<PAGE>

                                UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549


                               AMENDMENT NO. 1
                                     ON
                                 FORM 10-K/A


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


For the fiscal year ended September 30, 2004      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 ].

         Indicate by check mark whether the registrant is an accelerated
filer (as defined in Rule 12b-25 of the Act).  Yes X .  No   .
                                                  ---     ---

         State the aggregate market value of the voting stock held by
non-affiliates of the registrant as of March 31, 2004: approximately
$98,007,500.

         Indicate the number of shares outstanding of each of the
registrant's classes of common stock as of: December 28, 2004: 16,453,481
shares of Common Stock, par value $.01 per share.

                                     1

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<PAGE>

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


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

Proxy Statement for the 2005
  Annual Meeting of Shareholders                         III







                                     2

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<PAGE>

EXPLANATORY NOTE
----------------

         On May 20, 2005, the Company concluded that its financial results
for the fiscal year ended September 30, 2004 and interim periods ended March
31, June 30, September 30 and December 31, 2004 would be restated to reflect
additional non-operating gains and losses related to the correction of its
accounting for the conversion feature and related warrants to purchase the
Company's common stock associated with convertible debt issued by the
Company in January, March and October 2004 and the amortization expense
associated with debt discount. Historically, the Company had classified the
value of warrants to purchase common stock and the beneficial conversion
feature, when applicable, as equity as the Company believed these
instruments met the exceptions for recording these instruments as
liabilities. After further review the Company determined that these
instruments did not meet these exceptions and should have been classified as
liabilities on its balance sheet at the fair value of each instrument. In
subsequent periods the change in fair value of these instruments will result
in an adjustment to this liability with the corresponding gain or loss being
recorded in the statement of operations. At the date of conversion of the
instrument or exercise of the warrants (dollar amounts in thousands), as the
case may be, the corresponding liability will be reclassified to equity. In
addition, the Company recorded individually immaterial adjustments to
property and equipment, net and other assets that increased other expenses
by $0.1 million in the quarter ended March 31, 2004 and to accounts
receivable, net that increased other expenses by $0.2 million in the quarter
ended September 30, 2004. These adjustments resulted in corresponding
adjustments in the September 30, 2004 balance sheet. The Company has also
enhanced certain disclosures at the request of the Securities and Exchange
Commission. In Item 6 the Company has changed "Other income (expense) and
income tax expense benefit" from $(2,270) to $(2,486) in 2003 and from
$1,730 to $1,562 in 2002 due to mathematical errors in the original filing.

         The impact of the restatements related to the change in accounting
for the conversion feature and the related warrants are summarized below:

         For the quarter ended March 31, 2004, the loss on the fair value of
the warrants and conversion feature and increased amortization expense,
increased the net loss by $5.7 million. This result increased the Company's
basic and diluted loss per share from $0.23 to $0.59 for the quarter ended
March 31, 2004. The Company's previously reported long-term and total
liabilities increased by $12.0 million with a corresponding decrease in the
Company's equity.

         For the quarter ended June 30, 2004, there was a gain on the fair
value of the warrants and conversion feature, partially offset by the
increase in amortization expense that decreased the previously reported net
loss by $4.3 million. This result decreased the Company's basic loss per
share from a loss of $0.22 to income of $0.04 and diluted loss per share
from a loss of $0.22 to a loss of $0.12 for the quarter ended June 30, 2004.
The Company's previously reported long-term and total liabilities increased
by $7.7 million with a corresponding decrease in the Company's equity.

         For the quarter ended September 30, 2004, the loss on the fair
value of the warrants and conversion feature and increased amortization
expense increased the previously reported net loss by $4.3 million. This
result increased the Company's basic and diluted loss per share from $0.34
to $0.62 for the quarter ended September 30, 2004.

         For the fiscal year ended September 30, 2004, the loss on the fair
value of warrants and conversion feature and increased amortization expense
increased the previously reported net loss by $5.7 million. This result
increased the Company's basic and diluted loss per share from $1.02 to $1.40
for the fiscal year ended September 30, 2004. The Company's previously
reported long-term and total liabilities increased by $12.0 million with a
corresponding decrease in the Company's equity.

         For the quarter ended December 31, 2004, the loss on the fair value
of warrants and conversion feature and increased amortization expense,
increased the previously reported net loss by $26.4 million. This result
increased the Company's basic and diluted loss per share from $0.21 to $1.82
for the quarter ended December 31, 2004. The Company's previously reported
long-term and total liabilities increased by $40.9 million with a
corresponding decrease in the Company's equity.



                                     3

<PAGE>
<PAGE>

         The foregoing adjustments do not affect previously recorded net
sales, operating loss or cash flows from continuing operations. Furthermore,
these adjustments do not affect previously reported income tax expense as
the Company has recorded a full valuation allowance against all deferred tax
assets.

         As a result of the restatement, the Company is filing this amended
Form 10-K/A for the year ended September 30, 2004 and has filed amended Form
10-Q/A's for the quarters ended June 30, 2004, December 31, 2004 and March
31, 2005.

         This Form 10-K/A includes only Items 3, 5, 6, 7, 8, 9 and 15 as
these Items have been amended from the previously filed Form 10-K/A for the
year ended September 30, 2004.





                                     4

<PAGE>
<PAGE>

PART I

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

         In October 2003, the Company was named as a defendant in a civil
action filed in the Court of Common Pleas for Cuyahoga County, Ohio by the
former owner of Hardcore Composites Operations, LLC ("Hardcore") alleging
breach by Hardcore and the Company of their respective obligations under a
sublease, the Company's guaranty of the sublease, and prior settlement
agreement among the parties. The former owner's action claims damages in the
amount of $0.3 million for breaches by the Company of its obligations under
the guaranty and the settlement agreement and, in addition, demands $0.5
million in damages from Hardcore and the Company, jointly and severally,
under the terms of the settlement agreement. In October 2004, the Court of
Common Pleas for Cuyahoga County, Ohio ruled in favor of the former owner of
Hardcore Composites in the amount of $1.1 million. In prior periods, the
Company has accrued $1.1 million in respect of the possible liability in
this matter, which it believes is its maximum obligation under this
guaranty. The Company is vigorously defending this matter, has filed
counterclaims and filed an appeal that represents its only recourse
regarding this guaranty. Management believes that the ultimate resolution of
this litigation will not have a further material adverse effect on the
Company's results of operations, financial condition or cash flow. To date,
the Company has not made any payments of any portion of this obligation,
although it posted an appeal bond in the amount of $1.3 million. The Company
executed a guaranty of Hardcore Composite's lease obligations of
approximately $30,000 per month to the former owner. The lease of the
Hardcore Composites manufacturing facility expires March 31, 2008. Hardcore
no longer occupies the facility and, accordingly, in connection with the
ongoing litigation with the former owner, Zoltek is asserting that Zoltek
has no further ongoing guarantee obligation with respect to the lease. The
Company also is the obligee on aggregate original value of unsecured
promissory notes of $9.3 million in connection with the sale of Hardcore,
for which a full valuation allowance has been recorded. A full valuation
allowance is appropriate in light of Hardcore's current financial condition
which, among other relevant factors, makes the collection of the promissory
notes doubtful.

         In September 2004, the Company was named a defendant in a civil
action filed by a former investment banker that was retained by the Company
to obtain equity investors, alleging breach by the Company of its
obligations under the agreement signed by the parties. The investment banker
alleges it is owed commission from equity investment obtained by the Company
from a different source. The Company has asserted various defenses,
including that the investment banker breached the agreement by not
performing reasonable efforts to obtain financing for the Company and,
therefore, the agreement was terminated by the Company prior to obtaining
new financing. The court granted summary judgment in favor of the plaintiff
on the issue of breach of the agreement and the parties are considering the
issue of damages. The Company cannot predict the timing or the outcome of
this litigation or the impact on the Company's financial condition and
results of operations.

         The Company is plaintiff in a patent infringement lawsuit pending
in the United States Court of Federal Claims. The lawsuit, which has been
pending since 1996, involves the alleged unauthorized use of the Company's
carbon fiber processing technology in the manufacture of extremely stealthy
aircraft. A preliminary court ruling has been favorable for the Company, but
the Company cannot predict the timing or the outcome of this litigation or
the impact on the Company's financial condition and results of operations.

         Except as described above, the Company is not a party to 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.




                                     5

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<PAGE>

                                   PART II

Item 5. Market for Registrant's Common Equity, Related Shareholder Matters
------  ------------------------------------------------------------------
and Issuer Purchases of Equity Securities
-----------------------------------------

         The Company's Common Stock (symbol: "ZOLT") is traded in the Nasdaq
National Market. The number of beneficial holders of the Company's stock is
approximately 11,500, including shareholders whose shares are held in
"nominee" or "street" names. The Company has never paid dividends.

         Set forth below are the high and low bid quotations as reported by
the Nasdaq National Market 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, 2004              September 30, 2003
                                               ------------------              ------------------
                                               High           Low            High              Low
                                               ----           ---            ----              ---
<S>                                          <C>            <C>            <C>               <C>
         First Quarter...................... $  6.99        $  2.43        $   3.49          $  1.25
         Second Quarter.....................   11.21           5.05            3.07             1.48
         Third Quarter......................   10.67           6.75            4.15             2.41
         Fourth Quarter.....................    9.22           6.59            3.00             2.09
</TABLE>

         In October 2004, the Company issued convertible debentures in the
aggregate principal amount of $20.0 million to institutional private equity
investors. The convertible debentures have a stated maturity of 42 months
and bear interest at 7.5% per annum and are presently convertible into
1,666,666 shares of common stock at a conversion price of $12.00 per share.
The Company also issued to the investors six-year warrants to purchase an
aggregate of 500,000 shares of common stock of the Company at an exercise
price of $13.00 per share. The fair value of the debt discount associated
with the warrants and conversion feature of the debt at the time of issuance
was $10.2 million and will be amortized over the life of the convertible
debt. Proceeds from issuance of these convertible debentures were used to
reduce existing Hungarian bank debt by $12.0 million and the balance for
working capital purposes which allowed the Company to refinance the
remaining Hungarian bank debt to a three-year term loan for $3.0 million
with no financial covenants going forward.

         In January 2004, the Company issued and sold convertible debentures
in the aggregate principal amount of $7.0 million to institutional private
equity and other investors (including $250,000 to each of Mr. Rumy and Mr.
McDonnell who are members of the Company's Board of Directors). The
convertible debentures have a stated maturity of 30 months and bear interest
at 6% per annum and are convertible into 1,295,954 shares of common stock at
the date of issuance at a conversion price of $5.40 per share for each
investor other than Messrs. Rumy and McDonnell and $5.42 per share for each
of Messrs. Rumy and McDonnell. The Company also issued to the investors
five-year warrants to purchase an aggregate of 323,994 shares of common
stock of the Company at an exercise price of $5.40 per share for each
investor other than Messrs. Rumy and McDonnell and $5.42 per share for each
of Messrs. Rumy and McDonnell. The fair value of the debt discount
associated with the warrants and the conversion feature, at the time of
issuance, was $3.0 million and will be amortized over the life of the
convertible debt. Proceeds from the issuance of these convertible debentures
were used for working capital purposes.

         In March 2004, the Company issued and sold convertible debentures
in the aggregate principal amount of $5.75 million to institutional private
equity investors and Mr. Dill ($750,000) who is member of the Company's
board of directors. The convertible debentures have a stated maturity of 30
months and bear interest at 6% per annum and have been converted into
895,908 shares of common stock at a conversion price of $6.25 per share for
each investor other than Mr. Dill and $7.82 per share for Mr. Dill. The
Company also issued to the investors five-year warrants to purchase an
aggregate of 223,997 shares of common stock of the Company at an exercise
price of $7.50 per share for each investor other than Mr. Dill whose
warrants have an exercise price of $7.82 per share. The fair value of the
debt discount associated with the warrants and conversion feature, at the
time of issuance, was $5.7 million and will be amortized over the life of
the convertible debt. Proceeds from the issuance of these convertible
debentures are being used for working capital and capital expenditures.




                                     6

<PAGE>
<PAGE>

         Each issuance of convertible debt is summarized in the table below
which sets forth the significant term of the debt, warrants and assumptions
associated with valuing the conversion feature and warrants:

<TABLE>
<CAPTION>
                                                  (1)FEBRUARY 2003     JANUARY 2004      MARCH 2004       OCTOBER 2004
                                                     -------------     ------------      ----------       ------------
<S>                                                    <C>                <C>               <C>             <C>
Amount of debenture (millions)......................   $8.1               $7.0              $5.75           $20.0
Per share conversion price on debenture.............   $3.25              $5.40             $6.25           $12.00
Interest rate.......................................   7.5%               6.0%              6.0%            7.0%
Term of debenture...................................   60 months          30 months         30 months       42 months
Warrants issued.....................................   405,000            323,995           230,000         500,000
Term of warrant.....................................   60 months          48 months         48 months       72 months
Per share exercise price of warrants................   $5.00              $5.40             $7.50           $13.00
Fair value per warrant at issuance..................   $0.93              $2.27             $5.43           $6.02
Value per share conversion feature at issuance......   $3.11              $1.78             $5.06           $4.31
Stock price on date of agreement....................   $1.58              $5.40             $9.53           $9.60
Stock volatility at issuance........................   100%               50%               61%             75%
Dividend yield......................................   0.0%               0.0%              0.0%            0.0%
Risk-free interest rate at issuance.................   3.0%               2.78%             2.44%           3.71%
<FN>
--------------------------------
(1)    The warrants issued in connection with the February 2003 convertible
       issuance meet the criteria of EITF 00-19 for equity classification as
       they do not contain registration rights obligations with respect to
       the underlying shares similar to the other financing described in the
       table. The conversion feature on the related debt does not require
       derivative accounting and no beneficial conversion feature exists on
       this issuance.
</TABLE>

         The Company issued the foregoing securities without registration
under the Securities Act of 1933, as amended, in reliance upon the exemption
therefrom set forth in Section 4(2) of such Act relating to sales by an
issuer not involving a public offering.






                                     7

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<PAGE>

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



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

<CAPTION>
Statement of Operations Data: (1)                                           Year Ended September 30,
----------------------------------------------------------------------------------------------------------------------------------

                                                            2004         2003          2002        2001           2000
                                                          --------    ----------    ----------  ----------     -----------
                                                         (RESTATED-
                                                         SEE NOTE 2)

<S>                                                       <C>          <C>          <C>          <C>          <C>
Net sales.................................................$ 45,273     $  39,405    $  41,787    $  47,797    $  51,892
Cost of sales, excluding available unused capacity costs..  37,878        33,181       33,508       48,745       42,616
Available unused capacity costs...........................   4,466         5,716        6,039        6,803        4,658
Selling, general and administrative expenses (2)..........   8,414         9,951       10,319       12,839       10,759
Operating loss from continuing operations.................  (5,485)       (9,443)      (8,079)     (20,590)      (6,141)
Other income (expense) and income tax expense benefit..... (11,494)       (2,486)       1,562         (649)       1,544
Net loss from continuing operations....................... (16,979)      (11,929)      (6,517)     (21,239)      (4,597)
Loss on discontinued operations, net of income taxes......  (5,828)       (3,673)      (1,314)     (10,332)      (4,088)
Net loss.................................................. (22,807)    $ (15,602)   $  (7,831)   $ (31,571)   $  (8,685)
Net loss per share:
  Basic and diluted loss per share:
     Continuing operations................................$  (1.04)    $   (0.73)   $   (0.40)   $   (1.29)   $   (0.25)
     Discontinued operations..............................   (0.36)        (0.23)       (0.08)       (0.62)       (0.22)
                                                          --------     ---------    ---------    ---------    ---------

     Net loss.............................................$  (1.40)    $   (0.96)   $   (0.48)   $   (1.91)   $   (0.47)
                                                          ========     =========    =========    =========    =========

Weighted average common shares outstanding................  16,372        16,307       16,289       16,515       18,360



<CAPTION>
Balance Sheet Data:                                                                  September 30,
----------------------------------------------------------------------------------------------------------------------------------

                                                            2004         2003          2002        2001          2000
                                                          --------    ----------    ----------  ----------    -----------
                                                         (RESTATED-
                                                         SEE NOTE 2)

<S>                                                       <C>          <C>          <C>          <C>          <C>
Working capital...........................................$ 16,802     $  18,790    $   9,872    $  22,891    $  27,041
Total assets.............................................. 122,455       119,455      121,422      121,492      207,701
Short-term debt...........................................     570           933       14,014        2,073       47,126
Long-term debt, less current maturities...................  42,002        33,541       13,699       22,036        8,697
Shareholders' equity......................................  44,230        64,516       75,904       79,596      122,811
<FN>
------------------
(1) Prior year amounts have been reclassified for discontinued operations as
discussed in Note 2 to Consolidated Financial Statements.

 (2) Includes application and development costs of $3,070, $3,453, $3,750,
$3,533 and $2,479 for fiscal years 2004, 2003, 2002, 2001 and 2000,
respectively.
</TABLE>



                                     8

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<PAGE>

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


GENERAL
-------

         On May 20, 2005, the Company concluded that its financial results
for the fiscal year ended September 30, 2004 and interim periods ended March
31, June 30, September 30 and December 31, 2004 would be restated to reflect
additional non-operating gains and losses related to the correction of its
accounting for the conversion feature and related warrants to purchase the
Company's common stock associated with convertible debt issued by the
Company in January, March and October 2004 and the amortization expense
associated with debt discount. Historically, the Company had classified the
value of warrants to purchase common stock and the beneficial conversion
feature, when applicable, as equity as the Company believed these
instruments met the exceptions for recording these instruments as
liabilities. After further review the Company determined that these
instruments did not meet these exceptions and should have been classified as
liabilities on its balance sheet at the fair value of each instrument. In
subsequent periods the change in fair value of these instruments will result
in an adjustment to this liability with the corresponding gain or loss being
recorded in the statement of operations. At the date of conversion of the
instrument or exercise of the warrants, as applicable, the corresponding
liability will be reclassified to equity. In addition, the Company recorded
individually immaterial adjustments to property and equipment, net and other
assets that increased other expenses by $0.1 million in the quarter ended
March 31, 2004 and to accounts receivable, net that increased other expenses
by $0.2 million in the quarter ended September 30, 2004. See further
discussion in Note 2 to the Consolidated Financial Statements included in
this Form 10-K/A for discussion of this restatement.

         The Company's mission is to commercialize the use of carbon fibers
as a low-cost but high performance reinforcement for composites used as the
primary building material in everyday commercial products. The Company has
developed and is implementing a strategy to manufacture and sell carbon
fibers into commercial applications at costs competitive with other
materials. In addition, through its technical fibers segment the Company is
the leading supplier of carbon fibers to the aircraft brake industry, and
manufactures and markets oxidized acrylic fibers, an intermediate product of
the carbon fiber manufacturing process, for fire and heat resistance
applications.

         The Company introduced its carbon fibers strategic plan in 1995 to
develop a low-cost process to produce carbon fibers and build significant
capacity while encouraging growth of new applications. As part of its
strategy to establish availability of carbon fibers on a scale sufficient to
encourage growth of large-volume applications, the Company completed a major
carbon fiber production capacity expansion in fiscal 1998 at its Abilene,
Texas facility. While the Company succeeded in developing its infrastructure
to become the low-cost producer, the large volume applications were slower
to develop than anticipated. From 1998 to mid-2003 total carbon fiber usage
did not grow significantly and aerospace applications actually declined.
This situation resulted in substantial overcapacity and destructive pricing
in the industry. Much of the new carbon fiber business was captured by the
aerospace fibers as certain manufacturers sold their aerospace-grade fibers
on the commercial markets at prices that did not cover their costs,
undermining the Company's commercialization strategy.

         The carbon fiber market conditions began to change during the
second quarter of fiscal 2004. Two major aerospace programs, the Airbus
A-380 and the Boeing 7E7, have absorbed virtually all of the aerospace fiber
capacity, and resulted in the divergence of the aerospace and commercial
markets for carbon fibers. Since the beginning of fiscal 2004, the Company
has entered into several significant supply relationships with carbon fibers
customers. Increases in sales of carbon fiber products in the second, third
and fourth quarters of fiscal 2004 confirmed this shift. The divergence of
the two markets was accelerated by the strength in the development of the
carbon fiber wind turbine blade market. Currently Zoltek believes it is in a
unique position of having installed capacity and fiber quality that can
attract current available and future new business.

         The recent increase in the demand for carbon fibers relates to
several different applications including aerospace. During fiscal 2004, the
Company experienced growth in customer demand in the carbon and technical
fiber business units, as sales (excluding inter-segment sales) increased
$5.2 million and $0.7 million, respectively, over fiscal 2003. The improved
sales in the carbon fibers and technical fibers business units


                                     9

<PAGE>
<PAGE>

resulted in a reduction in the overall operating loss from continuing
operations reported by the Company from a loss of $9.4 million in 2003 to a
loss of $5.5 million in 2004.

