of carbon fibers as reinforcement for composites. Zoltek
believes it is a leader in developing commercial markets for carbon fibers
and carbon fiber reinforced composites for a diverse range of applications
based upon carbon fibers' distinctive combination of physical and chemical
properties, principally corrosion and fatigue resistance, high-strength,
low-weight and stiffness.

         For developing commercial applications that utilize carbon fibers,
Zoltek's business strategy consists of the following elements:

         * Continue Reducing Production Costs -- Zoltek believes its
proprietary process and equipment design technology enables it to produce
carbon fibers at costs substantially lower than those generally prevailing
in the industry and to supply carbon fibers for applications which are not
economically viable for most higher cost competitors. Zoltek intends to
continue to reduce its total production costs through various means,
including use of its acrylic fiber precursor manufacturing technology.

         * Maintain Price Leadership -- Zoltek currently sells carbon fibers
to high volume users at a price of approximately $8.00 per pound and has
targeted a selling price of $5.00 per pound as a long-term goal. The
ultimate objective of the Company's pricing strategy is to market carbon
fibers for use as a base reinforcement material in composites at sustainable
price levels resulting in composite costs per unit of strength which compete
favorably with alternative base construction materials such as steel and
aluminum. The Company believes this would result in significant new product
applications for carbon fibers.

         * Leverage Capacity Leadership -- In order to encourage new
applications development for carbon fibers, the Company believes it is
necessary to maintain significant available capacity. From fiscal 1997
through early fiscal 1999 the Company pursued an aggressive capacity
expansion program and currently has the largest rated capacity for carbon
fibers production in the world. The Company believes that demonstration of
significant additional available capacity will encourage potential high
volume users to commit to incorporating carbon fibers into their products.
Zoltek has developed a standardized continuous carbonization line design in
order to optimize technical process capabilities, reduce equipment cost and
shorten lead time from the decision to add lines to the time when the lines
become operational.


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         * Support New Commercial Market and Applications Development -- To
accelerate the commercialization of carbon fibers and carbon fiber
composites across a broad range of mass-market applications, the Company has
pursued various initiatives for the Company to act as a catalyst in the
development of new low-cost, high volume applications. In fiscal 2000, the
Company completed a series of downstream acquisitions as part of its
strategy to accelerate the introduction and development of carbon fibers and
carbon fiber composites. These acquisitions included: Cape Composites, Inc.
("Cape Composites"), a San Diego, California-based manufacturer of carbon
fiber prepreg (pre-impregnated with resin) composite materials; and
Engineering Technology, Inc. and Composite Machines Corporation ("CMC") and
its parent company Ramal International (collectively "CMC"), which design,
manufacture and market filament winding and pultrusion equipment. In
addition, the Company acquired a 45% preferred membership interest in
Hardcore Composites Operations LLC, a Delaware based company which designs
and manufactures large composite structures for the civil infrastructure,
construction and marine markets.

         In November 1999, the Company also acquired Structural Polymer
(Holdings) Limited, which designs composite structures and manufactures
composite intermediate materials, used in manufacturing marine and wind
energy composite products. SP Systems did not meet its sales and profit
forecasts and, as a result, was unable to support the Company's carbon fiber
commercialization objectives. Therefore, in November 2000, the Company sold
SP Systems to a group consisting of the former Structural Polymer (Holdings)
Limited shareholders and a merchant banking firm. The cash proceeds from the
sale of SP Systems were used to repay bank debt. This transaction improved
the Company's balance sheet and allowed the Company's management resources
to refocus on its carbon fibers strategy. In connection with the sale of SP
Systems, the Company entered into agreements that provide for various
continuing strategic relationships with SP Systems. These agreements include
a long-term carbon fiber supply agreement, an agreement to utilize SP
Systems' formulations for prepreg and formulated products and a license
agreement for the Company to offer SP Systems' proprietary SPRINT composite
process technology.

         Zoltek believes that it has substantially achieved its strategic
goals of lowering its costs, establishing sustainable but competitive
selling prices and increasing its capacity. Its recent downstream
acquisitions are intended to accelerate development of carbon fiber
reinforced composite applications by providing parts producers and original
equipment manufacturers with complete solutions to optimizing the value
chain from carbon fibers to finished components.

         The Company is a Missouri corporation founded in 1975. Until it
entered the carbon fibers business in fiscal 1988, the Company's
business consisted of the sale of various industrial equipment and the
provision of related services. The Company sold its equipment and services
business unit in fiscal 1995. In November 1992, the Company completed its
initial public offering. The Company completed follow-on equity offerings in
November 1995 and September 1996.

COMPANY OPERATIONS

         Zoltek's operations consist of three business segments: Carbon Fibers,
Composite Intermediate Materials and Specialty Products.

         The Carbon Fibers Business Segment manufactures and markets carbon
fibers and develops applications for carbon fibers. At plants in Abilene,
Texas, Hungary and St. Charles, Missouri, the Company's rated annual carbon
fibers production capacity of 12.5 million pounds is the largest in the
world. The Carbon Fibers Business Segment also sells oxidized fiber and
performs certain downstream processing, such as chopping and milling. The
Company's primary focus is creating integrated solutions


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for large potential end users, by working directly with users in the primary
market sectors identified by the Company.

         The Composite Intermediate Materials Business Segment, which is
substantially comprised of the various operations acquired by the Company
during fiscal 2000, develops, manufactures and markets reinforcement
materials, prepregs (glass or carbon fiber pre-impregnated with resin),
specialty resins, consumable supplies and manufacturing equipment for the
composite manufacturing industry. In addition, the Composite Intermediates
Materials Business Segment supports the Carbon Fibers Business Segment by
providing composite design and engineering for development of applications
for carbon fiber reinforced composites. The Company intends to consider
additional acquisitions and strategic partnerships and joint ventures for
the Composite Intermediates Materials Business Segment.

         The Specialty Products Business Segment, which is primarily
comprised of the Company's Hungarian-based subsidiary, Zoltek Rt.,
manufactures and markets acrylic fibers, nylon products and industrial
materials. Acrylic fibers currently represent the Specialty Products
Business Segment's primary product line and are used in producing a variety
of end products, including clothing and carpet. The segment's acrylic fibers
are sold in regional markets, principally to textile mills in Europe and, to
a limited extent, Taiwan and the United States. The Specialty Products
Business Segment's other principal fiber product line consists of nylon-6
fibers and granules. Granular nylon-6 is used as a thermoplastic molding
material and combined in certain applications with glass or carbon fibers.
The Specialty Products Business Segment has targeted Western Europe export
markets, the largest of which is Italy, and also sells significant amounts
in Central and Eastern Europe.

         The reason for the acquisition of Zoltek Rt. in December 1995 was
to secure access to the technology underlying the production of precursor,
the acrylic fiber raw material utilized in the manufacture of carbon fiber.
Acrylic fiber precursor comprises more than 50% of the Company's total
carbon fiber product cost. Currently, there is only one merchant
textile-type acrylic fiber manufacturer, Acordis UK, Ltd. ("Acordis"
formerly Courtaulds Fibres, Ltd.), which produces such fiber in a form
suitable for precursor use. While this textile-type acrylic fiber is
substantially less costly than internally produced custom-made acrylic fiber
precursor utilized by most of the Company's competitors, Acordis takes
advantage of its sole merchant supplier position to charge a premium price
for its fibers sold as precursor. To provide control of a reliable source of
precursor on favorable terms, the Company undertook a conversion of a
portion of the Specialty Products Business Segment's acrylic fiber capacity
to produce precursor grade material. The Company also established a
precursor technology group to assure continued supply of precursor sources
around the world.

         During 1999, the Company modified the Specialty Products Business
Segment's Mavilon (acrylic) facility to convert it to the production of
precursor and permanently removed this production facility from the production
for textile applications. As a result, the Company permanently removed from
production $25 to $35 million of potential acrylic fiber annual revenue
historically used for textile applications. During 2000, the Company began
to manufacture production quantities of precursor and the Carbon Fibers
Business Unit commenced the sale of fibers manufactured from this material.
The Company expects that in the future this technology will be transferable
to other potential suppliers to assure sufficient cost-competitive supply of
raw material to support the Company's carbon fiber growth strategy.

         For historical financial information regarding the Company's
various business segments, see Note 10 of the accompanying Consolidated
Financial Statements.


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CARBON FIBERS INDUSTRY OVERVIEW

         Carbon fiber composite materials are suited for a diverse range of
applications based on their distinctive combination of physical and chemical
properties. Carbon fibers are used as reinforcements in composite materials
that combine reinforcement carbon fibers with resins or other matrix materials
to form a substance with high strength, light weight, conductivity or other
exceptional properties not found in either component alone. Carbon fibers
most often are manufactured from acrylic fiber raw material ("precursor"),
which is desirable due to the linear orientation of its molecular structure
and high carbon content (approximately 60%). While most other producers of
carbon fibers utilize internally produced custom-made acrylic raw material,
the Company utilizes less costly textile-type acrylic fiber.

         Beginning in the early 1980s, the Company developed a family of
products for use in a new type of carbon/carbon composite brakes utilized in
military and large commercial aircraft. This business, which the Company
expects will continue to grow at a rate of 15 to 25% per year, has provided
the base for the Company's carbon fiber business. Currently, Zoltek has
long-term supply contracts for this application. The barrier to entry in
these programs is the extreme cost of qualifying products for aerospace use
and the resistance to change by aircraft manufacturers and airlines.

         Until the past few years, the high cost of carbon fibers precluded
all but the most demanding applications, limiting carbon fibers use
primarily to the aerospace industry. During the past decade, as additional
capacity occasionally outpaced demand from aerospace applications,
manufacturers sold excess production at significantly reduced prices into
specialty sporting goods and industrial applications. As a result, the
distinctive characteristics of carbon fibers and the techniques for
fabricating carbon fiber composites became more broadly understood and some
new and diverse transitional applications developed. In sporting goods, the
first significant transitional commercial application, the
strength-to-weight ratio, stiffness, rapid damping and fatigue resistance
characteristics of carbon fibers have made them a desirable and affordable
material for a wide range of products such as golf club shafts, tennis
racquets and bicycle frames. The Company initiated aggressive programs to
develop a significant market share in this application. Another transitional
application is the inclusion of carbon fibers in thermoplastic compounds to
provide electrically conductive molded plastics. This application continues
to account for a significant part of the Company's sales.

         However, extensive commercially viable applications are only
possible at carbon fiber prices significantly lower those historically
prevailing for aerospace applications. Commercial applications targeted by
the Company, due to the favorable weight, strength and stiffness properties
of carbon fibers, include wind turbine blades, vehicle drive shafts,
compressed natural gas (CNG) tanks, civil structures, construction components,
automotive body and structural members, cargo shipping containers, mass
transit vehicle components, high strength piping, marine uses and
alternative energy systems. In current industrial uses, carbon fibers'
non-structural properties are often most important. Chemical inertness is
useful in corrosive applications for heat exchanger tubing and pump cavities
and in gas turbine blades; high temperature resistance is useful in
specialty metallurgical mold applications; and combined rigidity and damping
are useful in audio equipment applications.

         The Company believes that the substantial majority of current
worldwide carbon fibers capacity remains dedicated to production of
high-cost, high-selling price material for primary aerospace applications.
This market segment differs in important respects from the commercial
markets targeted by Zoltek.


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CURRENT AND DEVELOPING APPLICATIONS

         Zoltek is focusing on primary application categories which are
believed to offer potential for substantial market development over coming
years. These application categories are as follows:

         Transportation and Automotive

         At today's lower carbon fiber price points, transportation
companies, such as shipping, rail, pipelines and buses, are now focusing on
the lifecycle cost savings that are possible through the combination of
light weight, great strength and durability provided by carbon fibers. In
addition, Zoltek has identified automotive as a distinct sub-category
because of the perceived potential in this market. Auto companies are
looking to composites to reduce the number of parts required to build
different sub-assemblies and components. In applying lean production
techniques, auto companies and their suppliers are concentrating on reducing
the cost of assembly by eliminating the need for assembly. One- or two-part
composite structures can replace complex metal assemblies made up of more
than 100 different parts. Accordingly, major auto companies and their
suppliers are actively exploring the development of a wide variety of carbon
fiber-reinforced parts and assemblies, including steering columns, frames,
and heavy-duty clutches and brakes (see also "--Friction Products").

         Alternative Energy

         Carbon fiber can be utilized in many known applications primarily
because carbon fiber offers a combination of light weight and strength in
the design of complex machinery involving many moving parts. For a variety
of reasons, including strength and stiffness, carbon fiber is also emerging
as the best materials for other alternative energy applications such as wind
turbines and fuel cells. As the size of wind turbine blades increases to
improve the cost-effectiveness of this power generating source, particularly
in emerging offshore applications, carbon fiber composites become the only
feasible material to achieve the desired structural properties. Zoltek
intends to work with SP Systems and other companies in the European wind
turbine market to promote the conversion to carbon fibers from glass fibers
which are used in current generation technology.

         Due to the superior performance, both in terms of physical
characteristics and chemical/UV resistance, carbon fibers have emerged as a
desirable material for CNG tank reinforcement. Carbon fiber-reinforced CNG
tanks are primarily sold into the bus and other vehicle fleet market, as the
reduction of weight directly translates to increased payload capability. In
addition, the Company believes that governmental pressure to design and
manufacture an automobile with significantly improved fuel efficiency could
continue to cause automotive manufacturers to pursue CNG technologies.
Zoltek supplies carbon fibers to several customers for use in carbon
fiber-reinforced CNG tanks.

         Marine

         There are a multiplicity of potential applications in the marine
environment capitalizing not just on carbon fibers' comparative advantages
in light weight and strength, but also (to cite two properties that are
lacking in fiberglass) on their stiffness and resistance to aqueous
corrosion. Fiberglass, carbon fibers' predecessor, revolutionized boat
building. A great deal of further progress is possible through the
additional use of composites reinforced with carbon fiber or in combination
with fiberglass. For instance, the use of carbon fiber can reduce the weight
of hulls, riggings and decks and other structural components in boats by as
much as 30% compared to fiberglass.


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         Infrastructure and Construction

         Carbon fiber can be used as a substitute for steel in reinforcing
concrete in many infrastructure projects, providing greater strength and
stiffness while eliminating the problem of corrosion. This is true both in
new construction projects and in addressing a growing need for maintenance
or repair work. There is growing state and federal interest in alternatives
to conventional steel and concrete construction and repair systems. Carbon
fiber-reinforced composite systems often permit retrofit and repair to be
done without stopping or diverting traffic for extended periods.
Applications include concrete column wrapping, bridge decking, composite
re-bar, cables and tendons.

         Carbon fibers can be used to create earthquake-resistant bridges
and overpasses and can also be used to wrap concrete columns in the
construction of earthquake-resistant buildings. Additionally, carbon fiber
has been used to reinforce wood for residential and commercial construction
and home decorative applications. Carbon fiber may provide a practical means
of obtaining the same strength and stiffness from younger, newly cut timber
that is currently available only in aged timber.

         Friction

         This is a category that cuts across several other categories,
including automotive and industrial. It capitalizes on a unique property of
carbon fibers. While other materials soften under rising temperatures,
carbon/carbon (carbon fibers fused in a carbon matrix) grows stronger.
Zoltek continues to be the world's largest supplier of carbon fiber to the
carbon/carbon aircraft braking industry. Carbon-carbon is used in aircraft
brakes because its utility is enhanced by heat. Developed originally as a
lightweight heat shield for spacecraft, carbon-carbon has become a key
material in advanced braking systems used in fighter aircraft, military
aircraft, newer model commercial airliners and newer model business
aircraft.

         The Company is the exclusive supplier to BF Goodrich Aerospace
("BFG") of carbon fibers for aircraft brakes pursuant to a ten-year
agreement (the "BFG Supply Agreement") entered into in June 1994 and
extended in 1999. The BFG Supply Agreement does not restrict the Company
from supplying carbon fibers to other aircraft brake manufacturers.

         The technology used in advanced aircraft brakes is now being used
as brakes and clutches in race cars, and is under active study and
investigation for high speed trains, over-the-road trucks, cars and
industrial rotating equipment. Specialty friction product applications are a
natural extension of the existing aircraft brake applications. For instance,
following the lead of aircraft makers, virtually all grand prix racing cars
now use carbon-carbon brakes and clutches because of their superior
performance and long life in high-temperature and high-friction
environments. Other friction products utilizing carbon fibers are emerging
as carbon fiber prices are reduced. As the price of carbon fibers is
lowered, the drive for better performance and weight reduction makes
possible their use in a range of automotive applications. Zoltek is pursuing
a number of initiatives in this area.

         Industrial

         Zoltek has identified numerous potential high volume industrial
applications for carbon-fiber reinforced composites. In paper mills, for
instance, there is growing interest in development of fast-rotating
composite drums - capitalizing on carbon fibers' light-weight, stiffness and
resistance to corrosion. Carbon fiber can be used to strengthen and improve
many kinds of rollers and shafts. There is


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also a growing market for industrial apparel utilizing oxidized fiber to
protect workers in high temperature environments.

         Zoltek's carbon fibers are used in fire-retardant coatings to
prevent or control fire-related disasters in chemical plants, nuclear power
plants, refineries and off-shore drilling platforms. Used as an additive or
reinforcement, carbon fiber heightens the ability of the fire-retardant
coatings to withstand exceptionally high temperatures.

         The Company also has identified substantial potential markets in
industrial tanks and pipes utilizing carbon fiber's high strength, light
weight and corrosion resistance. In addition, the Company is actively
involved in programs to use carbon fiber composites in offshore oil
exploration and drilling due to their combination of light weight, strength,
stiffness and resistance to corrosion. The Company currently supplies carbon
fibers which are used in buoyancy devices for offshore drilling equipment.
The Company also has participated in trials of spoolable pipe capable of
extending the reach of existing offshore oil platforms and interwound
composite rods to tether offshore platforms to the ocean floor at greater
depths.

