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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended September 30, 2010
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period From  to
 Commission File Number 0-20600
 ZOLTEK COMPANIES, INC.
  Missouri
    
    43-1311101(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 3101 McKelvey Road,
St. Louis, Missouri 63044
 Registrants telephone number, including area code: (314) 291-5110
 Securities registered pursuant to Section 12(b) of the Act:
 Title of Each Class:
    
    Name of Each Exchange on Which Registered:Common Stock, $.01 Par Value Per Share
    
    The NASDAQ Stock Market LLC(NASDAQ Global Select Market)
 Securities registered pursuant to Section 12(g) of the Act: None
 o þ
 o þ
 þ o
 þ o
 þ
  Large Accelerated Filer o
    
    Accelerated Filer þ
    
    Non-Accelerated Filer o
    
    Smaller Reporting Company o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE
  Document
    
    Part of Form 10-KProxy Statement for the 2011Annual Meeting of Shareholders
    
    III




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##### 



ZOLTEK COMPANIES, INC.
INDEX
 PART I.Item 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    9Item 1B. Unresolved Staff Comments
    
    
    12Item 2. Properties
    
    
    13Item 3. Legal Proceedings
    
    
    13Item 4A. Executive Officers of Registrant
    
    
    13PART II.Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    14Item 6. Selected Financial Data
    
    
    16Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    17Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 8. Financial Statements and Supplementary Data
    
    
    30Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    56Item 9A. Controls and Procedures
    
    
    56Item 9B. Other Information
    
    
    56PART III.Item 10. Directors, Executive Officers and Corporate Governance
    
    
    57Item 11. Executive Compensation
    
    
    57Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    57Item 13. Certain Relationships and Related Transactions and Director Independence
    
    
    57Item 14. Principal Accounting Fees and Services
    
    
    57PART IV.Item 15. Exhibits and Financial Statement Schedules
    
    
    58Signatures
    
    
    60Exhibit Index
    
    
    61Exhibit 23.1Exhibit 23.2Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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PART I
 
 ITEM 1. BUSINESS
  General Development of Business
 ® ®
 Overview
        3




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Business Strategy
   Sustainable Price Leadership.
 Support for New Commercial Markets and Applications Development.
 Capacity Leadership to Keep Pace with Long-Term Demand Growth.
 Development of Model for Long-Term Joint Ventures with Strategic Partners.
 Targeted Applications
  
    
    Wind Energy
   4




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
    
    Deep Sea Drilling
  
    
    Aerospace Secondary Structures
  
    
    Automotive
   
    
    Aircraft Brakes
  Customers
   5




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Backlog
  Company Operations
      Competition
      6




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International
  Sources of Supply
  Environmental
  Employees
   AVAILABLE INFORMATION
 http://www.sec.gov
  SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
   7




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8




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Item 1A. Risk Factors
 The following are certain risk factors that could affect Zolteks business, financial results and
results of operations. These risk factors should be considered in connection with evaluating the
forward-looking statements contained in this Annual Report on Form 10-K because these factors could
cause the actual results and conditions to differ materially from those projected in
forward-looking statements. Before you buy the Companys securities, you should know that making
such an investment involves a high degree of risk, including the risks described below. The risks
that we have highlighted here are not the only ones that the Company faces. If any of the risks
actually occur, the Companys business, financial condition, results of operations or cash flows
could be negatively affected. In that case, the trading price of its securities could decline, and
you may lose all or part of your investment.
 Our growth and profitability will depend on increases in demand for carbon fibers and entering into
new supply relationships.
   Increases in sales of our carbon fiber products are subject to long sales cycles of our customers.
  A limited number of customers generate a significant portion of our revenue and they may terminate
their contracts with us in the event of certain changes in control or may require that we make
penalty payments in the event we fail to perform.
  We reported net losses from continuing operations for fiscal 2010, 2009, 2007 and each of the five
fiscal years preceding it.
  Demand for our carbon fiber products may be adversely affected by the current economic and credit
environment.
   9




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Our operations and sales in foreign countries are subject to risks.
  Our ability to fund and manage our anticipated growth will affect our operating results.
  Our operations are dependent upon our senior management and technical personnel.
  Our operating results may fluctuate.
  Developments by competitors may reduce demand for our products and technologies, which may
adversely affect our sales.
  The price volatility of many of our raw materials and energy costs may result in increased
production costs, which we may not be able to pass on to our customers.
   10




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We could be adversely affected by environmental and safety requirements.
   Our business depends upon the maintenance of our proprietary technology.
  Our existing lines of credit expire on January 1, 2011 and August 30, 2011 and failure to
extend or replace these facilities could have a material adverse effect on us.
  We have incurred and will continue to incur increased costs and demands upon our management as a
result of complying with the laws and regulations affecting public companies, which could affect
our operating results and make it more difficult to attract and retain qualified management.
  Our stock price has been volatile and may continue to fluctuate.
   11




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A change of control of our company may be discouraged, delayed or prevented by our classified
board of directors, our ability to issue preferred stock, or the voting control of our principal
shareholder.
    Future sales of common stock could affect the price of our common stock.
  We do not currently intend to pay dividends on our common stock.
  
 Item 1B. Unresolved Staff Comments
   12




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Item 2. Properties
  Approximate AreaLocation
    
    Use
    
    (in square feet)
    
    
    StatusSt. Louis, Missouri
    
    Administrative, marketing and central engineering offices
    
    
    30,000
    
    
    OwnedSt. Charles, Missouri
    
    Carbon and technical fiber manufacturing and R&D facility
    
    
    107,000
    
    
    OwnedAbilene, Texas
    
    Carbon fiber manufacturing and secondary processing
    
    
    278,000
    
    
    OwnedSalt Lake City, Utah I
    
    Composite fabrication equipment design and manufacturing
    
    
    65,000
    
    
    Owned/MortgagedSalt Lake City, Utah II
    
    Carbon fiber prepreg manufacturing
    
    
    35,000
    
    
    LeasedNyergesujfalu, Hungary
    
    Carbon and technical fiber, and
acrylic fiber precursor manufacturing
    
    
    2,000,000
    
    
    OwnedGuadalajara, Mexico
    
    Carbon fiber, and acrylic fiber precursor manufacturing
    
    
    1,400,000
    
    
    Owned
 
 Item 3. Legal Proceedings
   
 Item 4A. Executive Officers of the Registrant
      13




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
   Fiscal year ended
    
    
    Fiscal year endedSeptember 30, 2010
    
    
    September 30, 2009High
    
    
    Low
    
    
    High
    
    
    LowFirst Quarter
    
    $
    11.24
    
    
    $
    8.24
    
    
    $
    17.77
    
    
    $
    4.28Second Quarter
    
    
    10.74
    
    
    
    7.00
    
    
    
    9.39
    
    
    
    5.02Third Quarter
    
    
    11.19
    
    
    
    8.44
    
    
    
    12.60
    
    
    
    6.50Fourth Quarter
    
    
    10.84
    
    
    
    8.05
    
    
    
    11.44
    
    
    
    7.84
   Number of securitiesremaining available forfuture issuance underNumber of securities to
    
    
    Weighted-average
    
    
    equity compensationbe issued upon exercise
    
    
    exercise price of
    
    
    plans (excludingof outstanding options,
    
    
    outstanding options,
    
    
    securities reflected inwarrants and rights
    
    
    warrants and rights
    
    
    column (a))Plan category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation plans approved by
security holders
    
    
    427,087
    
    
    $
    22.21
    
    
    
    2,173,500Equity compensation plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    427,087
    
    
    $
    22.21
    
    
    
    2,173,500
   14




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Performance Graph
  
 
 9/30/2005
    
    
    9/30/2006
    
    
    9/30/2007
    
    
    9/30/2008
    
    
    9/30/2009
    
    
    9/30/2010Zoltek Companies, Inc.
    