         The Company has specifically targeted three significant and
emerging applications: wind energy, flame retardant bedding and home
furnishings, and automotive.

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

         In order to meet demand for carbon fibers for wind energy and other
commercial carbon fiber applications, Zoltek has undertaken a three-phase
capacity expansion program. First, Zoltek has initiated the start-up of the
five installed lines at its Abilene, Texas facility and activated sufficient
precursor capacity to support all of the Company's carbon fiber capacity.
Second, Zoltek plans to add two new carbon fiber lines and add sufficient
precursor capacity at the Company's Hungarian facility around the end of
fiscal 2005. The third phase of the expansion program calls for a doubling
of the carbon fiber and precursor capacity levels after the second phase, to
be operational in 2006.

         Outside of the carbon fiber business, the Company sells acrylic and
nylon fibers into textile markets and manufactures other specialty products
in its Hungary facility. During the fourth quarter of fiscal 2004, the
Company discontinued the nylon fiber operation and the acrylic textile
business. These divisions were deemed not to be part of the long-term
strategy of the Company and not expected to be profitable in the foreseeable
future due to the continued pricing pressure from competitive manufacturers.
The Company will utilize a portion of the acrylic fiber capacity to supply
precursor for its growing carbon fiber manufacturing operations. The Company
recorded a one-time charge to earnings of $0.2 million related to severance.
The results from operations of these two divisions have been reclassified to
discontinued operations for fiscal 2004, 2003 and 2002.

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

         All data for fiscal 2004 has been presented on a restated basis.
See Note 2 to the Consolidated Financial Statements included in this Form
10-K/A for discussion on this restatement.

FISCAL YEAR ENDED SEPTEMBER 30, 2004 COMPARED TO FISCAL YEAR ENDED SEPTEMBER
30, 2003

         The Company's sales increased by 15%, or $5.9 million, to $45.3
million in fiscal 2004 from $39.4 million in fiscal 2003, due to increases
in carbon fiber sales (excluding intersegment) and technical fiber sales
(excluding intersegment). Carbon fiber sales (excluding intersegment)
increased 40%, or $5.2 million, to $18.4 million in fiscal 2004 from $13.2
million in fiscal 2003. The increase in carbon fiber sales in fiscal 2004
was achieved despite a decrease of $5.9 million from 2003 related to the
Company's decision to relocate its prepreg operations from California to
Utah to reduce costs by combining its operations with another of the
Company's facilities. Other carbon fibers sales increased by $11.1 million
in fiscal 2004 from fiscal 2003 as production and sales of sporting goods
and wind energy orders continued during the third and fourth quarters of
fiscal 2004 and the Company experienced a strong increase in the overall
demand for carbon fiber over prior years. Technical fiber sales (excluding
intersegment) increased 5%, or $0.7 million, to $14.8 million in fiscal 2004
from $14.1 million in fiscal 2003. Technical fiber sales increased as demand
improved not only in the aircraft brake customers but also for the
flame-retardant market. Sales of the specialty products business segment
decreased 1%, or $0.1 million, to $12.0 million in fiscal 2004 from $12.1
million in fiscal 2003. During the fourth quarter of fiscal 2004, the
Company discontinued the nylon fiber operation and the acrylic textile
business. The Company will utilize a limited portion of the acrylic fiber
capacity to supply precursor for its growing carbon fiber manufacturing
operations. The results from operations of these two divisions have been
reclassified to


                                     10

<PAGE>
<PAGE>

discontinued operations for fiscal 2004, 2003 and 2002. The remaining
specialty products division sales have remained flat from fiscal 2004 to
2003, however, the divisions remained profitable at these levels.

         The Company's cost of sales (excluding available unused capacity
costs) increased by 14.1%, or $4.7 million, to $37.9 million in fiscal 2004
from $33.2 million in fiscal 2003. Carbon and technical fiber cost of sales
(excluding intersegment) increased by 17% or $4.1 million to $28.1 million
in fiscal 2004 from $24.0 million in fiscal 2003 as sales of carbon and
technical fiber (excluding intersegment) increased 21% for the year. The
increase of 16% compared to an increase of 21% in sales results from the
Company's ability to absorb its fixed cost as manufacturing activities
increased. The cost of sales of the Company's specialty products business
segment increased 7% compared to the 1% decrease in sales, reflecting sales
mix factors.

         The Company continued to incur costs related to the underutilized
productive capacity for carbon fibers at the Abilene, Texas facility,
including depreciation and other overhead associated with the unused
capacity. These costs, which were separately identified on the statement of
operations, were approximately $4.5 million during fiscal 2004 and $5.7
million in fiscal 2003. The decrease in 2004 was due to the start-up of the
carbon fiber lines in Abilene during the fourth quarter of 2004. The Company
believes it has been necessary to maintain available capacity to encourage
development of significant new large-scale applications. With the increased
orders in fiscal 2005, unused capacity costs are expected to continue to
decrease significantly during that period and to be fully absorbed in
ongoing operations as all installed production lines began operating. See
additional discussion of the Abilene facility under "--Liquidity and Capital
Resources."

         Application and market development costs were $3.1 million in
fiscal 2004 and $3.5 million in fiscal 2003 as the Company continued cost
containment measures implemented in 2003 related to personnel involved in
research and development. These costs included product and market
development efforts, product trials and sales and product development
personnel and related travel. Targeted emerging applications include
automobile components, fire/heat barrier and alternate energy technologies.

         Selling, general and administrative expenses were $5.3 million in
fiscal 2004 compared to $6.5 million in fiscal 2003. Although sales for the
year increased 15% and carbon fiber sales increased 40% the Company has
continued cost containment measures related to personnel in non-operations
departments implemented during fiscal 2003.

         Operating loss from continuing operations was $5.5 million in
fiscal 2004 compared to a loss of $9.4 million in fiscal 2003, an
improvement of $4.1 million. Carbon fiber operating loss improved from a
loss of $8.6 million in fiscal 2003 to a loss of $6.8 million in fiscal
2004. The operating income in technical fibers increased from income of $0.1
million in fiscal 2003 to $1.2 million in fiscal 2004. Corporate
headquarters operating loss decreased with a loss of $1.4 million in fiscal
2004 compared to a loss of $2.5 million in fiscal 2003. Specialty product
operating loss decreased from a loss of $1.6 million in fiscal 2003 to a
loss of $1.5 million in fiscal 2004. The decrease in the Company's total
operating loss was a result of the significant improvement in the carbon
fibers and technical fibers business units as sales and production have
increased to absorb fixed manufacturing cost and the continued reduction of
operating expenses due to the cost containment measures implemented during
2003.

         Interest expense was approximately $3.4 million in fiscal 2004
compared to $1.9 million in fiscal 2003. The increase in interest resulted
from higher debt levels after the Company's refinancing transactions (see
"--Liquidity and Capital Resources"). The Company experienced little
fluctuation attributed to changes in interest rates as a substantial portion
of the debt portfolio consists of fixed rate.

         Amortization of debt discount from warrants, deferred financing and
beneficial conversion feature costs, which are non-cash expenses, was $2.6
million in fiscal 2004 compared to $0.1 million in fiscal 2003. The increase
in amortization resulted from the Company's refinancing transactions (see
"--Liquidity and Capital Resources").

         Loss on value of warrants and conversion feature, a non-cash item,
increased $4.9 million from no expense in fiscal 2003 to a loss of $4.9
million in fiscal 2004 (see "--Liquidity and Capital Resources"). The
increase in the loss was attributable to an increase in our stock price
during 2004 as the Company had to market


                                     11

<PAGE>
<PAGE>

to market the value of the warrants and conversion feature following the
issuance of convertible debt instruments in January and March 2004. No such
obligations existed in the prior year.

         Other income/expense, net, was immaterial in fiscal 2004 and fiscal
2003.

         Income tax expense was $0.4 million for fiscal 2004 compared to an
income tax expense of $0.5 million for fiscal 2003. A valuation allowance
was recorded against the income tax benefit resulting from the pre-tax loss
in both fiscal 2004 and 2003 due to uncertainties in the Company's ability
to utilize tax losses in the future.

         The foregoing resulted in a net loss from continuing operations of
$17.0 million for fiscal 2004 compared to a net loss of $11.9 million for
fiscal 2003. Similarly, the Company reported a net loss per share from
continuing operations of $1.04 and $0.73 on a basic and diluted basis for
fiscal 2004 and 2003, respectively. The weighted average common shares
outstanding were 16.4 million for fiscal 2004 and 16.3 million for fiscal
2003.

         In the fourth quarter of fiscal 2004, the Company formally adopted
a plan to discontinue and exit two divisions of its Zoltek Rt. operations
which manufacture acrylic and nylon fibers and yarns. These divisions are
not part of the long-term strategy of the Company and will not be profitable
in the foreseeable future due to the continued pricing pressure from
competitive manufacturers. In the fourth quarter of fiscal 2004, the Company
recorded an impairment loss on discontinued operations of $0.2 million
compared to zero in 2003. The operating loss related to those divisions was
$5.2 million for the fiscal year compared to $3.7 million in fiscal 2003.
The increase in the operating loss was due to sales decreasing by $7.8
million, or 32%, from $24.1 million in fiscal 2003 to $16.3 million in
fiscal 2004 while cost of sales only decreased $6.6 million, or 27%, from
$24.4 million in fiscal 2003 to $17.8 million in fiscal 2004, as the Company
did not decrease its fixed cost component of cost of sales at a rate equal
to the decline in its sales. The Company also recorded a loss of $0.5
million related to a legal judgment involving the Company's former Hardcore
subsidiary. The Company is vigorously defending this matter and has filed
counterclaims and an appeal. Management believes that the ultimate
resolution of this litigation will not have a material adverse effect on the
Company's results of operations or financial condition.

COMPARISON OF RESULTS FOR FISCAL YEARS ENDED SEPTEMBER 30, 2003 AND 2002

         The Company's sales decreased 6%, or $2.4 million, to $39.4 million
in fiscal 2003 from $41.8 million in fiscal 2002. Technical fiber sales
decreased 29%, or $5.7 million, to $14.1 million in fiscal 2003 from $19.8
million in fiscal 2002. Carbon fiber sales (excluding intersegment)
increased 23%, or $2.5 million, to $13.2 million during fiscal 2003 from
$10.7 million in fiscal 2002. Carbon fiber sales increased both in Hungary
and the U.S. as the demand for carbon fiber increased in the second half of
the year as excess capacity in the industry started to decrease. During
fiscal 2003, technical fibers sales decreased due to excess technical fiber
capacity that weakened economic conditions globally specifically in the
aerospace business. Sales of other products produced at Zoltek Rt. increased
$0.8 million, or 7%, to $12.1 million in fiscal 2003 from $11.3 million in
fiscal 2002 as sales of the Mavibond division increased due to higher demand
from Eastern European customers.

         The Company's cost of sales (excluding available unused capacity
costs) decreased by 1%, or $0.3 million, to $33.2 million in fiscal 2003
from $33.5 million in fiscal 2002. The decrease in cost of sales (excluding
available unused capacity costs) was consistent with the decrease in sales,
however, not to the degree of the sales decline due to the technical fiber
unit having been impacted from industry-wide excess capacity that resulted
in distressed pricing across most existing markets and lower sales volume
that have not supported the level of the Company's fixed manufacturing cost.
The Company also recorded a reserve of $1.0 million for certain carbon fiber
inventories of which it was deemed to have excess amounts in fiscal 2003.

         In fiscal 2003, the Company continued to incur costs related to the
underutilized productive capacity for carbon fibers at the Abilene, Texas
facilities. These costs included depreciation and other overhead associated
with the unused capacity. These costs, which were separately identified on
the income statement, were approximately $5.7 million during fiscal 2003 and
$6.0 million in fiscal 2002. The decrease relates to the continued cost
containment measures related to personnel implemented during fiscal 2003.

         Application and market development costs were $3.5 million in
fiscal 2003 compared to $3.7 million in fiscal 2002, representing a $0.2
million decrease. This decrease was due to cost containment measures. The
costs incurred in fiscal 2003 related to the carbon fiber operations for
product and market development efforts for product trials, and for
additional sales and product development personnel and travel. Targeted


                                     12

<PAGE>
<PAGE>

emerging applications included automobile manufacturing, alternate energy
technologies, deep sea oil drilling, filament winding and buoyancy.

         Selling, general, and administrative expenses decreased $0.1
million, or 2%, from $6.6 million in fiscal 2002 to $6.5 million in fiscal
2003. The decrease in expense was from both business segments and the
corporate headquarters, due to cost cutting measures, including lower
payroll.

         Interest expense was approximately $1.9 million in fiscal 2003
compared to $1.6 million in fiscal 2002. The increase resulted from higher
debt levels after the Company's refinancing transactions (see "--Liquidity
and Capital Resources"). The Company experienced little fluctuation
attributed to changes in interest rates as a substantial portion of the debt
portfolio consists of fixed rate.

         Other income/expense, net, increased $0.4 million to $0.1 million
expense for fiscal 2003 from $0.3 million income for fiscal 2002 due to an
increase in the foreign currency transactional losses on the Company's debt
at its Hungarian subsidiary which is denominated in U.S dollars or Euros.

         Income tax expense increased $3.4 million to $0.5 million for
fiscal 2003 from an income tax benefit of $2.9 million for the corresponding
period in the prior year. A valuation allowance was recorded against the
income tax benefit resulting from the pre-tax loss for fiscal 2003 and 2002
due to uncertainties in the Company's ability to utilize tax losses in the
future. During fiscal 2002, the tax laws changed allowing the Company
additional carryback of net operating loss to prior years resulting in a tax
benefit in the statement of operations.

         The loss from discontinued operations related to the acrylic fiber
operations increased from a loss of $2.2 million in fiscal 2002 to a loss of
$3.7 million in fiscal 2003. The increase in the loss in fiscal 2003 was due
to the decrease in sales related to continuing pricing pressures from
competitors without a corresponding reduction in manufacturing cost. The
loss in 2002 was offset by a gain of $0.9 million related to the sale of the
Company's former Hardcore subsidiary.

         The foregoing resulted in a net loss from continuing operations of
$11.9 million for fiscal 2003 compared to a net loss of $6.5 million for
fiscal 2002. Similarly, the Company reported net loss from continuing
operations per share of $0.73 and $0.40 on a basic and diluted basis for
fiscal 2003 and fiscal 2002, respectively. The weighted average common
shares outstanding were 16.3 million for fiscal 2003 and fiscal 2002.

LIQUIDITY AND CAPITAL RESOURCES

         Management will seek to fund its near-term operations from the sale
of excess inventories, continued aggressive management of the Company's
working capital and existing borrowing capacity under the Company's
revolving credit facility. As the demand for carbon fiber continues to
increase, the Company will need additional financing to execute its capacity
expansion program. Based upon these forecasts, borrowing capacity, and the
completion of the transaction discussed in "--Fiscal 2005 Refinancing"
below, the Company believes it has sufficient cash flows to continue
operations for at least the next 12 months.

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

WARRANT AND CONVERSION FEATURES
-------------------------------

         In January, March and October of 2004, the Company issued
convertible notes and warrants which would require the Company to register
the resale of the shares of common stock upon conversion or exercise of
these securities. The Company accounts for the fair value of these
outstanding warrants to purchase common stock and conversion feature of its
convertible notes in accordance with SFAS No. 133 "Accounting For Derivative
Instruments And Hedging Activities" and EITF Issue No. 00-19 "Accounting For
Derivative Financial Instruments Indexed To And Potentially Settled In A
Company's Own Stock;" which requires the Company to


                                     13

<PAGE>
<PAGE>

bifurcate and separately account for the conversion feature and warrants as
embedded derivatives contained in the Company's convertible notes. Pursuant
to SFAS No. 133, the Company bifurcated the fair value of the conversion
feature from the convertible notes, since the conversion feature were
determined to not be clearly and closely related to the debt host. In
addition, since the effective registration of the securities underlying the
conversion feature and warrants is an event outside of the control of the
Company, pursuant to EITF Issue No. 00-19, the Company recorded the fair
value of the conversion feature and warrants as long-term liabilities as it
was assumed that the Company would be required to net-cash settle the
underlying securities. The Company is required to carry these embedded
derivatives on its balance sheet at fair value and unrealized changes in the
values of these embedded derivatives are reflected in the consolidated
statement of operation as "Gain (loss) on value of warrants and conversion
feature." See table below for impact on results for the fiscal year ended
September 30, 2004.

<TABLE>
<CAPTION>
                                                                      YEAR ENDED SEPTEMBER 30, 2004
                                                                      -----------------------------
                                                                         (RESTATED - SEE NOTE 2)
                                                                                CONVERSION
                                                                  WARRANTS      FEATURES          TOTAL
                                                                  --------      --------          -----
<S>                                                              <C>            <C>            <C>
         January 2004 issuance - mark to market .................$  (1,109)     $ (4,039)      $  (5,148)
         March 2004 issuance - mark to market ...................       18           210             228
                                                                 ---------      --------       ---------
                  Totals.........................................$  (1,091)     $ (3,829)      $  (4,920)
                                                                 =========      ========       =========
</TABLE>

2005 Refinancing
----------------

         In October 2004, the Company issued convertible debentures in the
aggregate principal amount of $20.0 million to institutional private equity
investors. The convertible debentures have a stated maturity of 42 months
and bear interest at 7.5% per annum and are presently convertible into
1,666,666 shares of common stock at a conversion price of $12.00 per share.
The Company also issued to the investors six-year warrants to purchase an
aggregate of 500,000 shares of common stock of the Company at an exercise
price of $13.00 per share. The fair value of the debt discount associated
with the warrants and conversion feature of the debt at the time of issuance
was $10.2 million and will be amortized over the life of the convertible
debt. Proceeds from issuance of these convertible debentures were used to
reduce existing Hungarian bank debt by $12.0 million and the balance for
working capital purposes which allowed the Company to refinance the
remaining Hungarian bank debt to a three-year term loan for $3.0 million
with no financial covenants going forward.

         In December 2004, the Company's U.S. bank extended the maturity and
waived the financial covenants of the Company's revolving credit loan, term
loan and mortgage on an existing property to January 1, 2006. The Company's
U.S. bank also increased the amount available under the revolving credit
loan by $0.5 million to $5.5 million and increased the term loan by $0.1
million to $0.8 million. The principal of the term loan is payable on a
quarterly basis of $0.1 million with the remainder of the principal due at
the maturity date of January 1, 2006 and is therefore classified current.
The mortgage is payable on a monthly basis of $15,344 of principal and
interest with the remainder of the principal due at the maturity date of
January 1, 2006 and is therefore classified as current.

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

         In January 2004, the Company issued and sold convertible debentures
in the aggregate principal amount of $7.0 million to institutional private
equity and other investors (including $250,000 to each of Mr. Rumy and Mr.
McDonnell who are members of the Company's Board of Directors). The
convertible debentures have a stated maturity of 30 months and bear interest
at 6% per annum and are convertible into 1,295,954 shares of common stock at
the date of issuance at a conversion price of $5.40 per share for each
investor other than Messrs. Rumy and McDonnell and $5.42 per share for each
of Messrs. Rumy and McDonnell. The Company also issued to the investors
five-year warrants to purchase an aggregate of 323,994 shares of common
stock of the Company at an exercise price of $5.40 per share for each
investor other than Messrs. Rumy and McDonnell and $5.42 per share for each
of Messrs. Rumy and McDonnell. The fair value of the debt discount
associated with the warrants and the conversion feature, at the time of
issuance, was $3.0 million and will be amortized over the life of the
convertible debt. Proceeds from the issuance of these convertible debentures
were used for working capital purposes.

                                     14

<PAGE>
<PAGE>

         As part of the Company's January 2004 refinancing, the bank lender
to the Company's Hungarian subsidiary amended certain financial covenants
and extended the maturity date of its loan to December 31, 2004. In
connection with such actions, the bank required that the Company make
arrangements to settle intercompany accounts payable by Zoltek U.S.
operations to its Hungarian subsidiary in the amount of approximately $2.8
million. The bank was unwilling to keep open its offer to restructure Zoltek
Rt.'s loans until after the Company's January 2004 refinancing package was
completed. Prior to the refinancing, the Company did not have cash on hand
or available borrowings that would enable it to make the settlement of the
intercompany accounts required by the Hungarian bank. In order to proceed
expeditiously to resolve the Company's financing requirements, Zsolt Rumy,
the Company's Chief Executive Officer and a director of the Company, in
December 2003 loaned the Company $1.4 million in cash and posted a $1.4
million letter of credit for the benefit of the Company. This arrangement
was approved by the Company's board of directors and audit committee. The
loan by Mr. Rumy bore interest on the amount advanced and the notional
amount of the letter of credit at a rate per annum equal to LIBOR plus 11%
with a LIBOR floor of 2%, the same interest rate as the mortgage financing
discussed below. As a result of the Company completing the refinancing
transactions making available the cash to settle the intercompany accounts,
the letter of credit was released. After converting $250,000 into
convertible debt as part of the January 2004 financing, the remaining $1.15
million loan was repaid during the third quarter of fiscal 2004.

