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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
 Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 For the fiscal year ended September 30, 2008
 Commission File Number 0-20600
 ZOLTEK COMPANIES, INC.
  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)
   
 Yes o No þ
 Yes o No þ
 þ o
 þ
 Rule 12b-2
 Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE
  Document
    
    Part of Form 10-KProxy Statement for the 2009Annual Meeting of Shareholders
    
    III




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##### 



ZOLTEK COMPANIES, INC.
INDEX
 PART I.Item 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    8Item 1B. Unresolved Staff Comments
    
    
    11Item 2. Properties
    
    
    12Item 3. Legal Proceedings
    
    
    12Item 4. Submission of Matters to a Vote of Security Holders
    
    
    13Item 4a. Executive Officers of Registrant
    
    
    13PART II.Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
    
    
    14Item 6. Selected Financial Data
    
    
    15Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    30Item 8. Financial Statements and Supplementary Data
    
    
    31Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures
    
    
    58Item 9A. Controls and Procedures
    
    
    58Item 9B. Other Information
    
    
    59PART III.Item 10. Directors, Executive Officers and Corporate Governance
    
    
    60Item 11. Executive Compensation
    
    
    60Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    60Item 13. Certain Relationships, Related Transactions and Director Independence
    
    
    60Item 14. Principal Accounting Fees and Services
    
    
    60PART IV.Item 15. Exhibits and Financial Statement Schedules
    
    
    61Signatures
    
    
    63Exhibit Index
    
    
    64Exhibit 10.10Exhibit 23.1Exhibit 23.2Exhibit 31Exhibit 32
   2




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PART I
 
 ITEM 1. BUSINESS
  Overview
        ® ®
  3




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Business Strategy
   Sustainable Price Leadership.
 Support New Commercial Markets and Applications Development.
 Capacity Leadership to Keep Pace with Increasing Demand.
 Develop Model for Long-Term Joint Ventures with Strategic Partners.
 Emerging Applications
  
    
    Wind Energy
  
    
    Deep Sea Drilling
  
    
    Aerospace Secondary Structures
   4




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
    
    Automotive
  
    
    Aircraft Brakes
  Customers
   Backlog
  Company Operations
       5




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Competition
     International
  Sources of Supply
  Environmental
  Employees
    6




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AVAILABLE INFORMATION
 http://www.sec.gov
  SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
     7




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Item 1A. Risk Factors
 The following are certain risk factors that could affect Zolteks business, financial results and
results of operations. These risk factors should be considered in connection with evaluating the
forward-looking statements contained in this Annual Report on Form 10-K because these factors could
cause the actual results and conditions to differ materially from those projected in
forward-looking statements. Before you buy the Companys securities, you should know that making
such an investment involves a high degree of risk, including the risks described below. The risks
that we have highlighted here are not the only ones that the Company faces. If any of the risks
actually occur, the Companys business, financial condition, results of operations or cash flows
could be negatively affected. In that case, the trading price of its securities could decline, and
you may lose all or part of your investment.
 Our growth and profitability is dependant on growth in demand for carbon fibers and entering into
new supply agreements.
   Increases in sales of our carbon fiber products are subject to long sales cycles of our customers.
  A limited number of customers generate a significant portion of our revenue and may terminate their
contracts with us in the event of certain changes in control or may require that we make penalty
payments in the event we fail to perform.
  We reported net losses from continuing operations for fiscal year 2007 and each of the five fiscal
years preceding it.
  We have experienced negative cash flows from operations for each of the four fiscal years
prior to fiscal 2006 and may experience negative cash flows in the future, which may adversely
affect our ability to fund our operations.
   8




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Demand for our carbon fiber products may be adversely affected by the current economic and credit
environment.
  Our operations and sales in foreign countries are subject to risks.
  Our ability to fund and manage our anticipated growth will affect our operating results.
  Our operations are dependent upon our senior management and technical personnel.
  Our operating results may fluctuate.
  Developments by competitors may reduce demand for our products and technologies, which may
adversely affect our sales.
  The price volatility of many of our raw materials and energy costs may result in increased
production costs, which we may not be able to pass on to our customers.
  We could be adversely affected by environmental and safety requirements.
   9




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Our business depends upon the maintenance of our proprietary technology.
  We have incurred and will continue to incur increased costs and demands upon our management
as a result of complying with the laws and regulations affecting public companies, which could
affect our operating results and make it more difficult to attract and retain qualified management.
  Our stock price has been volatile and may continue to fluctuate.
  A change of control of our company may be discouraged, delayed or prevented by our classified
board of directors, our ability to issue preferred stock, or the voting control of our principal
shareholder.
     10




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Future sales of common stock could affect the price of our common stock.
  We do not currently intend to pay dividends on our common stock.
  