    
    100.00
    
    
    
    194.30
    
    
    
    331.79
    
    
    
    130.11
    
    
    
    79.85
    
    
    
    73.92NASDAQ Industrial Index
    
    
    100.00
    
    
    
    107.09
    
    
    
    128.39
    
    
    
    93.83
    
    
    
    90.93
    
    
    
    106.77The Russell 2000 Index
    
    
    100.00
    
    
    
    108.65
    
    
    
    120.61
    
    
    
    101.76
    
    
    
    90.49
    
    
    
    101.25
  15




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Item 6. Selected Financial Data
 ZOLTEK COMPANIES, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
 Fiscal year ended September 30,Statement of Operations Data:
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Net sales
    
    $
    128,464
    
    
    $
    138,756
    
    
    $
    185,616
    
    
    $
    150,880
    
    
    $
    92,357Cost of sales, excluding available unused capacity costs
    
    
    102,350
    
    
    
    100,744
    
    
    
    134,393
    
    
    
    107,506
    
    
    
    69,994Available unused capacity costs (1)
    
    
    12,822
    
    
    
    7,352
    
    
    
    
    
    
    
    
    
    
    
    Gross profit
    
    
    13,292
    
    
    
    30,660
    
    
    
    51,223
    
    
    
    43,374
    
    
    
    22,363Application and development costs
    
    
    8,207
    
    
    
    7,589
    
    
    
    8,093
    
    
    
    7,230
    
    
    
    4,887Litigation charge (2)
    
    
    
    
    
    
    238
    
    
    
    4,884
    
    
    
    5,400
    
    
    
    22,795Selling, general and administrative expenses
    
    
    15,649
    
    
    
    19,438
    
    
    
    18,239
    
    
    
    12,635
    
    
    
    10,356Operating (loss) income from continuing operations
    
    
    (10,564
    )
    
    
    3,395
    
    
    
    20,007
    
    
    
    18,109
    
    
    
    (15,675
    )Other income (expense)
    
    
    2,384
    
    
    
    (5,492
    )
    
    
    (7,150
    )
    
    
    (18,095
    )
    
    
    (49,202
    )Income tax benefit (expense)
    
    
    1,841
    
    
    
    (2,105
    )
    
    
    (5,416
    )
    
    
    (1,986
    )
    
    
    (888
    )Net (loss) income from continuing operations
    
    
    (6,339
    )
    
    
    (4,202
    )
    
    
    7,441
    
    
    
    (1,972
    )
    
    
    (65,765
    )Discontinued operations:Operating loss, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (545
    )
    
    
    (187
    )Gain on disposal of discontinued operation, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150Net loss on discontinued operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (545
    )
    
    
    (37
    )Net (loss) income
    
    $
    (6,339
    )
    
    $
    (4,202
    )
    
    $
    7,441
    
    
    $
    (2,517
    )
    
    $
    (65,802
    )Net (loss) income per share:Basic and diluted (loss) income per share:Continuing operations
    
    $
    (0.18
    )
    
    $
    (0.12
    )
    
    $
    0.22
    
    
    $
    (0.07
    )
    
    $
    (2.91
    )Discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.02
    )
    
    
    Total
    
    $
    (0.18
    )
    
    $
    (0.12
    )
    
    $
    0.22
    
    
    $
    (0.09
    )
    
    $
    (2.91
    )Basic weighted average common shares outstanding
    
    
    34,411
    
    
    
    34,402
    
    
    
    34,042
    
    
    
    28,539
    
    
    
    22,575Diluted weighted average common shares outstanding
    
    
    34,411
    
    
    
    34,402
    
    
    
    34,172
    
    
    
    28,539
    
    
    
    22,575
 September 30,Balance Sheet Data:
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006Working capital (3)
    
    $
    71,972
    
    
    $
    76,127
    
    
    $
    76,000
    
    
    $
    147,956
    
    
    $
    20,042Total assets (3)
    
    
    322,140
    
    
    
    366,845
    
    
    
    440,164
    
    
    
    403,599
    
    
    
    187,684Current maturities of long-term debt and credit lines
    
    
    981
    
    
    
    16,436
    
    
    
    12,601
    
    
    
    13,813
    
    
    
    1,365Long-term debt, less current maturities
    
    
    
    
    
    
    981
    
    
    
    3,562
    
    
    
    6,851
    
    
    
    32,002Shareholders equity (3)
    
    
    292,698
    
    
    
    315,465
    
    
    
    346,666
    
    
    
    320,767
    
    
    
    111,661
 (1)
    
    These costs include depreciation and other costs associated with the available unused
capacity. The Company believes maintaining this available unused capacity has been necessary
to encourage development of significant large-scale applications and maintain a level of
readiness as we anticipate a return to more robust market conditions.(2)
    
    See Note 8 of the Notes to Consolidated Financial Statements.(3)
    
    The Company completed a public offering of shares in August 2007 and realized net proceeds of
$131.5 million, recorded as increases to cash and equity. During fiscal 2008 a substantial
portion of those proceeds were used to fund capacity expansion projects in Mexico.  16




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 OVERVIEW
      OUR BUSINESS
 EXECUTIVE OVERVIEW
 ® ®
 KEY PERFORMANCE INDICATORS
  Revenue.
 Gross profit.
 Operating expenses.
 Cash flow from operating activities.
 Liquidity and cash flows.
  17




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BUSINESS TRENDS
  
    
    Increased Sales Efforts in Selected International Markets.We have identified
international markets with high growth potential for our existing and emerging commercial
applications. Accordingly, we have added sales personnel and increased our marketing
efforts in India, China, and Korea.
    
    Business Development in Emerging Applications. We have identified emerging
applications for our products with high growth potential across a variety of industries and
regions. In addition to producing carbon fibers for the existing prepreg technology used
by our large wind turbine customers, we have recently begun shipments of carbon fibers
qualified for use in the infusion process utilized by other wind turbine blade
manufacturers. We also are seeking to qualify our products for use in aerospace secondary
structures such as floor, luggage bins and seats, and anticipate increased sales in this
market as the production of new jetliners increases.
    
    Operating Cash Flows and Cash Management.Despite a 7.4% decrease in sales,
we had positive operating cash flows of $22.0 million in fiscal 2010 compared to $15.2
million in fiscal 2009. Reduced inventory levels provided cash of $8.8 million in fiscal
2010. The Company paid down the remaining outstanding balance of $4.2 million of its
convertible debt and reported $4.4 million of capital expenditures during fiscal 2010.
    
    High Raw Material Cost for Fiscal 2010.Unscheduled production shutdowns in
Europe of our primary raw material, ACN, coupled with an increase in demand for ACN drove
market prices up more than 100% and negatively impacted gross margins.
 RESULTS OF OPERATIONS
 FISCAL YEAR ENDED SEPTEMBER 30, 2010 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 2009
     18




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FISCAL YEAR ENDED SEPTEMBER 30, 2009 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 2008
        20




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LIQUIDITY AND CAPITAL RESOURCES
  CASH FLOWS
 Cash Provided By Operating Activities
   Cash Used In and Provided By Investing Activities
    21




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Cash Used and Provided In Financing Activities
   HUNGARIAN GRANT
   FINANCING ACTIVITY
 Revolving Credit Facility
    Bond Related to Litigation
   Convertible Debt
   22




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Fiscal year ended September 30, 2009Number of shares
    
    
    Conversionconverted
    
    
    price
    
    
    Equity valueFebruary 2003
    
    
    
    
    
    $
    3.50
    
    
    $
    December 2005
    
    
    
    
    
    
    12.50
    
    
    
    February 2006
    
    
    
    
    
    
    13.07
    
    
    
    May 2006
    
    
    
    
    
    
    25.51
    
    
    
    July 2006
    
    
    16,264
    
    
    
    15.40
    
    
    
    250,466October 2006
    
    
    
    
    
    
    25.51
    
    
    
    16,264
    
    
    
    
    
    
    $
    250,466
 As of September 30, 2009Number of shares
    
    
    Conversion
    
    
    Principaloutstanding
    
    
    price
    
    
    outstandingMay 2006
    
    
    70,560
    
    
    $
    25.51
    
    
    $
    1,799,986July 2006
    
    
    19,640
    
    
    
    25.51
    
    
    
    501,016October 2006
    
    
    76,381
    
    
    
    25.51
    
    
    
    1,948,479166,581
    
    
    
    
    
    
    $
    4,249,481
 Amortization of Financing Fees and Debt Discount
    23




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Fiscal year ended September 30, 2010ConversionWarrants
    
    
    Features
    
    
    TotalMay 2006 Issuance
    
    $
    18
    
    
    $
    26
    
    
    $
    44July 2006 Issuance
    
    
    15
    
    
    
    17
    
    
    
    32October 2006 Issuance
    
    
    54
    
    
    
    62
    
    
    
    116$
    87
    
    
    $
    105
    
    
    
    192Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    97Total
    
    
    
    
    
    
    
    
    
    $
    289
 Fiscal year ended September 30, 2009ConversionWarrants
    
    
    Features
    
    
    TotalMay 2006 Issuance
    
    $
    1,549
    
    
    $
    2,285
    
    
    $
    3,834July 2006 Issuance
    
    
    242
    
    
    
    296
    
    
    
    538October 2006 Issuance
    
    
    317
    
    
    
    364
    
    
    
    681$
    2,108
    
    
    $
    2,945
    
    
    
    5,053Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    311Total
    
    
    
    
    
    
    
    
    
    $
    5,364
 Fiscal year ended September 30, 2008ConversionWarrants
    
    
    Features
    
    
    TotalMay 2006 Issuance
    
    $
    1,943
    
    
    $
    2,867
    
    
    $
    4,810July 2006 Issuance
    
    
    230
    
    
    
    280
    
    
    
    510October 2006 Issuance
    
    
    392
    
    
    
    452
    
    
    
    844$
    2,565
    
    
    $
    3,599
    
    
    
    6,164Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    518Total
    
    
    
    
    
    
    
