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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, 1998   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: approximately $49,887,000 as of December 28,
1998.

   Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:  As of
December 28, 1998, 16,216,338 shares of Common Stock, par value $.01,
were outstanding.

                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 1999
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, 1998 and the documents incorporated by reference herein contain
forward-looking statements which are inherently subject to risks and
uncertainties.  Cautionary statements made herein should be read as
being applicable to all related forward-looking statements wherever they
appear herein or in the documents incorporated by reference herein.  The
Company's actual results could differ materially from those anticipated
due to a number of factors, including, without limitation, the
following: the Company's ability to manage rapid growth, increase its
carbon fibers production capacity on a timely and profitable basis,
manufacture low-cost carbon fibers and profitably market them at
decreasing price points, successfully operate and integrate Zoltek Rt.
and penetrate existing, identified and emerging future markets for
carbon fibers, as well as other factors discussed herein and the
documents incorporated by reference herein.

GENERAL

        Zoltek Companies, Inc. (the "Company" or "Zoltek") is a leader
in the rapidly developing carbon fibers market, manufacturing products
for a diverse range of applications based upon carbon fibers'
distinctive combination of physical and chemical properties, principally
high-strength, low-weight and stiffness.  Zoltek believes it produces
carbon fibers at costs substantially lower than those generally
prevailing in the industry and, accordingly, can supply carbon fibers
for applications which are not economically viable for most higher cost
competitors.  With the December 1995 acquisition of Zoltek Rt. (formerly
known as Magyar Viscosa Rt.), a Hungarian manufacturer of acrylic fiber
and nylon products, the Company secured access to the technology
underlying the production of the acrylic fiber raw material utilized in
the manufacture of carbon fibers.  The Company's strategy is to grow its
business by continually lowering its cost to manufacture carbon fibers,
marketing its carbon fibers at price points substantially lower than
those generally prevailing in the industry and working with current and
prospective customers to develop new carbon fiber applications.  In
order to meet indicated and forecasted demand for carbon fiber products,
the Company has substantially expanded its manufacturing capacity and is
pursuing plans for additional capacity increases.

        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 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.

        The Company is a Missouri corporation founded in 1975. Until it
entered the carbon fibers business in 1987, 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 toward the end of 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.

INDUSTRY OVERVIEW

        Worldwide carbon fibers capacity (excluding the former Soviet
Union and China) was estimated to be approximately 35 million pounds
per year in calendar year 1997.  Carbon fiber


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composites are an attractive material for a diverse range of
applications, based on their distinctive characteristics, including high
strength, low weight, stiffness, toughness, resistance to corrosion,
resistance to fatigue, capacity to dissipate heat and electrical
conductivity.  Until the early 1980s, 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 outpaced demand from aerospace applications,
manufacturers sold excess production at significantly reduced prices.
As a result, the distinctive characteristics of carbon fibers and the
techniques for fabricating carbon fiber composites became more broadly
understood and a number of diverse applications developed.

        A number of specialty applications are commercially viable only
at carbon fiber prices lower than those historically prevailing for primary
aerospace applications.  In sporting goods manufacturing, the strength-to-
weight ratio, stiffness, rapid damping and fatigue resistance characteristics
of carbon fibers have made them a desirable material for a wide range of
products such as golf club shafts, tennis racquets and bicycle frames.
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.  New developing, commercial
applications identified by the Company include vehicle drive shafts,
compressed natural gas (CNG) tanks, civil engineering uses, wood
laminates, automotive body and structural members, cargo shipping
containers, mass transit vehicle components, high strength piping,
marine uses and alternative energy systems.  Currently served specialty
niche markets which the Company believes offer growth prospects include
aircraft brakes, conductive plastics, fire-retardant coatings and
specialty friction products.

        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.

COMPANY STRATEGY

        Zoltek's goal is to be the premier provider of low-cost carbon
fibers.  Key elements of the Company's business strategy are as follows:

        Low-Cost Producer -- The Company believes it currently
manufactures carbon fibers at costs substantially lower than those
generally prevailing in the industry. Longer term, the Company believes
that the precursor manufacturing technology acquired in the Zoltek Rt.
acquisition will enhance its ability to procure from third party sources
precursor with specifications which currently are not generally available
from merchant suppliers.  Acrylic fiber precursor comprises more than 50%
of the Company's total carbon fiber product costs.

        Currently, only one textile-type acrylic fiber manufacturer, Acordis
UK, Ltd. (formerly Courtaulds Fibres, Ltd.; "Acordis"), 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.

        Zoltek believes Zoltek Rt.'s operations afford a strategic
advantage by providing access to the technology underlying the
production of precursor.  Conversion of Zoltek Rt.'s acrylic fiber
capacity to produce precursor grade material provides the opportunity to
control a reliable source of precursor on favorable terms and to
optimize the carbon fibers production chain.  During 1998, Zoltek Rt.
began


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supplying the Company's carbon fiber operations with trial production
quantities of precursor.  The Company expects that in the future this
technology will be transferable to other potential suppliers to assure
sufficient supply of raw material to support the Company's carbon fiber
growth strategy.

        Price Leadership -- Zoltek has identified various price points
lower than those generally prevailing in the industry, at which it
believes customers will incorporate carbon fibers into their products to
achieve enhanced properties and performance.  Targeted commercial market
applications include shipping containers, vehicle drive shafts, wrapping
and reinforcement for concrete structures, pressurized tanks, wood
laminates, specialty piping and a number of non-friction automotive
uses.  The Company believes that these applications alone represent
potential long-term market demand requiring substantial increases in
current carbon fibers industry capacity.  The ultimate goal of the
Company's pricing strategy is to market carbon fibers for use as a base
reinforcement material in composites at 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 that achievement of this pricing goal would result in
significant new product applications for carbon fibers.

        New Commercial Market Applications Development -- The Company
will continue to identify, evaluate and develop new commercial market
applications for carbon fibers.  Potential opportunities include:
(i) applications for which carbon fiber composites have been
demonstrated to be well-suited, but which only recently have begun to be
commercialized (e.g., vehicle drive shafts and CNG tanks);
(ii) applications which have been established in principle or in small
scale projects, but for which additional engineering and fabrication
developments are required (e.g., earthquake-proofing of bridge columns,
aircraft seating and offshore spoolable piping); and (iii) applications
in which carbon fibers may permit totally new technologies (e.g.,
flywheel-based alternative energy systems and light trains).

        As part of its efforts to expand its current range of market
applications, the Company 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.  For example, studies
performed by a research consortium, including the Company, sponsored by
the U.S. Advanced Research Project Agency ("ARPA") demonstrated that
columns wrapped with carbon fiber composite materials made from the
Company's carbon fibers significantly improved the ability of bridges
and other structures to withstand earthquakes.  Successful partnerships
with commercial customers include long-term supply relationships with BF
Goodrich Aerospace ("BFG") and TRW Vehicle Safety Systems, Inc. ("TRW").


        The Company also plans to accelerate the development of new
commercial applications by enhancing its application engineering
capability.  The Company's applications engineers will assist
prospective users of carbon fibers in properly evaluating the utility of
carbon fibers for new applications and will consult with customers
regarding modifications of their manufacturing processes to facilitate
the full use of carbon fibers.

        Carbon Fibers Manufacturing Capacity and Expansion Plans -- In
order to assure availability of carbon fibers as new applications
develop, the Company has pursued an aggressive capacity expansion
program.  The present rated capacity of the Company's carbon fiber
manufacturing operations is approximately 10.5 million pounds per year.
During fiscal 1997, three continuous carbonization lines were constructed
at the Company's new manufacturing site in Abilene, Texas and two lines were
constructed at its Zoltek Rt. facility.  The Company will continue to use
the net proceeds of the secondary offering of its common stock completed in
September 1996, together with internally generated funds and, if necessary,
borrowings under credit facilities, to fund capital expenditures


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related to these continuous carbonization lines.  Each continuous
carbonization line has a rated capacity of approximately 1.0 million
pounds of carbon fibers per year. At the end of fiscal 1998, the Company
substantially completed two additional continuous carbonization lines at
its Abilene, Texas facility. During the first quarter of fiscal 1999, the
Company made the two additional lines ready for their intended use. The
Company does not plan to utilize these two new lines until product demand
increases.


        In the process of expanding capacity, the Company has developed
a standardized continuous carbonization line design in order to optimize
technical process capabilities, reduce equipment cost and shorten lead
time between the decision to add lines and the time when the lines
become operational.

CUSTOMERS AND BACKLOG

        During the fiscal year ended September 30, 1998, BFG (to which
the Company reported sales of $8.7 million) was the only customer or
group of affiliated customers which represented greater than 10% of the
Company's total consolidated revenues.

        As of September 30, 1998 and 1997, the Company had backlogs of
orders believed to be firm aggregating more than $17.3 million and $20
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.

CURRENT AND DEVELOPING PRODUCT APPLICATIONS

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

     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 substantial growth in future demand as graphite golf clubs,
skis, racquets, etc. become less expensive, therefore, less of a novelty
item and more of a staple.  With the new capacity in place, the Company
plans to make a major initiative in these markets as they enter a new
stage of development based upon lower prices.

     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 fiber's extraordinary stiffness-to-weight and strength-to-weight
can be put to use in improving performance and enhancing sales.

     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
in laptop computers, disk drives and similar devices.  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.  The
Company believes that this application offers significant potential for
future sales growth.  Zoltek also supplies products used in carbon
fiber-impregnated injection-molded plastic boxes to offer effective
shielding from electromagnetic interference.

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     Carbon fiber reinforced composites also provide the opportunity to
reduce weight and to provide EMI shielding for portable electronic
equipment all at the same time.  There are many current projects
concentrating on these applications.

     Conductivity also enables thermoplastics compounded with chopped
and milled carbon fibers to eliminate the need for a conductive primer
for plastic parts which require painting, such as automotive parts.
This material also increases the accuracy of spray guns used in painting
and reducing pollution control costs by increasing the attraction between
the electrostatic paint and the part.

     Industrial

     The list of potential industrial applications for carbon-fiber
reinforced composites is long.  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 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 has
participated in trials of spoolable pipe capable of extending the reach
of existing oil platforms and interwound composite rods to tether
platforms to the ocean floor at great depths.

     Construction

     Carbon fibers can be used to create earthquake-resistant  bridges
and overpasses, it can also be used to wrap concrete columns in the
construction of earthquake-resistant  buildings.

     Carbon fiber can be used as a substitute for steel in reinforcing
concrete in many infrastructure projects by providing greater strength
and stiffness while eliminating the problem of corrosion.  Other
applications include concrete column wrapping, bridge decking, cables
and tendons.  Industrial tanks, pipes, rollers and shafts have been
produced with carbon fiber.  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.  Zoltek supplies
material to several customers involved in these applications.

     Infrastructure

     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.

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     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.  One of the most publicized
applications underway involves strengthening the ability of bridge
columns to withstand major earthquakes.  An estimated 25,000 freeway
bridge columns in California alone have required seismic retrofitting,
half of which have already been repaired with conventional welded steel
jacketing.  The California Department of Transportation is in the
process now of evaluating and qualifying fiber-reinforced composite
systems for column retrofit.  Zoltek is involved in that program and
other similar programs in other states.