         Conductive Plastics

         Carbon fiber acts to dissipate both static electricity and heat.
Those two properties, combined with light weight, have made it an
increasingly important material in the manufacture of computers, printers,
copiers and other electronic devices. Growth in computers and electronics
has resulted in rising demand for carbon fibers used in conductive plastics
to dissipate static electricity or to act as a shield against
electromagnetic interference ("EMI") in laptop computers, disk drives and
similar devices. It has also been used in making plastic carrying trays for
a manufacturing environment that cannot tolerate contamination, Zoltek's
carbon fibers help to safeguard the electrical integrity of new and more
powerful computer chips and offer effective shielding from electromagnetic
interference.

         Sporting Goods

         Sporting goods represent a stepping stone in the progression of
carbon fiber from an "advanced" material, limited to high-priced
applications, to a price-sensitive, mass-market material. Zoltek anticipates
growth in future demand as graphite golf clubs, skis, racquets and similar
equipment become less expensive, therefore, less of a novelty item and more
of a staple. Carbon fibers have significantly improved the performance of
many sporting good products. But until very recently, so-called "graphite"
clubs and racquets have been produced from high-priced carbon fibers and
have sold at very high prices. Zoltek has generated its first significant
sales in this market as a result of new ways of spreading its low-cost,
high-tow fibers that facilitate the production of very thin sheets of
fabric. The production of very thin sheets of fabric from carbon fibers
enables a number of highly promising new applications, such as snowboards,
in-line skates and skis, in which carbon fibers' extraordinary
stiffness-to-weight and strength-to-weight can be put to use in improving
performance.

CUSTOMERS AND BACKLOG

         As part of its efforts to expand its current range of market
applications, the Carbon Fibers Business Segment engages in various
strategic relationships to study the viability of the use of carbon fibers
in new composite materials and structural enhancement environments. These
relationships are designed to build on existing expertise and industry
knowledge by exploring new potential uses for carbon fibers. Successful
partnerships with commercial customers include the long-term supply
relationship with BFG. The Company intends to consider additional
acquisitions and strategic


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application development and composite manufacturing partnerships and joint
ventures with other participants in the composite value chain.

         In each of the fiscal years ended September 30, 2000 and 1999, the
Company reported sales of $9.6 million to a single customer which was the
only customer that represented greater than 10% of the Company's total
consolidated revenues.

         As of September 30, 2000 and 1999, the Company had backlogs of
orders believed to be firm aggregating more than $15.1 million and $14.2
million, respectively (including estimated releases under long-term supply
arrangements during the succeeding 12 months). Purchase orders from the
Company's customers are subject to amendment or cancellation.

INTERNATIONAL

         The Company conducts its operations and sells its products
primarily in the United States and Europe. The Company has, however, shipped
carbon fiber products to customers in Asia. Through the Specialty Products
Business Segment, the Company derives a substantial portion of its revenues
from Europe.

         For additional information regarding the Company's international
operations, see Note 10 to the accompanying Consolidated Financial
Statements.

SOURCES OF SUPPLY

         The Company currently obtains most of its textile-type acrylic
fibers to supply its carbon fiber operations from Acordis, which is
currently the sole merchant supplier of such raw materials in the world.
Acordis is also the only supplier that currently produces precursor approved
for use in aircraft brake applications such as those supplied under the BFG
Supply Agreement. Pursuant to an agreement with the Company, Acordis has
agreed to supply the Company with up to 18.0 million pounds per year of
precursor. This supply agreement may be terminated by either party on
January 1, 2002, or any anniversary thereof, by providing two years' prior
notice.

         The Company believes Acordis is a reliable source of supply at the
Company's current operating levels. However, as part of its growth strategy,
the Company is developing alternative sources of precursor supply, including
Zoltek Rt. In the near term, although not expected, any interruption of
precursor supply from Acordis would have a material adverse effect on the
Company's carbon fibers business.

         The major materials used by the Composite Intermediates Business
Segment and the Specialty Products Business Segment include glass fiber,
acrylonitrile and other basic commodity products which are widely available
from a variety of sources.

INTELLECTUAL PROPERTY

         The Company believes that it has developed and utilizes valuable
technology and innovations, including various aspects of its manufacturing
process, which are trade secrets in which it has a proprietary interest. The
Company seeks to protect its proprietary information by, among other things,
requiring key employees to execute non-disclosure agreements. The Company
holds a number of patents which are not material to its business.


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COMPETITION

         The Company's Carbon Fibers Business Segment competes with various
other producers of carbon fibers, acrylic fibers and other textile fiber
products, many of which have substantially greater research and development,
marketing, financial and managerial resources than the Company and represent
significant competition for the Carbon Fibers Business Segment.

         The Company believes that no single manufacturer of carbon fiber
products competes across all of its applications. The Carbon Fibers Business
Segment's direct carbon fiber competitors include Fortafil Fibers, Inc. in
the United States and SGL Carbon in the United States and Europe, inasmuch
as they use the same textile-type precursor as the Company. To varying
degrees, depending on market conditions and supply, the Carbon Fibers
Business Segment also competes with primarily aerospace grade carbon fiber
producers, such as Hexcel Corporation and Amoco Corporation in the United
States and Toray Industries, Inc., Toho Rayon and Mitsubishi Rayon Co., Ltd.
in Japan. These carbon fibers producers tend to market higher cost products
than the Carbon Fibers Business Segment's products, with a principal focus
on aerospace structural applications. These manufacturers, while unable to
sustain low pricing, tend to enter into direct competition with the Carbon
Fibers Business Segment primarily when they engage in significant
discounting due to protection of their market share, excess capacity or
product surpluses.

         The Company believes that the principal areas of competition for
its carbon fibers operations are sustainable price, quality, development
of new applications and ability to reliably meet the customer's volume
requirements and qualifications for particular programs.

         The Composite Intermediates Materials Business Segment competes
with a range of other suppliers in the United States and Europe, including
large competitors such as Hexcel Corporation and many smaller suppliers in
markets with more fragmented participants.

         Competitors of the Specialty Products Business Segment in the
textile fibers market include MonteFibre, Sp.A., A.G. Bayer and Acordis.
However, the historic ties with and geographic proximity to customers in
Eastern and Central Europe provide competitive advantages for the Specialty
Products Business Segment in these markets compared to the larger
manufacturers. Zoltek believes this advantage will decrease over time and,
accordingly, the Specialty Products Business Segment is pursuing a strategy
to increase sales to Western European markets and seeking a product mix with
more favorable competitive characteristics, such as advanced materials (e.g.,
carbon fiber precursor).

         The non-textile market for the Specialty Products Business
Segment's products is sufficiently fragmented that no significant single
direct competitor exists. The Specialty Products Business Segment's sales of
its industrial products are heavily concentrated in the Central and Eastern
European markets.

ENVIRONMENTAL

         The operations of the Company's Carbon Fibers Business Segment in
Abilene, Texas and St. Charles, Missouri utilize thermal oxidation of
various by-product streams designed to comply with applicable laws and
regulations. The plants produce air emissions that are regulated and
permitted by various environmental authorities. The plants are required to
verify by performance tests that certain emission rates are not exceeded.
Management believes that the plants are currently operating in compliance
with their permits and the conditions set forth therein. The Company does
not believe that compliance by its Carbon Fibers Business Segment with
applicable environmental regulations will have a material adverse effect
upon the Company's future capital expenditure requirements, results of


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operations or competitive position. There can be no assurance, however, as
to the effect of implementation of current laws or future changes in federal
or state environmental laws or regulations on the Company's results of
operations or financial condition.

         The operations of the Specialty Products Business Segment and the
Composite Intermediate Materials Business Segment generate various hazardous
wastes, including gaseous, liquid and solid materials. Zoltek believes the
Specialty Products Business Segment and the Composite Intermediates
Materials Business Segment are in substantial compliance with applicable
environmental and safety regulations applicable to their respective
operations. Zoltek expects that compliance with current environmental
regulation will not have a material adverse effect on the business, results
of operations or financial condition of the Company. There can be no
assurance, however, that the application of future national or local
environmental laws, regulations and enforcement policies will not have a
material adverse effect on the business, results of operations or financial
condition of the Company.

EMPLOYEES

         As of September 30, 2000, the Company employed approximately 350
persons in its U.S. operations, approximately 1,125 in its Hungarian operations
and approximately 278 in its U.K. operations, which U.K. operations were sold
in November 2000. The Company's U.S. employees are not represented by any
collective bargaining organizations. By law, most employees in Hungary are
represented by at least one labor union. At Zoltek Rt. there are two active
unions: Union Viscosa with approximately 710 members and Viscosa 1990 with
approximately 400 members (some Zoltek Rt. employees belong to both unions).
The Company believes that relations with both unions are good. Management meets
with union representatives on a bi-weekly basis. There have not been any
problems or major disagreements with either union in the past five years. The
Company believes that overall its employee relations are good.

SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

         This Form 10-K, the annual report and certain information provided
periodically in writing and orally by the Company's designated officers and
agents including the annual report contain certain statements which
constitute "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended and Section 21E of the Securities
Exchange Act of 1934, as amended. The terms "Zoltek," "Company," "we," "our"
and "us" refer to Zoltek Companies, Inc. The words "expect," "believe,"
"goal," "plan," "intend," "estimate," and similar expressions and variations
thereof are intended to specifically identify forward-looking statements.
Those statements appear in this Form 10-K, the annual report and the
documents incorporated herein by reference, particularly "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
and include statements regarding the intent, belief or current expectations
of the Company, its directors and officers with respect to, among other
things: (i) our financial prospects; (ii) the successful integration of both
completed and any future acquisitions; (iii) our growth strategy and
operating strategy including the focus on facilitating acceleration of the
introduction and development of mass market applications for carbon fibers;
(iv) our current and expected future revenue and the impact of any
acquisitions may have on our future performance.

         You are cautioned that any such forward looking statements are not
guarantees of future performance and involve risks and uncertainties, and
that actual results may differ materially from those projected in the
forward looking statements as a result of various factors. The factors that
might cause such differences include, among others, the following: (i) the
Company continues to experience operating and net losses and negative cash
flows; (ii) any material inability to successfully integrate and profitably
operate our acquisitions; (iii) any material inability to acquire additional


                                      10

<PAGE>
<PAGE>

sufficient capital and financing at a reasonable cost to fund our liquidity
requirements and long-term growth strategy or to maintain compliance with
our credit facility; (iv) developments or new initiatives in the carbon
fibers market by our competitors; (v) any failure by the Company to meet
analysts' expectations; (vi) fluctuations in stock price; (vii) inability
to successfully manage rapid growth; and (viii) unexpected cost increases
or adverse conditions in the market for carbon fiber and acrylic fiber.

         The Company undertakes no obligation to publicly update or revise
forward looking statements to reflect events or circumstances after the date
of this Form 10-K and annual report or to reflect the occurrence of
unanticipated events.

Item 2.  Properties
------   ----------

         The Company's facilities are listed below and are considered to be
suitable and adequate for its operations. Except as noted below, all the
Company's properties are owned, subject to various mortgage loans.

<TABLE>
<CAPTION>
                                                                                        APPROXIMATE AREA
                  LOCATION                                    USE                       (IN SQUARE FEET)
                  --------                                    ---                       ----------------
<S>                                               <C>                                       <C>
         St. Louis, Missouri...................   Administrative offices, marketing
                                                  and engineering                              40,000

         St. Charles, Missouri(1)..............   Carbon fibers manufacturing                 107,000

         Abilene, Texas........................   Carbon fibers manufacturing
                                                  and processing                              428,000

         San Diego, California(2)..............   Carbon fiber prepreg manufacturing           35,000

         Salt Lake City, Utah..................   Filament winding equipment
                                                  manufacturing                                65,000

         New Castle, Delaware(2)...............   Composite materials design and
                                                  manufacturing                                45,000

         Nyergesujfalu, Hungary................   Carbon fibers, acrylic fiber, nylon
                                                  and other manufacturing                   1,600,000
<FN>
----------------
(1)      Properties subject to ground lease.
(2)      Properties subject to lease.
</TABLE>

Item 3.  Legal Proceedings
------   -----------------

         The Company is not a defendant in any legal proceedings other than
ordinary routine litigation incidental to its business which the Company
does not believe will result in any material adverse effect on future
consolidated results of operations or financial condition.

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

         The Company did not submit any matters to a vote of its security
holders during the quarter ended September 30, 2000.


                                      11

<PAGE>
<PAGE>

Item 4A.  Executive Officers of the Registrant
-------   ------------------------------------

         The name, age and position with respect to each of the executive
officers of the Company are set forth below:

         Zsolt Rumy, age 58, is the founder of the Company and has served as
its Chairman, Chief Executive Officer and President and as a Director since
1975. Prior to founding the Company, Mr. Rumy served as Industrial Marketing
Manager and Process Engineer for Monsanto Company, Accounts Manager for
General Electric Company and Technical Sales Representative for W.R. Grace
Company. Since May 1996, Mr. Rumy has served as a director of Southwest Bank
of St. Louis, with which the Company maintains a banking relationship. Mr.
Rumy received a B.S. degree in Chemical Engineering from the University of
Minnesota in 1966. Mr. Rumy speaks fluent Hungarian.

         Daniel Greenwell, age 38, has served as Chief Financial Officer and
Secretary of the Company since December 1996. Prior to joining the Company,
from November 1992 to December 1996, Mr. Greenwell served as Corporate
Director of Financial Analysis and Reporting of Sigma-Aldrich Corporation (a
publicly held specialty chemical manufacturer) and Controller of Sigma
Chemical Company (a subsidiary of Sigma-Aldrich Corporation). From August
1985 to November 1992, Mr. Greenwell was a certified public accountant for
KPMG Peat Marwick (an international accounting and auditing firm) holding
various positions, including Senior Manager. Mr. Greenwell received a B.S.
degree in Accounting from Truman State University in 1985.


                                   PART II

Item 5.  Market for Registrant's Common Equity and Related Shareholder Matters
------   ---------------------------------------------------------------------

         The Company's Common Stock (symbol: "ZOLT") is traded in the Nasdaq
National Market System. The number of beneficial holders of the Company's
stock is approximately 20,000. The Company has never paid dividends.

         Set forth below are the high and low bid quotations as reported by
Nasdaq for the periods indicated. Such prices reflect interdealer prices,
without retail mark-up, mark-down or commission:

<TABLE>
<CAPTION>
                                                   Fiscal year ended                  Fiscal year ended
                                                  September 30, 2000                 September 30, 1999
                                                  ------------------                 ------------------

                                                High               Low            High                 Low
                                                ----               ---            ----                 ---
<S>                                           <C>                <C>             <C>                  <C>
         First Quarter                        $ 13.19            $  7.56         $15.68               $8.53

         Second Quarter                         12.25               8.37           9.87                7.50

         Third Quarter                           9.87               6.06           9.93                6.87

         Fourth Quarter                          9.87               9.00           9.12                7.68

</TABLE>



                                      12

<PAGE>
<PAGE>


Item 6.  Selected Financial Data
------   -----------------------
<TABLE>

                                                       ZOLTEK COMPANIES, INC.
                                                SELECTED CONSOLIDATED FINANCIAL DATA
                                                (In thousands, except per share data)
<CAPTION>
STATEMENT OF OPERATIONS DATA:                                                        YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------------------------------------------------------------------------------
                                                                    2000          1999            1998          1997         1996
                                                                  --------      --------        --------      --------     --------
<S>                                                               <C>           <C>             <C>           <C>          <C>
Net sales...................................................      $ 81,381      $ 68,525        $ 83,390      $ 90,628     $ 68,957

Cost of sales...............................................        65,678        53,375          58,805        64,214       49,772

Gross profit................................................        15,703        15,150          24,585        26,414       19,185

Available unused capacity costs.............................         4,658         3,953              --            --           --

Goodwill amortization.......................................            20            --              --            --           --

Selling, general and administrative expenses................        16,326        14,525          12,958        13,172        9,510

Operating income (loss) from continuing operations..........        (5,301)       (3,328)         11,627        13,242        9,675

Interest expense............................................         1,314           540             494           820        1,013

Net income (loss) from continuing operations................        (3,991)       (2,642)          9,595        12,828        6,172

Loss on discontinued operations, net of income taxes........        (4,694)           --              --            --           38

Net income (loss)...........................................        (8,685)     $ (2,642)       $  9,595      $ 12,828     $  6,210

Net income (loss) per share:

   Basic income (loss) per share: Continuing operations.....      $   (.22)     $   (.16)       $    .59      $    .79     $    .46
                                  Discontinued operations...      $   (.25)           --              --            --           --
                                                                  --------      --------        --------      --------     --------

   Net income (loss) per share..............................      $   (.47)     $   (.16)       $    .59      $    .79     $    .46
                                                                  ========      ========        ========      ========     ========


Weighted average common shares outstanding..................        18,360        16,209          16,216        16,212       13,348

   Diluted income (loss) per share: Continuing operations...      $   (.22)     $   (.16)       $    .58      $    .78     $    .45
                                    Discontinued operations.          (.25)           --              --            --           --
                                                                  --------      --------        --------      --------     --------

   Net income (loss) per share..............................      $   (.47)     $   (.16)       $    .58      $    .78     $    .45
                                                                  ========      ========        ========      ========     ========


Weighted average common and common equivalent shares
   outstanding..............................................        18,360        16,209          16,525        16,547       13,737

<CAPTION>

BALANCE SHEET DATA:                                                                        SEPTEMBER 30,
------------------------------------------------------------------------------------------------------------------------------------
                                                                    2000          1999            1998          1997         1996
                                                                  --------      --------        --------      --------     --------
<S>                                                               <C>           <C>             <C>           <C>          <C>
Working capital(1)..........................................      $ 24,464      $ 43,946        $ 53,058      $ 69,556     $ 83,224

Total assets................................................       191,861       136,756         147,209       139,962      134,660

Short-term debt.............................................        46,126           630             817         2,760        4,578

Long-term debt, less current maturities.....................         6,667         5,423           5,898         4,295        5,207

Shareholders' equity........................................       122,811       114,634         121,602       115,836      108,778

<FN>
--------
(1) Working capital at September 30, 2000 does not include discontinued
    operations.
</TABLE>

                                       13

<PAGE>
<PAGE>



Item 7.  Management's Discussion and Analysis of Financial Condition and
------   ---------------------------------------------------------------
         Results of Operations
         ---------------------

OVERVIEW

         The Company's mission is to commercialize the use of carbon fibers
as reinforcement in composite materials. The Company believes it is the
lowest cost producer of carbon fibers and its sales price strategy is
designed to attract significant new applications for carbon fiber
reinforced composites in automotive, infrastructure, construction, marine
and other industries. The Company believes introduction of carbon fibers
to potential end users has been well received and the Company is
participating in a number of ongoing development projects in these
application categories.