    
    
    $
    6,682
  24




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September 30, 2009ConversionWarrants
    
    
    Features
    
    
    TotalMay 2006 Issuance
    
    $
    18
    
    
    $
    26
    
    
    $
    44July 2006 Issuance
    
    
    15
    
    
    
    17
    
    
    
    32October 2006 Issuance
    
    
    54
    
    
    
    62
    
    
    
    116$
    87
    
    
    $
    105
    
    
    
    192Debt acquisition cost and financing fees
    
    
    
    
    
    
    
    
    
    
    97Total
    
    
    
    
    
    
    
    
    
    $
    289
 EARNINGS PER SHARE
   Fiscal year ended September 30,2010
    
    
    2009
    
    
    2008Numerators:Net (loss) income
    
    $
    (6,339
    )
    
    $
    (4,202
    )
    
    $
    7,441Denominators:Average shares outstanding  basic
    
    
    34,411
    
    
    
    34,402
    
    
    
    34,042Impact of convertible debt, warrants and stock options
    
    
    
    
    
    
    
    
    
    
    130Average shares outstanding  diluted
    
    
    34,411
    
    
    
    34,402
    
    
    
    34,172Basic (loss) income per share
    
    $
    (0.18
    )
    
    $
    (0.12
    )
    
    $
    0.22Diluted (loss) income per share
    
    $
    (0.18
    )
    
    $
    (0.12
    )
    
    $
    0.22
  25




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FUTURE CONTRACTUAL OBLIGATIONS
  Payments Due by PeriodLess than
    
    
    
    
    
    
    
    
    
    
    Over 5Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    YearsOperating lease obligations (a)
    
    
    10,198
    
    
    
    1,335
    
    
    
    2,073
    
    
    
    1,714
    
    
    
    5,076Capital leases obligations
    
    
    68
    
    
    
    57
    
    
    
    11
    
    
    
    
    
    
    
    Total debt and leases
    
    
    10,266
    
    
    
    1,392
    
    
    
    2,084
    
    
    
    1,714
    
    
    
    5,076Note payable
    
    
    981
    
    
    
    981
    
    
    
    
    
    
    
    
    
    
    
    Contractual interest payments (b)
    
    
    15
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    Purchase obligations (c)
    
    
    2,390
    
    
    
    2,390
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    13,652
    
    
    $
    4,778
    
    
    $
    2,084
    
    
    $
    1,714
    
    
    $
    5,076
 (a)
    
    Includes four-year contract for nitrogen gas facility and equipment at approximately $0.9
million per year.(b)
    
    Amounts represent the expected cash payment of interest on our debt.(c)
    
    Purchase obligations include agreements to purchase goods or services that are enforceable
and legally binding and that specify all significant terms, including fixed or minimum
quantities to be purchased, fixed, minimum or variable price provisions, and the approximate
timing of the transactions. Purchase obligations exclude agreements that are cancelable at any
time without penalty. SUPPLY CONTRACTS
      26




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##### Table of Contents



LEGAL CONTINGENCIES
   CRITICAL ACCOUNTING ESTIMATES
  ACCOUNTS RECEIVABLE COLLECTIBILITY
  INVENTORIES
  Ò
  VALUATION OF LONG-LIVED ASSETS
   27




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##### Table of Contents



CONTINGENT LIABILITIES
   INCOME TAXES
   STOCK-BASED COMPENSATION
  RECENT ACCOUNTING PRONOUNCEMENTS
  
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Foreign Currency Risk
   28




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Commodity Price Risk
  Interest Rate Risk
   29




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 ZOLTEK COMPANIES, INC.
REPORT OF MANAGEMENT
     /s/ Zsolt Rumy

Zsolt RumyChief Executive OfficerNovember 29, 2010
  30




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
       /s/ ERNST & YOUNG LLPSt. Louis, MissouriNovember 29, 2010
  31




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      .
  /s/ ERNST & YOUNG LLPSt. Louis, MissouriNovember 29, 2010
  32




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    /s/ GRANT THORNTON LLPChicago, IllinoisDecember 1, 2008
  33




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##### Table of Contents



ZOLTEK COMPANIES, INC.
 CONSOLIDATED BALANCE SHEET
 September 30,2010
    
    
    2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    21,534
    
    
    $
    20,943Accounts receivable, less allowance for doubtful accounts of $178 and $2,356
    
    
    22,816
    
    
    
    30,507Inventories, net
    
    
    38,002
    
    
    
    48,058VAT Receivable
    
    
    5,703
    
    
    
    4,109Other current assets
    
    
    2,251
    
    
    
    5,991Total current assets
    
    
    90,306
    
    
    
    109,608Property and equipment, net
    
    
    231,661
    
    
    
    256,910Other assets
    
    
    173
    
    
    
    327Total assets
    
    $
    322,140
    
    
    $
    366,845Liabilities and shareholders equityCurrent liabilities:Borrowings under credit lines
    
    $
    
    
    
    $
    12,277Current maturities of long-term debt
    
    
    981
    
    
    
    4,159Trade accounts payable
    
    
    8,865
    
    
    
    9,408Accrued expenses and other liabilities
    
    
    7,583
    
    
    
    6,845Construction payables
    
    
    905
    
    
    
    792Total current liabilities
    
    
    18,334
    
    
    
    33,481Long-term debt, less current maturities
    
    
    
    
    
    
    981Hungarian grant, long-term
    
    
    9,020
    
    
    
    10,228Deferred tax liabilties
    
    
    792
    
    
    
    6,690Derivative liabilities
    
    
    1,296
    
    
    
    Total liabilities
    
    
    29,442
    
    
    
    51,380Commitments and contingencies (See Note 8)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 shares authorized, 34,389,442 and 34,424,441
shares issued and outstanding in 2010 and 2009, respectively
    
    
    344
    
    
    
    344Additional paid-in capital
    
    
    480,302
    
    
    
    494,311Accumulated other comprehensive loss
    
    
    (33,381
    )
    
    
    (18,405
    )Accumulated deficit
    
    
    (154,567
    )
    
    
    (160,785
    )Total shareholders equity
    
    
    292,698
    
    
    
    315,465Total liabilities and shareholders equity
    
    $
    322,140
    
    
    $
    366,845
 The accompanying notes are an integral part of the consolidated financial statements.
  34




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ZOLTEK COMPANIES, INC.
 CONSOLIDATED STATEMENT OF OPERATIONS
 Fiscal Year Ended September 30,2010
    
    
    2009
    
    
    2008Net sales
    
    $
    128,464
    
    
    $
    138,756
    
    
    $
    185,616Cost of sales, excluding available unused capacity costs
    
    
    102,350
    
    
    
    100,744
    
    
    
    134,393Available unused capacity costs
    
    
    12,822
    
    
    
    7,352
    
    
    
    Gross profit
    
    
    13,292
    
    
    
    30,660
    
    
    
    51,223Application and development costs
    
    
    8,207
    
    
    
    7,589
    
    
    
    8,093Litigation charge (see Note 8)
    
    
    
    
    
    
    238
    
    
    
    4,884Selling, general and administrative expenses
    
    
    15,649
    
    
    
    19,438
    
    
    
    18,239Operating (loss) income
    
    
    (10,564
    )
    
    
    3,395
    
    
    
    20,007Other income (expense):Interest income
    
    
    55
    
    
    
    350
    
    
    
    2,904Gain (loss) on foreign currency transactions
    
    
    1,938
    
    
    
    2,161
    
    
    
    (385
    )Other expense, net
    
    
    (678
    )
    
    
    (1,228
    )
    
    
    (1,125
    )Gain on derivative liabilities
    
    
    1,753
    
    
    
    
    
    
    
    Interest expense, excluding amortization of financing fees and
debt discount
    
    
    (395
    )
    
    
    (1,411
    )
    
    
    (1,862
    )Amortization of financing fees and debt discount
    
    
    (289
    )
    
    
    (5,364
    )
    
    
    (6,682
    )(Loss) income from continuing operations before income taxes
    
    
    (8,180
    )
    
    
    (2,097
    )
    
    
    12,857Income tax (benefit) expense
    
    
    (1,841
    )
    
    
    2,105
    
    
    
    5,416Net (loss) income
    
    
    (6,339
    )
    
    
    (4,202
    )
    
    
    7,441Basic and diluted (loss) income per share
    
    $
    (0.18
    )
    
    $
    (0.12
    )
    
    $
    0.22Weighted average common shares outstanding  basic
    
    
    34,410,608
    
    
    
    34,402,046
    
    
    
    34,042,792Weighted average common shares outstanding  diluted
    
    
    34,410,608
    
    
    
    34,402,046
    
    
    
    34,171,629
 The accompanying notes are an integral part of the consolidated financial statements.
  35




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ZOLTEK COMPANIES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
 AccumulatedTotal
    
    
    
    
    