     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 huge lifecycle cost savings that are possible through the
combination of light weight and great strength and durability provided
by carbon fibers.  For example, several companies are experimenting with
carbon fiber reinforced composite components for light-weight all
composite refrigerated containers and railcars.

     The Company has identified automotive as a category of its own
(beyond transportation) because of the perceived potential in this
market.  Government-mandated fuel standards dictate a continuation in
the trend toward lighter vehicles.  In the development of new
generations of cars capable of going a hundred miles or more on a single
gallon of gasoline, structural requirements dictate substantial use of
carbon fibers in creating molded, light-weight structures of great
strength and stiffness. Small amounts of Zoltek carbon fibers are already
present in many cars as an additive in the propellant mix used in pyrotechnic
airbags.

     Sales of carbon fibers used in automotive airbags account for a
significant part of Zoltek's total sales of carbon fibers.  Carbon fiber
material is used as an additive in the airbag propellant mix in the
pyrotechnic type of automotive airbag produced by TRW.  The carbon fiber
material is used to improve performance in the inflation process.

     Since 1994, Zoltek has been the exclusive supplier to TRW of
carbon fibers for use in producing its pyrotechnic type of airbags.  The
automotive industry continues to conduct research and product
development with respect to airbag technology.  Accordingly, the Company
believes that the volume of sales for this application will depend upon
the relative utilization of the pyrotechnic type of airbag in
automobiles and trucks in future years.

     The use of carbon fibers allows a two-piece vehicle drive shaft to
be replaced with a one-piece design, reducing its average weight by
approximately 60%.  The inherent damping characteristics of composites
also reduce the noise and vibration to the passenger compartment.  New
designs with hybrid carbon fiber composites and alternative processing
methods continue to be developed to increase the cost-competitiveness of
the composite design.

     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).

     Auto companies are looking to composites for another critical
advantage, and that is bringing about a huge reduction in 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.

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     Alternative Energy

     While there are an abundance of competing ideas in the field of
alternative energy sources, many known applications lead to carbon
fiber.

     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.  Of the
total heat developed by the combustion of fuel in today's automotive engines,
only 20% to 30% is converted into useful work.  Flywheels could result in
far greater fuel efficiency by capturing and utilizing heat energy that is
lost every time a motorist puts a foot on the brake.  Flywheels act
alternatively as generators and as motors.  With its combination of strength,
stiffness and light weight, carbon fiber can be important to the success
of this application.

     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 a sedan 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.  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 fuel cells and windmills.

     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 grows stronger.  Zoltek continues to be the world's
largest supplier of carbon fiber to the carbon/carbon aircraft braking
industry.

     Carbon-carbon (carbon fibers fused in a carbon matrix) is used in
aircraft brakes because its utility is enhanced by heat.  Where other
materials soften under rising temperatures, carbon-carbon grows
stronger.  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.

     There is a growing replacement market for composite brakes with
the retirement of older aircraft and their replacement by newer model
aircraft which utilize carbon-carbon brakes.  Brake pads wear out and
must be replaced at regular intervals, typically at intervals of 750 to
2,000 landings depending upon aircraft type, size and use.  As the
relative proportion of newer aircraft to older aircraft increases, the
demand for carbon-carbon brakes increases proportionately.  Zoltek's
carbon fibers are approved as the single source, or one of only two
approved fibers, for many high production new models of commercial
aircraft, and for selected civil and military aircraft.

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     The Company is the exclusive supplier to BFG of carbon fibers for
aircraft brakes pursuant to a ten-year agreement (the "BFG Supply
Agreement") entered into in June 1994.  The Company anticipates
aggregate sales of more than $80 million over the term of this
agreement, increasing from approximately $5 million of expected sales in
the initial years to approximately $15 million to $18 million per year
during the later years of the contract.  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 adaptable for high speed
trains, over-the-road trucks, cars and industrial rotating equipment -
to cite potential high volume application areas that are now under
active study and investigation.

     Specialty friction product applications are a natural extension of
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.

     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 still possible through
the additional use of composites reinforced with carbon fiber or the
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.

     The foregoing list is not intended to be all-inclusive in setting
out emerging new applications.  In the medical field, for instance,
there is great interest in the use of composites for high-strength, low-
weight prosthetics and for a variety of other applications.  The list
above reflects Zoltek's view of broad areas of application that are
likely to demonstrate significant development during the next three
fiscal years.

     In addition to the carbon fibers products marketed by the Company,
Zoltek Rt. continues to market its traditional products.  These products
include the following:

        Textile Fiber Products

        Acrylic fibers currently represent Zoltek Rt.'s primary product
line (approximately two-thirds of Zoltek Rt.'s sales) and are used in
producing a variety of end products, including clothing and carpet.
Zoltek Rt.'s acrylic fibers are sold in regional markets, principally to
textile mills in Europe and, to a limited extent, Taiwan and the United
States.  Zoltek Rt.'s primary markets for acrylic fibers are currently
in Hungary and Poland.

        The other principal fiber product line currently manufactured
and marketed by Zoltek Rt. consists of nylon-6 fibers and granules.  Due
to the long-term decline in the domestic Hungarian market for nylon-6
fibers, Zoltek Rt. has targeted export markets, the largest of which is
Italy, and also has sold


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significant amounts in the United Kingdom and Central and Eastern
Europe.  Granular nylon-6 is used as a thermoplastic molding material
and combined in certain applications with glass or carbon fibers.

        Other

        Zoltek Rt. also currently manufactures:  carboxyl-methyl
cellulose which is used as a film former, absorber or viscosity modifier
for applications in soap additives, drilling mud additives, paper
manufacturing and adhesive manufacturing; plastic netting and grids
which are produced from continuously extruded polyethylene and
polypropylene net or screen with varying specifications and used for
soil stabilization and packaging; and filtration membrane products for
use in filtration media utilized in food and wine processing and water
purification.  The Company is in the process of evaluating the ultimate
potential of these products and technologies.

INTERNATIONAL

        To date, the Company's carbon fiber operations have focused
primarily on meeting the needs of U.S. customers.  The Company has,
however, shipped limited amounts of carbon fiber products to customers
in Europe and Asia, primarily for use in conductive plastics
applications.  Most of these sales have been made to foreign operations
of domestic corporations, or to foreign parent companies of domestic
operating units.

        Zoltek believes that significant opportunities exist to develop
international markets, particularly in Europe and Asia, as commercial
market applications of carbon fiber products develop. The Company
expects to pursue opportunities in Europe through the marketing
organization currently in place at Zoltek Rt.  This organization will
seek to find customers for the carbon fiber products currently
manufactured at the Company's plants in the United States, as well as
for those products produced at the carbon fibers facilities at Zoltek
Rt.

        The Company expects that, in the future, it will pursue
opportunities in Asia either with a strategic partner or through a
direct sales office located in that market.

SOURCES OF SUPPLY

        The Company currently obtains substantially all 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.


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<PAGE>

        The major materials used in the Zoltek Rt. facility are
acrylonitrile and other basic commodity chemical 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.

COMPETITION

        The Company 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 Company.

        The Company believes that no single manufacturer of carbon
fiber products competes across all of its applications.  The Company's
direct carbon fiber competitors include Fortafil Fibers, Inc. in the
United States and SGL Carbon in Europe, inasmuch as they use the same
textile-type precursor as the Company.  To varying degrees, depending on
market conditions and supply, the Company also competes with larger
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.  Large international carbon fibers producers
tend to market higher cost products than the Company's products, with a
principal focus on aerospace structural applications.  These large
manufacturers tend to enter into direct competition with the Company
primarily when they engage in significant discounting due to excess
capacity and product surpluses; however, such competition historically
has not had a material adverse effect on the Company's business.

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

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

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

ENVIRONMENTAL

        The carbon fibers operations at the Company's Abilene, Texas
and St. Charles, Missouri plants utilize incineration and scrubbing of
various exhaust streams, designed to comply with applicable laws and
regulations.  The plants produce air emissions which are regulated and
permitted by various environmental authorities.  The plants are required
to verify by performance tests that certain emission rates


                                       11

<PAGE>
<PAGE>
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 operations
with applicable environmental regulations will have a material effect
upon the Company's future capital expenditure requirements, results of
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.

        Zoltek Rt.'s operations generate various hazardous wastes,
including gaseous, liquid and solid materials.  The Hungarian State
Property Agency, which formerly owned Zoltek Rt., commissioned an
environmental audit by an independent consulting firm, which in its June
1995 report recommended expenditures aggregating approximately HUF 20.1
million (which then approximated $160,000) to correct certain identified
environmental deficiencies and Zoltek expects that Zoltek Rt.'s
operations may require additional funds for enhancement of other
environmental compliance systems.  Zoltek expects that compliance with
current environmental regulation will not have a material adverse effect
on Zoltek Rt.'s business, results of operations or financial condition.
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 Zoltek Rt.'s
business, results of operations or financial condition.

EMPLOYEES

        As of September 30, 1998, the Company employed approximately
216 persons in its U.S. operations and approximately 1,436 in its
Hungarian operations.  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 and at Zoltek Rt.
there are two active unions, Union Viscosa with approximately 910
members, and Viscosa 1990 with approximately 600 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 its employee relations are good.

        In June 1993, Zoltek Rt. entered into an agreement with the
Labor Office (the "Labor Office") of the county in which the plant is
located, pursuant to which the Labor Office made a HUF 285 million
(approximately $1.5 million translated at the exchange rate in effect at
September 30, 1996) grant to Zoltek Rt. to finance salary payments to
Zoltek Rt.'s employees during the period April through December 1993.
During fiscal 1998, Zoltek Rt. received notification from the Labor
Office that the labor grant would not have to be repaid.


                                       12


<PAGE>
<PAGE>

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

         The Company's facilities are listed below and are considered to
be suitable and adequate for its operations.  All the Company's
properties are owned or leased subject to various mortgage loans.

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

   St. Charles, Missouri<F1>     Carbon fibers manufacturing                       107,000

   Abilene, Texas                Carbon fibers manufacturing
                                 and processing                                    428,000

   Nyergesujfalu, Hungary<F2>    Acrylic fiber, nylon, other
                                 manufacturing                                   1,600,000

<FN>
________________
<F1>Subject to ground lease which expires in 2065, subject to a
    24-year renewal option thereafter.

<F2>Zoltek Rt. is located on a 150-acre site in the town of
    Nyergesujfalu, approximately 30 miles from Budapest.  The facility
    is located on a main highway between Budapest and Vienna on the
    shore of the Danube River and on a major rail line.
</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, 1998.

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 56, is the founder of the Company and has
served as its Chairman, President and Chief Executive Officer 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 its primary banking relationships.  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 36, 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.

                                       13

<PAGE>
<PAGE>

                               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.