         As part of its strategy to demonstrate availability of carbon
fibers, the Company initiated a major carbon fiber production capacity
expansion plan during fiscal 1997 that continued into fiscal 1999. During
the fourth quarter of fiscal 1997, the Company completed construction and
began operation of five continuous carbon fiber lines, each with an annual
rated capacity of one million pounds, at its Abilene, Texas facility (three
lines) and Zoltek Rt. facilities (two lines).

         While these lines were not fully utilized immediately, the Company
continued its construction program to establish significant available
capacity to encourage potential customers to develop new applications.
During fiscal years 1998 and 1999, the Company completed construction of a
secondary processing building at its Abilene, Texas facility to perform
intermediate and secondary carbon fiber processing operations, such as
chopping, milling and specialty packaging. The Company also substantially
completed two additional continuous production lines and placed them in a
condition ready for their intended use.

         The Company also continued construction and partial finish out of
an additional building (288,000 square feet) designed to ultimately house up
to 24 more continuous carbonization lines at its Abilene, Texas facility.
Additionally, the Company has purchased long-lead time equipment items for
four additional continuous carbonization lines, each with an annual rated
capacity of one million pounds. The Company is housing the long-lead time
equipment items at its facility in Abilene, Texas.

         During fiscal 2000, the Company completed construction of an
oxidization line in Hungary, with an annual rated capacity of two million
pounds. The Company is supplying European markets with oxidized fiber used
in friction and thermal applications from this line. The Company expects to
complete another such line in Hungary and in its St. Louis facility during
fiscal 2001. In addition, the Company is pursuing plans to complete several
projects for producing carbon fiber fabrics during fiscal 2001.

         As the Company pursued its application and market development
efforts, the Company has found the existing composite materials value chain
inadequate and unresponsive and has initiated steps to accelerate the
introduction and development of carbon fiber composites across a broad range
of mass market applications.

         The Company acquired a series of downstream businesses during
fiscal 2000, with the objective to position it to accelerate the
introduction and development of carbon fibers and carbon fiber composites in
low-cost, high volume applications. The Company's strategy includes
providing direct input into the composites value chain by supplying
composite engineering and design technology, composite fabrication and
processing technology and the ability to create integrated product solutions
utilizing composite materials.


                                      14

<PAGE>
<PAGE>


         In October 1999, Zoltek acquired Cape Composites Inc. Cape
Composites, located in San Diego, California, is a manufacturer of carbon
fiber prepreg (pre-impregnated with resin) composite materials.

         In November 1999, the Company acquired substantially all of the
assets of Engineering Technology, Inc. ("EnTec"). EnTec, located in Salt
Lake City, Utah, designs and manufactures filament winding equipment used in
the production of composite parts.

         Also in November 1999, the Company acquired Composite Machines
Corporation ("CMC") and Ramal International, Inc. (parent company of CMC).
CMC, located in Salt Lake City, Utah, designed and manufactured filament
winding and pultrusion equipment used in the production of composite parts.
CMC and Ramal have been integrated in the EnTec operations.

         Additionally, in November 1999, the Company acquired Structural
Polymer (Holdings) Ltd. Structural Polymer, located in Newport, Isle of
Wight, United Kingdom, designs and manufactures composite materials used in
large scale structures such as wind turbine blades and marine structures.
While the strategic purpose that made this acquisition highly desirable
continued to be valid, the financial results of this business became a
significant burden for the Company during fiscal 2000 due to the borrowing
incurred to finance the acquisition. The Company determined that substantial
additional financial and managerial resources would be required to
facilitate the improvement of the operations and, accordingly, decided to
divest this subsidiary to most efficiently use the Company's resources.

         On November 6, 2000 the Company sold Structural Polymer and entered
into various agreements that provide for continuing strategic relationships,
including a ten-year carbon fiber supply agreement. Accordingly, the
Company's consolidated financial statements for fiscal 2000 account for
Structural Polymer as a discontinued operation. Unless otherwise indicated,
the following discussion relates to the Company's continuing operations.
Subsequent to the sale, Structural Polymer's operations ceased to be part of
the Company's operations and reported results.

         On April 28, 2000 the Company acquired a 45% preferred membership
interest in Hardcore Composites Operations LLC ("Hardcore"). Hardcore
designs and manufactures composite structures for the civil infrastructure
market.

         As part of its strategic plan, the Company is pursuing various
initiatives to facilitate further development of product and process
applications to increase demand for low-cost carbon fiber, which may include
additional acquisitions of selected technology for the enhancement of its
operations and to lead the commercialization of selected large-scale carbon
fiber composites.

         The Company's carbon fiber manufacturing capacity continues to be
underutilized and it is not reflected in its current sales. Carbon fiber
sales for fiscal 2000 were $27.5 million compared to $25.4 million for
fiscal 1999. The Company's strategy for initial sales increases was to rely
on what had been two fast-growing commercial markets in conductive plastics
used in electronic products and sporting goods. In addition, the Company
also believed that the product development for large-scale commercial
applications would result in initial sales at a faster pace.

         Sales of carbon fibers into commercial markets have been slower
to develop than expected due to long lead times in product development for
large-scale applications.


                                      15

<PAGE>
<PAGE>


COMPARISON OF RESULTS FOR FISCAL YEARS ENDED SEPTEMBER 30, 2000 AND 1999

         The Company's sales increased 18.8% to $81.4 million in fiscal 2000
from $68.5 million in fiscal 1999. The composites intermediates acquisitions
during fiscal 2000 accounted for $14.1 million of sales. Carbon fiber sales
increased 7.8% ($2.0 million) to $27.5 million in fiscal 2000 from $25.4
million in fiscal 1999. During fiscal 2000, carbon fiber sales volumes
increased in quantity much faster than indicated by reported sales amounts.
The price weakness in the existing markets was due to significant capacity
due to price decreases increases by several other carbon fiber manufacturers
that resulted in overcapacity in the industry. Sales of acrylic and other
products produced at Zoltek Rt. decreased by 7.6% to $39.8 million in fiscal
2000 compared to $43.1 million in fiscal 1999. This decrease was principally
due to volume reductions in the Company's available production capacity. The
Company converted its Mavilon acrylic fiber plant to carbon fiber precursor
production during the last half of 1999, permanently removing the capacity
from the acrylic textile fiber operation. The Mavilon plant produced
approximately 7,900 metric tons of material in fiscal 1999. Excluding the
reduction resulting from the Mavilon plant conversion, the acrylic fiber
sales volume increased approximately 13.1%.

         Gross profit increased 3.3% to $15.7 million in fiscal 2000 from
$15.2 million in fiscal 1999. The composites intermediates acquisitions
during fiscal 2000 accounted for $2.2 million of gross profit. The gross
profit percentage on composite intermediates was 15.6% in fiscal 2000. Gross
profit from carbon fibers decreased to $6.7 million in fiscal 2000 from $8.0
million in fiscal 1999. The gross profit percentage on carbon fiber
decreased to 24.4% of sales in fiscal 2000 from 31.6% in fiscal 1999 due to
selling price decreases and product mix changes. Gross profit from acrylic
and other products sold by Zoltek Rt., was $6.8 million in fiscal 2000
compared to $7.1 million in fiscal 1999. Gross margin on acrylic fibers and
other products increased to 17.1% of sales for fiscal 2000 compared to 16.5%
of sales for fiscal 1999 due primarily to higher sales demand. The gross
margins contributed by the acrylic and other products, which are produced at
Zoltek Rt., have historically generated lower gross margins than the
Company's carbon fiber business.

         During fiscal years 2000 and 1999, the Company was not operating
its new continuous carbonization lines at full capacity, resulting in
available unused capacity charges of approximately $4.7 million and $4.0
million, respectively. The Company currently anticipates that it will
continue not to operate its lines at full capacity during fiscal 2001. While
the Company believes it is necessary to maintain available capacity to
encourage development of significant new applications for carbon fibers,
costs related to the unutilized capacity will adversely impact results of
operations during fiscal 2001. The Company does, however, anticipate
increases in carbon fiber sales from both the U.S. and Hungarian locations
in fiscal 2001.

         Selling, general and administrative expenses increased
approximately 12.4%, or $1.8 million, from $14.5 million in fiscal 1999 to
$16.3 million in fiscal 2000. The composites intermediates acquisitions
during fiscal 2000 accounted for $3.7 million of selling, general and
administrative expenses. Excluding the increase from the recent
acquisitions, these expenses decreased by $1.9 million. The decrease was
primarily due to reduction in personnel and administrative expenses in
Hungary. The carbon fiber operations reported increased costs related to
product and market development efforts for product trials, additional
sales/product development personnel and travel. The component costs of
selling, general and administrative expenses changed to reflect increased
costs related to product and market development efforts, offset by a
reduction in engineering and administrative costs.

         Interest expense was approximately $1.3 million for fiscal year
2000 compared to $0.5 million in fiscal 1999. The increase in interest
expense resulted from borrowings related to the use of funds for the
composite intermediates acquisitions, working capital and capital
expenditures. Interest income was $0.5


                                      16

<PAGE>
<PAGE>

million for fiscal 2000 compared to $1.2 million in fiscal 1999. The decrease
in interest income was due to the use of funds to finance the acquisitions,
working capital and capital expenditures during fiscal 2000 and 1999. During
fiscal 2000 capital expenditures totaled $6.2 million.

         During fiscal 2000, the Company reported an income tax benefit of
$2.3 million compared to an income tax benefit of $0.2 million in fiscal
1999 due to the increased losses from operations before taxes. The Company
recognizes income taxes in both the United States and Hungary based on the
income before income taxes. Included in the provision for income taxes are
gross receipts taxes charged by the Hungarian local taxing authorities,
which were $0.4 and $0.6 million in fiscal year 2000 and 1999, respectively,
as well as the statutory income taxes. The statutory income tax rate for the
Zoltek Rt. operation in Hungary is 9%.

         In fiscal 2000, the Company purchased a 45% membership interest in
Hardcore Composites Operations LLC and began consolidating the partnership
with its results, due to its ability to exercise control over the
partnership's operating and financial policies. The pro-rata share of the
partnership's loss allocated to the other owners during fiscal 2000 was
$26,000.

         The foregoing resulted in a net loss from continuing operations of
$4.0 million for fiscal 2000 compared to a net loss of $2.6 million for
fiscal 1999. Similarly, the Company reported net loss from continuing
operations per share of $0.22 and $0.16 on a basic and diluted basis for
fiscal 2000 and fiscal 1999, respectively. The weighted average common
shares outstanding increased to 18.2 million for fiscal 2000 compared to
16.3 million for fiscal year 1999 due to the issuance of approximately 2.5
million common shares as partial consideration for the purchase of
Structural Polymer.

         The net loss from discontinued operations includes the results of
operations of Structural Polymer and interest costs related to borrowings
used to finance the acquisition. The net loss from discontinued operations
for fiscal year 2000 was $2.0 million. During the fourth quarter of fiscal
2000, the Company determined that a portion of the goodwill associated with
Structural Polymer was impaired and $2.7 million was written off through a
special charge. The foregoing resulted in a net loss from discontinued
operations of $4.7 million in fiscal 2000, or $0.25 per share on a basic and
diluted basis.

         The net loss for fiscal 2000 was $8.7 million, or $0.47 per share
on a basic and diluted basis compared to a net loss of $2.6 million, or
$0.16 per share in fiscal 1999.

COMPARISON OF RESULTS FOR FISCAL YEARS ENDED SEPTEMBER 30, 1999 AND 1998

         The Company's sales decreased 17.8% to $68.5 million in fiscal 1999
from $83.4 million in fiscal 1998. Carbon fiber sales increased 11.8% ($2.7
million) to $25.4 million in fiscal 1999 from $22.7 million in fiscal 1998.
The carbon fibers sales increase was due to growth in the aircraft brake
business, the impact of the new capacity additions and a rebound in sales to
the conductive plastics markets for the electronics markets in the Far East
during the fourth quarter. The increase in carbon fiber sales was
constrained by delays in the development of new large-scale applications
utilizing significant quantities of carbon fibers. Sales of acrylic and
other products produced at Zoltek Rt. decreased by 28.9% to $43.1 million in
fiscal 1999 compared to $60.7 million in fiscal 1998. This decrease was
principally due to selling price and volume reductions in the acrylic fiber
markets. The acrylic fiber sales price reductions resulted from a
substantial reduction in acrylonitrile (ACN) raw material pricing, which the
acrylic fiber manufacturers tend to pass through to customers. The acrylic
fiber sales volume reduction of approximately 14.6% was due to an overall
worldwide reduction in the markets for acrylic fibers. In addition, the
Company converted its Mavilon acrylic fiber plant to carbon fiber precursor
production during the last half of 1999 permanently removing the capacity
from the acrylic textile fiber operation.


                                      17

<PAGE>
<PAGE>

The Mavilon plant produced approximately 7,900 metric tons of material in
fiscal 1999. This change did not result in an asset impairment charge.

         Gross profit decreased 38.4% to $15.2 million in fiscal 1999 from
$24.6 million in fiscal 1998. Gross profit from carbon fibers decreased to
$8.0 million in fiscal 1999 from $8.7 million in fiscal 1998. The gross
profit percentage on carbon fiber decreased to 31.6% of sales in fiscal 1999
from 38.3% in fiscal 1998 due to selling price decreases and product mix
changes. Decreased gross profit resulted principally from acrylic and other
products sold by Zoltek Rt., which yielded gross profit of $7.1 million or
55.1% less than that in fiscal 1998. Gross margin on acrylic fibers and
other products decreased to 16.5% of sales for fiscal 1999 compared to 26.2%
of sales for fiscal 1998 due primarily to reductions in the selling prices
and lower volume of sales. The gross margins contributed by the acrylic and
other products, which are produced at Zoltek Rt., have historically
generated lower gross margins than the Company's carbon fiber business. The
decrease in gross profit from acrylic and other products was compounded by a
decrease in carbon fibers gross margin of 6.7%.

         The Company continued to incur costs related to the underutilized
productive capacity for carbon fibers at the Abilene, Texas and Hungarian
facilities. These costs include depreciation and other overhead associated
with the unused capacity. These costs, which were separately identified on
the income statement, were approximately $4.0 million during fiscal 1999.

         Selling, general and administrative expenses increased
approximately 12.1%, or $1.5 million, from $13.0 million in fiscal 1998 to
$14.5 million in fiscal 1999. This increase was primarily attributable to
increased costs related to product and market development efforts for
product trials, additional sales/product development personnel and travel.
The component costs of selling, general and administrative expenses changed
to reflect increased costs related to product and market development
efforts, offset by a reduction in engineering and administrative costs.

         Interest expense was approximately $0.5 million for fiscal years
1999 and 1998. Interest income was $1.2 million for fiscal 1999 compared to
$2.7 million in fiscal 1998. The decrease in interest income was due to the
use of funds to finance the capital expenditures during fiscal 1999 and
1998. During fiscal 1999 capital expenditures totaled $15.7 million. In
January 1999, the Company sold its nitrogen generation plant in Abilene,
Texas for $5.0 million and leased it back under a seven-year operating
lease. The Company did not realize a gain or loss on this sale.

         During fiscal 1999, the Company reported an income tax benefit of
$0.2 million compared to income tax expense of $3.9 million in fiscal 1998
due to the reduced profit levels. The income tax benefit reflects the loss
before income taxes reported for the fiscal year. The Company recognizes
income taxes in both the United States and Hungary based on the income
before income taxes. Included in the provision for income taxes are gross
receipts taxes charged by the Hungarian local taxing authorities, which were
$0.6 million for fiscal years 1999 and 1998, as well as the statutory income
taxes. The statutory income tax rate for the Zoltek Rt. operation in Hungary
is 9%. During the first nine months of fiscal 1998, Zoltek Rt. was able to
utilize net operating loss carryforwards arising from losses incurred prior
to the Company's acquisition. These net operating loss carryforwards
resulted in a reduced income tax liability in 1998. However, due to the
uncertainty of the availability of these operating loss carryforwards to
reduce Zoltek Rt.'s future income tax liability, the Company recognized a
full valuation allowance against these net operating loss carryforwards at
the date of acquisition. During fiscal 1998, Zoltek Rt. utilized operating
loss carryforwards to reduce the income tax liabilities by $0.6 million.
Additionally, valuation allowance adjustments of $0.6 million for the first
nine months of fiscal year 1998 were recognized as a reduction of income tax
expense.


                                      18

<PAGE>
<PAGE>

         The foregoing resulted in a net loss of $2.6 million for fiscal
1999 compared to a net income of $9.6 million for fiscal 1998. Similarly,
the Company reported net income (loss) per share of ($0.16) and $0.58 on a
diluted basis for fiscal 1999 and fiscal 1998, respectively. The weighted
average common and common equivalent shares outstanding decreased to 16.2
million for fiscal 1999 compared to 16.5 million for fiscal year 1998 due to
a reduction in common stock equivalents and the treasury stock repurchase.