 Item 1B. Unresolved Staff Comments
   11




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Item 2. Properties
  Approximate AreaLocation
    
    Use
    
    (in square feet)
    
    
    StatusSt. Louis, Missouri
    
    Administrative, marketing and central engineering offices
    
    
    30,000
    
    
    OwnedSt. Charles, Missouri
    
    Carbon and Technical fiber manufacturing and R&D facility
    
    
    107,000
    
    
    OwnedAbilene, Texas
    
    Carbon fiber manufacturing
    
    
    278,000
    
    
    OwnedSalt Lake City, Utah I
    
    Composite fabrication equipment design and manufacturing
    
    
    65,000
    
    
    Owned/MortgagedSalt Lake City, Utah II
    
    Carbon fiber prepreg manufacturing
    
    
    35,000
    
    
    LeasedNyergesujfalu, Hungary
    
    Carbon fiber, acrylic fiber precursor
    
    
    2,000,000
    
    
    OwnedGuadalajara, Mexico
    
    Carbon fiber, acrylic fiber precursor
    
    
    1,400,000
    
    
    Owned
 
 Item 3. Legal Proceedings
        12




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Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 4A. Executive Officers of the Registrant
       13




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
   Fiscal year ended
    
    
    Fiscal year endedSeptember 30, 2008
    
    
    September 30, 2007High
    
    
    Low
    
    
    High
    
    
    LowFirst Quarter
    
    $
    47.83
    
    
    $
    34.10
    
    
    $
    27.99
    
    
    $
    18.75Second Quarter
    
    
    42.44
    
    
    
    20.97
    
    
    
    35.12
    
    
    
    20.26Third Quarter
    
    
    32.25
    
    
    
    22.79
    
    
    
    42.87
    
    
    
    29.70Fourth Quarter
    
    
    24.97
    
    
    
    15.26
    
    
    
    51.39
    
    
    
    35.18
 Performance Graph
  
 9/30/2003
    
    
    9/30/2004
    
    
    9/30/2005
    
    
    9/30/2006
    
    
    9/30/2007
    
    
    9/30/2008Zoltek Companies, Inc.
    
    
    100.00
    
    
    
    320.71
    
    
    
    469.64
    
    
    
    912.50
    
    
    
    1558.21
    
    
    
    611.07NASDAQ Industrial
Index
    
    
    100.00
    
    
    
    114.53
    
    
    
    128.91
    
    
    
    138.05
    
    
    
    165.51
    
    
    
    120.95The Russell 2000 Index
    
    
    100.00
    
    
    
    117.48
    
    
    
    136.83
    
    
    
    148.78
    
    
    
    165.16
    
    
    
    139.35
  14




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Item 6. Selected Financial Data
 
 Year Ended September 30,Statement of Operations Data: (1)
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Net sales
    
    $
    185,616
    
    
    $
    150,880
    
    
    $
    92,357
    
    
    $
    55,377
    
    
    $
    34,525Cost of sales, excluding available unused capacity costs
    
    
    134,393
    
    
    
    107,506
    
    
    
    69,994
    
    
    
    52,809
    
    
    
    29,137Available unused capacity costs
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,347
    
    
    
    4,466Litigation charge (2)
    
    
    4,884
    
    
    
    5,400
    
    
    
    22,795
    
    
    
    
    
    
    
    Selling, general and administrative expenses (3)
    
    
    26,332
    
    
    
    19,865
    
    
    
    15,243
    
    
    
    7,847
    
    
    
    6,463Operating income (loss) from continuing operations
    
    
    20,007
    
    
    
    18,109
    
    
    
    (15,675
    )
    
    
    (7,626
    )
    
    
    (5,541
    )Other expense
    
    
    (7,150
    )
    
    
    (18,095
    )
    
    
    (49,202
    )
    
    
    (29,877
    )
    
    
    (11,118
    )Income tax expense
    
    
    (5,416
    )
    
    
    (1,986
    )
    
    
    (888
    )
    
    
    (708
    )
    
    
    (434
    )Net income (loss) from continuing operations
    
    
    7,441
    
    
    
    (1,972
    )
    
    
    (65,765
    )
    
    
    (38,211
    )
    
    
    (17,093
    )Discontinued operations:Operating loss, net of taxes
    
    
    
    
    
    
    (545
    )
    
    
    (187
    )
    