        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, 1998                  September 30, 1997
                              ------------------                  ------------------

                            HIGH               LOW              HIGH               LOW
                            ----               ---              ----               ---
<S>                        <C>               <C>               <C>               <C>
First Quarter              $61.25            $26.50            $44.50            $26.00

Second Quarter              41.50             26.25             39.75             21.88

Third Quarter               37.00             20.12             39.00             21.88

Fourth Quarter              22.12             11.62             65.75             34.25
</TABLE>

                                   14
<PAGE>
<PAGE>

Item 6. Selected Financial Data
------  -----------------------

<TABLE>
                                              ZOLTEK COMPANIES, INC.
                                       SELECTED CONSOLIDATED FINANCIAL DATA
                                       (In thousands, except per share data)

<CAPTION>
STATEMENT OF INCOME DATA:                                                             YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------------------------------------------------
                                                               1998           1997           1996           1995            1994
                                                             --------       --------       --------        -------         -------
<S>                                                          <C>            <C>            <C>             <C>             <C>
Net sales                                                    $ 83,390       $ 90,628       $ 68,957        $12,698         $ 7,920

Cost of sales                                                  58,805         64,214         49,772          7,716           4,502

Gross profit                                                   24,585         26,414         19,185          4,982           3,418

Selling, general and administrative expenses                   12,958         13,172          9,510          1,845           1,624

Operating income from continuing operations                    11,627         13,242          9,675          3,137           1,794

Interest expense                                                  494            820          1,013            740             617

Net income from continuing operations                           9,595         12,828          6,172          1,577             799

Income from discontinued operations, net of income taxes           --             --             38            456             208

Net income                                                   $  9,595       $ 12,828       $  6,210        $ 2,033         $ 1,007

Net income per share:

   Basic income per share: Continuing operations             $    .59       $    .79       $    .46        $   .16         $   .09
                           Discontinued operations                 --             --             --            .05             .02
                                                             --------       --------       --------        -------         -------

   Net income                                                $    .59       $    .79       $    .46        $   .21         $   .11
                                                             ========       ========       ========        =======         =======

Weighted average common shares outstanding                     16,216         16,212         13,348          9,583           9,314

   Diluted income per share:Continuing operations            $    .58       $    .78       $    .45        $   .16         $   .09
                            Discontinued operations                --             --             --            .05             .02
                                                             --------       --------       --------        -------         -------

   Net income                                                $    .58       $    .78       $    .45        $   .21         $   .11
                                                             ========       ========       ========        =======         =======

Weighted average common and common equivalent shares
outstanding                                                    16,525         16,547         13,737          9,820           9,449


<CAPTION>
BALANCE SHEET DATA:                                                                        SEPTEMBER 30,
----------------------------------------------------------------------------------------------------------------------------------
                                                               1998           1997           1996           1995            1994
                                                             --------       --------       --------        -------         -------
<S>                                                          <C>            <C>            <C>             <C>             <C>
Working capital                                              $ 53,058       $ 69,556       $ 83,224        $ 6,322         $ 3,866

Total assets                                                  147,209        139,962        134,660         18,390          17,373

Short-term debt                                                   817          2,760          4,578            745           1,662

Long-term debt, less current maturities                         5,898          4,295          5,207          6,191           6,562

Shareholders' equity                                          121,602        115,836        108,778          9,519           7,100

</TABLE>
                                   15
<PAGE>
<PAGE>

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

OVERVIEW


        This report contains forward-looking statements which are
inherently subject to risks and uncertainties. Cautionary statements
made herein should be read as being applicable to all related forward-
looking statements wherever they appear herein or in the documents
incorporated by reference herein.  The Company's actual results could
differ materially from those anticipated due to a number of factors,
including, without limitation, the following:  the Company's ability to
manage rapid growth, increase its carbon fibers production capacity on a
timely and profitable basis, manufacture low-cost carbon fibers and
profitably market them at decreasing price points, successfully operate
and integrate Zoltek Rt. and penetrate existing, identified and emerging
future markets for carbon fibers, as well as other factors discussed
herein and the comments incorporated by reference herein.

        The Company is a Missouri corporation founded in 1975.  Until it
entered the carbon fibers business in fiscal 1987, the Company's business
consisted of engineering, sales and installation of various process
equipment, provision of in-house and field repair services, and
distribution of various industrial products manufactured by others.

        The Company entered the carbon fiber business in fiscal 1987
through the acquisition of a Lowell, Massachusetts  company that produced
a line of carbon fiber products for niche and specialty markets.  In
fiscal 1991, the Company closed its carbon fiber production facility in
Lowell, and moved to its new production facility in St. Charles,
Missouri.  In November 1992, the Company completed its initial public
offering to finance the new facilities and to fund future growth and
product development.

        In 1994, the Company began producing low-cost, high-strength
carbon fiber products utilizing a proprietary continuous carbonization
process to complement its specialty carbon fibers product line. During
the same year, the Company negotiated two significant multi-year supply
arrangements with BFGoodrich Aerospace for fibers used in carbon/carbon
aircraft brakes and with TRW Vehicle Safety Systems for use in enhancing
the performance of its airbag propellant.  These two supply relationships
have provided a substantial sales base to support Zoltek' expansion.

        In order to focus its efforts on emerging opportunities in the
carbon fibers market, the Company sold all of the assets of its former
equipment and services business unit during fiscal 1995 and 1996.  The
results of the unit's operations have been reclassified to identify them
as discontinued operations.

        In November 1995, the Company completed a secondary public
offering of 4.2 million shares of Common Stock and received net proceeds
of $26.3 million.  The Company used much of the proceeds of the offering
to acquire substantially all of the shares of Magyar Viscosa Rt. (which
was renamed Zoltek Rt.) for $17.8 million in December 1995 and to provide
working capital to enhance Zoltek Rt.'s operations.  Zoltek Rt.
manufactures textile-type acrylic fibers (which are the raw material for
the manufacturing of carbon fibers), as well as nylon and other
industrial materials.  This acquisition enabled the Company to secure
access to the technology underlying the production of the acrylic fiber
raw material.  During fiscal 1998 Zoltek Rt. supplied trial quantities of
acrylic fiber used as carbon fiber precursor.  The Company expects Zoltek
Rt. will supply initial production quantities of precursor during fiscal
1999. The Zoltek Rt. acquisition is reported under the purchase method of
accounting and included in the Company's consolidated financial statements
from the date of acquisition.

                                   16
<PAGE>
<PAGE>

        Zoltek has achieved substantial sales growth in its carbon
fibers business.  From fiscal 1992 to fiscal 1998, net sales of carbon
fibers grew from $3.0 million to $22.7 million.  Much of the sales
increase came from specialty applications, however, the Company believes
that its greatest opportunities are presented by the market for its low-
cost carbon fibers for much broader applications.  Carbon fibers sales
decreased slightly in fiscal 1998 compared to fiscal 1997 primarily due
to the dampening of demand from electronics markets as a result of weak
economies in Asia.

        To support the Company's growth strategy, it completed a
secondary stock offering in September 1996.  The Company sold 2.3 million
shares of Common Stock and received net proceeds of $68.9 million.  The
Company is utilizing the net proceeds, together with internally generated
funds, to expand its carbon fibers manufacturing capacity to
approximately 40 million pounds in the United States and Hungary over the
next three to five years.  In addition to securing a potential raw
material source, the Company developed a standardized continuous
carbonization line design to optimize the technical process capabilities,
reduce equipment cost and shorten lead time for future expansion between
the decision to add capacity and when lines become operational.

        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 1.0 million pounds, at its Abilene,
Texas facility (three lines) and Zoltek Rt. facilities (two lines). The
period of process verification, product characterization and initial
customer qualification relative to the new carbon fiber capacity additions
that began operations at the end of fiscal 1997 was substantially completed
by March 31, 1998.

        During the first half of fiscal 1998, the Company completed
construction of a secondary processing building (40,000 square feet) at
its Abilene, Texas facility.  The Company plans to utilize the facility
to perform intermediate and secondary processing operations such as
specialty packaging, chopping and milling.

        At the end of fiscal 1998, the Company substantially completed
two additional continuous carbonization lines at its Abilene, Texas
facility.  During the first quarter of fiscal 1999, the Company made the
two additional lines ready for their intended use.  The Company does not
plan to utilize these two new lines until product demand increases.

        At the end of fiscal 1998, the Company substantially completed
construction of a building (288,000 square feet) designed to house up to
eight continuous carbonization lines.  Additionally, the Company has
placed orders for long-lead time equipment items for six additional
continuous carbonization lines, each with an annual rated capacity of one
million pounds.  The long-lead time equipment items will be temporarily
housed at the facility in Abilene, Texas.  The Company does not currently
anticipate initiating construction of the six additional lines during
fiscal 1999 unless demand for carbon fibers increases.  While the
additional operational capacity expands the Company's total capacity for
production of carbon fiber, the Company believes the market will require
demonstration of significant available capacity to initiate and develop
large-scale composite applications utilizing its carbon fiber products.

        The recent major additions to the Company's carbon fiber
manufacturing capacity (5.0 million pounds of rated capacity annually,
completed in late fiscal 1997 and 2.0 million pounds of rated capacity
annually, substantially completed in late fiscal 1998) currently are
having little impact on sales. Carbon fiber sales for fiscal 1998 were
$22.7 million compared to $23.2 million for fiscal 1997.  The Company's
strategy for the initial sales increases was to rely on what had been
fast-growing markets in conductive plastics and sporting goods
applications.  As a result of the Asian economic crisis and its impact

                                   17<PAGE>
<PAGE>

on the electronics sector, sales of carbon fiber into that market fell
significantly in fiscal 1998.  Qualification for the sporting goods
applications and accompanying increases in sales have taken longer than
was originally expected due to the excess capacity in the market resulting
from capacity increases by other carbon fiber manufacturers.

        At the end of fiscal 1998 the Company was not operating its new
continuous carbonization lines at full capacity.  The Company currently
anticipates that it will not operate its lines at full capacity during
fiscal 1999.  While the Company believes it is necessary to maintain
available capacity to develop significant new applications, costs related
to the unutilized capacity will adversely impact earnings during fiscal
1999. The Company currently anticipates increases in sales for the new
carbon fiber lines at both the U.S. and Hungarian locations beginning in
the second half of fiscal 1999.

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

COMPARISON OF RESULTS FOR FISCAL YEARS ENDED SEPTEMBER 30, 1998 AND 1997

        The Company's net sales decreased 8% to $83.4 million in 1998
from $90.6 million in 1997.  The decrease resulted from decreases in both
Zoltek's carbon fibers business and Zoltek Rt.'s acrylic fibers business.
Net sales from Zoltek's carbon fibers business totaled $22.7 million in
fiscal 1998, a decrease of 2% compared to fiscal 1997.   The decreased
sales of carbon fibers were due mainly to activities of customers that
serve the electronics markets in the Far East.  The Company is currently
experiencing a transition period in which recent major additions to
capacity have not yet had an impact on carbon fiber sales. The Company
expects that the historical growth trend in carbon fiber sales will resume
when Far East economies recover and additional progress is made in the
development of new large-scale applications utilizing significant
quantities of carbon fibers. The acrylic and other products, produced
at Zoltek Rt., generated  net sales of $60.7 million in 1998 compared
to $67.4 million for fiscal 1997, a decrease of 10%.  However, sales
in metric tons was constant at 4.1 thousand for both fiscal 1998 and
1997.  This decrease was due mainly to selling price 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 pass through to the
customers.  Zoltek Rt. sales of acrylic fibers and other products were to
the markets Zoltek Rt. had historically served.