LIQUIDITY AND CAPITAL RESOURCES

         As part of the Company's strategic plan for commercializing carbon
fibers and carbon fiber composites, the Company acquired a series of
downstream businesses during fiscal 2000.

         In October 1999, Zoltek acquired all of the outstanding stock of
Cape Composites Inc. for approximately $0.3 million in cash and assumed all
outstanding debt of Cape Composites of approximately $2.4 million. Cape
Composites is a manufacturer of carbon fiber prepreg composite materials.

         In November 1999, the Company acquired substantially all of the
assets and assumed certain liabilities of EnTec for approximately $2.7
million in cash. EnTec designs and manufactures filament winding equipment
used in the production of composite parts.

         In November 1999, the Company also acquired all of the outstanding
stock of CMC and Ramal International, Inc. (parent company of CMC) for
approximately $0.4 million in cash and assumed all outstanding debt of
approximately $0.3 million. CMC designs and manufactures filament winding
and pultrusion equipment used in the production of composite parts.

         Subsequent to the acquisitions of Cape Composites, EnTec and CMC,
the Company provided working capital of approximately $2.1 million for the
payment of accounts payable and accrued expenses. The Company anticipates
making additional working capital facilities available to these acquired
companies during fiscal 2001. The sources of these funds have been and are
expected to be available cash balances and borrowings under the Company's
credit facilities.

         In November 1999, the Company acquired all of the outstanding stock
of Structural Polymer (Holdings) Ltd. for approximately $30.0 million in
cash and 2.5 million shares of the Company's common stock. The Company also
borrowed $5.0 million to refinance certain existing bank debt of Structural
Polymer and fund working capital requirements. Structural Polymer designs
and manufactures composite materials used in large-scale structures such as
wind turbine blades and marine structures.

         In April 2000, the Company acquired a 45% membership interest in
Hardcore Composites Operations LLC ("Hardcore") for $1.4 million cash and
guaranteed a note payable of $1.0 million. The Company provided additional
funding of approximately $1.5 for working capital during fiscal 2000. The
Company has the option to purchase the remaining interest in 2002 based
upon a pre-determined formula. Hardcore designs and manufactures composite
structures for the civil infrastructure market.

         In November 1999, the Company financed the Structural Polymer
acquisition through a credit facility with Firstar Bank Missouri National
Association (formerly known as Mercantile Bank National Association) ("Firstar
Bank") in the original aggregate amount of $71.0 million. The credit
facility, originally structured as a $35.0 million, six-year acquisition
term loan, a $26.0 million, six-year revolving credit facility, and a $10.0
million, six-year future acquisition term loan was secured by 65% of the

                                      19

<PAGE>
<PAGE>

outstanding stock of the Company's international subsidiaries (Structural
Polymer (Holding) Ltd. and Zoltek Rt.) in addition to substantially all of
the assets of the Company's U.S. operations.

         Borrowings under the revolving credit facility are based on a
formula of eligible accounts receivable and eligible inventory of the
Company and certain subsidiaries. Interest rates are tied to either prime or
LIBOR with a margin depending upon the Company's achievement of certain
operating and financial benchmarks. The credit agreement contains financial
covenants, including financial covenants related to borrowings, future
acquisitions, working capital, net worth, cash flow and fixed charge
coverage. In addition, the credit facility restricts fixed asset purchases
and requires lender consent for the payment of cash dividends. There is no
requirement to maintain compensating balances under the credit facility,
however, the Company will be required to pay a fee of 0.50% per annum on the
unused portion of the total facility plus certain other administrative
costs. The Company paid $0.71 million as a nonrefundable fee to the bank for
the arrangement of the credit facility. Proceeds of $5.0 million drawn under
the new revolving credit facility were also used to refinance certain
existing bank debt of the Company and for working capital purposes.

         The Company amended and restated the credit agreement from Firstar
Bank on May 31, 2000. The amended and restated credit agreement, structured
as a $34.1 million, five and one-half year acquisition term loan, and a
$20.0 million, five and one-half year revolving credit facility is secured
by a pledge of 65% of the outstanding stock of the Company's international
subsidiaries in addition to substantially all of the assets of the Company's
U. S. operations.

         At September 30, 2000, the Company did not meet minimum EBITDA and
EBITDA to Funded Debt and other financial covenants of its credit agreement
with Firstar Bank. A waiver of these covenants was received on November 29,
2000.

         Subsequent to the Company's fiscal year end, the Company sold
Structural Polymer to a group consisting of the former shareholders from
whom the Company acquired Structural Polymer in November 1999 and a merchant
banking firm. Consideration for the November 6, 2000 sale consisted of $30.0
million in cash, a note receivable in the principal amount of $5.0 million
and the return of approximately 2.5 million shares of the Company's common
stock from the former Structural Polymer shareholders. In addition, the
Company was repaid approximately $7.3 million of intercompany loans and
accrued interest. Cash proceeds received from the sale and repayment of
the intercompany loans were used to retire $35.4 million of bank debt and
accrued interest of $0.8 million.

         The Company's bank credit facility has not yet been amended to reflect
the November 2000 disposition of Structural Polymer. As a result, the Company
expects that as of December 31, 2000, it will not be in compliance with the
minimum EBITDA and EBITDA to Funded Debt and other financial covenants, which
assumed continuing ownership of Structural Polymer. Accordingly, borrowings
under this facility have been classified as current as of September 30, 2000.
The Company expects to receive a waiver of any covenant noncompliance at
December 31, 2000 as future financing is being renegotiated. The Company is
currently negotiating with Firstar Bank and other financial institutions to
modify its credit facilities. The Company expects to enter into a revised
long-term credit facility by February 28, 2001.

         During fiscal 2000 and prior years, the Company's primary sources
of liquidity were cash flow from operating activities and available
borrowing capacity under credit facilities, supplemented with the net
proceeds from three equity offerings, and long-term debt financing utilizing
the equity in the Company's real estate properties.


                                      20




















                                             
<PAGE>
<PAGE>

         The Company believes its financial position has been significantly
improved as a result of the sale of Structural Polymer subsidiary and
remains adequate, with the anticipated revised credit facilities, to support
the execution of its strategic expansion plans. However, failure to conclude
revised credit facilities on a timely basis would have a material adverse
effect on the Company's results of operations and financial condition.

         At September 30, 2000, the Company reported working capital
(excluding discontinued operations) of $24.5 million compared to working
capital of $43.9 million at September 30, 1999. The decrease in working
capital from September 30, 1999 to September 30, 2000 was primarily due to
classification of $9.0 million of Firstar Bank debt as current, the use of
cash and temporary investments of $7.8 million to finance acquisitions and
$6.2 million in capital expenditures for further expansion of the carbon
fiber and acrylic precursor production capacity. Inventories increased from
$28.5 million at September 30, 1999 to $31.9 million at September 30, 2000.
The composite intermediates acquisitions during fiscal 2000 accounted for
$3.1 million of inventory at September 30, 2000. Carbon fibers accounted for
$0.6 million of the increase while acrylic fibers and other products decreased
$0.3 million. The increase of carbon fiber inventories reflected operations of
recently added carbon fiber lines during the application development period.
The Company anticipates that carbon fiber inventories will significantly
decrease during fiscal 2001.

         Marketable securities at September 30, 2000 amounted to $1.3
million compared to $7.1 million at September 30, 1999. The marketable
securities primarily include preferred stock.

         Other receivables of $0.3 million consisted primarily of VAT and
import refunds due Zoltek Rt. from the Hungarian taxing authority at
September 30, 1999 compared to $0.4 million at September 30, 1999.

         Current maturities of long-term debt at September 30, 2000 include
a $1.0 million note payable related to the Hardcore acquisition and $9.0
million under the revolving credit agreement with Firstar Bank which has
been reclassified from long-term debt. The Company anticipates obtaining
long-term refinancing for these amounts by February 28, 2001.

         Other long-term liabilities were related to various supply
agreements between Zoltek Rt. and its vendors and deferred income associated
with future tax abatements from Abilene, Texas.

         At the time of the purchase of its membership interest in Hardcore
Composites, the Company guaranteed Hardcore Composite's obligation to
purchase the land and buildings that Hardcore Composites currently occupies.
Hardcore Composites is required to purchase the facilities on or before
April 28, 2001 for $3,700,000, which approximates their market value. The
Company expects that such purchase will be financed through capital resources
which the Company expects Hardcore Composites or the Company to acquire.

         Historically, cash used in investing activities has been expended
for equipment additions and to support research and development of carbon
fibers applications and the expansion of the Company's carbon fibers
production capacity. In fiscal 2000, the Company made capital expenditures
of $6.2 million for various projects compared to $15.7 million during the
fiscal year 1999. Of these expenditures in fiscal 2000, approximately $2.8
million was used for a new oxidation line and secondary processing equipment
for carbon fibers and $2.8 million was used at Zoltek Rt. for modernization
and modifications to produce acrylic fiber and other industrial products.
Composite intermediates had capital expenditures of approximately $0.6
million for equipment additions and modifications. These expenditures were
financed principally with cash from the sale of temporary investments and
from cash from borrowings.

                                      21

<PAGE>
<PAGE>


         During fiscal 2000 the Company completed construction of an
oxidization line in Hungary, with an annual rated capacity of two million
pounds. The Company plans to supply European markets with oxidized fiber
used in friction and thermal applications from this line. The Company does
not currently anticipate initializing construction of additional
carbonization lines during fiscal 2001 unless demand for the product
increases.

         In connection with the initial purchase of the Abilene, Texas
facility in fiscal 1997, the Company obtained a $1.9 million short-term,
non-interest bearing loan through the City of Abilene. During fiscal 1998,
the Company purchased additional land and a building from the City of
Abilene and consolidated this purchase with its initial loan for a new $3.1
million non-interest bearing loan maturing in January 2008, which was
discounted. The long-term loan with the City of Abilene will be repaid with
future real estate and personal property tax abatements granted by the City
of Abilene.

         Additionally, since the beginning of fiscal 1994, the Company has
obtained long-term financing utilizing its equity in its real estate
properties. These loans are non-recourse loans for the Company's
headquarters and St. Charles manufacturing facility. Based on the interest
rates and the nature of the loans, the Company plans to repay these loans in
accordance with their stated long-term amortization schedules.

         During fiscal 1999, Zoltek Rt. obtained short-term financing
consisting of working capital and commercial letters of credit of which $1.5
million was outstanding at September 30, 1999.

         In January 1999, the Company sold its nitrogen generation facility
in Abilene, Texas to Southwest Bank for $5.0 million (actual construction
cost) and leased it back under a seven-year operating lease. The Company
utilized the funds for carbon fiber facility expansion and general corporate
purposes.

         In February 1999, the Company's Board of Directors authorized a
share repurchase program for up to 1,000,000 shares of the Company's common
stock in the open market over an unspecified period of time as market
conditions allow. The purpose of the repurchase plan is to meet the
Company's obligations under its stock option plans, while minimizing
dilution to shareholders. In connection with the approved repurchase, the
Company purchased 15,000 shares of the Company's common stock in March 1999
and the Company sold put options for 70,000 shares of the Company's common
stock in February and March 1999 which expired unexercised. The put options
allowed the purchasers to exercise the options and sell the shares back to
the Company or let the options expire. In addition, put options for 160,000
shares of the Company's common stock were sold in the fourth quarter of
fiscal 1999, which expired unexercised in January 2000. The Company sold
additional put options for 50,000 shares of the Company's common stock in
December 1999, which had an expiration date of July 22, 2000. The Company
repurchased these put options on March 1, 2000. There were no put options
outstanding at September 30, 2000.

OUTLOOK

         The recent downstream acquisitions are intended to provide the
Company direct input into the composites value chain by supplying composite
engineering and design technology, composite fabrication and processing
technology and the ability to create integrated product solutions utilizing
an entire range of composite materials and structures.

         Indications from the marketplace are that long-term demand for
carbon fibers and composite materials eventually will grow as forecasted by
the Company. During the Company's multi-year growth

                                      22

<PAGE>
<PAGE>

program, from time to time demand may lag capacity growth, as new markets
take time to develop. In the Company's view, this is neither unexpected
nor undesirable during the development of significant new applications.
The Company is working with several customers to develop major new
applications that would require significant quantities of carbon fiber,
not small incremental volume increases. Therefore, the Company believes
it will be necessary to incur costs related to available capacity during
the periods the new applications are being developed. The Company's carbon
fiber and composite material sales expectations are based on a combination
of the anticipated growth of existing customer demand and projected new
applications development.

         During much of fiscal 2000, the carbon fiber market experienced an
excess supply resulting from capacity increases by several other carbon
fiber manufacturers. As a result, the Company experienced substantial
reductions in sales prices and related gross profit in selected markets. The
Company expects market conditions similar to fiscal 2000 to continue until
the excess capacities are consumed by the markets. However, the Company
plans to significantly reduce its carbon fiber inventory and continue to
reduce manufacturing costs as the Company's lower cost precursor is utilized
in fiscal 2001. It is the objective of management to return to operating on
a profitable basis by the end of fiscal 2001.

Item 7A.  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
September 30, 2000, the Company had an interest rate swap agreement outstanding
with a notional amount of $22.2 million under which the Company paid a fixed
rate of interest and received a floating rate of interest over the term of the
swap agreement without the exchange of underlying notional amounts. The interest
rate swap agreement in effect converted a portion of the acquisition term loan
from a floating rate obligation to a fixed rate obligation at 6.51%. The fair
value of the swap agreement outstanding at September 30, 2000 was $0.1 million.
The fair value of the interest rate swap agreement was not recognized in the
consolidated financial statements at that time since the agreement was accounted
for as a hedge. The swap agreement was terminated on November 6, 2000 upon
repayment of the acquisition term loan from the proceeds from the sale of SP
Systems.

                                      23

<PAGE>
<PAGE>

Item 8.  Financial Statements
------   --------------------

[Letterhead of Pricewaterhouse Coopers]


                       Report of Independent Accountants


To the Board of Directors and
Shareholders of
Zoltek Companies, Inc.:

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of changes in stockholder's equity
and of cash flows present fairly, in all material respects, the financial
position of Zoltek Companies, Inc. and its subsidiaries at September 30,
2000 and 1999, and the results of their operations and their cash flows
for each of the three years in the period ended September 30, 2000 in
conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on
these financial statements based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.


/s/ PricewaterhouseCoopers LLP


November 22, 2000


                                      24


<PAGE>
<PAGE>

<TABLE>
                                                 ZOLTEK COMPANIES, INC.
                                              CONSOLIDATED BALANCE SHEET
                                     (Amounts in thousands, except per share data)

<CAPTION>
ASSETS                                                                                                SEPTEMBER 30,
---------------------------------------------------------------------------------------------------------------------------
                                                                                                  2000             1999
                                                                                              -------------    ------------

<S>                                                                                           <C>              <C>
Current assets:
     Cash and cash equivalents..............................................................  $       2,222    $      4,250
     Marketable securities..................................................................          1,327           7,117
     Accounts receivable, less allowance for doubtful accounts of $899 and $774,
       respectively.........................................................................         11,033          13,138
     Inventories............................................................................         31,876          28,490
     Prepaid expenses.......................................................................            500             212
     Other receivables......................................................................            321             436
     Refundable income taxes................................................................          1,556           1,620
     Net assets of discontinued operations held for sale....................................         57,360               -
                                                                                              -------------    ------------
          Total current assets..............................................................        106,195          55,263
Property and equipment, net.................................................................         81,922          77,422
Intangible assets, net (including goodwill).................................................          2,196               -
Other assets................................................................................          1,548           4,071
                                                                                              -------------    ------------
          Total assets......................................................................  $     191,861    $    136,756
                                                                                              =============    ============

<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                           <C>              <C>
Current liabilities:
     Short-term notes payable...............................................................  $           -    $      1,455
     Current maturities of long-term debt...................................................         10,751             630
     Trade accounts payable.................................................................          9,169           6,650
     Accrued expenses and other liabilities.................................................          4,451           2,582
     Long-term debt to be extinguished with sale of discontinued operations.................         35,375               -
                                                                                              -------------    ------------
          Total current liabilities.........................................................         59,746          11,317
Other long-term liabilities.................................................................            379             815
Long-term debt, less current maturities.....................................................          6,667           5,423
Deferred income taxes.......................................................................          1,429           3,367
          Total liabilities.................................................................         68,221          20,922
                                                                                              -------------    ------------
Majority interest in consolidated partnership...............................................            829               -
Mandatorily redeemable common stock, -0- and 160,000 shares respectively....................              -           1,200
Commitments and contingencies (Note 7)......................................................              -               -
Shareholders' equity:
     Preferred stock, $.01 par value, 1,000,000 shares authorized, no shares issued and
        outstanding.........................................................................              -               -
     Common stock, $.01 par value, 50,000,000 and 20,000,000 shares authorized,
        18,701,331 and 16,041,338 shares issued and outstanding, respectively...............            187             160
     Additional paid-in capital.............................................................        127,690          98,823
     Retained earnings......................................................................         22,500          31,185
     Treasury common stock at cost, 15,000 shares...........................................           (118)           (118)
     Outstanding common stock put options, -0- and 160,000 shares, respectively.............              -             181
     Accumulated other comprehensive loss...................................................        (27,448)        (15,597)
                                                                                              -------------    ------------
          Total shareholders' equity........................................................        122,811         114,634
                                                                                              -------------    ------------
          Total liabilities and shareholders' equity........................................  $     191,861    $    136,756
                                                                                              =============    ============
                    The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>

                                      25



<PAGE>
<PAGE>

<TABLE>

                                               ZOLTEK COMPANIES, INC.
                                       CONSOLIDATED STATEMENT OF OPERATIONS
                                   (Amounts in thousands, except per share data)
<CAPTION>