         Also in January 2004, the Company entered into a mortgage note with
a bank in the aggregate principal amount of $6.0 million. The note has a
stated maturity of three years and bears interest at a rate of LIBOR plus
11% with a LIBOR floor of 2%. The note provided for payment of interest only
on a monthly basis with principal balance due at time of maturity. The loan
was collateralized by a security interest in the Company's headquarters
facility and its two U.S. manufacturing facilities that produce carbon and
technical fibers. The proceeds of this transaction were used to pay down
debt of $6.0 million with its U.S. bank. Of such proceeds, $0.5 million was
held in an escrow account to be released when the Company completed certain
post-closing requirements. The Company completed these requirements during
the third quarter of fiscal 2004 and the $0.5 million was released from
escrow.

         In March 2004, the Company issued and sold convertible debentures
in the aggregate principal amount of $5.75 million to institutional private
equity investors and Mr. Dill ($750,000) who is member of the Company's
board of directors. The convertible debentures have a stated maturity of 30
months and bear interest at 6% per annum and have been converted into
895,908 shares of common stock at a conversion price of $6.25 per share for
each investor other than Mr. Dill and $7.82 per share for Mr. Dill. The
Company also issued to the investors five-year warrants to purchase an
aggregate of 223,997 shares of common stock of the Company at an exercise
price of $7.50 per share for each investor other than Mr. Dill whose
warrants have an exercise price of $7.82 per share. The fair value of the
debt discount associated with the warrants and conversion feature, at the
time of issuance, was $5.7 million and will be amortized over the life of
the convertible debt. Proceeds from the issuance of these convertible
debentures are being used for working capital and capital expenditures.






                                     15

<PAGE>
<PAGE>

         Each issuance of convertible debt is summarized in the table below
which sets forth the significant term of the debt, warrants and assumptions
associated with valuing the conversion feature and warrants:

<TABLE>
<CAPTION>
                                                  (1)FEBRUARY 2003     JANUARY 2004      MARCH 2004       OCTOBER 2004
                                                     -------------     ------------      ----------       ------------
<S>                                                    <C>                <C>               <C>             <C>
Amount of debenture (millions)......................   $8.1               $7.0              $5.75           $20.0
Per share conversion price on debenture.............   $3.25              $5.40             $6.25           $12.00
Interest rate.......................................   7.5%               6.0%              6.0%            7.0%
Term of debenture...................................   60 months          30 months         30 months       42 months
Warrants issued.....................................   405,000            323,995           230,000         500,000
Term of warrant.....................................   60 months          48 months         48 months       72 months
Per share exercise price of warrants................   $5.00              $5.40             $7.50           $13.00
Fair value per warrant at issuance..................   $0.93              $2.27             $5.43           $6.02
Value per share conversion feature at issuance......   $3.11              $1.78             $5.06           $4.31
Stock price on date of agreement....................   $1.58              $5.40             $9.53           $9.60
Stock volatility at issuance........................   100%               50%               61%             75%
Dividend yield......................................   0.0%               0.0%              0.0%            0.0%
Risk-free interest rate at issuance.................   3.0%               2.78%             2.44%           3.71%
<FN>
--------------------------------
(1)    The warrants issued in connection with the February 2003 convertible
       issuance meet the criteria of EITF 00-19 for equity classification as
       they do not contain registration rights obligations with respect to
       the underlying shares similar to the other financing described in the
       table. The conversion feature on the related debt does not require
       derivative accounting and no beneficial conversion feature exists on
       this issuance.
</TABLE>

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

         The Company executed an amended credit facility agreement, dated as
of February 13, 2003, with the U.S. bank. The amended credit facility
agreement is structured as a term loan in the amount of $3.5 million (due
February 13, 2005) and a revolving credit loan in the amount of $5.0 million
(due January 31, 2004). The Company repaid $5.0 million of this loan from
the proceeds of the sale of subordinated convertible debentures as discussed
below. Borrowings under the amended facility are based on a formula of
eligible accounts receivable and inventories of the Company's U.S.-based
subsidiaries. The outstanding loans under the agreement bear interest at the
prime interest rate plus 2% per annum. The loan agreement contains quarterly
financial covenants related to borrowings, working capital, debt coverage,
current ratio and capital expenditures. Total borrowings under the revolving
credit agreement were $4.6 million and the available credit under this
agreement was $0.4 million at September 30, 2003.

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

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

         The Company's financing of its U.S. operations is separate from
that of its Hungarian operations. Availability of credit is based on the
collateral value at each operation. However, the covenants of the term loan
and revolving line of credit from its U.S. bank, which have been waived
through February 13, 2006, the latest maturity date of these borrowings.

         US Operations - The Company's current credit facility with its U.S.
bank is described above under "--2005 Refinancing" and "--2003 Refinancing."
Total borrowings under the U.S. credit facility, including the revolving
line of credit and term loan, were $5.7 million at September 30, 2004.

                                     16

<PAGE>
<PAGE>

         Hungarian Operations - The Company's Hungarian subsidiary has a
credit facility with a Hungarian bank. Total borrowings under this credit
facility were $11.4 million at September 30, 2004. Due to the fiscal 2005
refinancing (see -"Refinancing" in Note 2), the credit facility has been
reduced to a $3.0 million term loan with interest only payments over the
next three years and a balloon payment at the end of the term.

         In March 2003, the Company's Hungarian subsidiary entered into a
credit agreement with another Hungarian bank for $2.2 million of which $2.2
million was outstanding as of September 30, 2004. This facility was paid off
as part of the 2005 refinancing.

         Total borrowings of the Hungarian subsidiary were $13.6 million at
September 30, 2004, of which $13.6 million has been classified as long-term
debt due to the 2005 refinancing in which $12.0 million was repaid.
Borrowings under the Hungarian bank credit facilities cannot be used in
Zoltek's U.S. operations.

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

         In the third quarter of fiscal 2001, the Company elected to
temporarily idle a significant part of the operations located at the
Abilene, Texas facility. The Company resumed manufacturing at this facility
during fiscal 2004. Given that these assets were previously idled and did
not generate significant cash flow in 2004, the Company performed an
impairment test. The Company determined that no impairment of its carrying
value exists at September 30, 2004 based on an analysis of expected future
net cash flow to be generated from this facility over the expected remaining
useful life.

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

         Net cash used by continuing operating activities was $6.9 million
for fiscal 2004. The cash flows used by continuing operating activities
during fiscal 2004 were primarily due to the net loss from continuing
operations of $17.0 million plus an increase in net operating assets of $3.2
million, offset by non-cash items, including depreciation and amortization
of $13.2 million. The increase in net operating assets consisted of an
increase in receivables and other assets of $4.1 million as carbon fiber
sales increased during the year and the Company's Entec subsidiary finished
a $2.0 million project related to building a machine for a wind turbine
provider to make carbon fiber composite blades for wind turbines with an
automated process close to its fiscal year-end; the related account
receivable had not been collected by September 30, 2004. In addition,
accrued expenses and other liabilities and trade payables increased $0.8
million with an increase in inventories of $0.2 million.

         The Company is exploring other alternative markets to sell certain
carbon fiber inventories to improve its cash flow. During fiscal 2004, the
Company decreased the carbon fiber and specialty unit actual inventory by
$0.9 million which was offset by an increased inventory in the Entec
operation.

         Net cash used by continuing operating activities was $2.0 million
for fiscal 2003. The cash flows used by continuing operating activities
during fiscal 2003 were primarily due to the net loss from continuing
operations of $11.9 million offset by non-cash items including depreciation
and amortization of $5.9 million and unrealized foreign exchange gain of
$0.8 million plus a decrease in net operating assets of $3.2 million. The
decrease in net operating assets consisted of a decrease of $0.8 million in
inventories due primarily to a concerted effort to reduce inventories, a
decrease of $1.1 million in accounts receivable, a decrease of $0.3 million
in prepaid and other assets and a $2.9 million increase in accrued expenses
and other liabilities, offset by a $1.2 million decrease in trade payables
and a $0.7 million decrease in long-term liabilities.

Cash Used by Discontinued Operating Activities
----------------------------------------------

         Net cash used by discontinued operating activities was $0.2 million
for fiscal 2004. The cash flow used by discontinued operating activities
during 2004 was primarily related to the net loss of $5.8 million plus
decreases in net operating assets of $5.6 million. The decrease in net
operating assets consisted of a decrease in receivables and inventory of
$3.5 million and $3.2 million, respectively, offset by decreases in payables
of $1.1 million. The decrease in receivables and inventory related to the
discontinuation of the textile acrylic division as the sales and inventory
purchases decreased significantly from the prior year.

         Net cash used by discontinued operating activities was $2.5 million
for fiscal 2003. The cash flow used by discontinued operating activities
during 2003 was primarily related to the net loss of $3.7 million plus


                                     17

<PAGE>
<PAGE>

decreases in net operating assets of $1.2 million. The decrease in net
operating assets consisted of a decrease in receivables and inventory of
$1.3 million and $1.0 million, respectively, offset by decreases in payables
of $1.1 million. The decrease in receivables and inventory related to the
discontinuation of the textile acrylic division as the sales and inventory
purchases decreased significantly from the prior year.

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

Inventories consist of the following (amounts in thousands):

<TABLE>
<CAPTION>
                                                                                         SEPTEMBER 30,  SEPTEMBER 30,
                                                                                             2004           2003
                                                                                         -------------  -------------

<S>                                                                                       <C>             <C>
         Raw materials....................................................................$   5,462       $   4,859
         Work-in-process..................................................................    1,177           1,132
         Finished goods...................................................................   18,317          19,057
         Supplies, spares and other.......................................................      946           1,930
                                                                                          ---------       ---------
                                                                                          $  25,902       $  26,978
                                                                                          =========       =========
</TABLE>

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

         Net cash used for continuing investing activities for fiscal 2004
was $6.0 million which consisted of capital expenditures. The primary
capital expenditures consisted of the $1.7 million purchase of the Company's
Abilene nitrogen plant which was previously leased in an arrangement
accounted for as an operating lease and the expenditures related to the
expansion of the Company's precursor facility and carbon fiber operations to
meet the additional demand for carbon fiber products.

         Net cash used for investing activities for fiscal 2003 was $0.7
million which included capital expenditures of $1.5 million primarily at the
Hungarian subsidiary related to expansion of its precursor facility, offset
by the sale of an investment held by the Hungarian subsidiary for $0.7
million.

         Historically, cash used in investing activities has been expended
for equipment additions and the expansion of the Company's carbon fibers
production capacity. The Company expects capital expenditures to increase in
connection with the restart of the Abilene carbon fiber lines, the expansion
of its precursor facility in Hungary and the installation of additional
carbon fiber lines to meet the increase demand for carbon fiber. The Company
will have to seek additional financing to fund its continuing capacity
expansion program.

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

         Net cash provided by financing activities was $12.6 million for
fiscal 2004 and $5.4 million for fiscal 2003. The various financing
transactions for 2004 and 2003 are described above.




                                     18

<PAGE>
<PAGE>

Future Contractual Obligations
------------------------------

         A summary of significant contractual obligations is shown below.
See Notes 5 and 8 to the consolidated financial statements for discussion of
the Company's debt agreements and lease obligations, respectively.

<TABLE>
<CAPTION>
                                                                             LESS THAN                     4-5       MORE THAN
                                                                  TOTAL       1 YEAR      1-3 YEARS       YEARS       5 YEARS
                                                                ---------    ---------    ---------     --------     ---------
<S>                                                             <C>          <C>          <C>           <C>          <C>
Notes payable...................................................$   2,441    $   2,441
Convertible debentures..........................................   20,850            -    $  20,850
Long-term debt, including current maturities....................   28,468          570       14,405     $ 13,493     $       -
                                                                ---------    ---------    ---------     --------     ---------
     Total debt.................................................   51,759        3,011       35,255       13,493             -
Operating leases................................................      348           58          174          116             -
                                                                ---------    ---------    ---------     --------     ---------
     Total debt and operating leases............................   52,107        3,069       35,429       13,609             -
Purchase obligations............................................    1,403        1,403            -            -             -
                                                                ---------    ---------    ---------     --------     ---------
     Total contractual obligations..............................$  53,510    $   4,472    $  35,429     $ 13,609     $       -
                                                                =========    =========    =========     ========     =========
</TABLE>

         The future contractual obligations and debt would be reduced by
$30.1 million in exchange for 6.2 million shares of common stock if all the
convertible debt including the 2005 financing that refinanced $10 million of
the existing Hungarian debt was converted. The Company would also receive
$12.0 million in additional cash if all warrants associated with the
convertible debt were exercised.

<TABLE>
<CAPTION>
                                                   CONVERSION                LESS THAN                    4-5        MORE THAN
                                                     PRICE        TOTAL       1 YEAR      1-3 YEARS      YEARS        5 YEARS
                                                   ----------   ---------    ---------    ---------     --------     ---------
<S>                                                <C>          <C>          <C>          <C>           <C>          <C>
Total contractual obligation.......................             $  53,510    $   4,472    $  35,429     $ 13,609     $       -
February 2003 issuance.............................$   3.25        (8,100)           -       (8,100)           -             -
January 2004 issuance..............................    5.40        (7,000)           -       (7,000)           -             -
March 2004 issuance................................    6.25        (5,750)           -       (5,750)           -             -
October 2004 issuance..............................   12.00       (10,000)           -            -      (10,000)            -
                                                                ---------    ---------    ---------     --------     ---------
     Total pro forma contractual obligations.......             $  22,660    $   4,472    $  14,579     $  3,609     $       -
                                                                =========    =========    =========     ========     =========
</TABLE>

         In October 2003, the Company was named as a defendant in a civil
action filed in the Court of Common Pleas for Cuyahoga County, Ohio by the
former owner of Hardcore Composites Operations, LLC ("Hardcore") alleging
breach by Hardcore and the Company of their respective obligations under a
sublease, the Company's guaranty of the sublease, and prior settlement
agreement among the parties. The former owner's action claims damages in the
amount of $0.3 million for breaches by the Company of its obligations under
the guaranty and the settlement agreement and, in addition, demands $0.5
million in damages from Hardcore and the Company, jointly and severally,
under the terms of the settlement agreement. In October 2004, the Court of
Common Pleas for Cuyahoga County, Ohio ruled in favor of the former owner of
Hardcore Composites in the amount of $1.1 million. In prior periods, the
Company has accrued $1.1 million in respect of the possible liability in
this matter, which it believes is its maximum obligation under this
guaranty. The Company is vigorously defending this matter, has filed
counterclaims and filed an appeal that represents its only recourse
regarding this guaranty. Management believes that the ultimate resolution of
this litigation will not have a further material adverse effect on the
Company's results of operations, financial condition or cash flow. To date,
the Company has not made any payments of any portion of this obligation,
although it posted an appeal bond in the amount of $1.3 million. The Company
executed a guaranty of Hardcore Composite's lease obligations of
approximately $30,000 per month to the former owner. The lease of the
Hardcore Composites manufacturing facility expires March 31, 2008. Hardcore
no longer occupies the facility and, accordingly, in connection with the
ongoing litigation with the former owner, Zoltek is asserting that Zoltek
has no further ongoing guarantee obligation with respect to the lease. The
Company also is the obligee on aggregate original value of unsecured
promissory notes of $9.3 million in connection with the sale of Hardcore,
for which a full valuation allowance has been recorded. A full valuation
allowance is appropriate in light of Hardcore's current financial condition
which, among other relevant factors, make the collection of the promissory
notes doubtful.



                                     19

<PAGE>
<PAGE>

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

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

REVENUE RECOGNITION

         Sales transactions are initiated through customer purchase order or
sales agreement which includes fixed pricing terms. The Company recognizes
sales for manufactured products on the date title to the sold product
transfers to the customer, which is either the shipping date or the date
consumed by the customer if sold on consignment. Revenues generated by its
Entec Composite Machines subsidiary are recognized on a percentage of
completion basis based on the percentage of total project cost incurred to
date which include change orders, revisions to estimates and provisions for
anticipated losses on contracts. Manufactured products are accepted prior to
shipment and thus an allowance for returns is not accrued as historical
returns have not been material. The Company reviews its accounts receivable
on a monthly basis to identify any specific customers for collectibility
issues. If the Company deems that an amount due from a customer is
uncollectible, the amount is recorded as expense in the statement of
operations.

         During fiscal 2004, 2003 and 2002, approximately $7.2 million, $8.0
million and $9.8 million, respectively, of sales was earned from one
customer in the technical fiber segment.

SHIPPING AND HANDLING

         All amounts billed to a customer in a transaction related to
shipping and handling are recorded as revenue and the subsequent cost to the
Company is recognized as expense in cost of sales, excluding unused
capacity.

INVENTORIES

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

         Until fiscal 2005, carbon fiber sales have been depressed by excess
capacity across the industry, distressed pricing across most existing
markets and weakening economic conditions globally. These factors combined
with the high level of inventories maintained by the Company, have resulted
in the Company reducing the cost of certain carbon fiber inventories to
their lower estimated market values. If demand for products held in
inventory does not improve in a reasonable period of time, or further
deteriorate, it is possible that the market value of these carbon fiber
inventories may further decrease resulting in additional charges to cost of
sales (excluding available unused capacity costs).

APPLICATION AND DEVELOPMENT EXPENSES

         The Company is actively pursuing the development of a number of
applications for the use of its carbon fiber and related products. The
Company is currently party to several developmental agreements with various
prospective users of these products for the purpose of accelerating the
development of various carbon fiber applications. Additionally, the Company
is executing several internal developmental strategies to further the use of
carbon fiber and consumer and industrial products made from carbon fiber. As
a result, the Company incurs certain costs for research, development and
engineering of products and manufacturing processes. These costs are
expensed as incurred and totaled approximately $3.1 million in fiscal 2004,
$3.5 million in fiscal 2003 and $3.8 million in fiscal 2002. Application and
development expenses are presented as an operating item on the Company's
consolidated statement of operations. Given the Company's position and
strategy within the carbon fiber industry, it is expected that similar or
greater levels of application and development expenses could be incurred in
future periods.


                                     20

<PAGE>
<PAGE>

UNUSED CAPACITY COSTS

         During 2004, the Company was not operating its Abilene, Texas
facility at full capacity. As a result, the Company has elected to
categorize certain costs related to these idle assets as unused capacity
costs. Such costs totaled $4.5 million, $5.7 million and $6.0 million for
fiscal 2004, 2003 and 2002, respectively, and include depreciation and other
overhead expenses associated with unused capacity. The unused capacity costs
are presented as an operating item on the Company's consolidated statement
of operations. As discussed above, the Company has resumed certain levels of
manufacturing at this facility during fiscal 2004. With the reactivation of
the Abilene plant, unused capacity costs are expected to diminish and,
ultimately, be fully absorbed in ongoing production once all the carbon
fiber lines start operating.

VALUATION OF LONG-LIVED ASSETS

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

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 basis of assets and liabilities applying enacted
statutory tax rates in effect for the year in which the differences are
expected to reverse. A valuation allowance is provided against certain
deferred tax assets when realization of those assets are not considered to
be more likely than not.

RECENT ACCOUNTING PRONOUNCEMENTS

         See Note 1 to the Company's Consolidated Financial Statements.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk
-------   ----------------------------------------------------------

         The Company is exposed to changes in interest rates primarily as a
result of borrowing activities under its credit facility. The nature and
amount of the Company's debt may vary as a result of future business
requirements, market conditions and other factors. The extent of the
Company's interest rate risk is not quantifiable or predictable because of
the variability of future interest rates and business financing
requirements. The Company does not believe such risk is material because a
significant amount of the Company's current debt is at fixed rates. At
September 30, 2004, the Company did not have any interest rate swap
agreements outstanding. However, a one percent increase in the weighted
average interest rate of the Company's debt would result in a $0.5 million
increase in interest expense based on the debt levels at September 30, 2004.

         The Company views as long-term its investment in Zoltek Rt., which
has a functional currency other than the U.S. dollar. As a result, the
Company does not hedge this net investment. In terms of foreign currency
translation risk, the Company is exposed to Zoltek Rt.'s functional
currency, which is the Hungarian Forint. The Company's net foreign currency
investment in Zoltek Rt. translated into U.S. dollars using period-end
exchange rates was $35.3 million and $30.0 million at September 30, 2004 and
2003, respectively. The potential loss in value of the Company's net foreign
currency investment in Zoltek Rt. resulting from a hypothetical 10% adverse
change in quoted foreign currency exchange rate of the Hungarian Forint at
September 30, 2004 and 2003 amounted to $3.5 million and $2.7 million,
respectively. In addition, Zoltek Rt. routinely sells its products to
customers located primarily throughout Europe in sales transactions that are
denominated in foreign currencies other than


                                     21

<PAGE>
<PAGE>

the Hungarian Forint. Also, Zoltek Rt. has debt that is denominated in
foreign currencies other than the Hungarian Forint. As a result, Zoltek Rt.
is exposed to foreign currency risks related to these transactions. The
Company does not currently employ a foreign currency hedging strategy
related to the sales of Zoltek Rt.