    
    Additional
    
    
    OtherShareholders
    
    
    Common
    
    
    Paid-In
    
    
    Comprehensive
    
    
    AccumulatedEquity
    
    
    Stock
    
    
    Capital
    
    
    Income (Loss)
    
    
    DeficitBalance, September 30, 2007
    
    $
    320,767
    
    
    $
    337
    
    
    $
    476,205
    
    
    $
    8,249
    
    
    $
    (164,024
    )Net income
    
    
    7,441
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,441Foreign currency translation adjustment
    
    
    3,481
    
    
    
    
    
    
    
    
    
    
    
    3,481
    
    
    
    Comprehensive income
    
    $
    10,922Convertible debt converted
    
    
    11,151
    
    
    
    6
    
    
    
    11,145
    
    
    
    
    
    
    
    Warrants exercised
    
    
    150
    
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    Restricted stock expense
    
    
    329
    
    
    
    
    
    
    
    329
    
    
    
    
    
    
    
    Stock option expense
    
    
    1,987
    
    
    
    1
    
    
    
    1,986
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    1,360
    
    
    
    
    
    
    
    1,360
    
    
    
    
    
    
    
    Balance, September 30, 2008
    
    $
    346,666
    
    
    $
    344
    
    
    $
    491,175
    
    
    $
    11,730
    
    
    $
    (156,583
    )Net loss
    
    
    (4,202
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,202
    )Foreign currency translation adjustment
    
    
    (30,135
    )
    
    
    
    
    
    
    
    
    
    
    (30,135
    )
    
    
    Comprehensive loss
    
    $
    (34,337
    )Convertible debt converted
    
    
    251
    
    
    
    
    
    
    
    251
    
    
    
    
    
    
    
    Cash settlement of restricted shares
    
    
    (75
    )
    
    
    
    
    
    
    (75
    )
    
    
    
    
    
    
    Restricted stock expense
    
    
    521
    
    
    
    
    
    
    
    521
    
    
    
    
    
    
    
    Stock option expense
    
    
    2,439
    
    
    
    
    
    
    
    2,439
    
    
    
    
    
    
    
    Balance, September 30, 2009
    
    $
    315,465
    
    
    $
    344
    
    
    $
    494,311
    
    
    $
    (18,405
    )
    
    $
    (160,785
    )Net loss
    
    
    (6,339
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,339
    )Foreign currency translation adjustment
    
    
    (14,976
    )
    
    
    
    
    
    
    
    
    
    
    (14,976
    )
    
    
    Comprehensive loss
    
    $
    (21,315
    )Cash settlement of restricted shares
    
    
    (144
    )
    
    
    
    
    
    
    (144
    )
    
    
    
    
    
    
    Restricted stock liability reclass
    
    
    (240
    )
    
    
    
    
    
    
    (240
    )
    
    
    
    
    
    
    Restricted stock expense
    
    
    349
    
    
    
    
    
    
    
    349
    
    
    
    
    
    
    
    Stock option expense
    
    
    1,506
    
    
    
    
    
    
    
    1,506
    
    
    
    
    
    
    
    Difference between compensation and
change in liability for restricted
stock awards
    
    
    138
    
    
    
    
    
    
    
    138
    
    
    
    Cumulative effect of change in
accounting principle
    
    
    (3,061
    )
    
    
    
    
    
    
    (15,618
    )
    
    
    
    
    
    
    12,557$
    292,698
    
    
    $
    344
    
    
    $
    480,302
    
    
    $
    (33,381
    )
    
    $
    (154,567
    )
 The accompanying notes are an integral part of the consolidated financial statements.
  36




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ZOLTEK COMPANIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
 Fiscal Year Ended September 30,2010
    
    
    2009
    
    
    2008Cash flows from operating activities:Net (loss) income
    
    $
    (6,339
    )
    
    $
    (4,202
    )
    
    $
    7,441Adjustments to reconcile net income to net cash from operating activities:Depreciation
    
    
    16,461
    
    
    
    16,351
    
    
    
    16,476Amortization of financing fees and debt discount
    
    
    289
    
    
    
    5,364
    
    
    
    6,682Deferred taxes
    
    
    (3,274
    )
    
    
    690
    
    
    
    1,501Gain on value of warrants and conversion feature
    
    
    (1,753
    )
    
    
    
    
    
    
    Foreign currency transaction gains
    
    
    (96
    )
    
    
    (1,396
    )
    
    
    (431
    )Stock compensation expense
    
    
    2,030
    
    
    
    2,960
    
    
    
    2,316Loss on disposal of assets
    
    
    342
    
    
    
    707
    
    
    
    Changes in assets and liabilities:Decrease (increase) in accounts receivable
    
    
    5,361
    
    
    
    8,528
    
    
    
    (4,381
    )Decrease (increase) in inventories
    
    
    8,826
    
    
    
    (4,327
    )
    
    
    (17,427
    )Decrease (increase) in other current assets and other assets
    
    
    (1,291
    )
    
    
    459
    
    
    
    (214
    )(Decrease) increase in trade accounts payable
    
    
    (761
    )
    
    
    (3,764
    )
    
    
    1,902Increase (decrease) in accrued expenses and other liabilities
    
    
    2,187
    
    
    
    (553
    )
    
    
    2,002(Decrease) increase in legal liabilities
    
    
    
    
    
    
    (5,583
    )
    
    
    4,328Net cash provided by operations
    
    
    21,982
    
    
    
    15,234
    
    
    
    20,195Cash flows from investing activities:Purchases of property and equipment
    
    
    (4,410
    )
    
    
    (16,206
    )
    
    
    (107,715
    )Increase (decrease) in construction payables
    
    
    114
    
    
    
    (6,016
    )
    
    
    3,591Proceeds received from sale of fixed assets
    
    
    83
    
    
    
    116
    
    
    
    Proceeds received from Hungarian grant
    
    
    150
    
    
    
    1,588
    
    
    
    3,253Change in cash restricted for letters of credit
    
    
    
    
    
    
    
    
    
    
    (9,685
    )Net cash used in investing activities
    
    
    (4,063
    )
    
    
    (20,518
    )
    
    
    (110,556
    )Cash flows from financing activities:Proceeds from exercise of stock options and warrants
    
    
    
    
    
    
    
    
    
    
    1,510Cash settlement of restricted shares
    
    
    (216
    )
    
    
    (75
    )
    
    
    Repayment of convertible debt
    
    
    (4,249
    )
    
    
    (10,550
    )
    
    
    Borrowings (repayment) of notes payable and credit lines
    
    
    (12,379
    )
    
    
    7,594
    
    
    
    (3,786
    )Net cash used in financing activities
    
    
    (16,844
    )
    
    
    (3,031
    )
    
    
    (2,276
    )Effect of exchange rate changes on cash and cash equivalents
    
    
    (484
    )
    
    
    34
    
    
    
    100Net increase (decrease) in cash and cash equivalents
    
    
    591
    
    
    
    (8,281
    )
    
    
    (92,537
    )Cash and cash equivalents at beginning of year
    
    
    20,943
    
    
    
    29,224
    
    
    
    121,761Cash and cash equivalents at end of year
    
    
    21,534
    
    
    
    20,943
    
    
    
    29,224Supplemental disclosures of cash flow information:Net cash paid during the year for:Interest
    
    $
    330
    
    
    $
    1,200
    
    
    $
    1,491Income taxes
    
    
    1,970
    
    
    
    1,510
    
    
    
    2,800Non-cash conversion of convertible debentures
    
    
    
    
    
    
    251
    
    
    
    11,500
 The accompanying notes are an integral part of the consolidated financial statements.
  37




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##### Table of Contents



ZOLTEK COMPANIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
   USE OF ESTIMATES
  REVENUE RECOGNITION
 revenue-producing
 ACCOUNTS RECEIVABLE
  CONCENTRATION OF CREDIT RISK
    38




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##### Table of Contents



CASH AND CASH EQUIVALENTS
  INVENTORIES
  PROPERTY AND EQUIPMENT
   YearsBuildings and improvements
    
    
    30 - 40Machinery and equipment
    
    
    3 - 20Furniture and fixtures
    
    
    7 - 10Computer hardware and software
    
    
    2 - 5
   FOREIGN CURRENCY TRANSLATION
   39




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##### Table of Contents



FINANCIAL INSTRUMENTS
     APPLICATION AND DEVELOPMENT EXPENSES
  INCOME TAXES
  EARNINGS PER SHARE
   40




---



##### Table of Contents



RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
     2. FINANCING TRANSACTIONS
 HUNGARIAN GRANT
   FINANCING ACTIVITY
 Revolving Credit Facility
     41




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##### Table of Contents



Bond Related to Litigation
   Convertible Debt
   Fiscal year ended September 30, 2009Number of sharesconverted
    
    
    Conversion price
    
    
    Equity valueFebruary 2003
    
    
    
    
    
    $
    3.50
    
    
    $
    December 2005
    
    
    
    
    
    
    12.50
    
    
    
    February 2006
    
    
    