                                                                                         YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------------------------------------------------
                                                                                   2000           1999              1998
                                                                               -----------     -----------      -----------

<S>                                                                            <C>             <C>              <C>
Net sales ...................................................................  $    81,381     $    68,525      $    83,390
Cost of sales................................................................       65,678          53,375           58,805
                                                                               -----------     -----------      -----------
     Gross profit............................................................       15,703          15,150           24,585
Available unused capacity costs..............................................        4,658           3,953                -
Goodwill amortization........................................................           20               -                -
Selling, general and administrative expenses.................................       16,326          14,525           12,958
                                                                               -----------     -----------      -----------
     Operating income (loss) from continuing operations......................       (5,301)         (3,328)          11,627
Other income (expense):
     Interest expense........................................................       (1,314)           (540)            (494)
     Interest income.........................................................          516           1,163            2,653
     Other, net..............................................................         (163)           (119)            (253)
                                                                               -----------     -----------      -----------
Income (loss) from continuing operations before income taxes.................       (6,262)         (2,824)          13,533
Provision (benefit) for income taxes.........................................       (2,297)           (182)           3,938
                                                                               -----------     -----------      -----------
     Net income (loss) from continuing operations before majority interest
          in consolidated partnership........................................       (3,965)         (2,642)           9,595
Majority interest in loss of consolidated partnership........................          (26)              -                -
                                                                               -----------     -----------      -----------
     Net income (loss) from continuing operations............................       (3,991)         (2,642)           9,595
Discontinued operations:
     Operating loss, net of taxes............................................       (1,994)              -                -
     Loss on impairment of goodwill, net of taxes............................       (2,700)              -                -
                                                                               -----------     -----------      -----------
     Total loss on discontinued operations, net of taxes.....................       (4,694)              -                -
                                                                               -----------     -----------      -----------
     Net income (loss).......................................................  $    (8,685)    $    (2,642)     $     9,595
                                                                               ===========     ===========      ===========
Net income (loss) per share:
     Basic income (loss) per share:
          Continuing operations..............................................  $     (0.22)    $     (0.16)     $      0.59
                                                                               -----------     -----------      -----------
          Discontinued operations............................................  $     (0.25)    $         -      $         -
                                                                               -----------     ===========      -----------
     Total...................................................................  $     (0.47)    $     (0.16)     $      0.59
                                                                               ===========     ===========      ===========
     Diluted income (loss) per share:
          Continuing operations..............................................  $     (0.22)    $     (0.16)     $      0.58
                                                                               -----------     -----------      -----------
          Discontinued operations............................................  $     (0.25)              -                -
                                                                               -----------     -----------      -----------
     Total...................................................................  $     (0.47)    $     (0.16)     $      0.58
                                                                               ===========     ===========      ===========
Weighted average common shares outstanding...................................       18,360          16,209           16,216
Weighted average common and common equivalent shares outstanding.............       18,360          16,209           16,525

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

                                      26


<PAGE>
<PAGE>

<TABLE>
                                                  ZOLTEK COMPANIES, INC.
                                 CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                                                 (Amounts in thousands)
<CAPTION>
                                                                           Accumulated
                                                                              Other               Outstanding              Compre-
                                    Total                         Add'l   Comprehensive             Common                 hensive
                                Shareholders' Preferred  Common  Paid-In     Income      Treasury    Stock     Retained    Income
                                   Equity       Stock     Stock  Capital     (Loss)       Stock   Put Options  Earnings    (Loss)
                                ------------- ---------  ------  -------  -------------  -------- -----------  --------    -------

<S>                               <C>           <C>       <C>    <C>        <C>           <C>       <C>        <C>        <C>
Balance, September 30, 1997.....  $115,836      $  -      $162   $ 99,954   $ (8,512)     $   -     $   -      $24,232

Net income......................     9,595         -         -          -          -          -         -        9,595    $  9,595

Foreign currency translation
 adjustment.....................    (3,829)        -         -          -     (3,829)         -         -            -      (3,829)
                                  --------      ----      ----   --------   --------      -----     -----      -------    --------

   Comprehensive income.........                                                                                          $  5,766
                                                                                                                          ========

Balance, September 30, 1998.....   121,602         -       162     99,954    (12,341)         -         -       33,827

Net loss........................    (2,642)        -         -          -          -          -         -       (2,642)   $ (2,642)

Foreign currency translation
 adjustment.....................    (3,186)        -         -          -     (3,186)         -         -            -      (3,186)

Unrealized losses on securities.       (70)        -         -          -        (70)         -         -            -         (70)
                                                                                                                          --------

   Comprehensive loss...........                                                                                          $ (5,898)
                                                                                                                          ========

Treasury shares purchased.......      (118)        -         -          -          -       (118)        -            -

Sale of put options on common
 stock:

   Put options sold and expired
    without redemption..........        67         -         -         67          -          -         -            -

   Put options sold and
    unexercised at
    September 30, 1999
    transferred to mandatorily
    redeemable common stock.....    (1,019)        -        (2)    (1,198)         -          -       181            -
                                  --------      ----      ----   --------   --------      -----     -----      -------

Balance, September 30, 1999.....   114,634                 160     98,823    (15,597)      (118)      181       31,185

Net loss........................    (8,685)        -         -          -          -          -         -       (8,685)   $ (8,685)

Foreign currency translation
 adjustment.....................   (11,765)        -         -          -    (11,765)         -         -            -     (11,765)

Unrealized losses on securities.       (86)        -         -          -        (86)         -         -            -         (86)
                                                                                                                          --------
   Comprehensive loss...........                                                                                          $(20,536)
                                                                                                                          ========

Sale of put options on common
 stock:

   Put options sold and expired
    without redemption..........     1,200         -         2      1,379          -          -      (181)           -

   Put options sold and
    repurchased before
    expiration..................        13         -         -         13          -          -         -            -

   Issuance of common stock
    for purchase of Structural
    Polymer (Holdings) Limited..    27,500         -        25     27,475          -          -         -            -
                                  --------      ----      ----   --------   --------      -----     -----      -------

Balance, September 30, 2000.....  $122,811      $  -      $187   $127,690   $(27,488)     $(118)    $   -      $22,500
                                  ========      ====      ====   ========   ========      =====     =====      =======

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

                                      27



<PAGE>
<PAGE>

<TABLE>
                                                  ZOLTEK COMPANIES, INC.
                                            CONSOLIDATED STATEMENT OF CASH FLOWS
                                                  (Amounts in thousands)
<CAPTION>
                                                                                         YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------------------------------------------------
                                                                                  2000            1999              1998
                                                                             -------------    ------------     ------------
<S>                                                                          <C>              <C>              <C>
Cash flows from operating activities:
     Net income (loss).....................................................  $      (8,685)   $     (2,642)    $      9,595
     Adjustments to reconcile net income (loss) to net cash used by
           operating activities:
          Loss from discontinued operations................................          4,694               -                -
          Depreciation and amortization....................................          6,275           5,422            3,519
          Unrealized foreign exchange (gain) loss..........................            (72)             58              121
          Other, net.......................................................             20              49               84
          Changes in assets and liabilities:
              (Increase) decrease in accounts receivable...................          2,332           1,093           (1,777)
              (Increase) decrease in other receivables.....................            (24)          1,882             (951)
              Increase in inventories......................................         (4,277)         (5,337)         (12,700)
              Increase in prepaid expenses and other assets................           (800)           (669)            (359)
              Increase (decrease) in trade accounts payable................          2,106          (4,181)           1,392
              Increase (decrease) in accrued expenses and other liabilities            437             (90)          (1,277)
              Change in income taxes payable/refundable and deferred taxes.         (1,754)            260              474
              Increase (decrease) in other long-term liabilities...........           (859)           (186)             761
                                                                             -------------    ------------     ------------
                  Total adjustments........................................          8,078          (1,699)         (10,713)
                                                                             -------------    ------------     ------------
     Net cash used by continuing operations................................           (607)         (4,341)          (1,118)
     Net cash used by discontinued operations..............................           (861)              -                -
                                                                             -------------    ------------     ------------
Net cash used by operating activities......................................         (1,468)         (4,341)          (1,118)
                                                                             -------------    ------------     ------------

Cash flows from investing activities:
     Payments for purchase of Zoltek Intermediates companies, net of cash..         (5,402)              -                -
     Payments for purchase of property and equipment.......................         (6,171)        (15,744)         (31,188)
     Proceeds from sale of property and equipment..........................             33           6,163                -
     (Increase) decrease in notes receivable...............................             74          (2,573)             119
     Sale (purchase) of marketable securities..............................          5,705          11,774             (659)
                                                                             -------------    ------------     ------------
   Net cash used by continuing operations..................................         (5,761)           (380)         (31,728)
   Net cash used by discontinued operations................................        (34,551)              -                -
                                                                             -------------    ------------     ------------
Net cash used by investing activities......................................        (40,312)           (380)         (31,728)
                                                                             -------------    ------------     ------------

Cash flows from financing activities:
     Purchase of treasury stock............................................              -            (118)               -
     Proceeds from sale of common stock put options........................             13             248                -
     Proceeds from issuance of notes payable...............................         49,977           1,525              509
     Repayment of notes payable............................................         (5,817)           (662)            (848)
                                                                             -------------    ------------     ------------
   Net cash provided (used) by continuing operations.......................         44,173             993             (339)
   Net cash used by discontinued operations................................         (3,889)              -                -
                                                                             -------------    ------------     ------------
Net cash provided (used) by financing activities...........................         40,284             993             (339)
                                                                             -------------    ------------     ------------
Effect of exchange rate changes on cash....................................           (532)            (26)              41
                                                                             -------------    ------------     ------------
Net decrease in cash.......................................................         (2,028)         (3,754)         (33,144)
Cash and cash equivalents at beginning of period...........................          4,250           8,004           41,148
                                                                             -------------    ------------     ------------
Cash and cash equivalents at end of period.................................  $       2,222    $      4,250     $      8,004
                                                                             =============    ============     ============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Net cash (refunded) paid during the year for:
     Interest..............................................................  $       3,573    $        527     $        502
     Income taxes..........................................................            747            (435)           3,559


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

                                      28



<PAGE>
<PAGE>

                           ZOLTEK COMPANIES, INC.
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES
-----------------------------------------------------------------------------

PRINCIPLES OF CONSOLIDATION

         Zoltek Companies, Inc. (the "Company") is a holding company which
operates through wholly owned subsidiaries, Zoltek Corporation, Zoltek
Properties Inc., Zoltek Rt., Cape Composites, Inc., Engineering Technology
Corporation ("Entec"), and a 45% membership interest in Hardcore Composites
Operations, LLC. Zoltek Corporation ("Zoltek") develops, manufactures and
markets carbon fibers used in aircraft brakes and other composite materials.
Cape Composites, Inc. manufactures "carbon fiber prepreg" (carbon fiber
impregnated with resin) composite materials used in the production of
composite products requiring unidirectional strength and stiffness, such as
golf club shafts and other sporting goods. Entec manufactures and sells
filament winding and pultrusion equipment used in the production of large
volume composite parts. Hardcore Composites designs and manufactures
composite structures for the civil infrastructure market, including bridges,
bridge decks, marine pilings, fender panels, piers and stay-in-place form
work. Zoltek Rt. (formerly known as Zoltek Magyar Viscosa, Rt.) manufactures
and markets acrylic and nylon fibers and yarns for the textile industry, and
carbon fiber. Other Zoltek Rt. products include nylon granules, plastic
grids and nets, and carboxymethyl cellulose. In addition, Zoltek Rt.
provides public works services for plant use and to the town of
Nyergesujfalu, Hungary. From November 1999 to November 2000, the Company
owned Structural Polymer (Holdings) Limited ("SP Systems") which develops,
markets and manufactures prepreg (glass and carbon fiber pre-impregnated
with resin) materials, special bonding and laminating resins, reinforcement
fabrics and consumable materials for composite manufacturing and engineering
of composite structures. These financial statements have been prepared in
accordance with U.S. generally accepted accounting principles. All
significant intercompany transactions and balances have been eliminated upon
consolidation.

DISCONTINUED OPERATIONS

         The financial data related to SP Systems is accounted for as a
discontinued operation for fiscal 2000. See Note 2.

FOREIGN CURRENCY TRANSLATION

         Zoltek Rt., which prepares its financial statements in the Hungarian
Forint, and SP Systems, which prepares its financial statements in British
Pounds, assets and liabilities are translated at year-end exchange rates and
the income statement is translated at the average exchange rate for the
year. The related translation adjustments are reported as other
comprehensive income (loss) within shareholders' equity. Gains and losses
from foreign currency transactions of Zoltek Rt. and SP Systems are included
in the results of operations.

USE OF ESTIMATES

         The preparation of financial statements in conformity with
generally accepted accounting principles requires that management make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Actual results may differ from those
estimates and assumptions.

                                  29

<PAGE>
<PAGE>

1.       SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
-----------------------------------------------------------------------------

REVENUE RECOGNITION

         The Company recognizes sales on the date title to the sold product
transfers to the customer which generally approximates the shipping date.
During 2000, approximately $9,626,000 of sales was earned from one customer.

CONCENTRATION OF CREDIT RISK

         Zoltek's carbon fiber products are primarily sold to customers in
the aerospace and composite industries. Zoltek Rt.'s products are mainly
sold to customers in the textile industry. Cape Composites products are
mainly sold to the sporting goods industry. Entec's products are mainly sold
in the composite industry. Hardcore Composites' products are sold in the
civil infrastructure market. While the markets for the Company's products
are geographically unlimited, most of Zoltek's, Cape Composites', and
Hardcore Composite's business is with customers located in North America and
most of Zoltek Rt.'s sales are to customers in Central, Eastern and Western
Europe, while Entec's sales are worldwide. The Company performs ongoing credit
evaluations and generally requires collateral for significant export sales to
new customers. The Company maintains reserves for potential credit losses and
such losses have been within management's expectations. As of September 30,
2000, the Company had no significant concentrations of credit risk.

CASH AND CASH EQUIVALENTS

         All highly liquid investments purchased with a maturity of three
months or less are considered to be cash equivalents. Such investments
amounted to $1,851,000 and $3,810,000 at September 30, 2000 and 1999,
respectively.

MARKETABLE SECURITIES

         Marketable securities consist of U.S. agency notes with maturities
of less than one year (classified as held-to-maturity) that are valued at
amortized cost and preferred stock equities (classified as available-for-
sale) that are valued at fair market value. At September 30, 2000 and 1999,
the Company held $0 and $4,790,000, respectively, of U.S. agency notes and
$1,327,000 and $2,327,000, respectively, of preferred stock equities.
Unrealized gains and losses are reflected as other comprehensive income
(loss) within shareholders' equity.

INVENTORIES

         Inventories are valued at the lower of cost, determined on the
first-in, first-out method, or market. Cost includes material, labor and
overhead.

PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost. Cost includes
expenditures necessary to make the property and equipment ready for its
intended use. Expenditures, which improve the asset or extend the useful
life, are capitalized, including interest on funds borrowed to finance the
acquisition or construction of major capital additions. No interest was
capitalized for the years ended September 30, 2000, 1999 and 1998, due to
the short period of construction. Maintenance and repairs are expensed as
incurred. When property is retired or otherwise disposed of, the related
cost and accumulated depreciation are removed from the accounts and any
profit or loss on disposition is credited or charged to income.

                                 30

<PAGE>
<PAGE>

1.       SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
-----------------------------------------------------------------------------

         The Company provides for depreciation by charging amounts
sufficient to amortize the cost of properties placed in service over their
estimated useful lives using primarily straight-line methods. The range of
estimated useful lives used in computing depreciation is as follows:

             Buildings and improvements.....................10 to 31.5 years
             Automobiles....................................3 to 5 years
             Machinery and equipment........................5 to 10 years
             Furniture and fixtures.........................7 to 10 years

         The Company primarily uses accelerated depreciation methods for
income tax purposes.

         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.

         During the years ended September 30, 2000 and 1999, the Company was
not operating certain continuous carbonization lines at full capacity,
resulting in available unused capacity charges of $4,658,000 and $3,953,000,
respectively. These costs include depreciation and other overhead expenses
associated with unused capacity.

GOODWILL AND OTHER INTANGIBLES

         Goodwill is the excess of the cost of net assets acquired in
business purchases over the fair value. Goodwill and other intangibles are
amortized on a straight-line basis over a 15-year period. The Company
evaluates goodwill for possible impairment based on estimated future
undiscounted cash flows of the business.

FINANCIAL INSTRUMENTS

         The Company does not hold any financial instruments for trading
purposes. The carrying value of cash, marketable securities and accounts
payable approximated fair value at September 30, 2000 and 1999. Long-term
debt bears current market rates of interest.

RESEARCH AND DEVELOPMENT EXPENSES

         Expenditures for research, development and engineering of products
and manufacturing processes are expensed as incurred. Such costs were
approximately $1,674,000, $1,318,000 and $893,000 in 2000, 1999, and 1998,
respectively.

INCOME TAXES

         The Company accounts for certain income and expense items
differently for financial reporting and income tax purposes. Deferred tax
assets and liabilities are determined based on the difference between the
financial statement and tax bases of assets and liabilities applying enacted
statutory tax rates in effect for the year in which the differences are
expected to reverse.

                                 31

<PAGE>
<PAGE>

1.       SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES (CONTINUED)
-----------------------------------------------------------------------------

STOCK-BASED COMPENSATION

         SFAS No. 123 "Accounting for Stock-Based Compensation," encourages,
but does not require companies to record compensation cost for stock-based
employee compensation plans at fair value. The Company has chosen to
continue to account for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees." APB No. 25 requires no recognition of
compensation expense for the stock-based compensation arrangements provided
by the Company where the exercise price is equal to the market price at the
date of the grant.