Item 8.  Financial Statements and Supplementary Data
------   -------------------------------------------


                           ZOLTEK COMPANIES, INC.
                            REPORT OF MANAGEMENT

         Management of Zoltek Companies, Inc. is responsible for the
preparation and integrity of the Company's financial statements. These
statements have been prepared in accordance with generally accepted
accounting principles and in the opinion of management fairly present the
Company's financial position, results of operations, and cash flow.

         The Company maintains accounting and internal control systems to
provide reasonable assurance that assets are safeguarded against loss from
unauthorized use or disposition and that the financial records are reliable
for preparing financial statements. The selection and training of qualified
personnel and the establishment and communication of accounting and
administrative policies and procedures are important elements of these
control systems. As set forth under "Item 9A. Controls and Procedures" of
this Annual Report on Form 10-K, as amended, the Company's Chief Executive
Officer and Chief Financial Officer concluded that material weaknesses
existed as of September 30, 2004 because the Company did not maintain
effective controls over accounting for non-routine and complex transactions
and earnings per share.

         The Board of Directors, through its Audit Committee consisting
solely of non-management directors, meets periodically with management and
the Independent Registered Public Accounting Firm to discuss audit and
financial reporting matters. To ensure independence, PricewaterhouseCoopers
LLP has direct access to the Audit Committee.

         The Report of PricewaterhouseCoopers LLP, Independent Registered
Public Accounting Firm, on their audits of the accompanying financial
statements follows.



/s/ Zsolt Rumy
------------------------------------
Zsolt Rumy
December 15, 2005






                                     22

<PAGE>
<PAGE>


                           ZOLTEK COMPANIES, INC.


           REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


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 operations, 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, 2004 and 2003, and the results of their
operations and their cash flows for each of the three years in the period
ended September 30, 2004 in conformity with accounting principles generally
accepted in the United States of America. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these statements in accordance with the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

         As discussed in Note 2 to the consolidated financial statements,
the Company restated its September 30, 2004 consolidated financial
statements.



/s/PricewaterhouseCoopers LLP
----------------------------------
PricewaterhouseCoopers LLP
St. Louis, Missouri
December 29, 2004, except for Note 2, as to which the date is December 15, 2005.






                                     23

<PAGE>
<PAGE>

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



<CAPTION>
ASSETS                                                                                                   September 30,
---------------------------------------------------------------------------------------------------------------------------
                                                                                                    2004             2003
                                                                                                  ---------        --------

                                                                                                 (RESTATED-
                                                                                                 SEE NOTE 2)
Current assets:
<S>                                                                                               <C>              <C>
     Cash and cash equivalents.................................................................   $     267        $    838
     Accounts receivable, less allowance for doubtful accounts of $981 and $931, respectively..      11,611          10,380
     Inventories...............................................................................      25,902          26,978
     Other current assets......................................................................       1,167           1,483
                                                                                                  ---------        --------
          Total current assets.................................................................      38,947          39,679
Property and equipment, net....................................................................      80,414          77,373
Other assets...................................................................................       3,094           2,403
                                                                                                  ---------        --------
          Total assets.........................................................................   $ 122,455        $119,455
                                                                                                  =========        ========

<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                               <C>              <C>
Current liabilities:
     Current maturities of long-term debt......................................................   $     570        $    933
     Trade accounts payable....................................................................      13,257          11,892
     Notes payable.............................................................................       2,441           2,916
     Accrued expenses and other liabilities....................................................       5,877           5,148
                                                                                                  ---------        --------
          Total current liabilities............................................................      22,145          20,889
Other long-term liabilities....................................................................         357             509
Value of warrants and conversion feature associated with convertible debenture.................      13,721               -
Long-term debt, less current maturities........................................................      42,002          33,541
                                                                                                  ---------        --------
          Total liabilities....................................................................      78,225          54,939
                                                                                                  ---------        --------
Commitments and contingencies (see Note 8)
Shareholders' equity:
     Preferred stock, $.01 par value, 1,000,000 shares authorized,
       no shares issued and outstanding........................................................           -               -
     Common stock, $.01 par value, 50,000,000 shares authorized,
        16,307,338 and 16,297,338 shares issued and outstanding, respectively..................         163             163
     Additional paid-in capital................................................................     109,524         109,290
     Accumulated deficit ......................................................................     (55,312)        (32,505)
     Accumulated other comprehensive loss......................................................     (10,145)        (12,432)
                                                                                                  ---------        --------
          Total shareholders' equity...........................................................      44,230          64,516
                                                                                                  ---------        --------
          Total liabilities and shareholders' equity...........................................   $ 122,455        $119,455
                                                                                                  =========        ========



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



                                     24

<PAGE>
<PAGE>

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



<CAPTION>
                                                                                        Year Ended September 30,
---------------------------------------------------------------------------------------------------------------------------
                                                                                   2004            2003               2002
                                                                               ------------    ------------       ---------
                                                                                (RESTATED-
                                                                                SEE NOTE 2)

<S>                                                                             <C>              <C>               <C>
Net sales....................................................................   $   45,273       $  39,405         $ 41,787
Cost of sales, excluding available unused capacity costs.....................       37,878          33,181           33,508
Available unused capacity costs..............................................        4,466           5,716            6,039
Application and development costs............................................        3,070           3,453            3,750
Selling, general and administrative expenses.................................        5,344           6,498            6,569
                                                                                ----------       ---------         --------
     Operating loss from continuing operations...............................       (5,485)         (9,443)          (8,079)
Other income (expense):
     Interest expense, excluding amortization of financing fees, debt
        discount and beneficial conversion feature...........................       (3,429)         (1,875)          (1,632)
     Amortization of financing fees, debt discount and beneficial
        conversion feature...................................................       (2,577)            (84)               -
     Loss on value of warrants and conversion feature........................       (4,920)              -                -
     Interest income.........................................................           21              57               25
     Other, net..............................................................         (155)            (49)             309
                                                                                ----------       ---------         --------
          Loss from continuing operations before income taxes................      (16,545)        (11,394)          (9,377)
Income tax expense (benefit).................................................          434             535           (2,860)
                                                                                ----------       ---------         --------
     Net loss from continuing operations.....................................      (16,979)        (11,929)          (6,517)
                                                                                ----------       ---------         --------
Discontinued operations:
     Operating loss, net of taxes............................................       (5,169)         (3,673)          (3,208)
     Gain (loss) on disposal of discontinued operations......................         (659)              -            1,894
                                                                                ----------       ---------         --------
          Net loss on discontinued operations, net of taxes .................       (5,828)         (3,673)          (1,314)
                                                                                ----------       ---------         --------
Net loss.....................................................................   $  (22,807)      $ (15,602)        $ (7,831)
                                                                                ==========       =========         ========
Net loss per share:
     Basic and diluted loss per share:
     Continuing operations...................................................   $    (1.04)      $   (0.73)        $  (0.40)
          Discontinued operations............................................        (0.36)          (0.23)           (0.08)
                                                                                ----------       ---------         ---------
               Total.........................................................   $    (1.40)      $   (0.96)        $  (0.48)
                                                                                ==========       =========         ========

Weighted average common shares outstanding...................................       16,372          16,307           16,289





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



                                     25

<PAGE>
<PAGE>

<TABLE>
                                                      ZOLTEK COMPANIES, INC.
                                     CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
                                                      (Amounts in thousands)



<CAPTION>
                                     Total Share-              Add'l     Accumulated Other
                                       holders'    Common     Paid-In      Comprehensive    Treasury  Accumulated   Comprehensive
                                        Equity     Stock      Capital      Income (Loss)      Stock    (Deficit)    Income (Loss)
-----------------------------------------------------------------------------------------------------------------------------------

<S>                                  <C>           <C>       <C>            <C>             <C>         <C>          <C>
Balance, September 30, 2001........  $   79,595    $ 188     $ 128,024      $ (20,364)      $(19,181)   $ (9,072)
Net loss...........................      (7,831)       -             -              -              -      (7,831)    $  (7,831)
Foreign currency translation
  adjustment.......................       4,111        -             -          4,111              -           -         4,111
                                                                                                                     ---------
         Comprehensive loss........                                                                                  $  (3,720)
                                                                                                                     =========
Treasury shares retired............           -      (25)      (19,156)             -         19,181           -
Exercise of stock options..........          29        -            29              -              -           -
                                     ----------    -----     ---------      ---------       --------    --------
Balance, September 30, 2002........      75,904      163       108,897        (16,253)             -     (16,903)
Net loss...........................     (15,602)                                                         (15,602)    $ (15,602)
Foreign currency translation
  adjustment.......................       3,821                                 3,821                                    3,821
                                                                                                                     ---------
         Comprehensive loss........                                                                                  $ (11,781)
                                                                                                                     =========
Warrants issued with sub-debt......         372                    372
Exercise of stock options..........          21                     21
                                     ----------    -----     ---------      ---------       --------    --------
Balance, September 30, 2003........      64,516      163       109,290        (12,432)             -     (32,505)
Net loss (Restated-See Note 2).....     (22,807)                                                         (22,807)    $ (22,807)
Foreign currency translation
  adjustment.......................       2,287                                 2,287                                    2,287
                                                                                                                     ---------
         Comprehensive loss
           (Restated-See Note 2)...                                                                                  $ (20,520)
                                                                                                                     =========
Exercise of stock options
  and warrants (Restated-See Note 2)         34        -           234
                                     ----------    -----     ---------      ---------       --------    --------
Balance, September 30, 2004
  (Restated-see Note 2)............  $   44,230    $ 163     $ 109,524      $ (10,145)      $      -    $(55,312)
                                     ==========    =====     =========      =========       ========    ========









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


                                     26

<PAGE>
<PAGE>

<TABLE>
                                                   ZOLTEK COMPANIES, INC.
                                            CONSOLIDATED STATEMENT OF CASH FLOWS
                                                   (Amounts in thousands)



<CAPTION>
                                                                                           Year Ended September 30,
----------------------------------------------------------------------------------------------------------------------------
                                                                                   2004             2003             2002
                                                                                ----------       ---------        ---------
                                                                                (RESTATED-
                                                                                SEE NOTE 2)
<S>                                                                             <C>              <C>              <C>
Cash flows from operating activities:
     Net loss..............................................................     $  (22,807)      $ (15,602)       $  (7,831)
     Adjustments to reconcile net loss to net cash
      used by operating activities:
          Loss from discontinued operations................................          5,828           3,673            1,314
          Depreciation and amortization....................................          5,614           5,889            6,046
          Amortization of financing and warrants...........................          2,577              84                -
          Value of warrant and conversion feature..........................          4,920               -                -
          Foreign currency transaction (gains) losses......................            128             787             (240)
          Other, net.......................................................            (38)            (36)             (17)
          Changes in assets and liabilities:
              (Increase) decrease in accounts receivable...................         (4,095)          1,109            1,511
              (Increase) decrease in inventories...........................           (176)            783           (1,577)
              (Increase) decrease in prepaid expenses and other assets.....            172             339           (1,950)
              Increase (decrease) in trade accounts payable................          2,487          (1,228)             413
              Increase (decrease) in accrued expenses and other liabilities         (1,590)          2,920             (742)
              Increase (decrease) in other long-term liabilities...........             (4)           (675)             190
                                                                                ----------       ---------        ---------
                  Total adjustments........................................         15,823          13,645            4,948
                                                                                ----------       ---------        ---------
     Net cash used by continuing operations................................         (6,984)         (1,957)          (2,883)
     Net cash provided (used) by discontinued operations...................           (234)         (2,488)           1,821
                                                                                ----------       ---------        ---------
Net cash used by operating activities......................................         (7,218)         (4,445)          (1,062)
                                                                                ----------       ---------        ---------
Cash flows from investing activities:
     Proceeds from sale of long-term investment............................              -             641                -
     Payments for purchase of property and equipment.......................         (6,003)         (1,483)          (1,865)
     Proceeds from sale of property and equipment..........................            137             121               74
                                                                                ----------       ---------        ---------
   Net cash used by continuing operations..................................         (5,866)           (721)          (1,791)
   Net cash used by discontinued operations................................             (6)            (94)            (116)
                                                                                ----------       ---------        ---------
Net cash used by investing activities......................................         (5,872)           (815)          (1,907)
                                                                                ----------       ---------        ---------
Cash flows from financing activities:
     Proceeds from exercise of common stock options and warrants...........            255              21               29
     Proceeds from issuance of convertible debt and warrants...............         12,750           8,100                -
     Proceeds from issuance of notes payable...............................         12,581           8,140            7,335
     Proceeds from issuance of note payable to related party...............          1,400               -                -
     Payment of financing fees.............................................         (1,249)              -                -
     Repayment of notes payable and long-term debt.........................        (11,811)        (10,880)          (4,265)
     Repayment of note payable to related party............................         (1,400)              -                -
                                                                                ----------       ---------        ---------
   Net cash provided by continuing operations..............................         12,526           5,381            3,099
   Net cash used by discontinued operations................................              -               -             (116)
                                                                                ----------       ---------        ---------
Net cash provided by financing activities..................................         12,526           5,381            2,983
                                                                                ----------       ---------        ---------
Effect of exchange rate changes on cash....................................             (7)             32                5
                                                                                ----------       ---------        ---------
Net increase (decrease) in cash............................................           (571)            153              (50)
Cash and cash equivalents at beginning of period...........................            838             685              667
                                                                                ----------       ---------        ---------
Cash and cash equivalents at end of period.................................     $      267       $     838        $     685
                                                                                ==========       =========        =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Net cash paid (refunded) during the year for:
     Interest..............................................................     $    3,436       $   1,875        $   2,425
     Income taxes..........................................................              -               -           (2,844)


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


                                     27

<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
Properties Inc., Zoltek Rt., and Engineering Technology Corporation ("Entec
Composite Machines"). Zoltek Corporation ("Zoltek") develops, manufactures
and markets carbon fibers, a low-cost but high performance reinforcement for
composites used as the primary building material in everyday commercial
products. Entec Composite Machines manufactures and sells filament winding
and pultrusion equipment used in the production of large volume composite
parts. Zoltek Rt. manufactures and markets acrylic and nylon fibers and
yarns for the textile industry, and carbon fiber. Other Zoltek Rt. products
include nylon granules, plastic grids and nets, and carboxymethyl cellulose.
From April 2000 to March 2002, the Company owned a 45% interest in Hardcore
Composites Operations, LLC ("Hardcore"), which designs and manufactures
composite structures for the civil infrastructure market. (See Note 4 for
further discussion.) These financial statements have been prepared in
accordance with U.S. generally accepted accounting principles. All
significant inter-company transactions and balances have been eliminated
upon consolidation.

FOREIGN CURRENCY TRANSLATION

         The consolidated balance sheet of the Company's current
international subsidiary, Zoltek Rt., was translated from Hungarian Forints
to U.S. Dollars at the exchange rate in effect at the applicable balance
sheet date, while its consolidated statements of operations were translated
using the average exchange rates in effect for the periods presented. The
related translation adjustments are reported as other comprehensive income
(loss) within shareholders' equity. Gains and losses from foreign currency
transactions of Zoltek Rt. are included in the results of operations in
other expenses.

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

         Sales transactions are initiated through customer purchase order or
sales agreement which includes fixed pricing terms. The Company recognizes
sales for manufactured products on the date title to the sold product
transfers to the customer, which is either the shipping date or the date
consumed by the customer if sold on consignment. Revenues generated by its
Entec Composite Machines subsidiary are recognized on a percentage of
completion basis based on the percentage of total project cost incurred to
date which include change orders, revisions to estimates and provisions for
anticipated losses on contracts. Manufactured products are accepted prior to
shipment and thus an allowance for returns is not accrued as historical
returns have not been material. The Company reviews its accounts receivable
on a monthly basis to identify any specific customers for collectibility
issues. If the Company deems that an amount due from a customer is
uncollectible, the amount is recorded as expense in the statement of
operations.

         During 2004, 2003 and 2002, approximately $7.2 million, $8.0
million and $9.8 million, respectively, of sales was earned from one
customer in the technical fibers segment.


                                     28

<PAGE>
<PAGE>

SHIPPING AND HANDLING

         All amounts billed to a customer in a transaction related to
shipping and handling are recorded as revenue and the subsequent cost to the
Company is recognized as expense in cost of sales, excluding unused
capacity.

CONCENTRATION OF CREDIT RISK

         Zoltek's carbon fiber products are primarily sold to customers in
the composite industry and its technical fibers are primarily sold to
customers in the aerospace industry. Zoltek Rt.'s acrylic products are
primarily sold to customers in the textile industry. Entec Composite
Machines' products are primarily sold in the composite 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 Asia and
most of Zoltek Rt.'s sales are to customers in Europe, while Entec Composite
Machines' sales are worldwide. The Company performs ongoing credit
evaluations and generally requires collateral for significant export sales
to new customers. The Company maintains reserves for potential credit losses
and such losses have been within management's expectations. As of September
30, 2004, the Company's Entec subsidiary finished a $2.0 million project
related to building a machine for a wind turbine provider to make carbon
fiber composite blades for wind turbines with an automated process close to
its fiscal year-end which had not been collected.

         In the fiscal years ended September 30, 2004 and 2003, the Company
reported sales of $7.2 million and $8.0 million, respectively, to a major
aircraft brake manufacturer which was the only customer that represented
greater than 10% of the Company's total consolidated revenues.

CASH AND CASH EQUIVALENTS

         All highly liquid investments purchased with a maturity of three
months or less are considered to be cash equivalents. As of September 30,
2004, the Company had a book overdraft of $0.7 million which was
reclassified as accounts payable. The subordinated debt agreements of 2004
and 2005 require that the Company maintain cash plus borrowing capacity
under credit facilities of at least $0.5 million, which the Company was in
compliance with as of September 30, 2004.

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. The Company recorded an inventory valuation reserve of $1.0
million in the fourth quarter of 2003 to reduce the carrying value of
inventories to a net realizable value. No material adjustments to the
reserve were required in the current year. The reserves were established
primarily due to intensified overcapacity for certain carbon fiber products.

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, 2004, 2003 and 2002.
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.

                                     29

<PAGE>
<PAGE>

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

              Buildings and improvements....................10 to 20 years
              Machinery and equipment.......................3 to 20 years
              Furniture, fixtures and software..............7 to 10 years

         The Company primarily uses accelerated depreciation methods for
income tax purposes. Depreciation expense was $5.6 million, $5.9 million and
$6.0 million for the fiscal years ended 2004, 2003 and 2002, respectively.

         Long-lived assets are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected future undiscounted cash flows is
less than the carrying amount of the asset, a loss is recognized for the
difference between the fair value and the carrying value of the asset.

         In the third quarter of fiscal 2001, the Company elected to
temporarily idle a significant part of the operations located at the
Abilene, Texas facility. The Company resumed manufacturing at this facility
during fiscal 2004. Given that these assets were previously idled and did
not generate significant cash flow in 2004, the Company performed an
impairment test. The Company determined that no impairment of its carrying
value exists at September 30, 2004 based on an analysis of expected future
net cash flow to be generated from this facility over the expected remaining
useful life.

FINANCIAL INSTRUMENTS

         The Company does not hold any financial instruments for trading
purposes. The carrying value of cash, accounts receivable and accounts
payable approximated their fair value at September 30, 2004 and 2003.

APPLICATION AND DEVELOPMENT EXPENSES

         The Company is actively pursuing the development of a number of
applications for the use of its carbon fiber and related products. The
Company is currently party to several developmental agreements with various
prospective users of these products for the purpose of accelerating the
development of various carbon fiber applications. Additionally, the Company
is executing several internal developmental strategies to further the use of
carbon fiber and consumer and industrial products made from carbon fiber. As
a result, the Company incurs certain costs for research, development and
engineering of products and manufacturing processes. These costs are
expensed as incurred and totaled approximately $3.1 million in fiscal 2004
and $3.5 million in fiscal 2003 and $3.8 million in fiscal 2002. Application
and development expenses are presented as an operating item on the Company's
consolidated statement of operations. Given the Company's position and
strategy within the carbon fiber industry, it is expected that similar or
greater levels of application and development expenses could be incurred in
future periods.

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 basis of assets and liabilities applying enacted
statutory tax rates in effect for the year in which the differences are
expected to reverse. A valuation allowance is provided


                                     30

<PAGE>
<PAGE>

against certain deferred tax assets when realization of those assets are not
considered to be more likely than not.