    
    (2,182
    )
    
    
    (5,055
    )Gain (loss) on disposal of discontinued operation,
net of taxes
    
    
    
    
    
    
    
    
    
    
    150
    
    
    
    
    
    
    
    (659
    )Net loss on discontinued operations, net of taxes
    
    
    
    
    
    
    (545
    )
    
    
    (37
    )
    
    
    (2,182
    )
    
    
    (5,714
    )Net income (loss)
    
    $
    7,441
    
    
    $
    (2,517
    )
    
    $
    (65,802
    )
    
    $
    (40,393
    )
    
    $
    (22,807
    )Net income (loss) per share:Basic and diluted income (loss) per share:Continuing operations
    
    $
    0.22
    
    
    $
    (0.07
    )
    
    $
    (2.91
    )
    
    $
    (2.12
    )
    
    $
    (1.04
    )Discontinued operations
    
    
    0.00
    
    
    
    (0.02
    )
    
    
    (0.00
    )
    
    
    (0.12
    )
    
    
    (0.35
    )Total
    
    $
    0.22
    
    
    $
    (0.09
    )
    
    $
    (2.91
    )
    
    $
    (2.24
    )
    
    $
    (1.39
    )Basic weighted average common shares outstanding
    
    
    34,042
    
    
    
    28,539
    
    
    
    22,575
    
    
    
    18,050
    
    
    
    16,372Diluted weighted average common shares outstanding
    
    
    34,172
    
    
    
    28,539
    
    
    
    22,575
    
    
    
    18,050
    
    
    
    16,372
 September 30,Balance Sheet Data:
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005
    
    
    2004Working capital (4)
    
    $
    76,000
    
    
    $
    147,956
    
    
    $
    20,042
    
    
    $
    19,072
    
    
    $
    16,802Total assets (4)
    
    
    440,164
    
    
    
    403,599
    
    
    
    187,684
    
    
    
    130,429
    
    
    
    122,455Current maturities of long-term debt
    
    
    12,601
    
    
    
    13,813
    
    
    
    1,365
    
    
    
    374
    
    
    
    570Long-term debt, less current maturities
    
    
    3,562
    
    
    
    6,851
    
    
    
    32,002
    
    
    
    40,421
    
    
    
    42,002Shareholders equity (4)
    
    
    346,666
    
    
    
    320,767
    
    
    
    111,661
    
    
    
    40,645
    
    
    
    44,230
 
 (1)
    
    Prior year amounts have been reclassified for discontinued operations as discussed in Note 3 to
Consolidated Financial Statements.(2)
    
    Litigation expenses related to the Scott Macon case in fiscal 2007 and the SP Systems case in
fiscal 2008 and 2006, as discussed in Note 8 of the accompanying Notes to Consolidated
Financial Statements.(3)
    
    Includes application and development costs of $8,093, $7,230, $4,887, $3,324 and $3,070 for
fiscal years 2008, 2007, 2006, 2005 and 2004, respectively.(4)
    
    The Company completed a public offering of shares in August 2007 and realized net proceeds of
$131.5 million, recorded as increases to cash and equity. During fiscal 2008 a substantial
portion of those proceeds were used to fund capital expenditure projects in Mexico.  15




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 OVERVIEW
      OUR BUSINESS
 ® ®
   RESULTS OF OPERATIONS
 FISCAL YEAR ENDED SEPTEMBER 30, 2008 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 2007
    16




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17




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FISCAL YEAR ENDED SEPTEMBER 30, 2007 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 2006
         18




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LIQUIDITY AND CAPITAL RESOURCES
   Cash Provided By Operating Activities
    19




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Cash Used In Investing Activities
     Cash Used and Provided By Financing Activities
   20




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Future Contractual Obligations
  Payments Due by PeriodLess than
    
    
    1-3
    
    
    3-5
    
    
    OverTotal
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 yearsConvertible debentures (a)
    
    $
    15,049
    
    
    $
    9,971
    
    
    $
    5,078
    
    
    
    
    
    
    
    Other long-term debt, including
current maturities (a)
    
    
    6,359
    
    
    
    6,359
    
    
    
    
    
    
    
    
    
    
    
    Total long-term debt obligations
    
    
    21,408
    
    
    
    16,330
    
    
    
    5,078
    
    
    
    
    
    
    
    Operating lease obligations
    
    
    354
    
    
    
    245
    
    
    
    90
    
    
    
    17
    
    
    
    2Capital leases obligations
    
    
    323
    
    
    
    202
    
    
    
    121
    
    
    
    
    
    
    