NET INCOME (LOSS) PER SHARE

         Basic net income (loss) per share includes no dilution and is
calculated by dividing net income (loss) by the weighted average number of
common shares outstanding for each period, while diluted net income (loss)
per share reflects the potential dilutive effects of stock options and
incentive shares. Because 2000 and 1999 results reflected a net loss, both
basic and diluted earnings per share were calculated based on the same
weighted average number of shares for the year.

RECENT ACCOUNTING PRONOUNCEMENTS

         No recently issued accounting standards will be applicable to the
Company for its fiscal year ending September 30, 2001 that management
believes may have a material impact upon adoption on the Company's financial
position or results of operations.

FINANCIAL PRESENTATION CHANGES

         Certain prior year amounts have been reclassified to conform to the
current year presentation.

2.       DISCONTINUED OPERATIONS
-----------------------------------------------------------------------------

         In the fourth quarter of fiscal 2000 the Company decided to dispose
of SP Systems, its only wind energy and marine related business unit.
Accordingly, the Company reported the results of the operations of SP
Systems as discontinued operations.

         The Company originally acquired SP Systems on November 19, 1999 for
$30,000,000 cash and 2.5 million shares of the Company's common stock valued
at a price of $11.00 per share or $27,500,000 for a total purchase price of
approximately $57,500,000. Fees and costs totaling $418,000 were associated
with the transaction. The acquisition resulted in the recognition of
$49,337,000 of goodwill. In connection with the acquisition, the Company
borrowed $30,000,000 to finance the purchase. Interest of $2,392,000 on
these borrowings was allocated to SP Systems during 2000.

         Under the provisions of Statement of Financial Accounting Standards
No. 121, which establishes accounting standards for the impairment of
long-lived assets, certain identifiable intangibles and goodwill related to
those assets, the Company determined in the fourth quarter of fiscal 2000
that an adjustment to the carrying value of goodwill related to SP Systems
was required. As a result, an impairment charge of $2,700,000 was recorded
in the fourth quarter of 2000 as a reduction in the carrying value of
goodwill.

                                    32


<PAGE>
<PAGE>

2.       DISCONTINUED OPERATIONS (CONTINUED)
------------------------------------------------------------------------------

         Certain information with respect to the discontinued operations of
SP Systems for the year ended September 30, 2000 is summarized as follows
(amounts in thousands):

                                                               Amount
                                                             ----------

         Sales............................................   $   53,862
         Cost of sales....................................       37,948
                                                             ----------
         Gross profit.....................................       15,914
         Selling, general and administrative expenses.....       11,672
         Goodwill amortization............................        2,728
         Loss on impairment of goodwill...................        2,700
                                                             ----------
         Operating loss...................................       (1,186)
         Interest expense.................................       (2,966)
                                                             ----------
         Loss from operations before taxes................       (4,152)
         Income tax expense...............................         (542)
                                                             ----------
             Net loss.....................................   $   (4,694)
                                                             ==========

         Certain information with respect to the assets and liabilities of
SP Systems at September 30, 2000 is summarized as follows (amounts in
thousands):

                                                               Amount
                                                             ----------

         Cash and cash equivalents.......................    $      537
         Accounts receivable, net.........................       10,936
         Other receivables................................        1,289
         Inventories......................................        7,871
         Property and equipment, net......................       10,519
         Goodwill, net....................................       39,847
         Accounts payable.................................       (8,260)
         Accrued expenses and other liabilities...........       (2,037)
         Income taxes payable.............................       (1,540)
         Long-term debt...................................       (1,367)
         Deferred income taxes payable....................         (435)
                                                             ----------
         Net assets of discontinued operations held
             for sale                                        $   57,360
                                                             ==========

       On November 6, 2000, the Company sold SP Systems to a group
consisting of the original shareholders and a merchant banking firm. In
connection with the sale, the Company received $30,000,000 in cash, an
interest-bearing note receivable of $5,000,000, the return of 2.5 million
shares of the Company's common stock valued at $7.625 per share (or
$19,063,000 aggregate value) and was repaid $7,924,000 consisting of
intercompany loans, accrued interest and closing expenses. Cash proceeds
from the sale and repayment of the intercompany balances were used to
retire $35,375,000 of bank debt and interest of $795,000. The Company
also entered into a 10-year carbon fibers supply agreement and certain
technology license agreements.

                                 33


<PAGE>
<PAGE>

2.       DISCONTINUED OPERATIONS (CONTINUED)
-----------------------------------------------------------------------------

         Certain information with respect to accounting for discontinued
operations at the date of sale is summarized as follows (amounts in
thousands):

                                                               Amount
                                                             ----------

         Original investment..............................       57,918
         Loss on operations and impairment of goodwill           (4,694)
                                                             ----------
             Investment in SP Systems                        $   53,224
                                                             ==========

         Net proceeds from sale of SP Systems:

         Cash.............................................   $   30,000
         Stock (2.5 million shares x $7.625)..............       19,063
         Notes receivable.................................        5,000
                                                             ----------
          Total proceeds..................................       54,063
         Less: closing costs and other expenses, net......         (839)
                                                             ----------
             Net proceeds from sale                          $   53,224
                                                             ==========


3.       INVENTORIES
-----------------------------------------------------------------------------

Inventories consist of the following (amounts in thousands):

<TABLE>
<CAPTION>
                                                                                          September 30,
                                                                                    2000                 1999
                                                                                -------------       --------------
<S>                                                                             <C>                 <C>
         Raw materials.....................................................     $       7,930       $        6,173
         Work-in-process...................................................             1,516                  935
         Finished goods....................................................            20,893               21,059
         Supplies, spares and other........................................             1,537                  323
                                                                                -------------       --------------
                                                                                $      31,876       $       28,490
                                                                                =============       ==============
</TABLE>


4.       PROPERTY AND EQUIPMENT
-----------------------------------------------------------------------------

Property and equipment consists of the following (amounts in thousands):
<TABLE>
<CAPTION>
                                                                                          September 30,
                                                                                    2000                 1999
                                                                                -------------       --------------
<S>                                                                             <C>                 <C>
Land.......................................................................     $       1,515       $        1,151
Buildings and improvements.................................................            23,102               21,837
Machinery and equipment....................................................            46,108               41,451
Furniture and fixtures.....................................................             4,291                3,652
Construction in progress...................................................            28,748               26,191
                                                                                -------------       --------------
                                                                                      103,764               94,282
Less: accumulated depreciation.............................................           (21,842)             (16,860)
                                                                                -------------       --------------
                                                                                $      81,922       $       77,422
                                                                                =============       ==============
</TABLE>
                                   34


<PAGE>
<PAGE>

5.       INCOME TAXES
-----------------------------------------------------------------------------

The components of the provision (benefit) for income taxes for the years
ended September 30, are as follows (amounts in thousands):

<TABLE>
<CAPTION>

                                                              2000                  1999                  1998
                                                          -------------         -------------       ---------------
<S>                                                       <C>                   <C>                 <C>
From continuing operations:
     Current:
         Federal.....................................     $      (1,497)        $      (1,792)      $         1,855
         State.......................................               (59)                  (93)                  117
         Non-U.S. local..............................               448                   635                   627
                                                          -------------         -------------       ---------------
                                                                 (1,108)               (1,250)                2,599
     Deferred:
         Federal.....................................            (1,401)                1,222                   714
         State.......................................               170                    93                     -
         Non-U.S.....................................                42                  (247)                  625
                                                                                -------------       ---------------
                                                                 (1,189)                1,068                 1,339
                                                          -------------         -------------       ---------------
              Total continuing operations............     $      (2,297)        $        (182)      $         3,938
                                                          =============         =============       ===============

From discontinued operations:
     Current:
         Non-U.S.....................................             1,292                     -                     -
     Deferred:
         Federal.....................................              (749)                    -                     -
                                                          -------------         -------------       ---------------
              Total discontinued operations..........               543                     -                     -
                                                          -------------         -------------       ---------------
     Total...........................................     $      (1,754)        $        (182)      $         3,938
                                                          =============         =============       ===============
</TABLE>

         Deferred income taxes reflect the tax impact of carryforwards and
temporary differences between the amount of assets and liabilities for
financial reporting purposes and such amounts as measured by tax laws and
regulations. Cumulative carryforwards and temporary differences giving rise
to the net deferred income tax liabilities at September 30 are as follows
(amounts in thousands):

<TABLE>
<CAPTION>
                                                                                     2000               1999
                                                                                -------------       -------------
<S>                                                                             <C>                 <C>
         Tax effect of regular net operating losses........................     $      (2,720)      $           -
         Depreciation......................................................             3,706               3,048
         Employee related costs............................................              (155)               (195)
         Inventory reserve.................................................               (10)                (12)
         Bad debt accrual..................................................               (33)                (42)
         Deferred state income taxes.......................................               174                 136
         Other.............................................................               (16)                 25
         Non-U.S. operations deferred tax, net.............................               483                 407
                                                                                -------------       -------------
              Total net deferred tax liabilities...........................     $       1,429       $       3,367
                                                                                =============       =============
</TABLE>

         At September 30, 1997, the Company had deferred tax assets and a
related valuation allowance of $559,000 related to net operating loss
carryforwards and tax positions subject to examination by Hungarian tax
authorities. During 1998, the Company recorded a reduction in the valuation
allowance of $559,000, related to utilization of net operating loss
carryforwards in 1998.

                                  35


<PAGE>
<PAGE>

5.       INCOME TAXES (CONTINUED)
-----------------------------------------------------------------------------

         The provision (benefit) for income taxes at September 30 differs
from the amount using the statutory federal income tax rate (34%) as follows
(amounts in thousands):

<TABLE>
<CAPTION>

                                                                          2000            1999             1998
                                                                      ------------    ------------     ------------
<S>                                                                   <C>             <C>              <C>
At statutory rate:
         Income taxes on income (loss) from continuing
         operations...............................................    $     (3,538)   $       (960)    $      4,601
Increases (decreases):
         Lower effective tax rate on non-U.S. operations..........            (361)            254             (988)
         Goodwill amortization and impairment.....................           1,846               -                -
         Valuation allowance change...............................               -               -             (334)
         Local taxes, non-U.S.....................................             360             569              627
         State taxes, net of federal benefit......................             (38)            (32)             (35)
         Other....................................................             (23)            (13)              67
                                                                      ------------    ------------     ------------
                                                                      $     (1,754)   $       (182)    $      3,938
                                                                      ============    ============     ============
</TABLE>

         For the years ended September 30, 2000, 1999 and 1998, the
consolidated income (loss) from continuing operations before income taxes by
domestic and foreign sources was ($9,943,000) and $1,442,000, ($1,810,000)
and ($1,014,000), and $7,358,000 and $6,175,000, respectively. Undistributed
earnings of Zoltek Rt. ($10,463,000 and $9,021,000 at September 30, 2000 and
1999, respectively) are considered to be permanently reinvested and,
accordingly, no provision for income taxes has been recorded.

6. FINANCING
-----------------------------------------------------------------------------

SHORT-TERM DEBT AND CREDIT AGREEMENTS

         In November 1999, the Company entered into a six-year multi-purpose
credit facility with Firstar Bank Missouri National Association ("Firstar
Bank) in the original aggregate amount of $71.0 million. The credit
facility, originally structured as a $35.0 million acquisition term loan, a
$26.0 million revolving credit facility, and a $10.0 million future
acquisition term loan, was secured by 65% of the outstanding stock of the
Company's international subsidiaries (SP Systems and Zoltek Rt.) in addition
to substantially all the assets of the Company's U.S. operations. Borrowings
under the revolving credit facility are based on a formula of eligible
accounts receivable and eligible inventory of the Company and certain
subsidiaries. Interest rates are tied to either prime or LIBOR with a margin
depending upon the Company's achievement of certain operating and financial
benchmarks. The facility contains financial covenants, including financial
covenants related to borrowings, future acquisitions, working capital, net
worth, cash flow and fixed charge coverage. In addition, the credit facility
restricts fixed asset purchases and requires lender consent for the payment
of cash dividends. There is no requirement to maintain compensating balances
under the revolving credit facility, however the Company is required to pay
a fee of 0.50% per annum on the unused portion of the total facility plus
certain administrative costs. The Company paid $0.71 million as a
nonrefundable fee to the bank for the arrangement of the credit facility.

         The Company amended and restated the credit agreement from Firstar
Bank on May 31, 2000. The amended and restated credit agreement, structured
as a $34.1 million, five and one half year acquisition term loan, and a
$20.0 million, five and one-half year revolving credit facility is secured
by a pledge of 65% of the outstanding stock of the Company's international
subsidiaries (SP Systems and Zoltek Rt.) in addition to substantially all
the assets of the Company's U.S. operations. Borrowings under the revolving
credit facility are based on a formula of eligible accounts receivable and
eligible


                                  36


<PAGE>
<PAGE>

6.       FINANCING (CONTINUED)
-----------------------------------------------------------------------------

inventory of the Company and certain subsidiaries. Interest rates are tied to
either prime or LIBOR with a margin depending upon the Company's achievement
of certain operating and financial benchmarks.  The facility contains
financial covenants, including financial covenants related to borrowings,
future acquisitions, working capital, net worth, cash flow and fixed charge
coverage. In addition, the credit facility restricts fixed asset purchases
and requires lender consent for the payment of cash dividends. There is no
requirement to maintain compensating balances under the revolving credit
facility, however the Company is required to pay a fee of 0.50% per annum
on the unused portion of the total facility plus certain administrative
costs.

         At September 30, 2000, the Company did not meet the covenants of
the credit facility with Firstar Bank. A waiver of non-compliance was
received on November 29, 2000. The Company expects to receive a waiver of
any covenant non-compliance at December 31, 2000 as future financing is
being renegotiated. The Company is currently negotiating with Firstar Bank
and other financial institutions to modify its credit facilities. The
Company expects to enter into a revised long-term credit facility by
February 28, 2001. At September 30, 2000, all debt to Firstar Bank is
classified as a current liability.

         The Company repaid the Firstar Bank term loan of $32.4 million and
$3.0 million of the revolving credit loan on November 6, 2000 from the
proceeds of the sale of SP Systems.

         The Company entered into a one year, $1.0 million note to Master
Builders, LLC in connection with the purchase of Hardcore Composites in
April 2000. This note is non-interest bearing and is due on or before April
28, 2001.

         In April 2000, the Company obtained secured financing in the amount
of $1,720,000 with Southwest Bank for the real estate and manufacturing
facility in Salt Lake City, Utah, The note bears interest at 9.0% and
matures in June 2003.

         In 1998, the City of Abilene, Texas provided secured long-term
financing as an incentive to locate facilities in Abilene. The original
financing of $3,099,287 is non-interest bearing and will be repaid from real
estate and personal property tax abatements.

         The Company also has various accounts receivable factoring
contracts with Hungarian banks totaling $3,029,000 at September 30, 2000. In
addition, Zoltek Rt. had bank guarantees and letters of credit outstanding
with various Hungarian banks that totaled $2,228,000 at September 30, 2000.
The term of these agreements expire in 2003.

         During 1999, the Company had a revolving credit agreement with
Southwest Bank, St. Louis, Missouri, which bore interest at prime (prime
rate at September 30, 1999 was 8.25%) with a maximum available of
$5,000,000. This revolving credit agreement was terminated on November 19,
1999. There were no borrowings under the revolving credit agreement at
September 30, 1999.

                                 37


<PAGE>
<PAGE>

6.       FINANCING (CONTINUED)
-----------------------------------------------------------------------------

LONG-TERM DEBT

Long-term debt consists of the following (amounts in thousands):

<TABLE>
<CAPTION>
                                                                                                  September 30,
                                                                                             ----------------------
                                                                                               2000          1999
                                                                                             --------      --------
<S>                                                                                          <C>           <C>
Note payable with interest at 9%, payable in monthly installments of
     principal and interest of $17,579 to maturity in June 2003.........................     $  1,700      $      -

Note payable with interest at 9.95%, payable in monthly installments of
     principal and interest of $19,288 to maturity in September 2009....................        1,373         1,462

Note payable with interest at 9.5%, payable in monthly installments of
     principal and interest of $27,672 to maturity in December 2009 ....................        2,030         2,158

Non-interest bearing note payable (discounted at 8%) to the City of Abilene,
     Texas to be repaid from real estate and personal property tax abatements ..........        2,315         2,433

Non-interest bearing note payable to Master Builders LLC to be repaid
     in full on or before April 28, 2001................................................        1,000             -

Revolving credit agreement, maturing in 2005 (average interest rate of 9.31%)...........       12,000             -

Term Loan, payable quarterly in amounts from $0.875 million to
     $1.75 million (average interest rate of 9.20%).....................................       32,375             -
                                                                                             --------      --------
                                                                                               52,793         6,053

Less:  amounts payable within one year..................................................      (46,126)         (630)
                                                                                             --------      --------
                                                                                             $  6,667      $  5,423
                                                                                             ========      ========
</TABLE>


         Following is a schedule of required principal payments of long-term
debt (amounts in thousands):

             Year ending
            September 30,                                       Total
            -------------                                       -----

                2001......................................     $46,126
                2002......................................         791
                2003......................................       2,473
                2004......................................       1,138
                2005......................................         358
                Thereafter................................       1,907
                                                               -------
                                                               $52,793
                                                               =======

7.       COMMITMENTS AND CONTINGENCIES
-----------------------------------------------------------------------------

LEASES

         Land at the carbon fibers manufacturing facility in Missouri is
leased under an operating lease that expires in December 2065, with a
renewal option for 24 years expiring in December 2089. The lease

                                     38


<PAGE>
<PAGE>

7.       COMMITMENTS AND CONTINGENCIES (CONTINUED)
-----------------------------------------------------------------------------

required a prepayment of $50,000 for rental through October 1993 and requires
annual rental payments of $57,991 through October 2010. Rental expense
related to this lease was $57,991 for the years ended September 30, 2000,
1999 and 1998.