STOCK-BASED COMPENSATION

         At September 30, 2004, the Company had stock-based employee
compensation plans. The Company accounts for those plans under the
recognition and measurement principles of Accounting Principles Board
Opinion No. 25 ("APB 25"), Accounting for Stock Issued to Employees, and its
related interpretations. No stock-based employee compensation costs are
reflected in net loss, as all options granted under those plans had an
exercise price equal to the market value of the underlying common stock on
the date of grant. The Company granted 77,500, 112,500 and 451,000 employee
stock options with an exercise price that equaled the Company's stock price
on the applicable date of grant in fiscal 2004, 2003 and 2002, respectively.
The following table illustrates the effect on net loss and loss per share if
the Company had applied the fair value recognition provisions of Statement
of Financial Accounting Standards No. 123 ("FAS 123"), Accounting for Stock
Based Compensation, to stock-based employee compensation (in thousands,
except per share):

<TABLE>
<CAPTION>
                                                                          2004           2003             2002
                                                                      ----------      ----------       ---------
                                                                      (Restated-
                                                                      See Note 2)
<S>                                                                   <C>             <C>               <C>
         Net loss:
             As reported..........................................    $  (22,807)     $  (15,602)       $ (7,831)
             Total stock-based employee compensation
               expense determined under fair value-based
               method for all awards, net of tax effects..........          (255)            (71)           (205)
                                                                      ----------      ----------       ---------
             Pro forma............................................       (23,062)        (15,673)         (8,036)

         Basic and diluted loss per share:
             As reported..........................................         (1.40)           (.96)          (0.48)
             Pro forma............................................         (1.41)           (.96)          (0.49)
</TABLE>

NET LOSS PER SHARE

         Basic net loss per share includes no dilution and is calculated by
dividing net loss by the weighted average number of common shares
outstanding for each period, while diluted net income loss per share
reflects the potential dilutive effects of stock options, warrants and the
convertible debt. Because 2004, 2003 and 2002 results reflected a net loss,
both basic and diluted earnings per share were calculated based on the same
weighted average numbers of shares for such years. If the results of the
Company reflected a net income, an additional 4.8 million shares would be
included in calculating the diluted earnings per share. The additional
shares relate to issuance of convertible debt of 4.5 million, warrants of
1.0 million of which 0.2 million would be dilutive using the treasury stock
method and stock options of 1.0 million of which 0.1 million would be
dilutive using the treasury stock method.

RECENT ACCOUNTING PRONOUNCEMENTS

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

                                     31

<PAGE>
<PAGE>

         In October 2004, the government passed the "Homeland Investment
Act," which allows companies to repatriate cash balances from their
controlled foreign subsidiaries at a reduced tax rate and created a new
deduction for U.S. manufacturers related to qualified production activities
for income tax purposes. The Company is still considering the implications
but has not currently decided to repatriate funds from its Hungarian
subsidiary.

         In December 2004, the FASB issued interpretation No. 123-R
"Accounting for Stock-Based Compensation" (FIN No. 123-R), which addressed
the requirement for expensing the cost of employee services received in
exchange for an award of equity instrument. FIN No. 123-R will apply to all
equity instruments awarded, modified or repurchased for fiscal years ending
after June 15, 2005. The Company is evaluating the effect of this
interpretation but believes it will have an immaterial impact on the
Company's financial statements when implemented.

FINANCIAL PRESENTATION CHANGES

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

2.       RESTATEMENT
----------------------------------------------------------------------------

         On May 20, 2005, the Company concluded that its financial results
for the fiscal year ended September 30, 2004 and interim periods ended March
31, June 30, September 30 and December 31, 2004 would be restated to reflect
additional non-operating gains and losses related to the classification and
accounting for the conversion feature and the related warrants to purchase
the Company's common stock associated with convertible debt issued by the
Company in January, March and October 2004 and the amortization expense
associated with debt discount. Historically, the Company has classified the
value of warrants to purchase common stock and the beneficial conversion
feature, when applicable, as equity as the Company believed these
instruments met exceptions that did not require recording these instruments
as derivative liabilities. After further review the Company determined that
these instruments did not meet these exceptions and should have been
classified as derivative liabilities at the fair value of each instrument,
and must be recorded as such on the balance sheet. In subsequent periods the
change in fair value of these instruments will result in an adjustment to
this liability with the corresponding gain or loss being recorded in the
statement of operations. At the date of conversion of the instrument or
exercise of the warrants, as the case may be, the corresponding derivative
liability will be reclassified to equity. In addition, the Company recorded
individually immaterial adjustments to property and equipment, net, other
assets and accounts receivable, net that increased other expenses by $0.3
million in the year ended September 30, 2004.

         The impact of the adjustments related to the classification and
accounting for the conversion feature and the related warrants are
summarized below:

         For the fiscal year ended September 30, 2004, the loss on the fair
value of warrants and conversion feature and increased amortization expense
increased the previously reported net loss by $5.7 million. This result
increased the Company's basic and diluted loss per share from $1.02 to $1.40
for the fiscal year ended September 30, 2004. The Company's previously
reported long-term and total liabilities increased by $12.0 million with a
corresponding decrease in the Company's equity.

         The foregoing adjustments do not affect previously recorded net
sales, operating loss or cash flows from continuing operations. Furthermore,
these adjustments do not affect previously reported income tax expense as
the Company has recorded a full valuation allowance against all deferred tax
assets.

         The following tables summarize in a condensed format, the
consolidated financial statements as previously reported and as restated for
the fiscal year ended September 30, 2004. The previously


                                     32

<PAGE>
<PAGE>

reported amounts for the periods ended September 30, 2004 have been adjusted
for discontinued operations presentation discussed in Note 4.

<TABLE>
<CAPTION>
                                                                                      YEAR ENDED
                                                                                  SEPTEMBER 30, 2004
                                                                                  ------------------
                                                                                    AS
                                                                                PREVIOUSLY       AS
CONSOLIDATED STATEMENT OF OPERATIONS                                            REPORTED      RESTATED
------------------------------------                                            ---------    ----------
<S>                                                                             <C>          <C>
Operating loss from continuing operations.......................................$  (5,485)   $   (5,485)
Interest expense, excluding amortization of
  financing fees and debt discount..............................................   (3,429)       (3,429)
Amortization of financing fees and debt discount................................   (1,771)       (2,577)
Loss on value of warrants and conversion feature................................        -        (4,920)
Other net and interest income...................................................      210          (134)
                                                                                ---------    ----------
Loss from continuing operations before income taxes.............................  (10,475)      (16,545)
Income taxes....................................................................      434           434
                                                                                ---------    ----------
Loss from continuing operations.................................................  (10,909)      (16,979)
Loss from discontinued operations...............................................   (5,828)       (5,828)
                                                                                ---------    ----------
Net loss........................................................................$ (16,737)   $  (22,807)
                                                                                =========    ==========
Basic and diluted loss per share:
     Continuing operations......................................................$   (0.67)   $    (1.04)
     Discontinued operations....................................................    (0.35)        (0.36)
                                                                                ---------    ----------
         Total..................................................................$   (1.02)   $    (1.40)
                                                                                =========    ==========
<CAPTION>
                                                                                  SEPTEMBER 30, 2004
                                                                                  ------------------
                                                                                    AS
                                                                                PREVIOUSLY       AS
CONSOLIDATED BALANCE SHEET                                                      REPORTED      RESTATED
--------------------------                                                      ---------    ----------
<S>                                                                             <C>          <C>
Cash............................................................................$     267    $      267
Accounts receivable.............................................................   11,811        11,611
Inventories.....................................................................   25,902        25,902
Other current assets............................................................    1,167         1,167
                                                                                ---------    ----------
Total current assets............................................................   39,147        38,947
Property and equipment..........................................................   80,538        80,414
Other assets....................................................................    3,114         3,094
                                                                                ---------    ----------
Total assets.................................................................... $122,799    $  122,455
Total current liabilities.......................................................   22,145        22,145
Other long-term liabilities.....................................................      357           357
Value of warrants and conversion feature associated with
   convertible debentures.......................................................        -        13,721
Long-term debt, less current maturities ........................................   43,718        42,002
                                                                                ---------    ----------
Total liabilities...............................................................   66,220        78,225
Common stock....................................................................      163           163
Additional paid in capital......................................................  115,803       109,524
Accumulated deficit.............................................................  (49,242)      (55,312)
Accumulated other comprehensive loss............................................  (10,145)      (10,145)
                                                                                ---------    ----------
Total shareholders' equity......................................................   56,579        44,230
                                                                                ---------    ----------
Total liabilities and shareholders' equity......................................$ 122,799    $  122,455
                                                                                =========    ==========
</TABLE>



                                     33

<PAGE>
<PAGE>

<TABLE>
<CAPTION>
(Amounts in thousands, except per share data)
Fiscal Year 2004 - As Previously Reported             1st Quarter      2nd Quarter    3rd Quarter       4th Quarter
-------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>            <C>               <C>
Net sales..........................................   $     8,152      $    11,537    $    13,285       $    12,299
Loss from continuing operations....................        (3,246)          (2,531)        (2,375)           (2,757)
Loss from discontinued operations..................          (446)          (1,313)        (1,163)           (2,906)
Net loss...........................................   $    (3,692)     $    (3,844)   $    (3,538)      $    (5,663)

Net loss per share:
Basic and diluted net loss per share
  Continuing operations............................   $      (.20)     $      (.15)   $      (.14)      $      (.17)
  Discontinued operations..........................          (.03)            (.08)          (.08)             (.17)
                                                      -----------      -----------    -----------       -----------
       Total.......................................   $      (.23)     $      (.23)   $      (.22)      $      (.34)
                                                      ===========      ===========    ===========       ===========

<CAPTION>
Fiscal Year 2004 - As Restated                        1st Quarter      2nd Quarter    3rd Quarter       4th Quarter
-------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>            <C>               <C>
Net sales..........................................   $     8,152      $    11,537    $    13,285       $    12,299
Income (loss) from continuing operations...........        (3,246)          (8,505)         2,039            (7,266)
Loss from discontinued operations..................          (446)          (1,192)        (1,286)           (2,905)
Net income (loss)..................................   $    (3,692)     $    (9,697)   $       753       $   (10,171)

Basic and diluted income (loss) per share:
  Continuing operations - basic....................   $     (0.20)     $     (0.52)   $      0.12       $     (0.44)
  Discontinued operations - basic..................         (0.03)           (0.07)         (0.08)            (0.18)
                                                      -----------      -----------    -----------       -----------
       Total basic.................................   $     (0.23)     $     (0.59)   $      0.04       $     (0.62)
                                                      ===========      ===========    ===========       ===========

  Continuing operations - diluted..................   $     (0.20)     $     (0.52)   $     (0.05)      $     (0.44)
  Discontinued operations - diluted................         (0.03)           (0.07)         (0.07)            (0.18)
                                                      -----------      -----------    -----------       -----------
       Total diluted...............................   $     (0.23)     $     (0.59)   $     (0.12)      $     (0.62)
                                                      ===========      ===========    ===========       ===========
</TABLE>

3.       FINANCING AND LIQUIDITY
----------------------------------------------------------------------------

         Management will seek to fund its near-term operations from the sale
of excess inventories, continued aggressive management of the Company's
working capital and existing borrowing capacity under the Company's
revolving credit facility. As the demand for carbon fiber continues to
increase, the Company will need additional financing to execute its capacity
expansion program. Based upon these forecasts, borrowing capacity, and the
completion of the transaction discussed in "--Fiscal 2005 Refinancing"
below, the Company believes it has sufficient cash flows to continue
operations for at least the next 12 months.

         Due to the timing of development of markets for carbon fiber
products, the Company's operating activities have used cash in each of the
past four fiscal years and the first six months of the current fiscal year.
As a result, the Company has executed refinancing arrangements and incurred
borrowings under credit facilities, multiple convertible debenture
facilities, as well as long-term debt financing utilizing the equity in the
Company's real estate properties, to maintain adequate liquidity to support
the Company's operating and capital activities.

         The Company anticipates it will require further financing in 2006
to support its previously announced capacity expansion program.

Warrant and Conversion Features
-------------------------------

         In January, March and October of 2004, the Company issued
convertible notes and warrants which would require the Company to register
the resale of the shares of common stock upon conversion or exercise of
these securities. The Company accounts for the fair value of these
outstanding warrants to


                                     34

<PAGE>
<PAGE>

purchase common stock and conversion feature of its convertible notes in
accordance with SFAS No. 133 "Accounting For Derivative Instruments And
Hedging Activities" and EITF Issue No. 00-19 "Accounting For Derivative
Financial Instruments Indexed To And Potentially Settled In A Company's Own
Stock," which requires the Company to bifurcate and separately account for
the conversion feature and warrants as embedded derivatives contained in the
Company's convertible notes. Pursuant to SFAS No. 133, the Company
bifurcated the fair value of the conversion feature from the convertible
notes, since the conversion feature were determined to not be clearly and
closely related to the debt host. In addition, since the effective
registration of the securities underlying the conversion feature and
warrants is an event outside of the control of the Company, pursuant to EITF
Issue No. 00-19, the Company recorded the fair value of the conversion
feature and warrants as long-term liabilities as it was assumed that the
Company would be required to net-cash settle the underlying securities. The
Company is required to carry these embedded derivatives on its balance sheet
at fair value and unrealized changes in the values of these embedded
derivatives are reflected in the consolidated statement of operation as
"Gain (loss) on value of warrants and conversion feature." See table below
for impact on the fiscal results ended September 30, 2004.

<TABLE>
<CAPTION>
                                                                     YEAR ENDED SEPTEMBER 30, 2004
                                                                     -----------------------------
                                                                         (RESTATED - SEE NOTE 2)
                                                                               CONVERSION
                                                                  WARRANTS      FEATURES         TOTAL
                                                                  --------      --------         -----
<S>                                                              <C>            <C>            <C>
         January 2004 issuance - mark to market .................$  (1,109)     $ (4,039)      $  (5,148)
         March 2004 issuance - mark to market ...................       18           210             228
                                                                 ---------      --------       ---------
                  Totals.........................................$  (1,091)     $ (3,829)      $  (4,920)
                                                                 =========      ========       =========
</TABLE>

2005 Refinancing
----------------

         In October 2004, the Company issued convertible debentures in the
aggregate principal amount of $20.0 million to institutional private equity
investors. The convertible debentures have a stated maturity of 42 months
and bear interest at 7.5% per annum and are presently convertible into
1,666,666 shares of common stock at a conversion price of $12.00 per share.
The Company also issued to the investors six-year warrants to purchase an
aggregate of 500,000 shares of common stock of the Company at an exercise
price of $13.00 per share. The fair value of the debt discount associated
with the warrants and conversion feature of the debt at the time of issuance
was $10.2 million and will be amortized over the life of the convertible
debt. Proceeds from issuance of these convertible debentures were used to
reduce existing Hungarian bank debt by $12.0 million and the balance for
working capital purposes which allowed the Company to refinance the
remaining Hungarian bank debt to a three-year term loan for $3.0 million
with no financial covenants going forward.

         In December 2004, the Company's U.S. bank extended the maturity and
waived the financial covenants of the Company's revolving credit loan, term
loan and mortgage on an existing property to January 1, 2006. The Company's
U.S. bank also increased the amount available under the revolving credit
loan by $0.5 million to $5.5 million and increased the term loan by $0.1
million to $0.8 million. The principal of the term loan is payable on a
quarterly basis of $0.1 million with the remainder of the principal due at
the maturity date of January 1, 2006 and is therefore classified current.
The mortgage is payable on a monthly basis of $15,344 of principal and
interest with the remainder of the principal due at the maturity date of
January 1, 2006 and is therefore classified as current.




                                     35

<PAGE>
<PAGE>

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

         In January 2004, the Company issued and sold convertible debentures
in the aggregate principal amount of $7.0 million to institutional private
equity and other investors (including $250,000 to each of Mr. Rumy and Mr.
McDonnell who are members of the Company's Board of Directors). The
convertible debentures have a stated maturity of 30 months and bear interest
at 6% per annum and are convertible into 1,295,954 shares of common stock at
the date of issuance at a conversion price of $5.40 per share for each
investor other than Messrs. Rumy and McDonnell and $5.42 per share for each
of Messrs. Rumy and McDonnell. The Company also issued to the investors
five-year warrants to purchase an aggregate of 323,994 shares of common
stock of the Company at an exercise price of $5.40 per share for each
investor other than Messrs. Rumy and McDonnell and $5.42 per share for each
of Messrs. Rumy and McDonnell. The fair value of the debt discount
associated with the warrants and the conversion feature, at the time of
issuance, was $3.0 million and will be amortized over the life of the
convertible debt. Proceeds from the issuance of these convertible debentures
were used for working capital purposes.

         As part of the Company's January 2004 refinancing, the bank lender
to the Company's Hungarian subsidiary amended certain financial covenants
and extended the maturity date of its loan to December 31, 2004. In
connection with such actions, the bank required that the Company make
arrangements to settle intercompany accounts payable by Zoltek U.S.
operations to its Hungarian subsidiary in the amount of approximately $2.8
million. The bank was unwilling to keep open its offer to restructure Zoltek
Rt.'s loans until after the Company's January 2004 refinancing package was
completed. Prior to the refinancing, the Company did not have cash on hand
or available borrowings that would enable it to make the settlement of the
intercompany accounts required by the Hungarian bank. In order to proceed
expeditiously to resolve the Company's financing requirements, Zsolt Rumy,
the Company's Chief Executive Officer and a director of the Company, in
December 2003 loaned the Company $1.4 million in cash and posted a $1.4
million letter of credit for the benefit of the Company. This arrangement
was approved by the Company's board of directors and audit committee. The
loan by Mr. Rumy bore interest on the amount advanced and the notional
amount of the letter of credit at a rate per annum equal to LIBOR plus 11%
with a LIBOR floor of 2%, the same interest rate as the mortgage financing
discussed below. As a result of the Company completing the refinancing
transactions making available the cash to settle the intercompany accounts,
the letter of credit was released. After converting $250,000 into
convertible debt as part of the January 2004 financing, the remaining $1.15
million loan was repaid during the third quarter of fiscal 2004.

         Also in January 2004, the Company entered into a mortgage note with
a bank in the aggregate principal amount of $6.0 million. The note has a
stated maturity of three years and bears interest at a rate of LIBOR plus
11% with a LIBOR floor of 2%. The note provided for payment of interest only
on a monthly basis with principal balance due at time of maturity. The loan
is collateralized by a security interest in the Company's headquarters
facility and its two U.S. manufacturing facilities that produce carbon and
technical fibers. The proceeds of this transaction were used to pay down
debt of $6.0 million with its U.S. bank. Of such proceeds, $0.5 million was
held in an escrow account to be released when the Company completed certain
post-closing requirements. The Company completed these requirements during
the third quarter of fiscal 2004 and the $0.5 million was released from
escrow.

         In March 2004, the Company issued and sold convertible debentures
in the aggregate principal amount of $5.75 million to institutional private
equity investors and Mr. Dill ($750,000) who is member of the Company's
board of directors. The convertible debentures have a stated maturity of 30
months and bear interest at 6% per annum and have been converted into
895,908 shares of common stock at a conversion price of $6.25 per share for
each investor other than Mr. Dill and $7.82 per share for Mr. Dill. The
Company also issued to the investors five-year warrants to purchase an
aggregate of 223,997 shares


                                     36

<PAGE>
<PAGE>

of common stock of the Company at an exercise price of $7.50 per share for
each investor other than Mr. Dill whose warrants have an exercise price of
$7.82 per share. The fair value of the debt discount associated with the
warrants and conversion feature, at the time of issuance, was $5.7 million
and will be amortized over the life of the convertible debt. Proceeds from
the issuance of these convertible debentures are being used for working
capital and capital expenditures.