    Total debt and leases
    
    
    22,085
    
    
    
    16,777
    
    
    
    5,289
    
    
    
    17
    
    
    
    2Legal liabilities (b)
    
    
    29,083
    
    
    
    29,083
    
    
    
    
    
    
    
    
    
    
    
    Contractual interest payments (c)
    
    
    1,329
    
    
    
    1,126
    
    
    
    203
    
    
    
    
    
    
    
    Purchase obligations (d)
    
    
    1,709
    
    
    
    1,709
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    54,206
    
    
    $
    48,695
    
    
    $
    5,492
    
    
    $
    17
    
    
    
    2
 
 (a)
    
    Convertible debentures and long-term debt are presented on the balance sheet net of debt
discount of $5.2 million.(b)
    
    Amount includes $23.1 million accrued for potential damages and litigation cost related to SP
Systems case and $5.8 million related to the investment banker case and $0.2 million accrued
for other pending litigation. See Note 4 of the Notes to Consolidated Financial Statements.(c)
    
    Amounts represent the expected cash payment for interest on our debt.(d)
    
    Purchase obligations include agreements to purchase goods or services that are enforceable
and legally binding and that specify all significant terms, including fixed or minimum
quantities to be purchased, fixed, minimum or variable price provisions, and the approximate
timing of the transactions. Purchase obligations exclude agreements that are cancelable at any
time without penalty.  Conversion
    
    
    
    
    
    
    Less than
    
    
    1-3
    
    
    3-5
    
    
    Overprice
    
    
    Total
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 yearsTotal contractual obligations
    
    
    
    
    
    $
    54,206
    
    
    $
    48,695
    
    
    $
    5,492
    
    
    $
    17
    
    
    $
    2May 2006 issuance
    
    $
    25.51
    
    
    
    (9,000
    )
    
    
    (7,200
    )
    
    
    (1,800
    )
    
    
    
    
    
    
    July and October 2006 issuance
    
    $
    25.51
    
    
    
    (6,049
    )
    
    
    (2,771
    )
    
    
    (3,278
    )
    
    
    
    
    
    
    Interest payments
    
    
    
    
    
    
    (1,329
    )
    
    
    (1,126
    )
    
    
    (203
    )
    
    
    
    
    
    
    Total contractual obligations assuming
conversion on September 30, 2008
    
    
    
    
    
    $
    37,828
    
    
    $
    37,598
    
    
    $
    211
    
    
    $
    17
    
    
    $
    2
  Bond Related to SP Systems Case
    21




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Revolving Credit Facility
    Hungarian Grant
   Financing Activity
  Convertible Debt
  2008
    
    
    2007
    
    
    2006Number
    
    
    
    
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    
    
    
    
    Numberof shares
    
    
    Conversion
    
    
    
    
    
    
    of shares
    
    
    Conversion
    
    
    
    
    
    
    of shares
    
    
    Conversionconverted
    
    
    price
    
    
    Equity value
    
    
    converted
    
    
    price
    
    
    Equity value
    
    
    converted
    
    
    price
    
    
    Equity valueFebruary 2003
    
    
    
    
    
    $
    3.50
    
    
    $
    
    
    
    
    771,431
    
    
    $
    3.50
    
    
    $
    2,700,009
    
    
    
    1,457,147
    
    
    $
    3.50
    
    
    $
    5,100,015October 2004
    
    
    
    
    
    
    9.50
    
    
    
    
    
    
    
    
    
    
    
    9.50
    
    
    
    
    
    
    
    2,108,199
    
    
    
    9.50
    
    
    
    20,027,891February 2005
    
    
    
    
    
    
    20.00
    
    
    
    
    
    
    
    
    
    
    
    20.00
    
    
    
    
    
    
    
    1,006,035
    
    
    
    20.00
    
    
    
    20,120,700September 2005
    
    
    
    
    
    
    12.50
    
    
    
    
    
    
    
    
    
    
    
    12.50
    
    
    
    
    
    
    
    167,105
    
    
    
    12.50
    
    
    
    2,088,812December 2005
    
    
    
    
    
    
    12.50
    
    
    
    
    
    
    
    1,444,489
    
    
    
    12.50
    
    
    
    18,056,112
    
    
    
    
    
    
    
    12.50
    
    
    
    February 2006
    
    
    
    
    
    
    13.07
    
    
    
    
    
    
    
    760,622
    
    
    
    13.07
    
    
    
    9,941,330
    
    
    
    
    
    
    
    13.07
    
    
    
    May 2006
    
    
    203,679
    
    
    