         The Company entered into a sale/leaseback arrangement with
Southwest Bank for the newly constructed nitrogen plant in Abilene in
January 1999. The Company received $5,000,000 in cash for the nitrogen plant
and did not recognize a gain or loss. The term of the lease is seven years
and may be extended on a month-to-month basis thereafter. At expiration of
the lease the Company may repurchase the plant for market value. The lease
is accounted for as an operating lease and requires minimum annual rental
payments of $962,000 per year. Rental expense related to this lease was
$784,000 and $187,000 for the years ended September 30, 2000 and 1999,
respectively.

BUILDING PURCHASE

         The Company entered into an assignment and assumption agreement at
the time of the purchase of Hardcore Composite Operations, LLC that requires
the purchase of land and buildings that are currently occupied by it in New
Castle, Delaware. The Company has guaranteed Hardcore's obligation to purchase
the facilities on or before April 28, 2001 for $3,700,000 which approximates
their market value.

LEGAL

         The Company is a 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

         The Company currently obtains substantially all of its textile-type
acrylic fibers to supply its carbon fiber operations from a single supplier,
which is currently the sole merchant supplier or such raw materials in the
world. This supplier is also 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. In the near term, although not
expected, any interruption of precursor supply from this supplier would have
a material adverse effect on the Company's carbon fiber business.

8.       PROFIT SHARING PLAN
-----------------------------------------------------------------------------

         The Company maintains a 401(k) Profit Sharing Plan for the benefit
of employees who have completed six months of service and attained 21 years
of age. Contributions of $260,000, $220,000, and $220,000 were made for the
years ended September 30, 2000, 1999 and 1998, respectively.

9.       STOCK OPTIONS
-----------------------------------------------------------------------------

         In July 1992, the Company adopted a Long-term Incentive Plan that
authorizes the Compensation Committee of the Board of Directors (the
"Committee") to grant key employees and officers of the

                                   39


<PAGE>
<PAGE>

9.       STOCK OPTIONS (CONTINUED)
-----------------------------------------------------------------------------

Company incentive or nonqualified stock options, stock appreciation rights,
performance shares, restricted shares and performance units. The Committee
determines the prices and terms at which awards may be granted along with
the duration of the restriction periods and performance targets. Currently,
2,500,000 shares of common stock may be issued pursuant to awards under the
plan. Outstanding stock options expire 10 years from the date of grant or
upon termination of employment. Options granted in 1995, 1996, 1997 and 1998
vest 100% five years from date of grant. Options granted in 1999 and 2000
vest 100% three years from date of grant. The options were issued at an
option price equal to the market price on the date of grant.

         In July 1992, the Company adopted a Directors Stock Option Plan
under which options to purchase 3,000 shares of common stock at the then
fair market value will be issued to each non-employee director annually. In
addition, newly elected non-employee directors receive options to purchase
3,000 shares of common stock, at the then fair market value. The plan was
amended in February 1995 to increase the annual grants to 7,500 shares. The
options expire from 2002 through 2009, respectively.

         The pro forma information required by SFAS 123 regarding net income
and earnings per share has been presented below as if the Company had
accounted for its stock option plans under the fair value method. The fair
value of each option grant is estimated on the date of the grant using the
Black-Scholes option pricing model with the following weighted average
assumptions:

<TABLE>
<CAPTION>
         Assumptions                                                        2000            1999
         -----------                                                      -------         -------
<S>                                                                       <C>             <C>
         Expected life of options.................................        6 years         6 years
         Risk free interest rate..................................          7.50%           6.25%
         Volatility of stock......................................           114%             72%
         Expected dividend yield..................................             --              --
</TABLE>

         The weighted average fair value of the options granted during 1999
and 1998 was $678,000 and $1,809,000, respectively. Had the fair value of
the options been amortized to expense over the options' vesting period, the
pro forma impact on earnings of the stock-based compensation for the options
under the provision would have been as follows (amounts in thousands, except
for earnings per share information):

<TABLE>
<CAPTION>
                                                                          2000           1999
                                                                       ---------      ----------
<S>                                                                    <C>            <C>
             Net income (loss):
             As reported..........................................     $  (8,685)     $   (2,642)
             Pro forma............................................        (9,190)         (3,152)

             Diluted income (loss) per share:
             As reported..........................................     $   (0.47)     $    (0.16)
             Pro forma............................................     $   (0.50)     $    (0.19)
</TABLE>

         In accordance with SFAS 123, the weighted average fair value of
stock options granted is required to be based on a theoretical statistical
model using the preceding assumptions. In actuality, the Company's stock
options do not trade on a secondary exchange and, therefore, the employees
and directors cannot derive any benefit from holding the stock options under
these plans without an increase in the market price of Company stock. Such
an increase in stock price would benefit all shareholders commensurately.

                                   40


<PAGE>
<PAGE>

9.       STOCK OPTIONS (CONTINUED)
-----------------------------------------------------------------------------

         Presented below is a summary of stock option plans activity for the
years shown:

<TABLE>
<CAPTION>
                                                    Wtd. Avg.       Options          Wtd. Avg.
                                                     Options     Exercise Price     Exercisable    Exercise Price
                                                    ---------    --------------     -----------    ---------------

<S>                                                 <C>            <C>                <C>            <C>
         Balance, September 30, 1997                 630,000       $    10.35         117,000        $    15.64
             Granted                                  97,500            38.27
             Exercised                                     -                -
             Cancelled                                (5,000)            8.38
                                                    --------
         Balance, September 30, 1998                 722,500       $    14.13         154,500        $    21.31
             Granted                                 203,000             8.93
             Exercised                                    --               --
             Cancelled                              (145,000)           10.78
                                                    --------

         Balance, September 30, 1999                 780,500       $    13.40         199,500        $    18.41
             Granted                                 157,500             8.38
             Exercised                                    --               --
             Cancelled                               (57,000)            7.74
                                                    --------

         Balance, September 30, 2000                 880,000       $    12.88         673,500        $    13.71
                                                    ========
</TABLE>

         The following table summarizes information for options currently
outstanding and exercisable at September 30, 2000:

<TABLE>
<CAPTION>
                                                  Options Outstanding                  Options Exercisable
                                            --------------------------------       ---------------------------
           Range of                            Wtd. Avg.         Wtd. Avg.                         Wtd. Avg.
             Prices            Number       Remaining Life    Exercise Price       Number       Exercise Price
      ------------------       ------       --------------    --------------       ------       --------------
        <C>                    <C>              <C>             <C>                <C>             <C>
        $    1.33-2.33          12,000          3 years         $    1.83           12,000         $   1.83
             3.42-6.25         315,000          4 years              4.85          315,000             4.85
            7.00-13.50         355,500          8 years              8.95          166,500             9.92
           24.50-31.25         100,000          6 years             28.68           97,500            28.79
           34.25-39.00          97,500          7 years             38.27           82,500            39.00
                               -------                                             -------
        $   1.33-39.00         880,000          6 years         $   12.88          673,500         $  13.71
                               =======                                             =======
</TABLE>

10.      BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
-----------------------------------------------------------------------------

         The Statement of Financial Accounting Standards (SFAS) No. 131,
"Disclosures about Segments of an Enterprise and Related Information"
requires disclosure of segment information on a basis consistent with the
basis used internally for evaluating segment performance and deciding how to
allocate resources to segments. The Company's strategic business units are
based on product lines and have been grouped into three reportable segments,
Carbon Fibers, Composite Intermediates and Specialty Products. The Carbon
Fibers segment is the primary strategic segment and is focused on the
manufacturing of low-cost carbon fibers, facilitating development of product
and process applications to increase the demand for carbon fibers and
aggressively market carbon fibers. The Carbon Fibers segment is located
geographically in the United States and Hungary. The Composite Intermediates
segment manufactures and markets glass and carbon fiber composite products
and filament winding equipment used in the composites industry and is
located in the United States. The Specialty Products segment manufactures
and markets acrylic and nylon products and fibers primarily to the textile
industry and is located in Hungary. The Company markets all of its products
globally. None of the segment's sales is substantially dependent on one
customer nor a small group of customers, but Carbon Fibers does

                                  41

<PAGE>
<PAGE>

10.      BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION (CONTINUED)
-----------------------------------------------------------------------------

have one customer which represented 12% of the total sales of the Company in
fiscal 2000. The Corporate and unallocated assets incur no cost of sales
expenses so it has no gross profit or loss to report.

         Management evaluates the performance of its operating segments on
the basis of operating income (loss) contribution to the Company. The
Company evaluates the individual segments performance based on the operating
income (loss) contribution to the Company. The following table presents
financial information on the Company's continuing operating segments as of
and for the fiscal years ended September 30, 2000, 1999 and 1998 (amounts in
thousands):

<TABLE>
<CAPTION>
                                                                  Fiscal Year Ended September 30, 2000
                                                                  ------------------------------------
                                                                                               Corporate
                                                                   Composite    Specialty   Headquarters and
                                                  Carbon Fibers  Intermediates  Products      Eliminations      Total
                                                  -------------  -------------  ---------   ----------------    -----

<S>                                                  <C>            <C>          <C>               <C>          <C>
Net sales - external                                 $27,523        14,074       39,784                 -       81,381
Net sales - intersegment                                 288             -            -              (288)           -
                                                     -------        ------       ------            ------     --------
   Total net sales                                    27,811        14,074       39,784              (288)      81,381
Gross profit                                           6,728         2,193        6,784                (2)      15,703
Operating income (loss)                               (1,928)       (1,577)         987            (2,783)      (5,301)
Available unused capacity expenses                     4,658             -            -                 -        4,658
Depreciation and amortization expense                  4,259           848        1,072                96        6,275
Capital expenditures                                   2,840           583        2,748                 -        6,171
Total assets, net of discontinued operations          89,615        17,513       23,873             3,500      134,501

<CAPTION>
                                                                  Fiscal Year Ended September 30, 1999
                                                                  ------------------------------------
                                                                                               Corporate
                                                                   Composite    Specialty   Headquarters and
                                                  Carbon Fibers  Intermediates  Products      Eliminations      Total
                                                  -------------  -------------  ---------   ----------------    -----

<S>                                                  <C>            <C>         <C>                <C>         <C>
Net sales                                            $25,404             -       43,121                 -       68,525
Gross profit                                           8,023             -        7,127                 -       15,150
Operating income (loss)                                1,093             -       (1,564)           (2,857)      (3,328)
Available unused capacity expenses                     3,953             -            -                 -        3,953
Depreciation and amortization expense                  4,240             -        1,066               116        5,422
Capital expenditures                                  13,330             -        2,414                 -       15,744
Total assets, net of discontinued operations          85,796             -       35,935            15,025      136,756

<CAPTION>
                                                                  Fiscal Year Ended September 30, 1998
                                                                  ------------------------------------
                                                                                               Corporate
                                                                   Composite    Specialty   Headquarters and
                                                  Carbon Fibers  Intermediates  Products      Eliminations      Total
                                                  -------------  -------------  ---------   ----------------    -----

<S>                                                  <C>            <C>          <C>               <C>         <C>
Net sales                                            $22,722             -       60,668                 -       83,390
Gross profit                                           8,695             -       15,890                 -       24,585
Operating income (loss)                                7,192             -        7,170            (2,735)      11,627
Available unused capacity expenses                         -             -            -                 -            -
Depreciation and amortization expense                  2,193             -        1,210               116        3,519
Capital expenditures                                  28,544             -        2,644                 -       31,188
Total assets, net of discontinued operations          79,710             -       39,651            27,848      147,209
</TABLE>

                                  42


<PAGE>
<PAGE>

10.      BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION (CONTINUED)
-----------------------------------------------------------------------------

Sales and long-lived assets, by geographic area, consist of the following as
of and for the three years ended September 30, 2000, 1999 and 1998 (amounts
in thousands):

<TABLE>
<CAPTION>
                                    2000                          1999                           1998
                       ---------------------------    ---------------------------  -----------------------------
                                            Net                            Net                            Net
                                        Long Lived                     Long Lived                     Long Lived
                       Net Sales (a)    Assets (b)    Net Sales (a)    Assets (b)   Net Sales (a)     Assets (b)
                       -------------    ----------    -------------    ----------   -------------     ----------
<S>                       <C>            <C>             <C>            <C>            <C>             <C>
United States             $34,112        $64,767         $21,347        $55,400        $20,925         $54,020
Western Europe
     Italy                  7,544              -           5,804              -          7,366               -
     France                 4,163              -           3,856                         1,949
     Other                  4,063              -           6,633              -          8,759               -
Eastern Europe
     Hungary               15,818         19,351          16,508         22,022         22,852          22,841
     Poland                 4,464              -           4,186              -          7,883               -
     Other                  7,300              -           4,730              -          8,342               -
Other Areas                 3,917              -           5,461              -          5,314               -
                          -------        -------         -------        -------        -------         -------
     Total                $81,381        $84,118         $68,525        $77,422        $83,390         $76,861
                          =======        =======         =======        =======        =======         =======

<FN>
(a)  Revenues are attributed to countries based on the location of the customer
(b)  Property, plant and equipment net of accumulated depreciation and goodwill
     and intangibles based on country location of assets
</TABLE>

11.      STOCK ISSUANCE
-----------------------------------------------------------------------------

         On November 19, 1999, the Company issued 2,499,993 shares of common
stock as partial consideration for the purchase of SP Systems. These shares
were valued at $11.00 per share for a total of $27,500,000.

12.      ACQUISITIONS
-----------------------------------------------------------------------------

         On October 1, 1999, the Company acquired all of the outstanding
shares of Cape Composites Inc., a California corporation ("Cape Composites")
for $312,500 in cash. Cape Composites manufactures "carbon fiber prepreg"
(carbon fiber impregnated with resin) composite materials used in the
production of composite products requiring unidirectional strength and
stiffness, such as golf club shafts and other sporting goods.

         On November 9, 1999, Engineering Technology Corporation ("EnTec"), a
Missouri corporation which is a wholly-owned subsidiary of the Company,
acquired substantially all of the assets of Engineering Technology, Inc., a
Utah corporation for $2,700,000 in cash.  Engineering Technology, Inc.
designs, manufactures and sells filament winding equipment.

         On November 15, 1999, EnTec acquired all of the outstanding shares of
Composite Machines Company, Inc., a Utah corporation ("CMC"), and Ramal
International, Inc., a Nevada corporation ("Ramal") for $350,000 in cash.
CMC and Ramal design and manufacture filament winding and

                                  43


<PAGE>
<PAGE>

12.      ACQUISITIONS (CONTINUED)
-----------------------------------------------------------------------------

pultrusion equipment used in the production of large volume composite parts.
CMC and Ramal have been integrated into the operations of EnTec.

         On November 19, 1999, the Company completed the acquisition of all of
the issued and outstanding share capital of SP Systems, a corporation
organized under the laws of England and Wales ("SP Systems"), pursuant to
the terms and conditions of that certain Stock Purchase Agreement, dated
November 19, 1999, by and among the Company and each of the holders of the
outstanding share capital of SP Systems. The aggregate purchase price paid
by the Company in connection with the acquisition was approximately $30.0
million in cash and aggregate of 2.5 million shares of the common stock of
the Company having a market value of $27.5 million on the date of
acquisition. SP Systems develops, markets and manufactures prepreg (glass
and carbon fiber pre-impregnated with resin) materials, special bonding and
laminating resins, reinforcement fabrics and consumable materials for
composite manufacturing and engineering of composite structures. During the
fourth quarter of 2000 the Company decided to sell SP Systems (See Note 2)
which was completed in November 2000.

         On April 28, 2000, the Company acquired a 45% preferred membership
interest in Hardcore Composites Operations, LLC for $1.4 million in cash and
guaranteed a note payable of $1.0 million. The Company provided additional
funding for working capital. The Company has the option to purchase the
remaining interest in 2002 based upon a pre-determined formula. Hardcore
Composites designs and manufactures composite structures for the civil
infrastructure market. Products manufactured include bridges, bridge decks,
marine pilings, fender panels, piers, and stay-in-place form work. The
financial statements of Hardcore are consolidated with the Company due to
the ability to directly control the operations.

         These acquisitions were accounted under the purchase method of
accounting and are included in the Company's consolidated financial
statements from the date of acquisition. The purchase prices were allocated
to the fair value of the assets acquired. The excess of the amount paid for
the companies over the fair value of the assets acquired was recognized as
goodwill and is to be amortized over 15 years.

         Set forth below is aggregate selected purchase price data of the
acquired companies at the dates of acquisition (amounts in thousands).

<TABLE>
<CAPTION>

                                                                      SP Systems         Other             Total
                                                                      ----------         -----             -----
<S>                                                                   <C>              <C>               <C>
         Fair value of assets and liabilities acquired:
                  Current assets................................      $   18,342       $    2,631        $   20,973
                  Long-term assets..............................           9,093            9,034            18,127
                  Goodwill and intangibles......................          49,337            1,898            51,235
                  Liabilities ..................................         (18,854)          (8,704)          (27,558)
                                                                      ----------       ----------        ----------
                      Net purchase price........................      $   57,918       $    4,859        $   62,777
                                                                      ==========       ==========        ==========
</TABLE>

                                     44


<PAGE>
<PAGE>

12.      ACQUISITIONS (CONTINUED)
-----------------------------------------------------------------------------

Set forth below is selected unaudited pro forma combined results of
operations data of the Company for the year ended September 30, 2000 and
1999 as if the acquisitions had been completed as of October 1, 1999 and
1998, respectively. The pro forma combined financial information set forth
below is not necessarily indicative of future results of operations or
results of operations that would have been reported for the periods
indicated (amounts in thousands, except per share data).