         Each issuance of convertible debt is summarized in the table below
which sets forth the significant term of the debt, warrants and assumptions
associated with valuing the conversion feature and warrants:

<TABLE>
<CAPTION>
                                                  (1)FEBRUARY 2003     JANUARY 2004      MARCH 2004       OCTOBER 2004
                                                     -------------     ------------      ----------       ------------
<S>                                                    <C>                <C>               <C>             <C>
Amount of debenture (millions)......................   $8.1               $7.0              $5.75           $20.0
Per share conversion price on debenture.............   $3.25              $5.40             $6.25           $12.00
Interest rate.......................................   7.5%               6.0%              6.0%            7.0%
Term of debenture...................................   60 months          30 months         30 months       42 months
Warrants issued.....................................   405,000            323,995           230,000         500,000
Term of warrant.....................................   60 months          48 months         48 months       72 months
Per share exercise price of warrants................   $5.00              $5.40             $7.50           $13.00
Fair value per warrant at issuance..................   $0.93              $2.27             $5.43           $6.02
Value per share conversion feature at issuance......   $3.11              $1.78             $5.06           $4.31
Stock price on date of agreement....................   $1.58              $5.40             $9.53           $9.60
Stock volatility at issuance........................   100%               50%               61%             75%
Dividend yield......................................   0.0%               0.0%              0.0%            0.0%
Risk-free interest rate at issuance.................   3.0%               2.78%             2.44%           3.71%
<FN>
--------------------------------
(1)    The warrants issued in connection with the February 2003 convertible
       issuance meet the criteria of EITF 00-19 for equity classification as
       they do not contain registration rights obligations with respect to
       the underlying shares similar to the other financing described in the
       table. The conversion feature on the related debt does not require
       derivative accounting and no beneficial conversion feature exists on
       this issuance.
</TABLE>

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

         The Company executed an amended credit facility agreement, dated as
of February 13, 2003, with the U.S. bank. The amended credit facility
agreement is structured as a term loan in the amount of $3.5 million (due
February 13, 2005) and a revolving credit loan in the amount of $5.0 million
(due January 31, 2004). The Company repaid $5.0 million of this loan from
the proceeds of the sale of subordinated convertible debentures as discussed
below. Borrowings under the amended facility are based on a formula of
eligible accounts receivable and inventories of the Company's U.S.-based
subsidiaries. The outstanding loans under the agreement bear interest at the
prime interest rate plus 2% per annum. The loan agreement contains quarterly
financial covenants related to borrowings, working capital, debt coverage,
current ratio and capital expenditures. Total borrowings under the revolving
credit agreement were $4.6 million and the available credit under this
agreement was $0.4 million at September 30, 2003.

         The Company also entered into a debenture purchase agreement, dated
as of February 13, 2003, under which the Company issued and sold to 14
investors, including certain directors, subordinated convertible debentures
in the aggregate principal amount of $8.1 million. The subordinated
convertible debentures have stated maturities of five years, bear interest
at 7% per annum and are convertible into an aggregate of 2,314,286 shares of
common stock of the Company at a conversion price of $3.50 per share. The
Company also issued to the investors five-year warrants to purchase an
aggregate of 405,000 shares


                                     37

<PAGE>
<PAGE>

of common stock of the Company at an exercise price of $5.00 per share. The
fair value of the warrants, at the time of issuance, was estimated to be
$376,650. Proceeds from the issuance of these convertible debentures were
used to repay existing borrowings as well as for working capital.

4.       DISCONTINUED OPERATIONS
----------------------------------------------------------------------------

         In the fourth quarter of fiscal 2004, the Company formally adopted
a plan to discontinue and exit two divisions of its Zoltek Rt. operations
which manufacture acrylic and nylon fibers and yarns. These divisions are
not part of the long-term strategy of the Company and were not expected to
be profitable in the foreseeable future due to the continued pricing
pressure from competitive manufacturers. In the fourth quarter of fiscal
2004, the Company recorded a loss on discontinued operations of $0.2 million
related to severance. These divisions had been included in the Specialty
Products segment (see Note 11). Certain information with respect to the
discontinued operations of the acrylic and nylon fibers divisions for the
years ended September 30, 2004, 2003 and 2002 is summarized as follows
(amounts in thousands):

<TABLE>
<CAPTION>
                                                                 2004            2003           2002
                                                              -----------    -----------     -----------
<S>                                                           <C>            <C>             <C>
         Net sales..........................................  $    16,345    $    24,134     $    26,649
         Cost of sales......................................       17,831         24,447          25,412
                                                              -----------    -----------     -----------
              Gross profit..................................       (1,486)          (313)          1,237
         Selling, general and administrative expenses.......       (3,869)        (2,918)          3,286
                                                              -----------    -----------     -----------
              Loss from operations..........................       (5,355)        (3,231)         (2,049)
         Other income (expense).............................          186           (442)           (129)
                                                              -----------    -----------     -----------
              Net loss from operations......................       (5,169)        (3,673)         (2,178)
         Loss on disposal of discontinued operations........         (209)             -               -
                                                              -----------    -----------     -----------
         Loss on discontinued operations....................  $    (5,378)   $    (3,673)    $    (2,178)
                                                              ===========    ===========     ===========
</TABLE>

         In the fourth quarter of fiscal 2001, the Company formally adopted
a plan to dispose of its 45% interest in Hardcore Composites, which designs
and manufactures composite structures for the civil infrastructure market.
The Company acquired its interest in Hardcore Composites in the third
quarter of fiscal 2000. From the date of acquisition until disposition, the
financial statements of Hardcore Composites were consolidated with the
Company due to the ability to directly control the operations. In the fourth
quarter of fiscal 2001, the Company recorded an impairment loss on
discontinued operations of $5.1 million to reduce the carrying value of
Hardcore Composites' long-lived assets to their estimated fair value less
estimated selling costs. Hardcore was included in the Carbon Fibers segment
(see Note 11).

         On March 1, 2002, the Company completed the sale of its interest in
Hardcore Composites to the 55% majority owner. At that date, Hardcore
Composites had net liabilities of approximately $1,319,000 which were 100%
consolidated by the Company. As part of the sale, Hardcore Composites
assumed these net liabilities, which resulted in the Company recognizing a
$1,319,000 gain on the sale of discontinued operations in the quarter ended
March 31, 2002. Additionally, in consideration for this sale, Hardcore
Composites issued a series of unsecured promissory notes to the Company. In
light of then existing financial condition of Hardcore Composites, the
Company recorded a full valuation allowance against the promissory notes in
its accounting for the sale transaction.

         In fiscal 2002, as a part of the sale of the Company's interest in
Hardcore Composites, Hardcore Composites and the Company also settled a
$1,000,000 note and certain other obligations payable to the former owner,
with the Company making a $475,000 payment and Hardcore Composites
contributing an additional amount. This note comprised part of the purchase
price of the acquisition in the third quarter of fiscal 2000 and was
guaranteed by the Company. However, the Company continues to guaranty
Hardcore Composite's lease obligations of approximately $30,000 per month to
the former owner. The


                                     38

<PAGE>
<PAGE>

obligation relates to a lease of the Hardcore Composites manufacturing
facility, which expires March 31, 2008. In fiscal 2002, the Company reversed
the $525,000 remaining accrual for the note payable to the former owner, as
its obligation has been satisfied.

         In October 2003, the Company was named as a defendant in a civil
action filed in the Court of Common Pleas for Cuyahoga County, Ohio by the
former owner of Hardcore Composites Operations, LLC ("Hardcore") alleging
breach by Hardcore and the Company of their respective obligations under a
sublease, the Company's guaranty of the sublease, and prior settlement
agreement among the parties. The former owner's action claims damages in the
amount of $0.3 million for breaches by the Company of its obligations under
the guaranty and the settlement agreement and, in addition, demands $0.5
million in damages from Hardcore and the Company, jointly and severally,
under the terms of the settlement agreement. During the third quarter of
fiscal 2004, Hardcore filed a petition under Chapter 11 of the U.S.
Bankruptcy Code. In October 2004, the Court of Common Pleas for Cuyahoga
County, Ohio ruled in favor of the former owner of Hardcore Composites in
the amount of $1.1 million. The Company recorded an additional accrual of
$0.5 million, which was recorded in discontinued operations to fully accrue
the liability under the judgment. The Company is vigorously defending this
matter, has filed counterclaims and filed an appeal. Management believes
that the ultimate resolution of this litigation will not have further
material adverse effect on the Company's results of operations or financial
condition. For additional information, see Note 9 to the Company's
Consolidated Financial Statements.

         Certain information with respect to the discontinued operations of
Hardcore for the years ended September 30, 2004 and 2002 is summarized as
follows (amounts in thousands):

<TABLE>
<CAPTION>
                                                                                     2004                2002
                                                                                  -----------        -----------
<S>                                                                               <C>                <C>
         Net sales..............................................................  $         -        $       408
         Cost of sales..........................................................            -                886
                                                                                  -----------        -----------
         Gross profit...........................................................            -               (478)
         Selling, general and administrative expenses...........................            -                535
                                                                                  -----------        -----------
         Loss from operations...................................................            -             (1,013)
         Other expenses.........................................................            -                (17)
                                                                                  -----------        -----------
         Net loss from operations...............................................            -             (1,030)
         Loss on disposal of discontinued operations............................         (450)             1,894
                                                                                  -----------        -----------
         Loss on discontinued operations, net of taxes..........................  $      (450)       $       864
                                                                                  ===========        ===========
</TABLE>

5.       INVENTORIES
----------------------------------------------------------------------------

<TABLE>
<CAPTION>
Inventories consist of the following (amounts in thousands):                               September 30,
                                                                                    2004                  2003
                                                                                -------------       ---------------
<S>                                                                             <C>                 <C>
         Raw materials.....................................................     $       5,462       $         4,859
         Work-in-process...................................................             1,177                 1,132
         Finished goods....................................................            18,317                19,057
         Supplies, spares and other........................................               946                 1,930
                                                                                -------------       ---------------
                                                                                $      25,902       $        26,978
                                                                                =============       ===============
</TABLE>

         Inventories are valued at the lower of cost, determined on the
first-in, first-out method, or market. Cost includes material, labor and
overhead. The Company recorded an inventory valuation reserve of $1.0
million in the fourth quarter of 2003 to reduce the carrying value of
inventories to a net realizable value. No material adjustments to the
reserve were required in the current year. The reserves were established
primarily due to intensified overcapacity for certain carbon fiber products.

                                     39

<PAGE>
<PAGE>

6.       PROPERTY AND EQUIPMENT
----------------------------------------------------------------------------

<TABLE>
<CAPTION>
Property and equipment consists of the following (amounts in thousands):                   September 30,
                                                                                    2004                  2003
                                                                                -------------       ---------------
                                                                                 (Restated-
                                                                                 See Note 2)
<S>                                                                             <C>                 <C>
Land.......................................................................     $       1,732       $         1,665
Buildings and improvements.................................................            32,696                30,061
Machinery and equipment....................................................            82,282                77,999
Furniture, fixtures and software...........................................             5,563                 5,477
Construction in progress...................................................             7,049                 4,014
                                                                                -------------       ---------------
                                                                                      129,322               119,216
Less:  accumulated depreciation............................................           (48,908)              (41,843)
                                                                                -------------       ---------------
                                                                                $      80,414       $        77,373
                                                                                =============       ===============
</TABLE>

         In the third quarter of fiscal 2001, the Company elected to
temporarily idle a significant part of the operations located at the
Abilene, Texas facility. The Company resumed manufacturing at this facility
during fiscal 2004. Given that these assets were previously idled and did
not generate significant cash flow in 2004, the Company performed an
impairment test. The Company determined that no impairment of its carrying
value exists at September 30, 2004 based on an analysis of expected future
net cash flow to be generated from this facility over the expected remaining
useful life.

         During 2004, the Company was not operating its Abilene, Texas
facility at full capacity. As a result, the Company has elected to
categorize certain costs related to these idle assets as unused capacity
costs. Such costs totaled $4.7 million, $5.7 million and $6.0 million for
fiscal 2004, 2003 and 2002, respectively, and include depreciation and other
overhead expenses associated with unused capacity. The unused capacity costs
are presented as an operating item on the Company's consolidated statement
of operations. As discussed above, the Company has resumed certain levels of
manufacturing at this facility during fiscal 2004. With the reactivation of
the Abilene plant, unused capacity costs are expected to diminish and,
ultimately, be fully absorbed in ongoing production once all the carbon
fiber lines start operating in fiscal 2005.

7.       INCOME TAXES
----------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
                                                              2004                  2003                  2002
                                                          --------------        -------------       ---------------
<S>                                                       <C>                   <C>                 <C>
From continuing operations:
     Current:
         Federal.....................................     $           -         $           -       $        (2,731)
         State.......................................                 -                     -                  (113)
         Non-U.S. local..............................               434                   171                   358
                                                          -------------         -------------       ---------------
                                                                    434                   171                (2,486)
                                                          -------------         -------------       ---------------
     Deferred:
         Federal.....................................                 -                   203                     9
         State.......................................                 -                    17                    (9)
         Non-U.S.....................................                 -                   144                  (374)
                                                          -------------         -------------       ---------------
                                                                      -                   364                  (374)
                                                          -------------         -------------       ---------------
              Total continuing operations............     $         434         $         535       $        (2,860)
                                                          =============         =============       ===============

                                     40

<PAGE>
<PAGE>

<CAPTION>
                                                              2004                  2003                  2002
                                                          --------------        -------------       ---------------
<S>                                                       <C>                   <C>                 <C>
From discontinued operations:
     Deferred:
         Federal.....................................     $           -         $           -       $             -
         State.......................................                 -                     -                     -
                                                          -------------         -------------       ---------------
            Total discontinued operations............                 -                     -                     -
                                                          -------------         -------------       ---------------
     Total ..........................................     $         434         $         535       $        (2,860)
                                                          =============         =============       ===============
</TABLE>


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

<TABLE>
<CAPTION>
                                                                                     2004                2003
                                                                                  -----------        -----------
                                                                                  (Restated-
                                                                                  See Note 2)
<S>                                                                               <C>                <C>
     Tax effect of regular net operating losses (expiring 2020-2022).........     $   (18,134)       $   (14,082)
     Valuation allowance on net operating losses.............................          13,971             10,690
     Tax effect of capital loss..............................................            (526)              (582)
     Valuation allowance on capital loss.....................................             526                582
     Depreciation............................................................           4,407              4,048
     Employee related costs..................................................             (88)               (85)
     Inventory reserve.......................................................               -               (464)
     Bad debt accrual........................................................            (127)               (65)
     Deferred state income taxes.............................................               -                  -
     Other...................................................................             (29)               (42)
     Non-U.S. operations deferred tax, net...................................               -                  -
                                                                                  -----------        -----------
              Total net deferred tax asset...................................     $         -        $         -
                                                                                  ===========        ===========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                          2004             2003            2002
                                                                      ------------    ------------     ------------
                                                                       (Restated-
                                                                       See Note 2)
<S>                                                                   <C>             <C>              <C>
At statutory rate:
         Income taxes on loss from continuing operations..........    $     (5,625)   $     (3,874)    $     (3,188)
Increases (decreases):
         Lower effective tax rate on non-U.S. operations..........           1,054             768              333
         Change in valuation allowance on net operating loss......           2,588           3,501           (1,174)
         Change in valuation allowance on capital loss............               -               -                -
         Reduction of NOL due to 5 year carry back................               -               -           (1,871)
         Refund related to 5 year carry back of NOL...............               -               -            2,731
         Local taxes, non-U.S.....................................             434             171              358
         State taxes, net of federal benefit......................               -              16               (9)
         Refund write-off.........................................               -               -                -
         Amortization of warrant discount.........................             274               -                -
         Fair market value adjustment to warrants.................           1,673               -                -
         Other....................................................              36             (48)             (40)
                                                                      ------------    ------------     ------------
                                                                      $        434    $        535     $     (2,860)
                                                                      ============    ============     ============
</TABLE>




                                     41

<PAGE>
<PAGE>

         The consolidated loss from continuing operations before income
taxes by domestic and foreign sources for the years ended September 30,
2004, 2003 and 2002 was as follows (amounts in thousands):

<TABLE>
<CAPTION>
                                                                          2004             2003            2002
                                                                      ------------    ------------     ------------
                                                                       (Restated-
                                                                       See Note 2)
<S>                                                                   <C>             <C>              <C>
Domestic..........................................................    $    (15,818)   $    (10,267)    $     (9,475)
Foreign...........................................................            (727)         (1,127)              98
                                                                      ------------    ------------     ------------
Loss from continuing operations before income taxes...............    $    (16,545)   $    (11,394)    $     (9,377)
                                                                      ============    ============     ============
</TABLE>

         Undistributed earnings of Zoltek Rt. of $957,000, $3,568,000 and
$8,368,000 at September 30, 2004, 2003 and 2002, respectively, are
considered to be permanently reinvested and, accordingly, no provision for
income taxes has been recorded.

8.       DEBT
----------------------------------------------------------------------------

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

         The Company's financing of its U.S. operations is separate from
that of its Hungarian operations. Availability of credit is based on the
collateral value at each operation. No covenants exist related to the credit
facility from its U.S. bank, which matures on January 1.

         US Operations - The Company's current credit facility with its U.S.
bank is described above under "--2005 Refinancing" and "--2003 Refinancing."
Total borrowings under the U.S. credit facility, including the revolving
line of credit and term loan, were $5.7 million at September 30, 2004.

         Hungarian Operations - The Company's Hungarian subsidiary has a
credit facility with a Hungarian bank. Total borrowings under this credit
facility were $11.4 million at September 30, 2004. Due to the fiscal 2005
refinancing (see "--Refinancing" in Note 2), the credit facility has been
reduced to a $3.0 million term loan with interest payments over the next
three years and repayment of principal at the maturity date.

         In March 2003, the Company's Hungarian subsidiary entered into a
credit agreement with another Hungarian bank for $2.2 million of which $2.2
million was outstanding as of September 30, 2004. This facility was paid off
as part of the 2005 refinancing.

         Total borrowings of the Hungarian subsidiary were $13.6 million at
September 30, 2004, of which $13.6 million has been classified as long-term
debt due to the 2005 refinancing in which $12.0 million was repaid and the
remaining borrowings extended to 2008. Borrowings under the Hungarian bank
credit facilities cannot be used in Zoltek's U.S. operations.

<TABLE>
<CAPTION>
Long-term debt consists of the following (amounts in thousands):                                  September 30,
                                                                                               2004         2003
                                                                                             --------     ---------
                                                                                            (Restated-
                                                                                            See Note 2)
<S>                                                                                          <C>          <C>
     Note payable with interest at 9%, payable in monthly installments of
         principal and interest of $15,392  to maturity in January 2006......................$  1,419     $   1,507

     Note payable with interest at 9.95%, payable in monthly installments of
         principal and interest of $19,288 to maturity in September 2009.....................       -         1,042

     Note payable with interest at 9.5%, payable in monthly installments of
         principal and interest of $27,672 to maturity in December 2009 .....................       -         1,558



                                     42

<PAGE>
<PAGE>

<CAPTION>
                                                                                                  September 30,
                                                                                               2004         2003
                                                                                             --------     ---------
                                                                                            (Restated-
                                                                                            See Note 2)
<S>                                                                                          <C>          <C>
     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 ................   1,781         1,706

     Convertible debentures due February 2008 bearing interest at 7.0%.......................   8,100         8,100

     Revolving credit agreement, maturing in January 2006, bearing interest at prime
            plus 2.0% (prime rate at September 30, 2003 was 4.00%) ..........................   5,000         4,670

     Term loan, $0.4 million payable in 2005, balance payable in January 2006,
          bearing interest at prime plus 2.0% (prime rate at September 30, 2004
          was 4.5%)..........................................................................     700         3,300

     Convertible debentures due June 2006 bearing interest at 6%.............................   7,000             -

     Convertible debentures due September 2006 bearing interest at 6%........................   5,750             -

     Mortgage payable with interest of 13.5% interest only payments
          maturity in January 2007...........................................................   6,000             -

     Facilities with Hungarian banks (interest rate of 5.5% to 10.6%)........................  13,568        12,566
                                                                                             --------      --------
         Total debt..........................................................................  49,318        34,474
         Less: Conversion feature and debt discount associated
            with warrants....................................................................  (6,746)            -
         Less: amounts payable within one year...............................................    (570)         (933)
                                                                                             --------     ---------
     Total long-term debt ...................................................................$ 42,002     $  33,541
                                                                                             ========     =========
</TABLE>

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

<TABLE>
<CAPTION>
                               Year ending
                              September 30,                                       Total
                              -------------                                       -----
                                 <S>                                       <C>
                                 2005......................................$        570
                                 2006......................................      14,405
                                 2007......................................      11,825
                                 2008......................................       9,656
                                 2009......................................      13,493
                                 Thereafter................................           -
                                                                           ------------
                                                                           $     49,318
                                                                           ============
</TABLE>

Value of derivative liabilities at:
-----------------------------------

<TABLE>
<CAPTION>
                                                                         SEPTEMBER 30, 2004
                                                                         ------------------
                                                                       (RESTATED - SEE NOTE 2)
                                                                                CONVERSION
                                                                  WARRANTS       FEATURES        TOTAL
                                                                  --------       --------        -----
<S>                                                               <C>            <C>           <C>
         January 2004 issuance  ..................................$   1,844      $  6,351      $   8,195
         March 2004 issuance  ....................................    1,198         4,328          5,526
                                                                  ---------      --------      ---------
                  Totals..........................................$   3,042      $ 10,679      $  13,721
                                                                  =========      ========      =========
</TABLE>



                                     43

<PAGE>
<PAGE>

9.       COMMITMENTS AND CONTINGENCIES
----------------------------------------------------------------------------
LEASES

         Land at the carbon fibers manufacturing facility in Missouri is
leased under an operating lease that expires in December 2065, with a
renewal option for 24 years expiring in December 2089. The lease requires
annual rental payments of $57,991 through October 2010, no further rental
payments are required through initial term of lease. Rental expense related
to this lease was $57,991 for the years ended September 30, 2004, 2003 and
2002.