    
    
    
    13.07
    
    
    
    May 2006
    
    
    
    
    
    
    25.51
    
    
    
    July 2006
    
    
    16,264
    
    
    
    15.40
    
    
    
    250,466October 2006
    
    
    
    
    
    
    25.51
    
    
    
    16,264
    
    
    
    
    
    
    $
    250,466September 30, 2009Number of shares
    
    
    
    
    
    
    Principalissuable
    
    
    Conversion price
    
    
    outstanding70,560
    
    
    $
    25.51
    
    
    $
    1,799,986May 2006
    
    
    19,640
    
    
    
    25.51
    
    
    
    501,016July 2006
    
    
    76,381
    
    
    
    25.51
    
    
    
    1,948,479October 2006
    
    
    166,581
    
    
    
    
    
    
    $
    4,249,481
 Amortization of Financing Fees and Debt Discount
    42




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##### Table of Contents



Fiscal year ended September 30, 2010ConversionWarrants
    
    
    Features
    
    
    TotalMay 2006 Issuance
    
    $
    18
    
    
    $
    26
    
    
    $
    44July 2006 Issuance
    
    
    15
    
    
    
    17
    
    
    
    32October 2006 Issuance
    
    
    54
    
    
    
    62
    
    
    
    116$
    87
    
    
    $
    105
    
    
    
    192Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    97Total
    
    
    
    
    
    
    
    
    
    $
    289
 Fiscal year ended September 30, 2009ConversionWarrants
    
    
    Features
    
    
    TotalMay 2006 Issuance
    
    $
    1,549
    
    
    $
    2,285
    
    
    $
    3,834July 2006 Issuance
    
    
    242
    
    
    
    296
    
    
    
    538October 2006 Issuance
    
    
    317
    
    
    
    364
    
    
    
    681$
    2,108
    
    
    $
    2,945
    
    
    
    5,053Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    311Total
    
    
    
    
    
    
    
    
    
    $
    5,364
 Fiscal year ended September 30, 2008ConversionWarrants
    
    
    Features
    
    
    TotalMay 2006 Issuance
    
    $
    1,943
    
    
    $
    2,867
    
    
    $
    4,810July 2006 Issuance
    
    
    230
    
    
    
    280
    
    
    
    510October 2006 Issuance
    
    
    392
    
    
    
    452
    
    
    
    844$
    2,565
    
    
    $
    3,599
    
    
    
    6,164Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    518Total
    
    
    
    
    
    
    
    
    
    $
    6,682
  September 30, 2009ConversionWarrants
    
    
    Features
    
    
    TotalMay 2006 Issuance
    
    $
    18
    
    
    $
    26
    
    
    $
    44July 2006 Issuance
    
    
    15
    
    
    
    17
    
    
    
    32October 2006 Issuance
    
    
    54
    
    
    
    62
    
    
    
    116$
    87
    
    
    $
    105
    
    
    
    192Debt acquisition cost and financing fees
    
    
    
    
    
    
    
    
    
    
    97Total
    
    
    
    
    
    
    
    
    
    $
    289
  43




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##### Table of Contents



EARNINGS PER SHARE
   Fiscal Year Ended September 30,2010
    
    
    2009
    
    
    2008Numerators:Net (loss) income
    
    $
    (6,339
    )
    
    $
    (4,202
    )
    
    $
    7,441Denominators:Average shares outstanding  basic
    
    
    34,411
    
    
    
    34,402
    
    
    
    34,042Impact of convertible debt, warrants and stock options
    
    
    
    
    
    
    
    
    
    
    130Average shares outstanding  diluted
    
    
    34,411
    
    
    
    34,402
    
    
    
    34,172Basic (loss) income per share
    
    $
    (0.18
    )
    
    $
    (0.12
    )
    
    $
    0.22Diluted (loss) income per share
    
    $
    (0.18
    )
    
    $
    (0.12
    )
    
    $
    0.22
 3. INVENTORIES
  September 30,2010
    
    
    2009Raw materials
    
    $
    6,988
    
    
    $
    7,349Work-in-process
    
    
    6,346
    
    
    
    8,977Finished goods
    
    
    20,976
    
    
    
    26,758Consigned inventory
    
    
    3,109
    
    
    
    4,471Supplies and other
    
    
    583
    
    
    
    503$
    38,002
    
    
    $
    48,058
  44




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##### Table of Contents



4. PROPERTY, PLANT AND EQUIPMENT
  September 30,2010
    
    
    2009Land
    
    $
    13,180
    
    
    $
    13,275Buildings and improvements
    
    
    64,372
    
    
    
    66,510Machinery and equipment
    
    
    236,729
    
    
    
    230,502Furniture, fixtures and software
    
    
    7,161
    
    
    
    6,759Construction in progress
    
    
    24,098
    
    
    
    41,029$
    345,540
    
    
    $
    358,075Less: accumulated depreciation
    
    
    (113,879
    )
    
    
    (101,165
    )$
    231,661
    
    
    $
    256,910
 5. INCOME TAXES
  2010
    
    
    2009
    
    
    2008From continuing operations:Current:Federal
    
    $
    121
    
    
    $
    130
    
    
    $
    State
    
    
    12
    
    
    
    
    
    
    
    107Non  U.S.
    
    
    849
    
    
    
    1,284
    
    
    
    2,724982
    
    
    
    1,414
    
    
    
    2,831Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    State
    
    
    
    
    
    
    (179
    )
    
    
    Non  U.S.
    
    
    (2,823
    )
    
    
    869
    
    
    
    2,585(2,823
    )
    
    
    690
    
    
    
    2,585Total continuing operations
    
    $
    (1,841
    )
    
    $
    2,104
    
    
    $
    5,416
  45




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##### Table of Contents



September 30,2010
    
    
    2009Deferred tax assets:Accrued employee compensation
    
    $
    116
    
    
    $
    106Reserves
    
    
    278
    
    
    
    581Other assets
    
    
    29
    
    
    
    Net operating loss and credit carryforwards
    
    
    33,910
    
    
    
    30,63534,333
    
    
    
    31,322Deferred tax liabilities:Property, plant and equipment
    
    
    (12,365
    )
    
    
    (12,291
    )Prepaid expenses
    
    
    (106
    )
    
    
    (110
    )Unrealized currency losses on intercompany loan in Hungary
    
    
    (3,537
    )
    
    
    (1,496
    )Other liabilities
    
    
    
    
    
    
    (715
    )(16,008
    )
    
    
    (14,612
    )Total deferred taxes
    
    
    18,325
    
    
    
    16,710Less: valuation allowance
    
    
    (18,516
    )
    
    
    (20,138
    )Net deferred tax liability
    
    $
    (191
    )
    
    $
    (3,428
    )Classification of deferred taxes:Current deferred tax asset (included in Other current assets)
    
    $
    601
    
    
    $
    3,262Long-term deferred tax liability
    
    
    (792
    )
    
    
    (6,690
    )$
    (191
    )
    
    $
    (3,428
    )
   2010
    
    
    2009
    
    
    2008At statutory rate:Income tax (benefit) expense on (loss) income from continuing operations
    
    $
    (2,781
    )
    
    $
    (713
    )
    
    $
    4,507Increases (decreases):Lower effective tax rate on non-U.S. operations
    
    
    1,253
    
    
    
    1,744
    
    
    
    (1,446
    )Change in valuation allowance on net operating loss
    
    
    1,771
    
    
    
    (4,034
    )
    
    
    (3,416
    )State taxes, net of federal benefit
    
    
    149
    
    
    
    (545
    )
    
    
    17Local taxes, non-U.S.
    
    
    711
    
    
    
    1,101
    
    
    
    2,724Change of uncertain tax positions
    
    
    (2,173
    )
    
    
    2,440
    
    
    
    Reflection of tax rate change  non-U.S.
    