<TABLE>
<CAPTION>
                                                                                       (Unaudited)
                                                                                       September 30
                                                                                  2000              1999
                                                                              ------------      ------------
<S>                                                                           <C>               <C>
         Net sales.........................................................   $    142,257      $    135,402
         Net loss..........................................................   $     (9,411)     $     (1,498)
         Net loss per share - basic and diluted............................   $      (0.50)     $      (0.08)
</TABLE>

13.      SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
-----------------------------------------------------------------------------

(Amounts in thousands, except per share data)

<TABLE>
<CAPTION>
FISCAL YEAR 2000                                      1ST QUARTER      2ND QUARTER    3RD QUARTER       4TH QUARTER
-------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>            <C>               <C>
Net sales..........................................   $    17,465      $    19,738    $    20,415       $    23,763
Gross profit.......................................         3,724            4,381          4,029             3,569
Loss from continuing operations....................          (744)            (672)          (965)           (1,610)
Loss from discontinued operations..................          (454)            (437)          (404)           (3,399)
Net loss applicable to common stock................   $    (1,198)     $    (1,109)   $    (1,369)      $    (5,009)

Net loss per share:
Basic and diluted net loss per share
  Continuing operations............................   $     (0.04)     $     (0.03)   $     (0.05)      $     (0.10)
  Discontinued operations..........................   $     (0.03)     $     (0.03)   $     (0.02)      $     (0.17)
                                                      -----------      -----------    -----------       -----------
         Total.....................................   $     (0.07)     $     (0.06)   $     (0.07)      $     (0.27)
                                                      ===========      ===========    ===========       ===========

<CAPTION>
FISCAL YEAR 1999                                      1ST QUARTER      2ND QUARTER    3RD QUARTER       4TH QUARTER
-------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>            <C>               <C>
Net sales..........................................   $    18,724      $    16,149    $    15,607       $    18,045
Gross profit.......................................         4,641            3,273          3,264             3,972
Net income (loss)..................................   $        10      $      (991)   $      (946)      $      (715)

Net income (loss) per share:
         Basic.....................................   $      0.00      $     (0.06)   $     (0.06)      $     (0.04)
         Diluted...................................   $      0.00      $     (0.06)   $     (0.06)      $     (0.04)
</TABLE>

Item 9.  Changes in and Disagreements with Accountants on Accounting and
------   ---------------------------------------------------------------
         Financial Disclosure
         --------------------

         Not Applicable.

                                         45



<PAGE>
<PAGE>
                                  PART III

Item 10. Directors and Executive Officers of the Registrant
-------  --------------------------------------------------

         The information set forth under the caption "Election of Directors"
in the registrant's Proxy Statement for its 2001 Annual Meeting of
Shareholders is incorporated herein by this reference. See also Item 4A of
Part I of this report.

Item 11. Executive Compensation
-------  ----------------------

         The information set forth under the captions "Directors' Fees" and
"Compensation of Executive Officers" in the registrant's Proxy Statement for
its 2001 Annual Meeting of Shareholders is incorporated herein by this
reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management
-------  --------------------------------------------------------------

         The information set forth under the captions "Voting Securities and
Principal Holders Thereof" and "Security Ownership By Management" in the
registrant's Proxy Statement for its 2001 Annual Meeting of Shareholders is
incorporated herein by this reference.

Item 13. Certain Relationships and Related Transactions
-------  ----------------------------------------------

         The information set forth under the caption "Certain Transactions"
in the registrant's Proxy Statement for its 2001 Annual Meeting of
Shareholders is incorporated herein by this reference.


                                   PART IV

Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
-------  --------------------------------------------------------------

         (a)     (1)      Financial statements:  The following financial
statements are included in Item 8 of this report:

                 Report of Independent Accountants

                 Consolidated Balance Sheet as of September 30, 2000
                 and 1999

                 Consolidated Statement of Operations for the years ended
                 September 30, 2000, 1999 and 1998

                 Consolidated Statement of Changes in Shareholders' Equity
                 for the years ended September 30, 2000, 1999 and 1998

                 Consolidated Statement of Cash Flows for the years ended
                 September 30, 2000, 1999 and 1998

                 Notes to Consolidated Financial Statements

                                      46


<PAGE>
<PAGE>


                 (2)      The following financial statement schedule and
independent accountant's report thereon are included in Part IV of this
report:
                                                                       Page
                                                                       ----

         Report of Independent Public Accountants on
         Financial Statement Schedule                                   51

         12-09 Valuation and Qualifying Accounts and Reserves           52


                          Schedules other than those listed above have been
omitted because they are either not required or not applicable, or because the
information is presented in the consolidated financial statements or the notes
thereto.

                 (3)      The following exhibits are filed herewith or
incorporated by reference herein, as indicated:


         3.1      Restated Articles of Incorporation of the Registrant, filed
                  as Exhibit 3.1 to Registrant's Registration Statement on
                  Form S-1 (Reg. No. 33-51142) is incorporated herein by this
                  reference

         3.2      Restated By-Laws of the Registrant, as currently in effect,
                  filed as Exhibit 3.2 to Registrant's Registration Statement
                  on Form S-1 (Reg. No. 33-51142) is incorporated herein by
                  this reference

         4.1      Form of certificate for Common Stock, filed as Exhibit 4.1
                  to Registrant's Registration Statement on Form S-1
                  (Reg. No. 33-51142) is incorporated herein by this reference

         10.1     Loan Agreement, dated December 29, 1989, by and between
                  Zoltek Corporation and Southwest Bank of St. Louis, as
                  amended by letter, dated August 13, 1992, filed as Exhibit
                  10.7 to Registrant's Registration Statement on Form S-1
                  (Reg. No. 33-51142) is incorporated herein by this reference

         10.2     Zoltek Companies, Inc. Long Term Incentive Plan filed as
                  Appendix B to Registrant's definitive proxy statement
                  for the 1997 Annual Meeting of Shareholders is incorporated
                  herein by this reference

         10.3     Zoltek Companies, Inc. Amended and Restated Directors Stock
                  Option Plan, filed as Exhibit 10.1 to Registrant's Quarterly
                  Report on Form 10-Q dated August 13, 1999, is incorporated
                  herein by this reference

         10.4     Promissory Note, dated September 29, 1994, by and between
                  Zoltek Properties, Inc. and Metlife Capital Corporation,
                  filed as Exhibit 10.8 to Registrant's Annual Report on Form
                  10-K for the fiscal year ended September 30, 1994, is
                  incorporated herein by this reference

                                        47


<PAGE>
<PAGE>

         10.5     Precursor Agreement, dated as of July 1, 1994, by and between
                  Zoltek Corporation and Courtaulds Fibres Limited, filed as
                  Exhibit 10.9 to Registrant's Annual Report on Form 10-K for
                  the fiscal year ended September 30, 1994, is incorporated
                  herein by this reference. (An application for confidential
                  treatment has been made for a portion of Exhibit 10.5.)

         10.6     Materials Supply Agreement, dated as of June 15, 1994, by
                  and between Zoltek Companies, Inc. and The B.F. Goodrich
                  Company, filed as Exhibit 10.10 to Registrant's Annual Report
                  on Form 10-K for the fiscal year ended September 30, 1994,
                  is incorporated herein by this reference. (An application for
                  confidential treatment has been made for a portion of Exhibit
                  10.6.)

         10.7     Loan Agreement, dated November 14, 1994, by and between
                  Zoltek Properties, Inc. and The Reliable Life Insurance
                  Company, filed as Exhibit 10.11 to the Registrant's Quarterly
                  Report on Form 10-Q for the quarter ended March 31, 1995, is
                  incorporated herein by this reference

         10.8     Promissory Note, dated November 14, 1994, by an between
                  Zoltek Corporation and Southwest Bank of St. Louis, filed as
                  Exhibit 10.2 to the Registrant's Quarterly Report on Form
                  10-Q for the quarter ended March 31, 1995, is incorporated
                  herein by this reference

         10.9     Letter, dated March 6, 1995, from Southwest Bank of St. Louis
                  to the Registrant regarding amendment of certain loan
                  covenants, filed as Exhibit 10.13 to the Registrant's
                  Quarterly Report of Form 10-Q for the quarter ended March 31,
                  1995, is incorporated herein by this reference

         10.10    Stock Purchase Agreement, dated November 19, 1999, by and
                  among Zoltek Companies, Inc. and each of the holders of the
                  outstanding share capital of Structural Polymer (Holdings)
                  Limited, filed as Exhibit 2.1 to Registrant's Current Report
                  on Form 8-K dated November 19, 1999 is incorporated herein by
                  this reference

         10.11    Credit Agreement, dated as of November 19, 1999 by and
                  among Zoltek Companies, Inc., Zoltek Corporation, Zoltek
                  Intermediates Corporation, Zoltek Properties, Inc.,
                  Cape Composites Incorporated, Engineering Technology
                  Corporation and Mercantile Bank National Association,
                  filed as Exhibit 2.3 to Registrant's Current Report on
                  Form 8-K dated November 19, 1999 is incorporated herein by
                  this reference

         10.12    Amended and Restated Credit Agreement dated as of November
                  19, 1999 and amended and restated as of May 31, 2000, among
                  Zoltek Companies, Inc., Zoltek Corporation, Zoltek
                  Intermediates Corporation, Zoltek Properties, Inc., Cape
                  Composites, Inc., Engineering Technology Corporation and
                  Firstar Bank Missouri, N.A., filed as Exhibit 10 to the
                  Registrant's Quarterly Report on Form 10-Q dated for the
                  quarter ended June 30, 2000 is incorporated herein by this
                  reference

         10.13    Stock Purchase Agreement, dated as of November 6, 2000, by
                  and among Structural Polymer Group Limited, Zoltek Companies,
                  Inc. and certain Shareholders of Zoltek Companies, Inc.,
                  filed as Exhibit 2.1 to Registrant's Current Report on
                  Form 8-K dated November 6, 2000 is incorporated herein by
                  this reference

         21       Subsidiaries of the Registrant

                                           48


<PAGE>
<PAGE>


         23       Consent of PricewaterhouseCoopers LLP is filed herewith

         27       Financial Data Schedule is filed herewith

                                      49


<PAGE>
<PAGE>

                                 SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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)


                                     By           /s/ Zsolt Rumy
                                       -----------------------------------------
                                       Zsolt Rumy, Chairman of the Board,
                                       President and Chief Executive Officer
Date: December 29, 2000


         Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature                                 Title                                         Date
---------                                 -----                                         ----
<S>                                       <C>                                           <C>

/s/ Zsolt Rumy                            Chairman, Chief Executive Officer             December 29, 2000
--------------------------------          and Director
Zsolt Rumy


/s/ Daniel D. Greenwell                   Chief Financial Officer                       December 29, 2000
--------------------------------          and Corporate Secretary
Daniel D. Greenwell


/s/ Linn Bealke                           Director                                      December 29, 2000
--------------------------------
Linn Bealke


/s/ James W. Betts                        Director                                      December 29, 2000
--------------------------------
James W. Betts


/s/ Charles A. Dill                       Director                                      December 29, 2000
--------------------------------
Charles A. Dill


/s/ John L. Kardos                        Director                                      December 29, 2000
--------------------------------
John L. Kardos


/s/ John F. McDonnell                     Director                                      December 29, 2000
--------------------------------
John F. McDonnell
</TABLE>
                                 50





<PAGE>
<PAGE>


[Letterhead of PricewaterhouseCoopers]


                    REPORT OF INDEPENDENT ACCOUNTANTS ON
                        FINANCIAL STATEMENT SCHEDULE




To the Board of Directors
of Zoltek Companies, Inc.:


Our audits of the consolidated financial statements referred to in our
report dated November 22, 2000 appearing in the 2000 Annual Report to
Shareholders of Zoltek Companies, Inc. (which report and consolidated
financial statements are included in this Annual Report on Form 10-K) also
included an audit of the Financial Statement Schedule listed in Item
14(a)(2) of this Form 10-K. In our opinion, this Financial Statement
Schedule presents fairly, in all material respects, the information set
forth therein when read in conjunction with the related consolidated
financial statements.


/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
St. Louis, Missouri
November 22, 2000


                                     51




<PAGE>
<PAGE>

<TABLE>
                                               FOR THE YEAR ENDED SEPTEMBER 30, 2000

                                     Rule 12-09 Valuation and Qualifying Accounts and Reserves

                                                      (Amounts in thousands)

<CAPTION>
          Column A                  Column B                       Column C                          Column D          Column E
          --------                  --------         -------------------------------------           --------          --------
                                                                  Additions
                                                      ------------------------------------
                                   Balance at         Charged to              Charged to                              Balance at
                                    beginning          costs and            other accounts          Deductions            end
                                    of period          expenses                describe              describe          of period
                                    ---------          --------                --------              --------          ---------

<S>                                 <C>                <C>                    <C>                    <C>               <C>
RESERVE FOR DOUBTFUL ACCOUNTS       $     774          $      81              $      190(2)          $     146(1)      $     899
                                    =========          =========              ==========             =========         =========


<CAPTION>
                                                 ---------------------------------


                                               FOR THE YEAR ENDED SEPTEMBER 30, 1999

                                     Rule 12-09 Valuation and Qualifying Accounts and Reserves

                                                      (Amounts in thousands)

          Column A                  Column B                       Column C                          Column D          Column E
          --------                  --------         -------------------------------------           --------          --------
                                                                  Additions
                                                      ------------------------------------
                                   Balance at         Charged to              Charged to                              Balance at
                                    beginning          costs and            other accounts          Deductions            end
                                    of period          expenses                describe              describe          of period
                                    ---------          --------                --------              --------          ---------

<S>                                 <C>                <C>                    <C>                    <C>               <C>
RESERVE FOR DOUBTFUL ACCOUNTS       $   314            $     577              $       --             $    117(1)       $     774
                                    =======            =========              ==========             ========          =========

<CAPTION>
                                                 ---------------------------------


                                               FOR THE YEAR ENDED SEPTEMBER 30, 1998

                                     Rule 12-09 Valuation and Qualifying Accounts and Reserves

                                                      (Amounts in thousands)

          Column A                  Column B                       Column C                          Column D          Column E
          --------                  --------         -------------------------------------           --------          --------
                                                                  Additions
                                                      ------------------------------------
                                   Balance at         Charged to              Charged to                              Balance at
                                    beginning          costs and            other accounts          Deductions            end
                                    of period          expenses                describe              describe          of period
                                    ---------          --------                --------              --------          ---------

<S>                                 <C>                <C>                    <C>                    <C>               <C>
RESERVE FOR DOUBTFUL ACCOUNTS       $   331            $      57              $       --             $    74(1)        $     314
                                    =======            =========              ==========             =======           =========

<FN>
-------------
(1) Write-off of uncollectible receivable, net of recovery.
(2) Acquisition of Subsidiaries.
</TABLE>

                                    52


<PAGE>
<PAGE>




                               EXHIBIT INDEX
                               -------------

Exhibit No.       Description
----------        -----------

       3.1        Restated Articles of Incorporation of the Registrant*

       3.2        Restated By-Laws of the Registrant, as currently
                  in effect*

       4.1        Form of certificate for Common Stock*

       10.1       Loan Agreement, dated December 29, 1989, by and
                  between Zoltek Corporation and Southwest Bank of
                  St. Louis, as amended by letter, dated August 13, 1992*

       10.2       Zoltek Companies, Inc. Long Term Incentive Plan

       10.3       Zoltek Companies, Inc. Amended and Restated
                  Directors Stock Option Plan filed as Exhibit 10.1 to
                  Registrant's Quarterly Report on Form 10-Q dated August
                  13, 1999.*

       10.4       Promissory Note, dated September 29, 1994, by
                  and between Zoltek Properties, Inc. and Metlife Capital
                  Corporation*

       10.5       Precursor Agreement, dated as of July 1, 1994,
                  by and between Zoltek Corporation and Courtaulds Fibres
                  Limited.* (An application for confidential treatment
                  has been made for a portion of Exhibit 10.5.)

       10.6       Materials Supply Agreement, dated as of June 15
                  1994, by and between Zoltek Companies, Inc. and The B.F.
                  Goodrich Company.* (An application for confidential
                  treatment has been made for a portion of Exhibit 10.6.)

       10.7       Loan Agreement, dated November 14, 1994, by and
                  between Zoltek Properties, Inc. and The Reliable Life
                  Insurance Company*

       10.8       Promissory Note, dated November 14, 1994, by an
                  between Zoltek Corporation and Southwest Bank of St.
                  Louis*

       10.9       Letter, dated March 6, 1995, from Southwest Bank
                  of St. Louis to the Registrant regarding amendment of
                  certain loan covenants*

       10.10      Stock Purchase Agreement, dated November 19, 1999, by
                  and among Zoltek Companies, Inc. and each of the
                  holders of the outstanding share capital of Structural
                  Polymer (Holdings) Limited *

[FN]
--------------
* Incorporated herein by reference

                                    53



<PAGE>
<PAGE>


                                EXHIBIT INDEX
                                -------------

Exhibit No.       Description
----------        -----------

       10.11      Credit Agreement, dated as of November 19, 1999,
                  by and among Zoltek Companies, Inc., Zoltek Corporation,
                  Zoltek Intermediates Corporation, Zoltek Properties, Inc.,
                  Cape Composites Incorporated, Engineering Technology
                  Corporation and Mercantile Bank National Association*

       10.12      Amended and Restated Credit Agreement dated as of
                  November 19, 1999 and amended and restated as of May 31,
                  2000, among Zoltek Companies, Inc., Zoltek Corporation,
                  Zoltek Intermediates Corporation, Zoltek Properties, Inc.,
                  Cape Composites, Inc., Engineering Technology Corporation
                  and Firstar Bank Missouri, N.A.*

       10.13      Stock Purchase Agreement, dated as of November 6, 2000,
                  by and among Structural Polymer Group Limited, Zoltek
                  Companies, Inc. and certain Shareholders of Zoltek
                  Companies, Inc.*

       21         Subsidiaries of the Registrant

       23         Consent of PricewaterhouseCoopers LLP

       27         Financial Data Schedule

[FN]
------------------
* Incorporated herein by reference

                                  54