LEGAL

         In October 2003, the Company was named as a defendant in a civil
action filed in the Court of Common Pleas for Cuyahoga County, Ohio by the
former owner of Hardcore Composites Operations, LLC ("Hardcore") alleging
breach by Hardcore and the Company of their respective obligations under a
sublease, the Company's guaranty of the sublease, and prior settlement
agreement among the parties. The former owner's action claims damages in the
amount of $0.3 million for breaches by the Company of its obligations under
the guaranty and the settlement agreement and, in addition, demands $0.5
million in damages from Hardcore and the Company, jointly and severally,
under the terms of the settlement agreement. In October 2004, the Court of
Common Pleas for Cuyahoga County, Ohio ruled in favor of the former owner of
Hardcore Composites in the amount of $1.1 million. In prior periods, the
Company has accrued $1.1 million in respect of the possible liability in
this matter, which it believes is its maximum obligation under this
guaranty. The Company is vigorously defending this matter, has filed
counterclaims and filed an appeal that represents its only recourse
regarding this guaranty. Management believes that the ultimate resolution of
this litigation will not have a further material adverse effect on the
Company's results of operations, financial condition or cash flow. To date,
the Company has not made any payments of any portion of this obligation,
although it posted an appeal bond in the amount of $1.3 million. The Company
executed a guaranty of Hardcore Composite's lease obligations of
approximately $30,000 per month to the former owner. The lease of the
Hardcore Composites manufacturing facility expires March 31, 2008. Hardcore
no longer occupies the facility and, accordingly, in connection with the
ongoing litigation with the former owner, Zoltek is asserting that Zoltek
has no further ongoing guarantee obligation with respect to the lease. The
Company also is the obligee on aggregate original value of unsecured
promissory notes of $9.3 million in connection with the sale of Hardcore,
for which a full valuation allowance has been recorded. A full valuation
allowance is appropriate in light of Hardcore's current financial condition
which, among other relevant factors, make the collection of the promissory
notes doubtful.

         The Company is plaintiff in a patent infringement lawsuit pending
in the United States Court of Federal Claims. The lawsuit, which has been
pending since 1996, involves the alleged unauthorized use of the Company's
carbon fiber processing technology in the manufacture of extremely stealthy
aircraft. Recently, a court decision has been favorable for the Company, but
the Company cannot predict the timing or the outcome of this litigation or
the impact on the Company's financial condition and results of operations.

         In September 2004, the Company was named a defendant in a civil
action filed by a former investment banker that was retained by the Company
to obtain equity investors, alleging breach by the Company of its
obligations under the agreement signed by the parties. The investment banker
alleges it is owed commission from equity investment obtained by the Company
from a different source. The Company has asserted various defenses,
including that the investment banker breached the agreement by not
performing reasonable efforts to obtain financing for the Company, and
therefore, the agreement was terminated by the Company prior to obtaining
new financing. The litigation is in early stages and the


                                     44

<PAGE>
<PAGE>

Company cannot predict the timing or the outcome of this litigation or the
impact on the Company's financial condition and results of operations.

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

ENVIRONMENTAL

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

SOURCES OF SUPPLY

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

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

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

10.      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. No contributions were made by the Company for the years ended
September 30, 2004, 2003, and 2002.

11.      STOCK OPTIONS
----------------------------------------------------------------------------

         In 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 of which
987,500 are currently outstanding. Outstanding stock options expire 10 years
from the date of grant or upon


                                     45

<PAGE>
<PAGE>

termination of employment. Options granted in 1998 and prior vest 100% five
years from date of grant. Options granted in 1999 and thereafter primarily
vest 100% three years from date of grant. All options were issued at an
option price equal to the market price on the date of grant.

         In 1992, the Company adopted a Directors Stock Option Plan under
which options to purchase 7,500 shares of common stock at the then fair
market value are currently issued to each non-employee director annually. In
addition, newly elected non-employee directors receive options to purchase
7,500 shares of common stock, at the then fair market value. The options
expire from 2004 through 2013, respectively.

         The pro forma information required by SFAS 123 regarding net income
and earnings per share has been presented in Note 1 as if the Company had
accounted for its stock option plans under the fair value method. The fair
value of each option grant is estimated on the date of the grant using the
Black-Scholes option pricing model with the following weighted average
assumptions:

<TABLE>
<CAPTION>
         Assumptions:                                                       2004            2003           2002
         -----------                                                      -------         -------        -------
<S>                                                                       <C>             <C>            <C>
         Expected life of options.................................        6 years         6 years        6 years
         Risk-free interest rate..................................          4.25%           4.25%          6.15%
         Volatility of stock......................................            77%             96%            98%
         Expected dividend yield..................................             --              --             --
</TABLE>

         The fair value of the options granted during 2004, 2003 and 2002
was $159,961, $119,513 and $349,000, respectively.


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

<TABLE>
<CAPTION>
                                                   Wtd. Avg.      Wtd. Avg.          Wtd. Avg.
                                                    Options     Exercise Price      Exercisable   Exercise Price
                                                    -------     --------------      -----------   --------------
<S>                                                <C>          <C>                   <C>           <C>
         Balance, September 30, 2001               1,056,000    $       10.75         531,000       $   10.81
             Granted.............................    451,000             2.10
             Exercised...........................    (12,000)            2.38
             Cancelled...........................   (408,000)           11.31
                                                   ---------
         Balance, September 30, 2002               1,087,000             7.05         561,833           10.35
             Granted.............................    112,500             2.70
             Exercised...........................    (10,000)            2.07
             Cancelled...........................   (187,500)            4.76
                                                   ---------
         Balance, September 30, 2003.............  1,002,000             7.04         744,083            8.67
             Granted.............................     77,500             6.36
             Exercised...........................    (63,000)            3.27
             Cancelled...........................    (29,000)            5.44
                                                   ---------     ------------
         Balance, September 30, 2004                 987,500     $       7.22         722,250       $    8.91
</TABLE>




                                     46

<PAGE>
<PAGE>

         The following table summarizes information for options currently
outstanding and exercisable at September 30, 2004:

<TABLE>
<CAPTION>
                                                   Options Outstanding                  Options Exercisable
                                             ---------------------------------     ----------------------------
           Range of                             Wtd. Avg.          Wtd. Avg.                       Wtd. Avg.
            Prices             Number        Remaining Life     Exercise Price     Number        Exercise Price
        --------------         ------        --------------     --------------     ------        --------------
<S>                            <C>              <C>             <C>                <C>             <C>
        $    1.33-2.50         409,500          8 years         $    2.13          184,250         $   2.21
             3.25-5.67         127,500          6 years              4.85           87,500             4.48
             6.25-6.88         188,000          1 years              6.38          188,000             6.38
             7.69-9.25         112,500          7 years              8.21          112,500             8.21
           10.00-39.00         150,000          4 years             23.44          150,000            23.44
                               -------                                             -------
        $   1.33-39.00         987,500          6 years         $    7.22          722,250         $   8.91
                               =======                                             =======
</TABLE>

12.      BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
----------------------------------------------------------------------------

           The Company's strategic business units are based on product lines
and have been grouped into three reportable segments: Carbon Fibers,
Technical Fibers and Specialty Products. In the fourth quarter of fiscal
2004, the Company discontinued two divisions within its specialty fibers
segment. Segment information for 2003 and 2002 has been reclassified to
reflect such change (see Note 3).

         The Carbon Fibers segment manufactures low-cost carbon fibers used
as reinforcement material in composites, carbon fiber composite products and
filament winding equipment used in the composite industry. The Technical
Fibers segment manufactures aircraft brake pads and oxidized acrylic fibers
for heat/fire barrier applications. These two segments also facilitate
development of product and process applications to increase the demand for
carbon fibers and technical fibers and seek to aggressively market carbon
fibers and technical fibers. The Carbon Fibers and Technical Fibers segments
are located geographically in the United States and Hungary. The Specialty
Products segment manufactures and markets acrylic and nylon products and
fibers primarily to the textile industry and is located in Hungary. In the
fourth quarter of fiscal 2004, the Company discontinued divisions within
this segment. With the exception of the Technical Fibers segment, none of
the segments are substantially dependent on sales from one customer or a
small group of customers.

         Management evaluates the performance of its operating segments on
the basis of operating income (loss) contribution to the Company. The
following table presents financial information on the Company's operating
segments as of and for the fiscal years ended September 30, 2004, 2003 and
2002 (amounts in thousands):

<TABLE>
<CAPTION>
                                                                          Year Ended September 30, 2004
                                                                          -----------------------------
                                                                                                Corporate
                                                         Carbon    Technical     Specialty   Headquarters
                                                         Fibers      Fibers      Products  and Eliminations      Total
                                                         ------      ------      --------  ----------------      -----
<S>                                                    <C>         <C>           <C>           <C>             <C>
Net sales - external.................................. $  18,431   $  14,831     $ 12,011      $      -        $  45,273
Net sales - intersegment..............................     2,479       1,642            -        (4,121)               -
                                                       ---------   ---------     --------      --------        ---------
   Total net sales....................................    20,910      16,473       12,011        (4,121)          45,273
Cost of sales, excluding available unused capacity
 expenses.............................................    19,117      14,091        9,794        (5,124)          37,878
Available unused capacity expenses....................     4,466           -            -             -            4,466
Operating income (loss)...............................    (6,823)      1,192        1,529        (1,383)          (5,485)
Depreciation and amortization expense.................     3,969       1,091          463            91            5,614
Capital expenditures (Restated-See Note 2)............     5,391         389          231            (8)           6,003




                                     47

<PAGE>
<PAGE>

<CAPTION>
                                                                          Year Ended September 30, 2003
                                                                          -----------------------------
                                                                                                Corporate
                                                         Carbon    Technical     Specialty   Headquarters
                                                         Fibers      Fibers      Products  and Eliminations      Total
                                                         ------      ------      --------  ----------------      -----
<S>                                                    <C>         <C>           <C>           <C>             <C>
Net sales - external.................................. $  13,179   $  14,098     $ 12,128      $      -        $  39,405
Net sales - intersegment..............................     5,675           -            -        (5,675)               -
                                                       ---------   ---------     --------      --------        ---------
   Total net sales....................................    18,854      14,098       12,128        (5,675)          39,405
Cost of sales, excluding available unused capacity
 expenses.............................................    17,367      12,689        9,141        (6,016)          33,181
Available unused capacity expenses....................     5,716           -            -             -            5,716
Operating income (loss)...............................    (8,644)         93        1,617        (2,511)          (9,443)
Depreciation and amortization expense.................     4,013       1,004          731           225            5,973
Capital expenditures..................................       515         512          456             -            1,483

<CAPTION>
                                                                          Year Ended September 30, 2002
                                                                          -----------------------------
                                                                                                Corporate
                                                         Carbon    Technical     Specialty   Headquarters
                                                         Fibers      Fibers      Products  and Eliminations      Total
                                                         ------      ------      --------  ----------------      -----
<S>                                                    <C>         <C>           <C>           <C>             <C>
Net sales - external................................... $  10,676  $  19,772     $ 11,339      $      -        $  41,787
Net sales - intersegment...............................     4,419          -            -        (4,419)               -
                                                        ---------  ---------     --------      ---------       ---------
   Total net sales.....................................    15,095     19,772       11,339        (4,419)          41,787
Cost of sales, excluding available unused capacity
 costs.................................................    13,971     14,070        9,325        (3,858)          33,508
Available unused capacity..............................     6,039          -            -             -            6,039
Operating income (loss)................................    (9,526)     3,584          907        (3,044)          (8,079)
Depreciation and amortization expense..................     3,978      1,182          572           314            6,046
Capital expenditures...................................     2,013       (624)         435            31            1,865

<CAPTION>
                                                                                   Total Assets
                                                                                   ------------
                                                                                                Corporate
                                                         Carbon    Technical     Specialty   Headquarters
                                                         Fibers      Fibers      Products  and Eliminations      Total
                                                         ------      ------      --------  ----------------      -----
<S>                                                    <C>         <C>           <C>           <C>             <C>
September 30, 2004 (Restated-See Note 2)............... $  63,306  $  19,701     $ 36,429      $  3,019        $ 122,455
September 30, 2003.....................................    66,226     22,611       32,569        (1,951)         119,455
September 30, 2002.....................................    74,046     25,465       25,024        (3,113)         121,422
</TABLE>

         Sales and long-lived assets, by geographic area, consist of the
following as of and for each of the three fiscal years in the period ended
September 30, 2004, 2003 and 2002 (amounts in thousands):

<TABLE>
<CAPTION>
                                   2004                         2003                            2002
                         --------------------------   ----------------------------   ---------------------------
                                           Net                            Net                          Net
                                        Long Lived                     Long Lived                   Long Lived
                         Net Sales (a)  Assets (b)  Net Sales (a)      Assets (b)  Net Sales (a)    Assets (b)
                         -------------  ----------  -------------      ----------  -------------    ----------
                                        (Restated-
                                        See Note 2)
<S>                      <C>            <C>           <C>              <C>           <C>            <C>
United States............$    22,731    $   46,582    $    20,892      $   45,936    $    24,243    $   50,366
Western Europe...........     10,583             -          2,861               -          2,994             -
Eastern Europe...........      9,400        33,832         13,585          31,436         11,020        28,660
Asia.....................      2,361             -              -               -              -             -
Other areas..............        198             -          2,067               -          3,530             -
                         -----------    ----------    -----------      ----------    -----------    ----------
   Total.................$    45,273    $   80,414    $    39,405      $   77,373    $    41,787    $   79,026
                         ===========    ==========    ===========      ==========    ===========    ==========

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




                                     48

<PAGE>
<PAGE>

13.     SUMMARY OF QUARTERLY RESULTS (UNAUDITED) - (RESTATED - SEE NOTE 2)
----------------------------------------------------------------------------

(Amounts in thousands, except per share data)

<TABLE>
<CAPTION>
Fiscal year 2004                                      1st Quarter      2nd Quarter    3rd Quarter       4th Quarter
-------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>            <C>               <C>
Net sales..........................................   $     8,152      $    11,537    $    13,285       $    12,299
Income (loss) from continuing operations...........        (3,246)          (8,505)         2,039            (7,266)
Loss from discontinued operations..................          (446)          (1,192)        (1,286)           (2,905)
Net income (loss)..................................   $    (3,692)     $    (9,697)   $       753       $   (10,171)

Basic and diluted income (loss) per share:
  Continuing operations - basic....................   $     (0.20)     $     (0.52)   $      0.12       $     (0.44)
  Discontinued operations - basic..................         (0.03)           (0.07)         (0.08)            (0.18)
                                                      -----------      -----------    -----------       -----------
       Total basic.................................   $     (0.23)     $     (0.59)   $      0.04       $     (0.62)
                                                      ===========      ===========    ===========       ===========

  Continuing operations - diluted..................   $     (0.20)     $     (0.52)   $     (0.05)      $     (0.44)
  Discontinued operations - diluted................         (0.03)           (0.07)         (0.07)            (0.18)
                                                      -----------      -----------    -----------       -----------
       Total diluted...............................   $     (0.23)     $     (0.59)   $     (0.12)      $     (0.62)
                                                      ===========      ===========    ===========       ===========

<CAPTION>
Fiscal year 2003                                      1st Quarter      2nd Quarter    3rd Quarter       4th Quarter
-------------------------------------------------------------------------------------------------------------------
<S>                                                   <C>              <C>            <C>               <C>
Net sales..........................................   $     9,440      $     9,573    $    10,338       $    10,054
Loss from continuing operations....................        (2,522)          (3,397)        (2,580)           (3,430)
Loss from discontinued operations..................          (657)            (898)        (1,210)             (908)
Net loss...........................................   $    (3,179)     $    (4,295)   $    (3,790)      $    (4,338)

Net loss per share:
Basic and diluted net loss per share
  Continuing operations............................   $     (0.16)     $     (0.20)   $     (0.15)      $     (0.21)
  Discontinued operations..........................         (0.04)           (0.06)         (0.08)            (0.06)
                                                      -----------      -----------    -----------       -----------
       Total.......................................   $     (0.20)     $     (0.26)   $     (0.23)      $     (0.27)
                                                      ===========      ===========    ===========       ===========
</TABLE>

         In the fourth quarter of 2004, the Company recorded a $0.2 million
charge associated with discontinued operations and a $0.5 million accrual
for a legal judgment (see Note 3). In the fourth quarter of 2003, the
Company recorded a $1.0 million charge related to the valuation of
inventory.

14.     SUBSEQUENT EVENTS
----------------------------------------------------------------------------

         In September 2005, Zoltek entered into an agreement for a new
convertible debenture financing package of up to $50 million in a private
placement with a group of institutional investors. In order to match the
cash needs to support this expansion, the financing agreement provides for
the funding to occur in four separate closings of $5.0 million, $15.0
million, $20.0 million and $10.0 million, respectively, of which the first
two tranches have been drawn down. The agreement provides for Zoltek to draw
down the remaining financing over the next twelve months. The borrowings
incurred at each closing will mature 42 months from that closing and bear
interest at a fixed rate of 7.5% per annum. The convertible debentures
issued at the first and second closings are convertible into Zoltek common
stock at a conversion price of $12.50 per share. Debentures issuable at the
third and fourth closings will be convertible into Zoltek common stock at a
conversion price equal to the market price at the time of the applicable
closing.

         In the first two closings, the debentures will be issued with
five-year warrants that give holders the right to purchase up to a total of
560,000 shares of Zoltek common stock at an exercise price of $14.50 per
share. In the third and fourth closings, the amount and number of attached
warrants will vary according to Zoltek's share price at the time of the
closing. As part of the new financing agreement, Zoltek has reduced the
conversion price on its outstanding convertible debt in the aggregate
principal amount of $20.0 million issued in October 2004 from $12.00 to
$9.50, with the requirement that conversion take place within 30 days of the
second closing. Further, Zoltek also has agreed to reduce the


                                     49

<PAGE>
<PAGE>

conversion price on its outstanding convertible debt in the aggregate
principal amount of $20.0 million issued February 2005 based on the market
price of Zoltek's common stock on the nine-month anniversary of the second
closing. The adjusted conversion price will equal 90% of the market price of
the common stock, but will not be less than $12.50 nor exceed $20.00.

Item 9A.  Controls and Procedures
-------   -----------------------

DISCLOSURE CONTROLS AND PROCEDURES

         The Company's management, under the supervision and with the
participation of the Company's management, including the Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of the
Company's disclosure controls and procedures, as defined in Rules 13a-15(e)
and 15d-15(e) under the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"), as of the end of the period covered by this report.
Management had previously concluded that the Company's disclosure controls
and procedures were effective as of the end of the period covered by this
report. However, in connection with the restatement of the Company's
previously issued consolidated financial statements described below,
management determined that material weaknesses existed in the Company's
internal control over financial reporting as of the end of the period
covered by this report. Because of these material weaknesses, management
concluded that the Company's disclosure controls and procedures were not
effective as of the end of the period covered by this report.

RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

         As discussed in Note 2 to the consolidated financial statements,
the Company has restated its previously issued financial statements.
Management evaluated the materiality of the correction on its consolidated
financial statements using the guidelines of Staff Accounting Bulletin No.
99, "Materiality" and concluded that the effects of the corrections were
material to its 2004 annual consolidated financial statements as well as its
interim consolidated financial statements for the quarters ended March 31,
2004, June 30, 2004, December 31, 2004 and March 31, 2005. Accordingly,
management concluded that it would restate the Company's previously issued
2004 annual consolidated financial statements as well as its interim
consolidated financial statements for the quarters ended March 31, 2004,
June 30, 2004, December 31, 2004 and March 31, 2005.

MATERIAL WEAKNESS IN INTERNAL CONTROL OVER FINANCIAL REPORTING

         A material weakness is a control deficiency or combination of
control deficiencies that results in more than a remote likelihood that a
material misstatement of the annual or interim consolidated financial
statements will not be prevented or detected.

         As of the end of the period covered by this report, the Company did
not maintain effective controls over the completeness and accuracy of its
accounting for its convertible debt and related amortization of financing
fees and debt discount and gain (loss) on value of warrants and conversion
feature. Specifically, the Company did not maintain effective controls over
the accounting for derivative liabilities in connection with its convertible
debt issued in January, March and October 2004 and February 2005.
Specifically, the Company did not have controls over the completeness and
accuracy of: (i) the beneficial conversion feature embedded in the Company's
convertible debt; or (ii) the common stock purchase warrants issued in
connection with the Company's convertible debt. The control deficiencies
resulted in accounting errors in total liabilities, shareholders'


                                     50

<PAGE>
<PAGE>

equity, interest expense, amortization expense, fair value gains and losses
which resulted in the restatement of the Company's 2004 annual consolidated
financial statements, as well as, the Company's interim consolidated
financial statements for the quarters ended March 31, 2004, June 30, 2004,
December 31, 2004 and March 31, 2005. In addition, the control deficiencies
could result in a misstatement of total liabilities, shareholders' equity,
interest expense, amortization expense, fair value gains and losses that
would result in a material misstatement to the annual or interim
consolidated financial statements that would not be prevented or detected.
Accordingly, management determined that this control deficiency constitutes
a material weakness.