    
    (340
    )
    
    
    370
    
    
    
    Amortization of warrant discount
    
    
    65
    
    
    
    1,718
    
    
    
    3,425Fair market value of warrants
    
    
    (596
    )
    
    
    
    
    
    
    Non-qualified stock option expense
    
    
    
    
    
    
    
    
    
    
    (567
    )Other
    
    
    100
    
    
    
    24
    
    
    
    172$
    (1,841
    )
    
    $
    2,105
    
    
    $
    5,416
  46




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##### Table of Contents



2010
    
    
    2009
    
    
    2008Domestic
    
    $
    5,760
    
    
    $
    13,352
    
    
    $
    6,831Foreign
    
    
    (13,940
    )
    
    
    (15,449
    )
    
    
    6,026Income (loss) from continuing operations before income taxes
    
    $
    (8,180
    )
    
    $
    (2,097
    )
    
    $
    12,857
    6. DEBT
 Credit Facilities
     September 30,
    
    
    September 30,2010
    
    
    2009U.S. facility (current interest rate of 3.1%  variable with Libor)
    
    $
    
    
    
    $
    8,343Facility with Hungarian bank (interest rate of 2.9% to 6.9%, depending on currency)
    
    
    
    
    
    
    3,934Total credit lines
    
    $
    
    
    
    $
    12,277
  47




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##### Table of Contents



September 30,
    
    
    September 30,2010
    
    
    2009Note payable with interest currently at 4.1% (variable with Libor, payable in monthly
installments of interest and principal to maturity in January 2011)
    
    $
    981
    
    
    $
    1,083Convertible debentures final payment due November 2009 (interest rate of 5.58% 
variable with Libor)
    
    
    
    
    
    
    1,800Convertible debentures final payment due January 2010 (interest rate of 5.12% 
variable with Libor)
    
    
    
    
    
    
    501Convertible debentures final payment due April 2010 (interest rate of 4.63% 
variable with Libor)
    
    
    
    
    
    
    1,948Total long-term debt including current maturities
    
    
    981
    
    
    
    5,332Less: Debt discount associated with conversion feature and warrants
    
    
    
    
    
    
    (192
    )Less: Amounts payable within one year, net of discount of $0 and $192
    
    
    (981
    )
    
    
    (4,159
    )Total long-term debt, less current maturities
    
    $
    
    
    
    $
    981
  AnnualSeptember 30,
    
    Maturities2011
    
    $
    981Total
    
    $
    981
 7. DERIVATIVE INSTRUMENTS AND FAIR VALUE MEASUREMENT
  Level 1 Valuations based on quoted prices for identical assets or liabilities in active
markets that the Company has the ability to access.
 Level 2 Valuations based on quoted prices in markets that are not active or for which all
significant inputs are observable, either directly or indirectly.
 Level 3 Valuations based on inputs that are unobservable and significant to the overall
fair value measurement.
    48




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##### Table of Contents



May 2006
    
    
    July 2006
    
    
    October 2006
    
    
    December 2006Warrants issued
    
    274,406 shares
    
    
    34,370 shares
    
    
    102,835 shares
    
    
    827,789 sharesExpiration of warrants
    
    May 2011
    
    
    July 2011
    
    
    October 2011
    
    
    December 2012Per share exercise price of warrants
    
    $
    28.06
    
    
    $
    28.06
    
    
    $
    28.06
    
    
    $
    28.06Expected remaining life of warrants
    
    
    0.62
    
    
    
    0.76
    
    
    
    1.07
    
    
    
    2.22Risk-free interest rate
    
    
    0.24
    %
    
    
    0.23
    %
    
    
    0.24
    %
    
    
    0.42
    %Stock volatility
    
    
    73.54
    %
    
    
    73.54
    %
    
    
    73.54
    %
    
    
    73.54
    %Dividend yield
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
     49




---



##### Table of Contents



Fair Value Measurements at September 30, 2010Description
    
    September 30, 2010
    
    
    Level 1
    
    
    Level 2
    
    
    Level 3Warrant  Date of IssuanceMay 2006
    
    $
    34
    
    
    $
    
    
    
    $
    
    
    
    $
    34July 2006
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    7October 2006
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    46December 2006
    
    
    1,222
    
    
    
    
    
    
    
    
    
    
    
    1,222Restricted Shares
    
    
    206
    
    
    
    
    
    
    
    
    
    
    
    206Total
    
    $
    1,515
    
    
    $
    
    
    
    $
    
    
    
    $
    1,515
 Fair Value Per
    
    
    Shares Issuable
    
    
    Total Fair Value ofShare
    
    
    Upon Exercise
    
    
    InstrumentWarrant  Date of IssuanceMay 2006
    
    $
    0.12
    
    
    
    274,406
    
    
    $
    34July 2006
    
    
    0.21
    
    
    
    34,370
    
    
    
    7October 2006
    
    
    0.44
    
    
    
    102,835
    
    
    
    46December 2006
    
    
    1.48
    
    
    
    827,789
    
    
    
    1,222Restricted Shares
    
    
    
    
    
    
    51,250
    
    
    
    206Total
    
    
    
    
    
    
    1,290,650
    
    
    $
    1,515
  Warrant balance  October 1, 2009
    
    $
    3,061Change in fair value of warrants
    
    
    (1,753
    )Warrant balance  September 30, 2010
    
    $
    1,308Restricted share balance  October 1, 2009
    
    $
    Establishment of restricted share liability  April 1, 2010
    
    
    240Settlements
    
    
    (71
    )Change in fair value of restricted shares
    
    
    37Restricted share balance  September 30, 2010
    
    $
    206
 8. COMMITMENTS AND CONTINGENCIES
 LEASES
   50




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##### Table of Contents



FutureCommitments forSeptember 30,
    
    Operating Leases2011
    
    $
    1,3352012
    
    
    1,1942013
    
    
    8792014
    
    
    8682015
    
    
    846Thereafter
    
    
    5,076Total
    
    $
    10,198
  LEGAL
     SOURCES OF SUPPLY
  9. PROFIT SHARING PLAN
   51




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##### Table of Contents



10. STOCK COMPENSATION EXPENSE
   Stock option awards
  Wtd. Avg.
    
    
    Options
    
    
    Wtd. Avg.Options
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Exercise PriceBalance, September 30, 2008
    
    
    415,587
    
    
    $
    25.52
    
    
    
    220,587
    
    
    $
    23.50Granted
    
    
    52,500
    
    
    
    6.31Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (59,750
    )
    
    
    19.99Balance, September 30, 2009
    
    
    408,337
    
    
    $
    23.60
    
    
    
    301,670
    
    
    $
    22.64Granted
    
    
    37,500
    
    
    
    8.52Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (18,750
    )
    
    
    25.03Balance, September 30, 2010
    
    
    427,087
    
    
    
    22.21
    
    
    
    410,837
    
    
    
    22.23
  Options Outstanding
    
    
    Options ExercisableWtd. Avg.
    
    
    Wtd. Avg.
    
    
    
    
    
    
    Wtd. Avg.Range of
    
    
    
    
    
    Remaining
    
    
    Exercise
    
    
    
    
    
    
    Exercise
    
    
    IntrinsicExercise Prices
    
    Number
    
    
    Life
    
    
    Price
    
    
    Number
    
    
    Price
    
    
    Value$2.07-5.47
    
    
    39,500
    
    
    3 years
    
    $
    5.30
    
    
    
    39,500
    
    
    $
    5.30
    
    
    $
    161,4038.40-8.60
    
    
    80,087
    
    
    5 years
    
    
    8.53
    
    
    
    80,087
    
    
    
    8.53
    
    
    
    68,78813.98-24.12
    
    
    75,000
    
    
    7 years
    
    
    19.21
    
    
    
    58,750
    
    
    
    18.50
    
    
    
    26.22-29.70
    
    
    142,500
    
    
    7 years
    
    
    29.09
    
    
    
    142,500
    
    
    
    29.09
    
    
    
    31.07-36.73
    
    
    90,000
    
    
    5 years
    
    
    33.43
    
    
    
    90,000
    
    
    
    33.43
    
    
    
    $2.07-36.73
    
    
    427,087
    
    
    
    
    
    
    
    
    
    
    
    410,837
    
    
    
    
    
    
    $
    230,191
  Assumptions
    
    Fiscal 2010
    
    
    Fiscal 2009
    
    
    Fiscal 2008Expected life of option
    
    3.8 years
    
    
    3.8 & 4 years
    
    
    4 & 7.5 yearsRisk-free interest rate
    
    
    0.4
    %
    
    
    0.5
    %
    
    
    1.8
    %Volatility of stock
    
    
    77
    %
    
    
    79
    %
    
    
    66
    %Forfeiture rate
    
    
    0%-25
    %
    
    
    0%-25
    %
    
    
    0%-30
    %
  52




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##### Table of Contents



Restricted stock awards.
     11. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
   53




---



##### Table of Contents



Fiscal year ended September 30, 2010Carbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalNet sales
    
    $
    103,390
    
    
    $
    23,301
    
    
    $
    1,773
    
    
    $
    128,464Cost of sales, excluding available unused capacity costs
    
    
    83,021
    
    
    
    18,113
    
    
    
    1,216
    
    
    
    102,350Available unused capacity costs
    
    
    11,874
    
    
    
    948
    
    
    
    
    
    
    
    12,822Gross profit
    
    
    8,495
    
    
    
    4,240
    
    
    
    557
    
    
    
    13,292Operating income (loss)
    
    
    312
    
    
    
    3,403
    
    
    
    (14,279
    )
    
    
    (10,564
    )Depreciation
    
    
    13,762
    
    
    
    1,567
    
    
    
    1,132
    
    
    
    16,461Capital expenditures
    
    
    3,175
    
    
    
    627
    
    
    
    608
    
    
    
    4,410
 Fiscal year ended September 30, 2009Carbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalNet sales
    
    $
    115,348
    
    
    $
    20,996
    
    
    $
    2,412
    
    
    $
    138,756Cost of sales, excluding available unused capacity costs
    
    
    82,274
    
    
    