        Gross profit decreased 7% to $24.6 million in fiscal 1998.  Decreased
gross profit resulted from a 5% decrease in gross profit from Zoltek's carbon
fiber business and a 8% decrease in gross profit from the acrylic and other
products at Zoltek Rt. which mirrors the decrease in sales.  Zoltek's gross
margin from the carbon fibers business was approximately 38% of sales for
fiscal 1998 and 39% for fiscal 1997.  The Company's overall gross profit
remained relatively constant at approximately 29% of sales for both fiscal
1998 and 1997.  The acrylic and other products business generates significantly
lower gross margins than the carbon fibers business and remained constant at
26% of sales for both fiscal 1998 and 1997.

        Selling, general and administrative expenses remained relatively
constant at $13.0 million for fiscal year 1998 compared to $13.2 million
during the prior year.  This slight decrease was attributable to a
reduction in market promotion costs and a change in certain employee
benefits.  The components of selling, general and administrative expense
remained relatively constant.

                                   18<PAGE>
<PAGE>

        Interest expense was $0.5 million for fiscal 1998 compared to
$0.8 in 1997 due mainly to the repayment of bank debt at Zoltek Rt. in
the second half of fiscal 1997.  Interest income for fiscal 1998 was $2.7
million compared to $4.0 million in 1997.  The decrease in interest
income was due to the use of the cash and cash equivalents to finance the
capital expenditures that amounted to $31.2 million in fiscal 1998.

        During fiscal 1998, the Company reported income tax expense of
$3.9 million compared to $3.6 million in 1997.  Income before income
taxes was $13.5 million in fiscal 1998 compared to $16.4 million for
fiscal 1997.  The increase in the effective tax rate was due principally
to the recognition of income tax expense on Zoltek Rt.'s earnings
beginning in the second half of fiscal 1998.  Zoltek Rt. fully utilized
the net operating loss carryforwards during the second quarter of fiscal
1998 and recorded tax expense for the remainder of fiscal 1998.  The
statutory rate for the Zoltek Rt. operation in Hungary is 18%.  During
most of the first half of fiscal 1998 and all of fiscal 1997, 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.  However, due
to the uncertainty of the Company's ability to generate operating profits
in the future, the Company recognized a full valuation allowance against
these net operating loss carryforwards at the date of acquisition.
During fiscal 1998 and 1997, Zoltek Rt. utilized operating loss
carryforwards to reduce the income tax liabilities by $0.6 million and
$1.5 million, respectively.  Additionally, valuation allowance
adjustments of $0.6 million and $1.5 million for fiscal 1998 and 1997,
respectively, were recognized as a reduction of income tax expense.

        As a result of the foregoing, net income decreased 25% to $9.6
million for fiscal 1998 from $12.8 million in 1997.  Similarly, the
Company reported net income per share on a diluted basis of $0.58 for
fiscal 1998 compared to $0.78 in 1997. Weighted average common shares on
a diluted basis remained relatively constant at 16.5 million for both
fiscal 1998 and 1997.

COMPARISON OF RESULTS FOR FISCAL YEARS ENDED SEPTEMBER 30, 1997 AND 1996

        The Company's net sales increased 31% to $90.6 million in 1997
from $69.0 million in 1996. The increase resulted from an increase in
both Zoltek's carbon fibers business and Zoltek Rt.'s acrylic fibers
business.  Net sales from Zoltek's carbon fibers business totaled $23.2
million in fiscal 1997, which was an increase of 16% compared to fiscal
1996.  Higher sales revenues were recorded across carbon fiber product
categories. Growth in carbon fiber sales continued to be constrained by
production capacity. The acrylic and other products, produced at Zoltek
Rt., had net sales of $67.4 million in 1997 compared to $48.9 million for
the period December 8, 1995 (the acquisition date) to September 30, 1996
which was an increase of 38%.  Zoltek Rt. sales of acrylic and other
products were from the markets Zoltek Rt. had historically served prior
to the acquisition.

        Gross profit increased 38% to $26.4 million in fiscal 1997.
Increased gross profit resulted from a 14% increase in gross profit from
Zoltek's carbon fiber business and a 55% increase in gross profit from
the acrylic and other products at Zoltek Rt.  Zoltek's gross margin from
the carbon fibers business was approximately 39% of sales for fiscal 1997
and 40% for fiscal 1996.  The Company's overall gross profit remained
relatively constant at 29% of sales for the year compared to 28% in the
prior year. The acrylic fibers and other products business generates
significantly lower gross margins than the carbon fibers business,
however, the gross margin was increased to 26% of sales in the current
year compared to 23% in the prior year due to productivity and sales
improvements over the prior year.

        Selling, general and administrative expenses were $13.2 million
for fiscal year 1997 compared to $9.5 million during the prior year.
This increase was due to the inclusion of Zoltek Rt.'s

                                   19
<PAGE>
<PAGE>

operations for the full year in 1997 compared to the period December 8,
1995 to September 30, 1996 and to the addition of marketing, engineering,
product development and administrative staffs to support the carbon
fibers manufacturing expansion.

        Interest expense was $0.8 million for fiscal 1997 compared to
$1.0 in 1996 due mainly to the elimination of bank debt at Zoltek Rt.
Interest income for the year was $4.0 million compared to $0.5 million in
1996.  Interest income increased due to the interest generated on the
increased cash, cash equivalents and marketable securities balances in
fiscal 1997 derived from the Company's secondary offerings.

        During fiscal 1997, the Company reported income tax expense of
$3.6 million compared to $2.6 million in 1996.  The effective tax rate
remained relatively constant between years, excluding the effects of the
Zoltek Rt. acquisition.  The increase in income tax expense was primarily
attributable to the increased interest income and net profits from the
U.S. carbon fiber operations.  The statutory rate for the Zoltek Rt.
operation in Hungary is 18%.  In 1997, Zoltek Rt. had 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.  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 1997 and 1996, Zoltek Rt. utilized $1.5 and $0.6
million, respectively, of the net operating loss carryforwards to reduce
the income tax liability.  Additionally, a valuation allowance adjustment
of $1.5 and $0.3 million was recognized as a reduction to income tax
expense during 1997 and 1996, respectively.

        In connection with the Company's determination, in August 1995,
to dispose of its equipment and services business unit, the Company sold
the unit's remaining product line, flexible graphite products, in June
1996 in consideration of a note receivable for $0.2 million, which
approximated the net book value of such assets.

        As a result of the foregoing, net income increased 107% to $12.8
million for fiscal 1997 from $6.2 million in 1996.  Similarly, the
Company reported net income per share of $0.78 for fiscal 1997 compared
to net income per share of  $0.45 in 1996. Weighted average common shares
increased to 16.5 million from 13.7 million primarily due to the effect
of stock options under existing plans.

LIQUIDITY AND CAPITAL RESOURCES


        The Company's primary sources of liquidity historically have
been and continue to be 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.

        The Company's financial position remains strong and it is
sufficient to continue to execute its strategic expansion plans.  At
September 30, 1998, the Company reported working capital of $53.1 million
compared to working capital of $69.6 million at September 30, 1997.  The
decrease in working capital from September 30, 1997 to September 30, 1998
was due primarily to the use of short-term investments to finance $31.2
million in capital expenditures for expansion of carbon fiber production
capacity ($28.6 million) and other product lines ($2.6 million), partially
offset by the net increase in short-term operating accounts.

        Inventories increased from $12.5 million at September 30, 1997 to
$24.2 million at September 30, 1998.  The Company has built carbon fiber
inventories as it qualified and readied new lines for commercial scale
operations. In addition, the Company added to its inventory levels to
capitalize on perceived advantageous pricing and availability of acrylic
fiber precursor, while expected carbon fiber sales were constrained by
market overcapacity and  competitive conditions. The Company expects that
the rate of inventory growth will decrease significantly in fiscal 1999.


                                   20
<PAGE>
<PAGE>

        Marketable securities at September 30, 1998 amounted to $19.0
million compared to $18.3 million at September 30, 1997.  The marketable
securities primarily include U.S. Agency Notes with maturities longer
than three months but less than twelve months and preferred stock.

        Other receivables of $2.4 million consisted primarily of VAT and
import refunds due Zoltek Rt. from the Hungarian taxing authorities and
cash in transit associated with the long-term debt financed by Abilene,
Texas.  Other long-term liabilities were related to various supply
agreements between Zoltek Rt. and its vendors and deferred interest
associated with financing and incentives from Abilene, Texas.

        Historically, cash used in investing activities has been
expended for equipment additions and to support research and development
of carbon fibers applications, the expansion of the Company's carbon
fibers production capacity and the acquisition of Zoltek Rt. In fiscal
1998, the Company made capital expenditures of $31.2 million for various
projects compared to $26.6 million during fiscal 1997.  Of these
expenditures in fiscal 1998 approximately $28.6 million was used for the
new continuous carbonization lines and $2.6 million was used at Zoltek
Rt. for modernization and modifications to produce acrylic fiber and
other industrial products.  These expenditures were financed principally
with cash from the secondary offering in September 1997 and from cash
generated from operations.

        The Company continues to believe that identified and forecasted
customer demand for carbon fiber products will require additional
substantial increases in capacity.  In June 1997, the Company acquired a
100,000 square foot newly constructed building and 11 acres in Abilene,
Texas for its planned capacity expansion, in consideration for a $1.9
million note payable.  The Company constructed a 40,000 square foot
building and acquired an additional 42 acres at the Abilene facility in
the fourth quarter of fiscal 1998.  In connection with the purchase of
the Abilene facility during fiscal 1997 and 1998, the Company obtained a
ten-year, non-interest-bearing loan of $3.1 million, which has been
discounted, through the City of Abilene that will mature in January 2008.
The Company refinanced the short-term non-interest-bearing loan of $1.9
million obtained from the City of Abilene in fiscal 1997 into the new
long-term loan with Abilene.  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.

        At the end of fiscal 1998, the Company substantially completed
two additional continuous carbonization lines at its Abilene, Texas
facility. During the first quarter of fiscal 1999, the Company made the two
additional lines ready for their intended use.  The Company does not plan
to utilize these two new lines until product demand increases.

        At the end of fiscal 1998, the Company substantially completed
construction of a building (288,000 square feet) designed to house up to
eight continuous carbonization lines.  Additionally, the Company has
placed orders for equipment items with long-lead times for six additional
continuous carbonization lines, each with an annual rated capacity of one
million pounds.  The Company plans to temporarily warehouse the long-lead
time equipment items at its facility in Abilene, Texas.  The Company does
not currently anticipate initiating construction of the six additional
lines during fiscal 1999 unless demand for carbon fibers increases.  The
Company's overall strategic plan calls for additional capital
expenditures of approximately $10 to $15 million in fiscal 1999 to obtain
long-lead time equipment items and fund building construction.  The
Company does not anticipate further expenditures on continuous
carbonization lines in fiscal 1999 other than those long-lead time items
which it is currently committed to acquire.  These expenditures will be
funded with cash and cash equivalents, marketable securities on hand and
internally generated funds.

                                   21
<PAGE>
<PAGE>

        The Company continues to maintain an excellent relationship with
its lead bank, Southwest Bank of St. Louis.  The Company maintains
several credit commitments with the bank that would allow the Company to
borrow approximately $10 million.  The Company is currently negotiating
with several U.S. and international banks to secure additional lines of
credit, should the need arise for additional borrowings.