         As of the end of the period covered by this report, the Company did
not maintain effective controls over the completeness and accuracy of its
earning per share disclosures. Specifically, the Company did not maintain
effective review and approval controls over the appropriate sequencing of
warrants and convertible debt instruments for determining diluted earnings
per share. This control deficiency resulted in the restatement of the
Company's interim consolidated financial statements for the quarter ended
March 31, 2005. Further, this control deficiency could result in a
misstatement of earnings per share that would result in a material
misstatement to the annual or interim consolidated financial statements that
would not be prevented or detected. Accordingly, management determined that
this control deficiency constitutes a material weakness.

MANAGEMENT'S REMEDIATION PLAN

         The Company, under the supervision of its Chief Executive Officer
and Chief Financial Officer, is currently evaluating steps that it can take
to remediate the material weaknesses in its internal control over financial
reporting, including steps that can be taken in the process of documenting
and evaluating the applicable accounting treatment for non-routine or
complex transactions as they may arise.

CHANGES IN INTERNAL CONTROL

         There were no changes in the Company's internal control over
financial reporting that occurred during the fiscal year covered by this
report that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.

Item 9B.  Other Information
-------   -----------------

         Not Applicable.






                                     51

<PAGE>
<PAGE>

                                   PART IV

Item 15.  Exhibits and Financial Statement Schedule
-------   -----------------------------------------

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

                  Report of Independent Registered Public Accounting Firm

                  Consolidated Balance Sheet as of September 30, 2004
                  and 2003

                  Consolidated Statement of Operations for the years ended
                  September 30, 2004, 2003 and 2002

                  Consolidated Statement of Changes in Shareholders' Equity
                  for the years ended September 30, 2004, 2003 and 2002

                  Consolidated Statement of Cash Flows for the years ended
                  September 30, 2004, 2003 and 2002

                  Notes to Consolidated Financial Statements

                  (2)      The following financial statement schedule and
Independent Registered Public Accounting Firm's report thereon are included
in Part IV of this report:

         Report of Independent Registered Public Accounting Firm on
         Financial Statement Schedule

         12-09 Valuation and Qualifying Accounts and Reserves

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

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

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

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

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

                                     52

<PAGE>
<PAGE>

         4.2      Form of Warrant, dated May 11, 2001, issued to Southwest
                  Bank of St. Louis with respect to 12,500 shares of
                  Registrant's Common Stock is filed herewith

         4.3      Subordinated Convertible Debenture Purchase Agreement,
                  dated as of February 13, 2003, by and among Zoltek
                  Companies, Inc. and the investors named therein, filed as
                  Exhibit 4.1 to Registrant's Current Report on Form 8-K
                  dated February 18, 2003 is incorporated herein by
                  reference

         4.4      Form of Subordinated Debenture, filed as Exhibit 4.2 to
                  Registrant's Current Report on Form 8-K dated February 18,
                  2003 is incorporated herein by reference

         4.5      Form of Warrant, filed as Exhibit 4.3 to Registrant's
                  Current Report on Form 8-K dated February 18, 2003 is
                  incorporated herein by reference

         4.6      Securities Purchase Agreement, dated as of December 19,
                  2003, by and among Zoltek Companies, Inc. and the
                  investors named therein, filed as Exhibit 4.6 to
                  Registrant's Annual Report on Form 10-K for the year ended
                  September 30, 2003 is incorporated herein by reference

         4.7      Form of 6% Convertible Debenture, filed as Exhibit 4.7 to
                  Registrant's Annual Report on Form 10-K for the year ended
                  September 30, 2003 is incorporated herein by reference

         4.8      Form of Warrant, filed as Exhibit 4.8 to Registrant's
                  Annual Report on Form 10-K for the year ended September
                  30, 2003 is incorporated herein by reference

         4.9      Securities Purchase Agreement, dated as of March 11, 2004,
                  by and among Zoltek Companies, Inc. and the investors
                  named therein, filed as Exhibit 4.2 to Registrant's
                  Registration Statement on Form S-3 (Reg. No. 333-115043)
                  is incorporated herein by reference

         4.10     Form of 6% Convertible Debenture, filed as Exhibit 4.3 to
                  Registrant's Registration Statement on Form S-3 (Reg. No.
                  333-115043) is incorporated herein by reference

         4.11     Form of Warrant, filed as Exhibit 4.4 to Registrant's
                  Registration Statement on Form S-3 (Reg. No. 333-115043)
                  is incorporated herein by reference

         4.12     Loan and Warrant Agreement, dated as of October 14, 2004,
                  filed as Exhibit 4.1 to Registrant's Current Report on
                  Form 8-K dated October 19, 2004 is incorporated herein by
                  reference

         4.13     Security Agreement, dated as of October 14, 2004, filed as
                  Exhibit 4.3 to Registrant's Current Report on Form 8-K
                  dated October 19, 2004 is incorporated herein by reference

         4.14     Mortgage Agreement, dated as of October 14, 2004, filed as
                  Exhibit 4.4 to Registrant's Current Report on Form 8-K
                  dated October 19, 2004 is incorporated herein by reference

         4.15     Form of Warrant, filed as Exhibit 4.5 to Registrant's
                  Current Report on Form 8-K dated October 19, 2004 is
                  incorporated herein by 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


                                     53

<PAGE>
<PAGE>

                  Exhibit 10.7 to Registrant's Registration Statement on
                  Form S-1 (Reg. No. 33-51142) is incorporated herein by
                  this reference

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

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

         10.5     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.)

         10.8     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    Credit Agreement, dated May 11, 2001, between Southwest
                  Bank of St. Louis and Zoltek Companies, Inc., Zoltek
                  Corporation, Cape Composites, Inc., Engineering Technology
                  Corporation, Zoltek Properties, Inc., and Hardcore
                  Composites Operations, LLC, filed as Exhibit 10.1 to
                  Registrant's Quarterly Report on Form 10-Q for the quarter
                  ended June 30, 2001 is incorporated herein by reference

         10.11    First Amendment to Credit Agreement, dated as of February
                  13, 2003, by and among Zoltek Companies, Inc., Zoltek
                  Corporation, Cape Composites, Inc., Engineering Technology
                  Corporation, Zoltek Properties, Inc. and Southwest Bank of
                  St. Louis, filed as Exhibit 10.1 to Registrant's Current
                  Report on Form 8-K dated February 18, 2003 is incorporated
                  herein by reference

         10.12    Zoltek Companies, Inc. 2003 Long-Term Equity Incentive
                  Plan, filed as Appendix A to Registrant's definitive proxy
                  statement for the 2002 Annual Meeting of Shareholders is
                  corporated herein by reference*

         10.13    Promissory Note, dated January 13, 2004, by and between
                  Zoltek Properties, Inc. and Beal Bank, S.S.B. filed as
                  Exhibit 10.13 to Registrant's Annual Report on Form 10-K
                  for the fiscal year ended September 30, 2003, is
                  incorporated herein by this reference

         10.14    Second Amendment to Credit Agreement, dated as of January
                  13, 2003, by and among Zoltek Companies, Inc., Zoltek
                  Corporation, Cape Composites, Inc., Engineering Technology
                  Corporation, Zoltek Properties, Inc. and Southwest Bank of
                  St. Louis filed


                                     54

<PAGE>
<PAGE>

                  as Exhibit 10.14 to Registrant's Annual Report on Form
                  10-K for the fiscal year ended September 30, 2003, is
                  incorporated herein by this reference

         21       Subsidiaries of the Registrant filed as Exhibit 21 to
                  Registrant's Annual Report on Form 10-K for the fiscal
                  year ended September 30, 2000 is incorporated herein by
                  this reference

         23       Consent of PricewaterhouseCoopers LLP is filed herewith

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

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

         32.1     Certification of Chief Executive Officer pursuant to 18
                  U.S.C. Section 1350, as adopted pursuant to Section 906 of
                  the Sarbanes-Oxley Act of 2002 is filed herewith

         32.2     Certification of Chief Financial Officer pursuant to 18
                  U.S.C. Section 1350, as adopted pursuant to Section 906 of
                  the Sarbanes-Oxley Act of 2002 is filed herewith


<FN>
---------------------
* Management compensatory plan or arrangement





                                     55

<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



                                       By /s/ Kevin Schott
                                          -------------------------------------
                                          Kevin Schott, Chief Financial Officer

Date: December 15, 2005






                                     56

<PAGE>
<PAGE>


         REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 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 December 29, 2004, except for Note 2, as to which the date is
December 15, 2005, appearing in the 2004 Annual Report to Shareholders of
Zoltek Companies, Inc. (which report and consolidated financial statements
are included in this Annual Report on Form 10-K/A) also included an audit of
the Financial Statement Schedule listed in Item 15(a)(2) of this Form
10-K/A. 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.

As discussed in Note 2 to the consolidated financial statements, the Company
restated its September 30, 2004 consolidated financial statements.



/s/PricewaterhouseCoopers LLP
---------------------------------
PricewaterhouseCoopers LLP
St. Louis, Missouri
December 29, 2004, except for Note 2, which the date is December 15, 2005






                                     57

<PAGE>
<PAGE>


<TABLE>
                                               FOR THE YEAR ENDED SEPTEMBER 30, 2004
                                                      (Restated - See Note 2)
                                     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       $   931            $   1,041              $        -             $     991(1)     $     981
                                    =======            =========              ==========             =========        =========
RESERVE FOR INVENTORY VALUATION     $ 6,300            $       -              $        -             $   1,113(2)     $   5,187
                                    =======            =========              ==========             =========        =========

DEFERRED TAX VALUATION              $11,272            $   2,195              $        -             $       -        $  13,467
                                    =======            =========              ==========             =========        =========


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



                                               FOR THE YEAR ENDED SEPTEMBER 30, 2003

                                     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       $   742            $     215              $        -             $      30(1)     $     931
                                    =======            =========              ==========             =========        =========
RESERVE FOR INVENTORY VALUATION     $ 6,100            $   1,106              $        -             $     906(2)     $   6,300
                                    =======            =========              ==========             =========        =========

DEFERRED TAX VALUATION              $ 7,378            $   3,894              $        -             $       -        $  11,272
                                    =======            =========              ==========             =========        =========


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


                                               FOR THE YEAR ENDED SEPTEMBER 30, 2002

                                     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       $   760            $     392              $        -             $     410(1)     $     742
                                    =======            =========              ==========             =========        =========
RESERVE FOR INVENTORY VALUATION     $ 7,972            $       -              $        -             $   1,872(2)     $   6,100
                                    =======            =========              ==========             =========        =========

DEFERRED TAX VALUATION              $ 7,811            $       -              $        -             $    (433)       $   7,378
                                    =======            =========              ==========             =========        =========

<FN>
-----------------
(1) Write-off of uncollectible receivable, net of recovery.
(2) Reduction in inventory reserve for specific inventory items.
</TABLE>



                                     58

<PAGE>
<PAGE>


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


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

         3.1      Restated Articles of Incorporation of the Registrant*

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

         4.1      Form of certificate for Common Stock*

         4.2      Form of Warrant, dated May 11, 2001, issued to Southwest
                  Bank of St. Louis with respect to 12,500 shares of
                  Registrant's Common Stock*

         4.3      Subordinated Convertible Debenture Purchase Agreement,
                  dated as of February 13, 2003, by and among Zoltek
                  Companies, Inc. and the investors named therein, filed as
                  Exhibit 4.1 to Registrant's Current Report on Form 8-K
                  dated February 18, 2003*

         4.4      Form of Subordinated Debenture, filed as Exhibit 4.2 to
                  Registrant's Current Report on Form 8-K dated February 18,
                  2003*

         4.5      Form of Warrant, filed as Exhibit 4.3 to Registrant's
                  Current Report on Form 8-K dated February 18, 2003*

         4.6      Securities Purchase Agreement, dated as of December 19,
                  2003, by and among Zoltek Companies, Inc. and the
                  investors named therein, filed as Exhibit 4.6 to
                  Registrant's Annual Report on Form 10-K for the year ended
                  September 30, 2003 is incorporated herein by reference

         4.7      Form of 6% Convertible Debenture, filed as Exhibit 4.7 to
                  Registrant's Annual Report on Form 10-K for the year ended
                  September 30, 2003 is incorporated herein by reference

         4.8      Form of Warrant, filed as Exhibit 4.8 to Registrant's
                  Annual Report on Form 10-K for the year ended September
                  30, 2003 is incorporated herein by reference

         4.9      Securities Purchase Agreement, dated as of March 11, 2004,
                  by and among Zoltek Companies, Inc. and the investors
                  named therein, filed as Exhibit 4.2 to Registrant's
                  Registration Statement on Form S-3 (Reg. No. 333-115043)
                  is incorporated herein by reference

         4.10     Form of 6% Convertible Debenture, filed as Exhibit 4.3 to
                  Registrant's Registration Statement on Form S-3 (Reg. No.
                  333-115043) is incorporated herein by reference

         4.11     Form of Warrant, filed as Exhibit 4.4 to Registrant's
                  Registration Statement on Form S-3 (Reg. No. 333-115043)
                  is incorporated herein by reference

         4.12     Loan and Warrant Agreement, dated as of October 14, 2004,
                  filed as Exhibit 4.1 to Registrant's Current Report on
                  Form 8-K dated October 19, 2004 is incorporated herein by
                  reference




                                     59

<PAGE>
<PAGE>


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


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

         4.13     Security Agreement, dated as of October 14, 2004, filed as
                  Exhibit 4.3 to Registrant's Current Report on Form 8-K
                  dated October 19, 2004 is incorporated herein by reference

         4.14     Mortgage Agreement, dated as of October 14, 2004, filed as
                  Exhibit 4.4 to Registrant's Current Report on Form 8-K
                  dated October 19, 2004 is incorporated herein by reference

         4.15     Form of Warrant, filed as Exhibit 4.5 to Registrant's
                  Current Report on Form 8-K dated October 19, 2004 is
                  incorporated herein by 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*

         10.2     Zoltek Companies, Inc. Long Term Incentive Plan*

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

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

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

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

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

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

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

         10.10    Credit Agreement, dated as of May 11, 2001, between
                  Southwest Bank of St. Louis and Zoltek Companies, Inc.,
                  Zoltek Corporation, Cape Composites, Inc., Engineering
                  Technology Corporation, Zoltek Properties, Inc., and
                  Hardcore Composites Operations, LLC*

         10.11    First Amendment to Credit Agreement, dated as of February
                  13, 2003, by and among Zoltek Companies, Inc., Zoltek
                  Corporation, Cape Composites, Inc., Engineering Technology
                  Corporation, Zoltek Properties, Inc. and Southwest Bank of
                  St. Louis*



                                     60

<PAGE>
<PAGE>


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

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

         10.12    Zoltek Companies, Inc. 2003 Long-Term Equity Incentive
                  Plan, filed as Appendix A to Registrant's definitive proxy
                  statement for the 2002 Annual Meeting of Shareholders*

         10.13    Promissory Note, dated January 13, 2004, by and between
                  Zoltek Properties, Inc. and Beal Bank, S.S.B. filed as
                  Exhibit 10.13 to Registrant's Annual Report on Form 10-K
                  for the fiscal year ended September 30, 2003, is
                  incorporated herein by this reference

         10.14    Second Amendment to Credit Agreement, dated as of January
                  13, 2003, by and among Zoltek Companies, Inc., Zoltek
                  Corporation, Cape Composites, Inc., Engineering Technology
                  Corporation, Zoltek Properties, Inc. and Southwest Bank of
                  St. Louis filed as Exhibit 10.14 to Registrant's Annual
                  Report on Form 10-K for the fiscal year ended September
                  30, 2003, is incorporated herein by this reference

         21       Subsidiaries of the Registrant*

         23       Consent of PricewaterhouseCoopers LLP

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

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

         32.1     Certification of Chief Executive Officer pursuant to 18
                  U.S.C. Section 1350, as adopted pursuant to Section 906 of
                  the Sarbanes-Oxley Act of 2002

         32.2     Certification of Chief Financial Officer pursuant to 18
                  U.S.C. Section 1350, as adopted pursuant to Section 906 of
                  the Sarbanes-Oxley Act of 2002


<FN>
------------------
* Incorporated herein by reference




                                     61

<PAGE>
<PAGE>

                                                                  EXHIBIT 23
                                                                  ----------





          CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Nos. 33-83160 and 33-06565) of Zoltek Companies,
Inc. of our report dated December 29, 2004, except for Note 2, as to which
the date is December 15, 2005, relating to the consolidated financial
statements and financial statement schedule of Zoltek Companies, Inc., which
appears in this Form 10-K/A.


/s/PricewaterhouseCoopers LLP
-----------------------------------
PricewaterhouseCoopers LLP
St. Louis, Missouri
December 15, 2005



                                     62

<PAGE>
<PAGE>

                                                                EXHIBIT 31.1
                                                                ------------
                                CERTIFICATION


         I, Zsolt Rumy, certify that:

         1. I have reviewed this annual report on Form 10-K/A of Zoltek
Companies, Inc.;

         2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;

         3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report;

         4. I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and have:

         (a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under my supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to me by others within those
entities, particularly during the period in which this quarterly report is
being prepared;

         (b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report my conclusions about
the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this quarterly report based on such evaluation; and

         (c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting; and

         5. I have disclosed, based on my most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):

         (a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and

         (b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.

Date: December 15, 2005


                                       By: /s/  Zsolt Rumy
                                           ----------------------------
                                                Zsolt Rumy
                                                Chief Executive Officer



                                     63

<PAGE>
<PAGE>

                                                                EXHIBIT 31.2
                                                                ------------
                                CERTIFICATION


         I, Kevin Schott, certify that:

         1. I have reviewed this annual report on Form 10-K/A of Zoltek
Companies, Inc.;

         2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this report;

         3. Based on my knowledge, the financial statements, and other
financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
report;

         4. I am responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) for the registrant and have:

         (a) Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under my supervision,
to ensure that material information relating to the registrant, including
its consolidated subsidiaries, is made known to me by others within those
entities, particularly during the period in which this quarterly report is
being prepared;

         (b) Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report my conclusions about
the effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this quarterly report based on such evaluation; and

         (c) Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during the
registrant's most recent fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting; and

         5. I have disclosed, based on my most recent evaluation of internal
control over financial reporting, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):

         (a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record,
process, summarize and report financial information; and

         (b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
control over financial reporting.

Date:  December 15, 2005


                                       By: /s/  Kevin Schott
                                           -----------------------------
                                                Kevin Schott
                                                Chief Financial Officer



                                     64

<PAGE>
<PAGE>

                                                                EXHIBIT 32.1
                                                                ------------




                          CERTIFICATION PURSUANT TO
                           18 U.S.C. SECTION 1350,
                           AS ADOPTED PURSUANT TO
                SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of Zoltek Companies, Inc. (the
"Company") on Form 10-K/A for the period ending September 30, 2004 as filed
with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Zsolt Rumy, Chief Executive Officer of the Company, certify,
pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of
the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief,
that:

                  (1)      The Report fully complies with the requirements
                           of section 13(a) or 15(d) of the Securities
                           Exchange Act of 1934; and

                  (2)      The information contained in the Report fairly
                           presents, in all material respects, the financial
                           condition and results of operations of the
                           Company.


Date: December 15, 2005                               By: /s/ Zsolt Rumy
                                                         -----------------------
                                                         Zsolt Rumy
                                                         Chief Executive Officer



                                     65

<PAGE>
<PAGE>

                                                                EXHIBIT 32.2
                                                                ------------




                          CERTIFICATION PURSUANT TO
                           18 U.S.C. SECTION 1350,
                           AS ADOPTED PURSUANT TO
                SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report of Zoltek Companies, Inc. (the
"Company") on Form 10-K/A for the period ending September 30, 2004 as filed
with the Securities and Exchange Commission on the date hereof (the
"Report"), I, Kevin Schott, Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of
the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief,
that:

                  (1)      The Report fully complies with the requirements
                           of section 13(a) or 15(d) of the Securities
                           Exchange Act of 1934; and

                  (2)      The information contained in the Report fairly
                           presents, in all material respects, the financial
                           condition and results of operations of the
                           Company.


Date: December 15, 2005                               By: /s/ Kevin Schott
                                                         -----------------------
                                                         Kevin Schott
                                                         Chief Financial Officer




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