    16,411
    
    
    
    2,059
    
    
    
    100,744Available unused capacity costs
    
    
    6,404
    
    
    
    948
    
    
    
    
    
    
    
    7,352Gross profit
    
    
    26,670
    
    
    
    3,637
    
    
    
    353
    
    
    
    30,660Operating income (loss)
    
    
    14,186
    
    
    
    2,307
    
    
    
    (13,098
    )
    
    
    3,395Depreciation
    
    
    13,490
    
    
    
    1,667
    
    
    
    1,194
    
    
    
    16,351Capital expenditures
    
    
    14,983
    
    
    
    642
    
    
    
    581
    
    
    
    16,206
 Fiscal year ended September 30, 2008Carbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalNet sales
    
    $
    156,033
    
    
    $
    25,910
    
    
    $
    3,673
    
    
    $
    185,616Cost of sales
    
    
    110,691
    
    
    
    20,378
    
    
    
    3,324
    
    
    
    134,393Gross profit
    
    
    45,342
    
    
    
    5,532
    
    
    
    349
    
    
    
    51,223Operating income (loss)
    
    
    33,961
    
    
    
    3,019
    
    
    
    (16,973
    )
    
    
    20,007Depreciation
    
    
    13,353
    
    
    
    2,030
    
    
    
    1,093
    
    
    
    16,476Capital expenditures
    
    
    101,628
    
    
    
    2,568
    
    
    
    3,519
    
    
    
    107,715
 Total AssetsCarbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalSeptember 30. 2010
    
    $
    263,600
    
    
    $
    22,655
    
    
    $
    35,885
    
    
    $
    322,140September 30. 2009
    
    
    293,200
    
    
    
    27,614
    
    
    
    46,031
    
    
    
    366,845
  54




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##### Table of Contents



2010
    
    
    2009
    
    
    2008Net Long
    
    
    
    
    
    
    
    
    
    
    Net Long
    
    
    
    
    
    
    
    
    
    
    Net LongNet
    
    
    Lived
    
    
    Net
    
    
    Net
    
    
    Lived
    
    
    Net
    
    
    Net
    
    
    Lived
    
    
    NetSales(a)
    
    
    Assets(b)
    
    
    Assets
    
    
    Sales(a)
    
    
    Assets(b)
    
    
    Assets
    
    
    Sales(a)
    
    
    Assets(b)
    
    
    AssetsUnited States
    
    $
    43,762
    
    
    $
    41,536
    
    
    $
    79,892
    
    
    $
    34,036
    
    
    $
    44,539
    
    
    $
    247,569
    
    
    $
    42,205
    
    
    $
    47,617
    
    
    $
    340,285Denmark
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    35,351
    
    
    
    
    
    
    
    
    
    
    
    49,109
    
    
    
    
    
    
    
    Hungary
    
    
    *
    
    
    
    112,034
    
    
    
    132,827
    
    
    
    *
    
    
    
    132,880
    
    
    
    53,668
    
    
    
    *
    
    
    
    158,694
    
    
    
    (14,641
    )Germany
    
    
    21,336
    
    
    
    
    
    
    
    
    
    
    
    19,809
    
    
    
    
    
    
    
    
    
    
    
    42,552
    
    
    
    
    
    
    
    Spain
    
    
    *
    
    
    
    
    
    
    
    
    
    
    
    15,178
    
    
    
    
    
    
    
    
    
    
    
    *
    
    
    
    
    
    
    
    Other Europe
    
    
    52,441
    
    
    
    
    
    
    
    
    
    
    
    31,999
    
    
    
    
    
    
    
    
    
    
    
    41,625
    
    
    
    
    
    
    
    Asia
    
    
    9,989
    
    
    
    
    
    
    
    
    
    
    
    2,205
    
    
    
    
    
    
    
    
    
    
    
    10,106
    
    
    
    
    
    
    
    Mexico
    
    
    *
    
    
    
    78,091
    
    
    
    79,979
    
    
    
    *
    
    
    
    79,491
    
    
    
    14,228
    
    
    
    *
    
    
    
    82,583
    
    
    
    21,022Other areas
    
    
    936
    
    
    
    
    
    
    
    
    
    
    
    178
    
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    Total
    
    $
    128,464
    
    
    $
    231,661
    
    
    $
    292,698
    
    
    $
    138,756
    
    
    $
    256,910
    
    
    $
    315,465
    
    
    $
    185,616
    
    
    $
    288,894
    
    
    $
    346,666
 (a)
    
    Revenues are attributed to countries based on the delivery location of the customer.(b)
    
    Property and equipment net of accumulated depreciation based on country location of assets.*
    
    Net sales for this country were less than 10% of total sales. Such sales were aggregated
into Other Europe, Asia or
Other areas. 12. SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
  Fiscal year 2010
    
    1st Quarter
    
    
    2nd Quarter
    
    
    3rd Quarter
    
    
    4th QuarterNet sales
    
    $
    28,867
    
    
    $
    26,029
    
    
    $
    42,448
    
    
    $
    31,120Gross profit
    
    
    3,947
    
    
    
    1,452
    
    
    
    4,655
    
    
    
    3,238Net loss
    
    
    (483
    )
    
    
    (4,986
    )
    
    
    (444
    )
    
    
    (426
    )Basic and diluted loss per share:Basic loss per share
    
    $
    (0.01
    )
    
    $
    (0.15
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )Diluted loss per share
    
    $
    (0.01
    )
    
    $
    (0.15
    )
    
    $
    (0.01
    )
    
    $
    (0.01
    )
 Fiscal year 2009
    
    1st Quarter
    
    
    2nd Quarter
    
    
    3rd Quarter
    
    
    4th QuarterNet sales
    
    $
    38,629
    
    
    $
    36,006
    
    
    $
    30,306
    
    
    $
    33,815Gross profit
    
    
    10,264
    
    
    
    9,118
    
    
    
    6,160
    
    
    
    5,118Net (loss) income
    
    
    535
    
    
    
    473
    
    
    
    (1,429
    )
    
    
    (3,781
    )Basic and diluted (loss) income per share:Basic (loss) income per share
    
    $
    0.02
    
    
    $
    0.01
    
    
    $
    (0.04
    )
    
    $
    (0.11
    )Diluted (loss) income per share
    
    $
    0.02
    
    
    $
    0.01
    
    
    $
    (0.04
    )
    
    $
    (0.11
    )
   55




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##### Table of Contents



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
  
 Item 9A. Controls and Procedures
 Evaluation of Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
  Internal Control-Integrated
Framework
 Attestation Report of Independent Registered Public Accounting Firm
  Changes in Internal Control over Financial Reporting
  
 Item 9B. Other Information
   56




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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accounting Fees and Services
   57




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
          *
    
    Report on financial statement schedule is included in Exhibit 23.1 hereto.    58




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##### Table of Contents



For the fiscal year ended September 30, 2010
Rule 12-09 Valuation and Qualifying Accounts and Reserves
 Column A
    
    Column B
    
    
    Column C
    
    
    Column D
    
    
    Column EAdditionsCharged toBalance at
    
    
    Charged to
    
    
    other
    
    
    
    
    
    
    Balance atbeginning of
    
    
    costs and
    
    
    accounts
    
    
    Deductions
    
    
    end ofperiod
    
    
    expenses
    
    
    describe
    
    
    describe
    
    
    periodReserve for doubtful accounts
    
    $
    2,356
    
    
    $
    497
    (1)
    
    $
    
    
    
    $
    2,675
    (2)
    
    $
    178Reserve for inventory valuation
    
    $
    665
    
    
    $
    214
    (3)
    
    $
    
    
    
    $
    
    
    
    $
    879Deferred tax valuation
    
    $
    20,138
    
    
    $
    
    
    
    $
    
    
    
    $
    1,622
    (4)(5)
    
    $
    18,516
 For the fiscal year ended September 30, 2009
Rule 12-09 Valuation and Qualifying Accounts and Reserves
 Column A
    
    Column B
    
    
    Column C
    
    
    Column D
    
    
    Column EAdditionsCharged toBalance at
    
    
    Charged to
    
    
    other
    
    
    
    
    
    
    Balance atbeginning of
    
    
    costs and
    
    
    accounts
    
    
    Deductions
    
    
    end ofperiod
    
    
    expenses
    
    
    describe
    
    
    describe
    
    
    periodReserve for doubtful accounts
    
    $
    1,754
    
    
    $
    1,303
    (1)
    
    $
    
    
    
    $
    701
    (2)
    
    $
    2,356Reserve for inventory valuation
    
    $
    500
    
    
    $
    165
    (3)
    
    $
    
    
    
    $
    
    
    
    $
    665Deferred tax valuation
    
    $
    30,815
    
    
    $
    
    
    
    $
    
    
    
    $
    10,677
    (4)(5)
    