        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.

        Pursuant to a secondary stock offering in November 1995, the
Company sold 4.2 million shares of Common Stock and realized net proceeds
of approximately $26.3 million.  The Company utilized approximately $17.8
million to fund the purchase of Zoltek Rt. With an additional secondary
stock offering in September 1996, the Company sold 2.3 million shares of
Common Stock and realized net proceeds of approximately $68.9 million.
The proceeds from these stock offerings were used to finance the capital
additions in the U.S. and at Zoltek Rt. of $31.2 and $26.6 million during
1998 and 1997, respectively.  Since the acquisition of Zoltek Rt., the
Company has made available $8.5 million to fund working capital
requirements, repayment of bank debt and capital expenditures associated
with the new continuous carbonization lines.  Zoltek Rt.'s cash flow from
operations has funded the carbon fiber expansion in Hungary during fiscal
1997 and 1998.  The remaining proceeds from the secondary stock offerings
are continuing to be used for capital expenditures associated with the
construction of additional continuous carbonization lines at Abilene and
Zoltek Rt. and for related working capital requirements.

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

        Beginning in the second quarter of fiscal 1996, Zoltek Rt.
obtained short-term financing consisting of working capital loans and
commercial letters of credit, of which $3.7 million was outstanding at
September 30, 1996. The Company repaid the Zoltek Rt. borrowings during
fiscal 1997.

        At the date of acquisition of Zoltek Rt., the Company recorded
liabilities related to a governmental grant received by Zoltek Rt. to
finance salary payments prior to the acquisition, subject to repayment by
Zoltek Rt. under certain conditions relative to employment levels, and
other additional cost related to the acquired operations.  Zoltek Rt. has
received notification from the Hungarian Labor Office that the labor
grant would not have to be repaid. The opening balance sheet of Zoltek Rt.
will be adjusted to reflect elimination of the unused portion of the
liability related to the governmental wage grant.

IMPACT OF YEAR 2000

        The significance of the year 2000 is that computer programs,
other business systems and date sensitive devices were installed using
two digits rather than four to define the applicable year, thus they
could read the year 2000 as 1900.  This could cause disruptions of
operations due to system failures or miscalculations that could result in
a temporary inability to process normal transactions or engage in other
business activities.

                                   22
<PAGE>
<PAGE>

        The Company has completed its review of the internal business
systems and is in the process of modifying or replacing any systems that
are not Year 2000 compliant.  The review of manufacturing processes and
facility management systems is underway and any identified systems will
be corrected to be Year 2000 compliant.  All modifications and changes in
internal business, manufacturing processes and facility management
systems are anticipated to be completed by June 1999.  Information system
maintenance and modifications are expensed as incurred, while any new
software and equipment is capitalized and amortized over the asset's
useful life.  The Company purchased and installed new business system
programs in both the U.S. and Hungarian operations at the beginning of
fiscal 1998 which were Year 2000 compliant upon installation.  The cost
of these new systems was approximately $1.0 million.  The Company has not
separately identified the costs incurred to date for system and program
modifications required specifically for Year 2000 compliance but does not
believe they were material to operations or financial position.  The
costs of any further changes currently anticipated are also not expected
to be material to either operations or financial position.

        The Company is currently contacting its key unrelated trading
partners (suppliers and customers) to determine the extent to which the
Company may be vulnerable to their failure to correct their own Year 2000
issues.  Sufficient responses to its inquiries have not been received
from these trading partners to form an accurate assessment of their Year
2000 readiness.  The Company does not have control over these third
parties and, therefore, cannot currently determine the extent future
operating results may be adversely affected by their failure to correct
their Year 2000 problems.

        Based on the Company's accomplishments to date, no contingency
plans are expected to be needed and none have been developed.  Since the
Company anticipates having all Year 2000 issues resolved by June 1999, it
believes that adequate time will be available to develop contingency
plans and insure that alternatives are developed and implemented.
Although the Company believes that the probability is remote, Year
2000 issues could have a material impact on the results from operations
if alternatives are not developed and implemented on a timely basis.

OUTLOOK

        Indications from the market place are that long-term demand for
carbon fibers will grow as expected.  During the Company's multi-year
growth 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.  Significant new applications would increase demand in
significant quantities, compared to limited incremental volume increases.
Therefore, the Company believes it will be necessary to incur costs
related to available capacity during the periods while applications are
being developed. The Company's carbon fiber sales expectations are based
on a combination of the anticipated growth of existing customer demand
and projected new applications development.

        During the fourth quarter of fiscal 1998, the acrylic fiber
market experienced a sharp downturn in sales prices and related gross
profit, primarily as a result of substantial reductions in the market
price of acrylonitrile (ACN) raw material.  The Company expects these
market conditions to continue during much of fiscal 1999.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
-------  ----------------------------------------------------------
        Not Applicable.

                                   23

<PAGE>
<PAGE>

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

                         ZOLTEK COMPANIES, INC.
                  REPORT OF INDEPENDENT ACCOUNTANTS


TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ZOLTEK COMPANIES, INC.
-------------------------------------------------------------------------

        In our opinion, the accompanying consolidated balance sheets and
the related consolidated statements of income, of changes in
shareholders' equity and of cash flows present fairly, in all material
respects, the financial position of Zoltek Companies, Inc., and its
subsidiaries at September 30, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 1998, in conformity with generally accepted
accounting principles.  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 generally accepted auditing
standards 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 the opinion expressed above.


/s/ PRICEWATERHOUSECOOPERS LLP


PricewaterhouseCoopers LLP
St. Louis, Missouri
November 18, 1998


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

ASSETS                                                                          SEPTEMBER 30,
----------------------------------------------------------------------------------------------------
                                                                          1998                1997
                                                                        --------            --------
<S>                                                                     <C>                 <C>
Current assets:
  Cash and cash equivalents                                             $  8,004            $ 41,148
  Marketable securities                                                   18,961              18,302
  Accounts receivable, less allowance for doubtful accounts of
    $314 and $331, respectively                                           14,964              14,163
  Inventories                                                             24,209              12,487
  Prepaid expenses                                                           173                 402
  Other receivables                                                        2,403               1,636
  Refundable income taxes                                                    745                   -
                                                                        --------            --------
      Total current assets                                                69,459              88,138
Property and equipment, net                                               76,861              51,382
Other assets                                                                 889                 442
                                                                        --------            --------
      Total assets                                                      $147,209            $139,962
                                                                        ========            ========

<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
----------------------------------------------------------------------------------------------------
<S>                                                                     <C>                 <C>
Current liabilities:
  Short-term notes payable                                              $      -            $  1,853
  Current maturities of long-term debt                                       817                 907
  Trade accounts payable                                                  11,429              10,599
  Accrued expenses and other liabilities                                   4,155               5,099
  Income taxes payable                                                         -                 124
                                                                        --------            --------
      Total current liabilities                                           16,401              18,582
Other long-term liabilities                                                1,009                 243
Long-term debt, less current maturities                                    5,898               4,295
Deferred income taxes                                                      2,299               1,006
                                                                        --------            --------
      Total liabilities                                                   25,607              24,126
                                                                        --------            --------
Commitments and contingencies (Note 7)
Shareholders' equity:
  Preferred stock, $.01 par value, 1,000 shares authorized,
    no shares issued and outstanding                                           -                   -
  Common stock, $.01 par value, 50,000 shares authorized,
    16,216 shares issued and outstanding                                     162                 162
  Additional paid-in capital                                              99,954              99,954
  Cumulative foreign currency translation adjustment                     (12,341)             (8,512)
  Retained earnings                                                       33,827              24,232
                                                                        --------            --------
      Total shareholders' equity                                         121,602             115,836
                                                                        --------            --------
      Total liabilities and shareholders' equity                        $147,209            $139,962
                                                                        ========            ========


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


                                   25
<PAGE>
<PAGE>

<TABLE>
                                  ZOLTEK COMPANIES, INC.
                             CONSOLIDATED STATEMENT OF INCOME
                       (Amounts in thousands, except per share data)
<CAPTION>
                                                                   YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------------------------------
                                                                 1998         1997       1996
                                                               -------      -------    -------
<S>                                                            <C>          <C>        <C>
Net sales                                                      $83,390      $90,628    $68,957
Cost of sales                                                   58,805       64,214     49,772
                                                               -------      -------    -------
  Gross profit                                                  24,585       26,414     19,185
Selling, general and administrative expenses                    12,958       13,172      9,510
                                                               -------      -------    -------
  Operating income from continuing operations                   11,627       13,242      9,675
Other income (expense):
  Interest expense                                                (494)        (820)    (1,013)
  Interest income                                                2,653        3,979        546
  Other, net                                                      (253)          29       (497)
                                                               -------      -------    -------
Income from continuing operations before income taxes           13,533       16,430      8,711
Provision for income taxes                                       3,938        3,602      2,539
                                                               -------      -------    -------
  Net income from continuing operations                          9,595       12,828      6,172
Income from discontinued operations, net of income taxes             -          -           38
                                                               -------      -------    -------
  Net income                                                   $ 9,595      $12,828    $ 6,210
                                                               =======      =======    =======
Net income per share:
  Basic income per share:  Continuing operations               $  0.59      $  0.79    $  0.46
                           Discontinued operations                   -            -          -
                                                               -------      -------    -------
  Net income                                                   $  0.59      $  0.79    $  0.46
                                                               =======      =======    =======
Weighted average common shares outstanding                      16,216       16,212     13,348

  Diluted income per share:  Continuing operations             $  0.58      $  0.78    $  0.45
                             Discontinued operations                 -            -          -
                                                               -------      -------    -------
  Net income                                                   $  0.58      $  0.78    $  0.45
                                                               =======      =======    =======
Weighted average common and common equivalent shares
 outstanding                                                    16,525       16,547     13,737

     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>
                                                                Additional  Cumulative                 Total
                                                        Common   Paid-in    Translation   Retained  Shareholders'
                                                        Stock    Capital    Adjustment    Earnings     Equity
-----------------------------------------------------------------------------------------------------------------
<S>                                                     <C>      <C>       <C>            <C>         <C>
Balance, September 30, 1995                             $ 48     $ 4,208     $     -      $ 5,263     $  9,519
Secondary stock offering November 1995                    21      26,271           -            -       26,292
Common stock split (2-for-1) in June 1996                 69           -           -          (69)           -
Secondary stock offering September 1996                   23      68,853           -            -       68,876
Exercise of stock options                                  1          78           -            -           79
Benefit of tax deduction for stock option
  compensation expense                                     -         460           -            -          460
Foreign currency translation adjustment                    -           -      (2,658)           -       (2,658)
Net income for the year ended September 30, 1996           -           -           -        6,210        6,210
                                                        ----     -------     -------      -------     --------
Balance, September 30, 1996                              162      99,870      (2,658)      11,404      108,778
Exercise of stock options and benefit of
  tax deduction                                            -          84           -            -           84
Foreign currency translation adjustment                    -           -      (5,854)           -       (5,854)
Net income for the year ended September 30, 1997           -           -           -       12,828       12,828
                                                        ----     -------     -------      -------     --------
Balance, September 30, 1997                              162      99,954      (8,512)      24,232      115,836
Foreign currency translation adjustment                    -           -      (3,829)           -       (3,829)
Net income for the year ended September 30, 1998           -           -           -        9,595        9,595
                                                        ----     -------     -------      -------     --------
Balance, September 30, 1998                             $162     $99,954    ($12,341)     $33,827     $121,602
                                                        ====     =======     =======      =======     ========


               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,
--------------------------------------------------------------------------------------------------------------
                                                                               1998        1997         1996
                                                                             --------    --------     --------
<S>                                                                          <C>         <C>          <C>
Cash flows from operating activities:
 Net income                                                                  $  9,595    $ 12,828     $  6,210
 Adjustments to reconcile net income to net cash provided by
  operating activities:
   Depreciation and amortization                                                3,519       2,637        2,848
   Unrealized foreign exchange (gain) loss                                        121        (159)           8
   Other, net                                                                      84         175          160
   Changes in assets and liabilities, net of effects from purchase
    of Zoltek Rt.:
     Increase in accounts receivable                                           (1,777)     (3,562)      (5,006)
     Increase in other receivables                                               (951)       (662)        (751)
     Increase in inventories                                                  (12,700)     (1,649)      (3,651)
     Increase in prepaid expenses and other assets                               (359)        (85)        (341)
     Decrease in inventories held for sale                                          -           -          453
     Increase (decrease) in trade accounts payable                              1,392       3,337       (1,322)
     Increase (decrease) in accrued expenses and other liabilities             (1,277)      2,258          393
     Increase in income taxes payable and deferred taxes                          474         286          131
     Increase (decrease) in other long-term liabilities                           761      (2,213)      (1,097)
                                                                             --------    --------     --------
      Total adjustments                                                       (10,713)        363       (8,175)
                                                                             --------    --------     --------
Net cash used (provided) by operating activities                               (1,118)     13,191       (1,965)
                                                                             --------    --------     --------

Cash flows from investing activities:
 Payments for purchase of Zoltek Rt., net of cash acquired                          -           -      (17,555)
 Payments for purchase of property and equipment                              (31,188)    (26,589)      (5,134)
 Net purchase of marketable securities                                           (659)    (18,302)           -
                                                                             --------    --------     --------
Net cash used by investing activities                                         (31,847)    (44,891)     (22,689)
                                                                             --------    --------     --------

Cash flows from financing activities:
 Net proceeds from sale of common stock                                             -           -       95,167
 Net proceeds from exercise of stock options and warrants                           -          84          538
 Proceeds from issuance of notes payable                                          509       5,527       13,050
 Repayment of notes payable                                                      (848)     (7,864)     (10,215)
 (Increase) decrease in notes receivable                                          119         169         (162)
 Decrease in deferred costs                                                         -           -          286
                                                                             --------    --------     --------
Net cash provided (used) by financing activities                                 (220)     (2,084)      98,664
                                                                             --------    --------     --------
Effect of exchange rate changes on cash                                            41        (515)        (240)
                                                                             --------    --------     --------
Net increase (decrease) in cash                                               (33,144)    (34,299)      73,770
Cash and cash equivalents at beginning of period                               41,148      75,447        1,677
                                                                             --------    --------     --------
Cash and cash equivalents at end of period                                   $  8,004    $ 41,148     $ 75,447
                                                                             ========    ========     ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
 Interest                                                                    $    502    $    815     $    996
 Income taxes                                                                   3,559       2,983        1,954


           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 POLICIES
-------------------------------------------------------------------------------

PRINCIPLES OF CONSOLIDATION

    Zoltek Companies, Inc. (the "Company") is a holding company which
operates through wholly-owned subsidiaries, Zoltek Corporation, Zoltek
Intermediates Corporation, Zoltek Properties, Inc. and Zoltek Rt.  Zoltek
Corporation ("Zoltek") develops, manufactures and markets carbon fibers used
in aircraft brakes and other composite materials.  In August 1995, the
Company's Board of Directors authorized the disposition of the Company's
former Equipment and Services Business Unit ("ESBU"), which supplied industrial
process equipment, aftermarket components and repair services.  These
operations have been classified as a discontinued operation (Note 12). Zoltek
Rt. (formerly known as Zoltek Magyar Viscosa, Rt.) manufactures and markets
acrylic and nylon fibers and yarns to the textile industry, and recently began
operating two continuous carbonization lines. 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.  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.

FOREIGN CURRENCY TRANSLATION

    For Zoltek Rt. which prepares its financial statements in the
Hungarian Forint, 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 a separate component of shareholders' equity.  Gains and
losses from foreign currency transactions of Zoltek Rt. are included in
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.

REVENUE RECOGNITION

    The Company recognizes sales on the date the products are shipped.
During 1998, approximately $8,721,000 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.  While the markets for the
Company's products are geographically unlimited, most of Zoltek's
business is with customers located in North America and most of Zoltek
Rt.'s sales are to customers in Eastern Europe, the Commonwealth of
Independent States, Europe and Asia.  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, 1998, the Company had no significant concentrations
of credit risk.


                                   29<PAGE>
<PAGE>

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 $7,222,000 and $40,041,000 at September 30, 1998 and 1997,
respectively.  At September 30, 1997, cash equivalents included
$25,443,000 of U.S. Treasury Bills.

MARKETABLE SECURITIES

    Marketable securities consist of U.S. Treasury and 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 that approximated
cost.  At September 30, 1998 and 1997, the Company held $16,811,000 and
$16,219,000, respectively, of U.S. Treasury and U.S. Agency Notes and
$2,150,000 and $2,083,000, respectively, of preferred stock equities.

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, 1998, 1997 and 1996, 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.

    The Company provides for depreciation by charging amounts sufficient
to amortize the cost of the properties 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.


                                   30<PAGE>
<PAGE>

    During 1998, the Company incurred costs of $1,250,000 relating to initial
operation of the new continuous carbonization lines. Such costs were reimbursed
by economic incentive funds received from the City of Abilene, Texas.

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, 1998 and 1997. 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 $893,000, $712,000 and $537,000 in 1998, 1997, and 1996,
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.

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 grants.

NET INCOME PER SHARE

    SFAS No. 128, "Earnings Per Share," was adopted by the Company and
all prior years presented were adjusted to reflect the new calculation.
Accordingly, basic net income per share includes no dilution and is
calculated by dividing net income by the weighted average number of
common shares outstanding for each period, while diluted net income per
share reflects the potential dilutive effects of stock options and
incentive shares.  All share and per share data have been adjusted to
give retroactive effect to the stock splits described in Note 9.

RECENT ACCOUNTING PRONOUNCEMENTS

    The following recently issued accounting standards will be applicable
to the Company for its fiscal year ending September 30, 1999:

SFAS 130, "Reporting Comprehensive Income," establishes standards for
reporting and displaying comprehensive income and its components as a
part of a full set of financial statements.  This statement applies only
to the presentation of comprehensive income.


                                   31<PAGE>
<PAGE>

SFAS 131, "Disclosure About Segments of an Enterprise and Related
Information," establishes standards for the reporting by public
enterprises of information about operating segments.  It also
establishes standards for disclosure about products and services,
geographical areas and major customers.

Both SFAS 130 and SFAS 131 are not expected to have a material impact on
the Company's consolidated financial condition, results of operations or
cash flows.

FINANCIAL PRESENTATION CHANGES

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

2.  ACQUISITION
-------------------------------------------------------------------------

    On December 8, 1995, the Company acquired Zoltek Rt. Pursuant to
agreements with the Hungarian State Property Agency and other
shareholders and lenders, the Company acquired approximately 95% of the
equity ownership and substantially all the debt of Zoltek Rt. for
approximately $18 million.  Subsequently, the Company acquired an
additional 2% of the equity ownership for $250,000.  The Zoltek Rt.
acquisition is reported under the purchase method of accounting and is
included in the Company's consolidated financial statements from the date
of acquisition.  The purchase price allocation includes assets and
liabilities acquired at their estimated fair values.  The excess of the
fair market value of the assets acquired over the purchase price was
allocated to reduce property and equipment.

    At the date of acquisition, the Company assumed a liability related
to a governmental grant received by Zoltek Rt. to finance salary payments
prior to the acquisition, but subject to repayment by Zoltek Rt. if it
failed to maintain specified employment levels, and other costs related
to the acquired operations was recorded.  During fiscal 1998 and fiscal
1997, a charge of approximately $0.2 and $0.9 million, respectively, was
made against the liability to maintain employment at levels specified by
the grant.  During fiscal 1998, Zoltek Rt. received notification from the
Hungarian Labor Office that the labor grant would not have to be repaid.
The opening balance sheet of Zoltek Rt. will be adjusted to reflect
elimination of the unused portion of the liability related to the
governmental wage grant.

    Set forth below are unaudited pro forma combined results of
operations of Zoltek and Zoltek Rt. for the twelve months ended September
30, 1996 as if the Zoltek Rt. acquisition had been completed as of
October 1, 1995.  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 had the acquisition of Zoltek Rt. been completed as of October
1, 1995 (amounts in thousands, except per share data):

                                          YEAR ENDED
                                     SEPTEMBER 30, 1996
                                     ------------------

    Net sales                              $80,323
    Net income from continuing operations    6,034
    Net income                               5,996
    Net income per share                      0.43


                                   32<PAGE>
<PAGE>

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

    Inventories consist of the following (amounts in thousands):

<TABLE>
<CAPTION>
                                                               SEPTEMBER 30,
                                                           1998          1997
                                                          -------       -------
<S>                                                       <C>           <C>
    Raw materials                                         $ 6,464       $ 5,886
    Work-in-process                                         1,837         1,008
    Finished goods                                         15,509         5,076
    Supplies, spares and other                                399           517
                                                          -------       -------

                                                          $24,209       $12,487
                                                          =======       =======
</TABLE>

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


    Property and equipment consists of the following (amounts in
    thousands):
<TABLE>
<CAPTION>
                                                               SEPTEMBER 30,
                                                           1998          1997
                                                         --------       -------
<S>                                                      <C>            <C>
    Land                                                 $  1,146       $ 1,176
    Buildings and improvements                             24,669        22,467
    Machinery and equipment                                59,200        33,591
    Furniture and fixtures                                  3,751         3,315
                                                         --------       -------
                                                           88,766        60,549
    Less:  accumulated depreciation                       (11,905)       (9,167)
                                                         --------       -------
                                                         $ 76,861       $51,382
                                                         ========       =======
</TABLE>

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

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

From continuing operations:

<TABLE>
<CAPTION>
                                               1998           1997         1996
                                              ------         ------       ------
<S>                                           <C>            <C>          <C>
    Current:
      Federal                                 $1,855         $2,721       $1,566
      State                                      117            142           98
      Non-U.S. local                             627            673          401
                                              ------         ------       ------
                                               2,599          3,536        2,065

    Deferred:
      Federal                                    714             66          154
      State                                        -              -            7
      Non-U.S.                                   625              -          313
                                              ------         ------       ------
                                               1,339             66          474
                                              ------         ------       ------

        Total continuing operations            3,938          3,602        2,539
                                              ------         ------       ------

    From discontinued operations:
    Current:
      Federal                                      -              -           24
      State                                        -              -            1
                                              ------         ------       ------
        Total discontinued operations              -              -           25
                                              ------         ------       ------
                                              $3,938         $3,602       $2,564
                                              ======         ======       ======
</TABLE>

                                   33<PAGE>
<PAGE>

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

<TABLE>
<CAPTION>
                                                              1998         1997
                                                             ------       ------
<S>                                                          <C>          <C>
    Depreciation                                             $1,700       $  899
    Employee related costs                                      167          (37)
    Inventory reserve                                          (220)           -
    Bad debt accrual                                            (36)         (34)
    Deferred state income taxes                                 (38)          43
    Other                                                        48          (89)
    Non-U.S. operations deferred tax, net                       678          224
                                                             ------       ------
    Total deferred tax liability                             $2,299       $1,006
                                                             ======       ======
</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 and 1997, the Company recorded a reduction in
the valuation allowance of $559,000 and $1,471,000, respectively, related
to utilization of net operating loss carryforwards in 1998 and 1997.