    $
    20,138
 For the fiscal year ended September 30, 2008
Rule 12-09 Valuation and Qualifying Accounts and Reserves
 Column A
    
    Column B
    
    
    Column C
    
    
    Column D
    
    
    Column EAdditionsCharged toBalance at
    
    
    Charged to
    
    
    other
    
    
    
    
    
    
    Balance atbeginning of
    
    
    costs and
    
    
    accounts
    
    
    Deductions
    
    
    end ofperiod
    
    
    expenses
    
    
    describe
    
    
    describe
    
    
    periodReserve for doubtful accounts
    
    $
    781
    
    
    $
    1,300
    (1)
    
    $
    
    
    
    $
    327
    (2)
    
    $
    1,754Reserve for inventory valuation
    
    $
    645
    
    
    $
    
    
    
    $
    
    
    
    $
    145
    (7)
    
    $
    500Deferred tax valuation
    
    $
    29,758
    
    
    $
    1,057
    
    
    $
    
    
    
    $
    
    
    
    $
    30,815
    (6)
 (1)
    
    Write off of uncollectible receivable.(2)
    
    Recovery of receivables previously listed as doubtful.(3)
    
    Increase reserve for slow-moving product.(4)
    
    Reduction in required valuation allowance due to domestic NOL utilization.(5)
    
    Reduction in required valuation due to non-qualified stock options deduction for which
no cash benefit has been realized.(6)
    
    Includes valuation allowance related to non-qualified stock options.(7)
    
    Company used and sold materials for which reserves were established primarily for
slow-moving product.   59




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##### Table of Contents



SIGNATURES
  ZOLTEK COMPANIES, INC.
(Registrant)By:
    /s/ ZSOLT RUMYZsolt Rumy, Chairman of the Board, President andChief Executive Officer   Signature
    
    Title
    
    Date/s/ ZSOLT RUMY

Zsolt Rumy
    
    Chairman, President,
Chief Executive Officer and Director
    
    November 29, 2010/s/ ANDREW W. WHIPPLE

Andrew W. Whipple
    
    Chief Financial Officer
    
    November 29, 2010/s/ LINN H. BEALKE

Linn H. Bealke
    
    Director
    
    November 29, 2010/s/ CHARLES A. DILL

Charles A. Dill
    
    Director
    
    November 29, 2010/s/ GEORGE E. HUSMAN

George E. Husman
    
    Director
    
    November 29, 2010/s/ MICHAEL D. LATTA

Michael D. Latta
    
    Director
    
    November 29, 2010/s/ PEDRO REYNOSO

Pedro Reynoso
    
    Director
    
    November 29, 2010
  60




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##### Table of Contents



Exhibit Index
 ExhibitNumber
    
    Description3.1
    
    
    Restated Articles of Incorporation of the Registrant dated October 7, 1992, filed as Exhibit 3.1 to Registrants Registration Statement on Form S-3 (Reg. No.333-143996) and incorporated herein by reference.3.2
    
    
    Certificate of Amendment of Restated Articles of Incorporation of the Registrant dated February 15, 1996, filed as Exhibit 3.2 to Registrants Registration Statement on Form S-3 (Reg. No.333-143996) and incorporated herein by reference.3.3
    
    
    Certificate of Amendment of Restated Articles of Incorporation of the Registrant dated February 7, 1997, filed as Exhibit 3.3 to Registrants Registration Statement on Form S-3 (Reg. No.333-143996) and incorporated herein by reference.3.4
    
    
    Restated By-Laws of the Registrant dated September 22, 1992, filed as Exhibit 3.4 to Registrants Registration Statement on Form S-3 (Reg. No.333-143996) and incorporated herein by 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) and incorporated herein by reference.4.2
    
    
    Form of Registration Rights Agreement, dated as of February 9, 2005, filed as Exhibit 4.4 to the Registrants Quarterly Report on Form 10-Q for the quarter ended December 31, 2004 and incorporated herein by reference.4.3
    
    
    Registration Rights Agreement, dated as of September 30, 2005, by and among the Registrant and the Lenders parties thereto, filed as Exhibit 4.4 to the Registrants Current Report on Form 8-K dated September 29, 2005 and incorporated herein by reference.4.4
    
    
    Waiver and Consent, dated as of February 3, 2006, by and among the Registrant and the Lender parties thereto, filed as Exhibit 4.5 to the Registrants Current Report on Form 8-K dated February 6, 2006, and incorporated herein by reference.4.5
    
    
    Amendment No. 1 to Loan and Warrant Agreement and Registration Rights Agreement among the Registrant and the Lender parties thereto, filed as Exhibit 4.2 to the Registrants Current Report on Form 8-K dated April 28, 2006 and incorporated herein by reference.4.6
    
    
    Form of Note, filed as Exhibit 4.3 to the Registrants Current Report on Form 8-K dated April 28, 2006 and incorporated herein by reference.4.7
    
    
    Form of Warrant, filed as Exhibit 4.4 to the Registrants Current Report on Form 8-K dated April 28, 2006 and incorporated herein by reference.4.8
    
    
    Amendment No. 2 to Loan and Warrant Agreement and Registration Rights Agreement, dated as of December 14, 2006, among the Registrant and the Lenders, filed as Exhibit 4.3 to the Registrants Current Report on Form 8-K dated December 14, 2006 and incorporated herein by reference.4.9
    
    
    Form of Warrant, filed as Exhibit 4.4 to the Registrants Current Report on Form 8-K dated December 14, 2006 and incorporated herein by reference.10.1
    
    
    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*10.2
    
    
    Credit Agreement, dated as of May 11, 2001, between Southwest Bank of St. Louis and Zoltek Companies, Inc., Zoltek Corporation, Cape Composites, Inc., Engineering Technology Corporation, Zoltek Properties, Inc., and Hardcore Composites Operations, LLC, filed as Exhibit 10.1 to Registrants Quarterly Report on Form 10-Q for the quarter ended June 30, 2001, is incorporate herein by reference.10.3
    
    
    First Amendment to Credit Agreement, dated as of February 13, 2003, by and among Zoltek Companies, Inc., Zoltek Corporation, Cape Composites, Inc., Engineering Technology Corporation, Zoltek Properties, Inc. and Southwest Bank of St. Louis, filed as Exhibit 10.1 to Registrants Current Report on Form 8-K dated February 18, 2003 is incorporated herein by reference.10.4
    
    
    Zoltek Companies, Inc. 2003 Long-Term Equity Incentive Plan, filed as Appendix A to Registrants definitive proxy statement for the 2002 Annual Meeting of Shareholders*10.5
    
    
    Second Amendment to Credit Agreement, dated as of January 13, 2003, by and among Zoltek Companies, Inc., Zoltek Corporation, Cape Composites, Inc., Engineering Technology Corporation, Zoltek Properties, Inc. and Southwest Bank of St. Louis filed as Exhibit 10.14 to Registrants Annual Report on Form 10-K for the fiscal year ended September 30, 2003, is incorporated herein by this reference10.6
    
    
    Zoltek Companies, Inc. 2008 Director Incentive Plan, filed as Appendix A to the Registrants Proxy Statement on Schedule 14A filed on January 2, 2008 and incorporated herein by this reference.*
  61




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##### Table of Contents



ExhibitNumber
    
    Description10.7
    
    
    Zoltek Companies, Inc. 2008 Long Term Incentive Plan, filed as Appendix B to the Registrants Proxy Statement on Schedule 14A filed on January 2, 2008 and incorporated herein by this reference.*10.8
    
    
    Employment Agreement, dated March 1, 2008, between the Registrant and Karen Bomba, filed as Exhibit 10.1 to the Registrants Quarterly Report on Form 10-Q for the quarter ended March 31, 2008 and incorporated herein by reference.10.9
    
    
    Employment Agreement, dated November 26, 2008, between the Registrant and Andrew W. Whipple, filed as Exhibit 10.10 to the Registrants Annual Report on Form 10-K for the fiscal year ended September 30, 2008, is incorporated herein by this reference.10.10
    
    
    Second Trade Agreement dated as of May 29, 2007, between Vestas Wind Systems A/S and Zoltek Companies, Inc., filed as Exhibit 10.11 to the Registrants Annual Report on Form 10-K/A for the year ended September 30, 2008, and incorporated herein by this reference.**21
    
    
    Subsidiaries of the Registrant filed as Exhibit 21 to the Registrants Annual Report on Form 10-K for the fiscal year ended September 30, 2007 and incorporated herein by reference.23.1
    
    
    Consent of Ernst & Young LLP.23.2
    
    
    Consent of Grant Thornton LLP.31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended is filed herewith31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as amended is filed herewith32.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is filed herewith32.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is filed herewith
 *
    
    Management compensatory plan or arrangement**
    
    Confidential portions of this exhibit have been redacted and filed separately with the Securities and Exchange
Commission pursuant to a confidential treatment request in accordance with Rule 24b-2 of the Securities
Exchange Act of 1934, as amended.  62