    The provision 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>
                                                                 1998           1997            1996
                                                                ------        -------          ------
<S>                                                             <C>           <C>              <C>
    At statutory rate:
      Income taxes on income from continuing operations         $4,601        $ 5,586          $2,962
      Income taxes on income from discontinued operations            -              -              22
    Increases (decreases):
      Lower effective tax rate on non-U.S. operations             (988)        (1,303)           (593)
      Valuation allowance change                                  (334)        (1,471)           (265)
      Local taxes, non-U.S.                                        627            673             401
      State taxes, net of federal benefit                          (35)           142              71
      Other                                                         67            (25)            (33)
                                                                ------         ------          ------
                                                                $3,938         $3,602          $2,565
                                                                ======         ======          ======
</TABLE>

    For the years ended September 30, 1998, 1997 and 1996, the
consolidated income from continuing operations before income taxes by
domestic and foreign sources was $7,358,000 and $6,175,000, $8,287,000
and $8,143,000, and $5,006,000 and $3,706,000, respectively.
Undistributed earnings of Zoltek Rt. ($10,424,000 and $5,142,000 at
September 30, 1998 and 1997, respectively) are considered to be
permanently invested and, accordingly, no provision for income taxes was
made.


6.  FINANCING
------------------------------------------------------------------------------
SHORT-TERM DEBT AND CREDIT AGREEMENTS

    The Company had a short-term non-interest bearing note of $1,853,000
at September 30, 1997 that was secured by the real estate of the Abilene
plant.  This note matured in December 1997 and was refinanced in 1998 as
part of the new long-term debt financing provided by the City of Abilene,
Texas.


                                   34<PAGE>
<PAGE>

    The Company has a revolving credit agreement with Southwest Bank,
St. Louis, Missouri, which bears interest at prime (prime rate at
September 30, 1998 was 8.0%) with a maximum available of $3,500,000.
There were no borrowings under the revolving credit agreement at
September 30, 1998 or 1997.  The Company also has various lines of credit
with Hungarian banks used primarily for bank guarantees and letters of
credit of Zoltek Rt.'s vendors which totaled $5,200,000 at September 30,
1998.

LONG-TERM DEBT

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

<TABLE>
<CAPTION>
                                                                                 SEPTEMBER 30,
------------------------------------------------------------------------------------------------
                                                                                 1998      1997
                                                                                ------    ------
<S>                                                                             <C>       <C>
Note payable with interest at 9%, payable in monthly installments of
  principal and interest of $62,458 to maturity in November 1999                $  533    $1,201

Note payable with interest at 9.95%, payable in monthly installments of
  principal and interest of $19,288 to maturity in September 2009                1,544     1,617

Note payable with interest at 9.5%, payable in monthly installments of
  principal and interest of $27,672 to maturity in December 2009                 2,276     2,384

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       2,362         -
                                                                                ------    ------
                                                                                 6,715     5,202

Less:  amounts payable within one year                                            (817)     (907)
                                                                                ------    ------

                                                                                $5,898    $4,295
                                                                                ======    ======
</TABLE>

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

             YEAR ENDING
            SEPTEMBER 30,              TOTAL

               1999                    $  817
               2000                       451
               2001                       600
               2002                       762
               2003                       937
               Thereafter               3,148
                                       ------
                                       $6,715
                                       ======

    The note payable, aggregating $533,000 at September 30, 1998, is
secured by machinery and equipment.  The remaining notes payable are
secured by real estate holdings.

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

LEASE

    Land at the carbon fibers manufacturing facility in Missouri is
leased under an operating lease which provides for 100% real estate tax
abatement and expires in December 2065, with a renewal option for 24
years expiring in December 2089.  The lease required a prepayment of
$50,000 for rental through October


                                   35<PAGE>
<PAGE>

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, 1998, 1997 and 1996.

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.

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.  The Company's contribution to the plan is determined
annually by the Board of Directors.  Contributions of $220,000, $180,000
and $139,000 were made for the years ended September 30, 1998, 1997 and
1996, respectively.


9.  RECAPITALIZATIONS AND STOCK SPLITS
----------------------------------------------------------------------------

    In February 1996, the Company's authorized capital structure was
changed to 20,000,000 shares of common stock, par value $.01 per share,
and 1,000,000 shares of preferred stock, par value $.01 per share.

    On May 20, 1996, the Company announced a two-for-one stock split
implemented by a stock dividend of one share for each share outstanding.
The stock dividend was paid June 17, 1996 to shareholders of record on
June 3, 1996.

    In February 1997, the Company's authorized capital structure was
changed to 50,000,000 shares of common stock, par value $.01 per share.

    All share and per share amounts in the accompanying financial
statements and notes have been adjusted to give retroactive effect to the
stock splits for all periods presented.

10. 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 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, 1,500,000 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.  The
options were issued at an option price equal to the market price on the
date of grant.


                                   36<PAGE>
<PAGE>

    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 2008, 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:

    Assumptions                          1998           1997
    -----------                         -------        -------
      Expected life of options          6 years        6 years
      Risk free interest rate           5.50%          6.36%
      Volatility of stock                 74%            65%
      Expected dividend yield              --             --

    The weighted average fair value of the options granted during 1998
and 1997 was $1,809,000 and $1,701,000, 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 (in
thousands, except for earning per share information):

                                        1998           1997
                                       ------        -------
    Net income:
      As reported                      $9,595        $12,828
      Pro forma                         9,040         12,547

    Diluted income per share:
      As reported                      $ 0.58        $  0.78
      Pro forma                          0.55           0.76

    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.


                                   37
<PAGE>
<PAGE>

    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, 1995   555,000       $ 3.98         61,500        $ 3.36
      Granted                      332,500         9.93
      Exercised                   (117,000)        1.33
      Cancelled                    (80,500)        1.33
                                  --------

     Balance, September 30, 1996   690,000       $ 7.40         85,500        $ 7.83
      Granted                      155,000        27.59
      Exercised                     (6,000)        1.83
      Cancelled                   (209,000)       17.92
                                  --------

     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
                                  ========
</TABLE>

     The following table summarizes information for options currently
outstanding and exercisable at September 30, 1998:

<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        5 years         $ 1.83        12,000        $ 1.83
      3.42-6.25     330,000        6 years           4.79        30,000          4.33
     8.38-13.50     168,000        7 years           9.52        37,500         13.50
    27.25-31.25     115,000        8 years          28.49        37,500         31.25
    34.25-39.00      97,500        9 years          38.27        37,500         39.00
                    -------                                     -------
   $ 1.33-39.00     722,500        7 years         $14.13       154,500        $21.31
                    =======                                     =======
</TABLE>

11. SECONDARY STOCK OFFERINGS
-------------------------------------------------------------------------

    Pursuant to a secondary public offering in November 1995, the
Company sold 4,170,000 shares of common stock and received net proceeds
of $26.3 million.  The Company used approximately $18 million to fund
the purchase of Zoltek Rt. and the remaining proceeds for Zoltek Rt.'s
working capital needs, and general corporate purposes, including capital
expenditures.

    On September 18, 1996, the Company completed a secondary offering
of 2,300,000 shares of common stock and received net proceeds of $68.9
million.  The Company is utilizing these funds to expand its production
capacity by constructing additional continuous carbonization lines and
for working capital needs and general corporate purposes.

                                   38<PAGE>
<PAGE>

12. DISCONTINUED OPERATIONS
-------------------------------------------------------------------------

    In view of the equipment and services business unit's operating
performance, demands of the unit on the Company's finite managerial
resources and the perceived opportunities in the carbon fibers
operations, the Company's Board of Directors authorized in August 1995
the disposition of the Company's ESBU.  Revenues from the ESBU were
$760,000 in fiscal 1996.  The Company sold the unit's remaining product
line, flexible graphite products, on June 30, 1996 in consideration of a
note receivable for $206,000, which approximated the net book value of
such assets.



13. SUMMARY OF QUARTERLY RESULTS (UNAUDITED) (amounts in thousands,
-------------------------------------------------------------------------
    except per share data)
-------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEAR 1998            1ST QUARTER    2ND QUARTER   3RD QUARTER   4TH QUARTER
----------------------------------------------------------------------------------
<S>                           <C>            <C>           <C>           <C>
Net sales                     $22,224        $22,566       $18,868       $19,732
Gross profit                    6,475          7,178         5,765         5,167
Net income                    $ 3,261        $ 3,470       $ 1,699       $ 1,165


Net income per share:
 Basic                        $  0.20        $  0.21       $  0.11       $  0.07
 Diluted                      $  0.20        $  0.21       $  0.10       $  0.07

<CAPTION>
FISCAL YEAR 1997            1ST QUARTER    2ND QUARTER   3RD QUARTER   4TH QUARTER
----------------------------------------------------------------------------------
<S>                           <C>            <C>           <C>           <C>
Net sales                     $22,026        $22,857       $22,945       $22,800
Gross profit                    5,589          6,630         6,886         7,309
Net income                    $ 2,528        $ 3,130       $ 3,253       $ 3,917


Net income per share:
 Basic                        $  0.16        $  0.19       $  0.20       $  0.24
 Diluted                      $  0.16        $  0.19       $  0.19       $  0.24
</TABLE>


                                   39<PAGE>
<PAGE>

14. SEGMENT INFORMATION  (amounts in thousands)
------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                        YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------
                                                           1998         1997
                                                         --------     --------
<S>                                                      <C>          <C>
Net sales
 Carbon fibers                                           $ 22,722     $ 23,209
 Acrylic fibers and other products                         60,668       67,419
                                                         --------     --------
                                                         $ 83,390     $ 90,628
                                                         ========     ========


Gross margin
 Carbon fibers                                           $  8,695     $  9,118
 Acrylic fibers and other products                         15,890       17,296
                                                         --------     --------
                                                         $ 24,585     $ 26,414
                                                         ========     ========

Total assets
 Carbon fibers                                           $ 79,710     $ 41,827
 Acrylic fibers and other products                         39,651       38,145
 General corporate                                         27,848       59,990
                                                         --------     --------
                                                         $147,209     $139,962
                                                         ========     ========

Capital expenditures
 Carbon fibers                                           $ 28,544     $ 25,292
 Acrylic fibers and other products                          2,644        1,297
                                                         --------     --------
                                                         $ 31,188     $ 26,589
                                                         ========     ========


Depreciation and amortization expense
 Carbon fibers                                           $  2,309     $  1,386
 Acrylic fibers and other products                          1,210        1,251
                                                         --------     --------
                                                         $  3,519     $  2,637
                                                         ========     ========
</TABLE>

                                   40<PAGE>
<PAGE>

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

         Not Applicable.


                          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 1999 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 1999 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 1999 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 1999 Annual
Meeting of Shareholders is incorporated herein by this reference.


                             PART IV

Item 14. Exhibits, Financial Statement Schedules 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, 1998
        and 1997

        Consolidated Statement of Income for the years ended
        September 30, 1998, 1997 and 1996

        Consolidated Statement of Changes in Shareholders' Equity
        for the years ended September 30, 1998, 1997 and 1996

        Consolidated Statement of Cash Flows for the years ended
        September 30, 1998, 1997 and 1996

        Notes to Consolidated Financial Statements



                                   41<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                           46

12-09 Valuation and Qualifying Accounts and Reserves     47

              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:


  2.1 Form of Share Purchase Agreement, by and among Allami
      Privatizacios Es Vagyonkezelo Reszvenytarsasag, Magyar Viscosa
      Rt. and Zoltek Corporation, filed as Exhibit 2.1 to Registrant's
      Registration Statement on Form S-1 (Reg. No. 33-97294) is
      incorporated herein by this reference

  2.2 Agreement on Sale of Lease Receivables, dated September 20,
      1995, by and between Zoltek Corporation and Central European
      International Bank Ltd, filed as Exhibit 2.2 to Registrant's
      Registration Statement on Form S-1 (Reg. No. 33-97294) is
      incorporated herein by this reference

  2.3 Agreement on Sale of Shares, dated September 20, 1995, with
      respect to 14.132 pcs of preferred shares of Magyar Viscosa Rt.
      by and between Zoltek Corporation and CIB Hungaria Bank Rt.,
      filed as Exhibit 2.3 to Registrant's Registration Statement on
      Form S-1 (Reg. No. 33-97294) is incorporated herein by this
      reference

  2.4 Agreement on Sale of Shares, dated September 20, 1995, with
      respect to 14.934 pcs of ordinary shares and 29.534 pcs of
      preferred shares of Magyar Viscosa Rt. by and between Zoltek
      Corporation and CIB Hungaria Bank Rt., filed as Exhibit 2.4 to
      Registrant's Registration Statement on Form S-1 (Reg. No. 33-
      97294) is incorporated herein by this reference

  2.5 Sales Agreement, dated September 22, 1995, by and between Zoltek
      Corporation and Bank of Hungarian Savings Cooperatives, Ltd.,
      filed as Exhibit 2.5 to Registrant's Registration Statement on
      Form S-1 (Reg. No. 33-97294) is incorporated herein by this
      reference


                                   42<PAGE>
<PAGE>

 2.6  Agreement on Sale of Shares, dated September 12, 1995, by and
      between Zoltek Corporation and Allami Fejlesztesi Intezet, filed
      as Exhibit 2.6 to Registrant's Registration Statement on Form
      S-1 (Reg. No. 33-97294) is incorporated herein by this reference

 2.7  Agreement on Sale of Shares Issued By Magyar Viscosa Rt., by and
      between Zoltek Corporation and Inter-Europa Bank Rt., filed as
      Exhibit 2.7 to Registrant's Registration Statement on Form S-1
      (Reg. No. 33-97294) is incorporated herein by this reference

 2.8  Agreement on Sale of Loan Receivables by and between Zoltek
      Corporation and Bank of Inter-Europa Bank Rt., filed as Exhibit
      2.8 to Registrant's Registration Statement on Form S-1 (Reg. No.
      33-97294) is incorporated herein by this reference

 2.9  Agreement on Sale of Loan Receivables and Shares, dated as of
      September 12, 1995, by and between Zoltek Corporation and
      Creditanstalt Rt., filed as Exhibit 2.9 to Registrant's
      Registration Statement on Form S-1 (Reg. No. 33-97294) is
      incorporated herein by this reference

 2.10 Agreement for the Sale of Assets, dated as of August 17, 1995,
      by and among Zoltek Corporation, Zoltek Properties, Inc.,
      Pioneer Pump and Packing, Inc., Pioneer Holdings, Inc. and Zsolt
      Rumy, filed as Exhibit 2 to Registrant's Current Report on Form
      8-K dated August 31, 1995, is incorporated herein by this
      reference

 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. Directors Stock Option Plan, filed as
      Appendix A to Registrant's definitive proxy statement for the
      1995 Annual Meeting of Shareholders 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


                                   43<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  Underwriting Agreement, dated November 17, 1995, by and between
      the Registrant and First Albany Corporation and Stifel, Nicolaus
      & Company, Incorporated, on behalf of the several underwriters,
      filed as Exhibit 1.1 to Registrant's Registration Statement on
      Form S-1 (Reg. No. 33-97294) is incorporated herein by this
      reference

10.8  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

10.9  Promissory Note, dated November 14, 1994, by and 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

10.10 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

10.11 Purchase Agreement, dated September 18, 1996, by and between
      Registrant and Merrill Lynch & Co. and Stifel, Nicolaus &
      Company, Incorporated, on behalf of the several underwriters,
      filed as Exhibit 1.1 to Registrant's Registration Statement on
      Form S-3 (Reg. No. 333-07547) is 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 year ended
      September 30, 1995, is incorporated herein by this reference.

 23   Consent of Pricewaterhouse Coopers LLP is filed herewith.

 27   Financial Data Schedule is filed herewith.


                                   44<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 30, 1998

    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, 1998
------------------------  and Director
Zsolt Rumy


/s/ Daniel D. Greenwell   Chief Financial Officer            December 29, 1998
------------------------  and Corporate Secretary
Daniel D. Greenwell


/s/ Linn Bealke           Director                           December 29, 1998
------------------------
Linn Bealke


/s/ James W. Betts        Director                           December 29, 1998
------------------------
James W. Betts


/s/ Charles A. Dill       Director                           December 29, 1998
------------------------
Charles A. Dill


/s/ James Dorr            Director                           December 29, 1998
------------------------
James Dorr


/s/ John L. Kardos        Director                           December 29, 1998
------------------------
John L. Kardos
</TABLE>

                                   45
<PAGE>
<PAGE>

                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 18, 1998, appearing in the 1998 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 18, 1998

                                   46
<PAGE>
<PAGE>

<TABLE>
                                                 FOR THE YEAR ENDED SEPTEMBER 30, 1998

                                       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      $     331      $      57     $      --      $      74<F1>    $     314
                                   =========      =========     =========      =========        =========

<CAPTION>

                                                   _________________________________


                                                 FOR THE YEAR ENDED SEPTEMBER 30, 1997

                                       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      $      72      $     259     $              $                $     331
                                   =========      =========     =========      =========        =========

<CAPTION>

                                                   _________________________________


                                                 FOR THE YEAR ENDED SEPTEMBER 30, 1996

                                       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      $      28      $      41     $     121<F2>  $     118<F1>    $      72
                                   =========      =========     =========      =========        =========

<FN>
_________________

<F1> Write-off of uncollectible receivable, net of recovery.
<F2> Acquisition of Zoltek Rt.
</TABLE>


                                      47
<PAGE>
<PAGE>

<TABLE>
                             EXHIBIT INDEX
                             -------------

<CAPTION>
Exhibit No.  Description
-----------  -----------
<C>          <S>
    2.1      Form of Share Purchase Agreement, by and among Allami
             Privatizacios Es Vagyonkezelo Reszvenytarsasag, Magyar
             Viscosa Rt. and Zoltek Corporation<F*>

    2.2      Agreement on Sale of Lease Receivables, dated September
             20, 1995, by and between Zoltek Corporation and Central
             European International Bank Ltd.<F*>

    2.3      Agreement on Sale of Shares, dated September 20, 1995,
             with respect to 14.132 pcs of preferred shares of Magyar
             Viscosa Rt. by and between Zoltek Corporation and CIB
             Hungaria Bank Rt.<F*>

    2.4      Agreement on Sale of Shares, dated September 20, 1995,
             with respect to 14.934 pcs of ordinary shares and 29.534
             pcs of preferred shares of Magyar Viscosa Rt. by and
             between Zoltek Corporation and CIB Hungaria Bank Rt.<F*>

    2.5      Sales Agreement, dated September 22, 1995, by and between
             Zoltek Corporation and Bank of Hungarian Savings
             Cooperatives, Ltd.<F*>

    2.6      Agreement on Sale of Shares, dated September 12, 1995, by
             and between Zoltek Corporation and Allami Fejlesztesi
             Intezet<F*>

    2.7      Agreement on Sale of Shares Issued By Magyar Viscosa Rt.,
             by and between Zoltek Corporation and Inter-Europa Bank
             Rt.<F*>

    2.8      Agreement on Sale of Loan Receivables by and between
             Zoltek Corporation and Bank of Inter-Europa Bank Rt.<F*>

    2.9      Agreement on Sale of Loan Receivables and Shares, dated
             as of September 12, 1995, by and between Zoltek
             Corporation and Creditanstalt Rt.<F*>

    2.10     Agreement for the Sale of Assets, dated as of August 17,
             1995, by and among Zoltek Corporation, Zoltek Properties,
             Inc., Pioneer Pump and Packing, Inc., Pioneer Holdings,
             Inc. and Zsolt Rumy<F*>

    3.1      Restated Articles of Incorporation of the Registrant<F*>

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

    4.1      Form of certificate for Common Stock<F*>

   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<F*>

   10.2      Zoltek Companies, Inc. Long Term Incentive Plan<F*>

   10.3      Zoltek Companies, Inc. Directors Stock Option Plan<F*>

<FN>
______________

<F*> Incorporated herein by reference


                                      48
<PAGE>
<PAGE>

<CAPTION>
                               EXHIBIT INDEX
                               -------------

Exhibit No.  Description
-----------  -----------
<C>          <S>
   10.4      Promissory Note, dated September 29, 1994, by and between
             Zoltek Properties, Inc. and Metlife Capital
             Corporation<F*>

   10.5      Precursor Agreement, dated as of July 1, 1994, by and
             between Zoltek Corporation and Courtaulds Fibres
             Limited.<F*> (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.<F*> (An application for confidential treatment
             has been made for a portion of Exhibit 10.6.)

   10.7      Underwriting Agreement, dated November 17, 1995, by and
             between the Registrant and First Albany Corporation and
             Stifel, Nicolaus & Company, Incorporated, on behalf of
             the several underwriters<F*>

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

   10.9      Promissory Note, dated November 14, 1994, by and between
             Zoltek Corporation and Southwest Bank of St. Louis<F*>

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

   10.11     Purchase Agreement, dated September 18, 1996, by and
             between Registrant and Merrill Lynch & Co. and Stifel,
             Nicolaus & Company, Incorporated, on behalf of the
             several underwriters, filed as Exhibit 1.1 to
             Registrant's Registration Statement on Form S-3 (Reg. No.
             333-07547) is incorporated herein by this reference.)<F*>

   21        Subsidiaries of the Registrant<F*>

   23        Consent of PricewaterhouseCoopers LLP

   27        Financial Data Schedule



<FN>
_______________

<F*> Incorporated herein by reference
</TABLE>

                                      49