    25.51
    
    
    
    5,195,856
    
    
    
    141,120
    
    
    
    25.51
    
    
    
    3,599,971
    
    
    
    
    
    
    
    25.51
    
    
    
    July 2006
    
    
    117,840
    
    
    
    25.51
    
    
    
    3,006,092
    
    
    
    
    
    
    
    25.51
    
    
    
    
    
    
    
    
    
    
    
    25.51
    
    
    
    October 2006
    
    
    115,578
    
    
    
    25.51
    
    
    
    2,948,383
    
    
    
    
    
    
    
    25.51
    
    
    
    
    
    
    
    
    
    
    
    25.51
    
    
    
    437,097
    
    
    
    
    
    
    $
    11,150,331
    
    
    
    3,117,662
    
    
    
    
    
    
    $
    34,297,422
    
    
    
    4,738,486
    
    
    
    
    
    
    $
    47,337,418
 As of September 30, 2008
    
    
    As of September 30, 2007
    
    
    As of September 30, 2006Number
    
    
    
    
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    
    
    
    
    Numberof shares
    
    
    Conversion
    
    
    Proceeds
    
    
    of shares
    
    
    Conversion
    
    
    Proceeds
    
    
    of shares
    
    
    Conversion
    
    
    Proceedsoutstanding
    
    
    price
    
    
    outstanding
    
    
    outstanding
    
    
    price
    
    
    outstanding
    
    
    outstanding
    
    
    price
    
    
    outstandingFebruary 2003
    
    
    
    
    
    $
    3.50
    
    
    $
    
    
    
    
    
    
    
    $
    3.50
    
    
    $
    
    
    
    
    771,431
    
    
    $
    3.50
    
    
    $
    2,700,008December 2005
    
    
    
    
    
    
    12.50
    
    
    
    
    
    
    
    
    
    
    
    12.50
    
    
    
    
    
    
    
    1,444,489
    
    
    
    12.50
    
    
    
    February 2006
    
    
    
    
    
    
    13.07
    
    
    
    
    
    
    
    
    
    
    
    13.07
    
    
    
    
    
    
    
    760,622
    
    
    
    13.07
    
    
    
    May 2006
    
    
    352,803
    
    
    
    25.51
    
    
    
    9,000,005
    
    
    
    556,482
    
    
    
    25.51
    
    
    
    14,195,860
    
    
    
    697,602
    
    
    
    25.51
    
    
    
    17,795,832July 2006
    
    
    58,800
    
    
    
    25.51
    
    
    
    1,499,988
    
    
    
    176,640
    
    
    
    25.51
    
    
    
    4,506,080
    
    
    
    176,640
    
    
    
    25.51
    
    
    
    4,506,080October 2006
    
    
    178,342
    
    
    
    25.51
    
    
    
    4,549,504
    
    
    
    293,919
    
    
    
    25.51
    
    
    
    7,497,887
    
    
    
    293,919
    
    
    
    25.51
    
    
    
    7,497,887589,945
    
    
    
    
    
    
    $
    15,049,497
    
    
    
    1,027,041
    
    
    
    
    
    
    $
    26,199,827
    
    
    
    4,144,703
    
    
    
    
    
    
    $
    32,499,807
  22




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##### Table of Contents



Outstanding Convertible Debt Issuances
 May 2006 (1)
    
    
    July 2006 (1)
    
    
    October 2006 (1)Original principal amount of debentures (millions)
    
    $
    20.0
    
    
    $
    2.5
    
    
    $
    7.5Per share conversion price on debenture
    
    $
    25.51
    
    
    $
    25.51
    
    
    $
    25.51Interest rate
    
    
    7.5
    %
    
    
    7.5
    %
    
    
    7.5
    %Term of debenture
    
    42 months
    
    
    42 months
    
    
    42 monthsWarrants issued
    
    274,406 shares
    
    
    34,370 shares
    
    
    102,835 sharesTerm of warrants
    
    60 months
    
    
    60 months
    
    
    60 monthsPer share exercise price of warrants
    
    $
    28.06
    
    
    $
    28.06
    
    
    $
    28.06Fair value per warrant at issuance
    
    $
    26.03
    
    
    $
    23.89
    
    
    $
    22.13Value per share of conversion feature at issuance
    
    $
    18.80
    
    
    $
    19.21
    
    
    $
    19.57Stock price on date of agreement
    
    $
    32.25
    
    
    $
    29.28
    
    
    $
    26.81Stock volatility at issuance
    
    
    106
    %
    
    
    111
    %
    
    
    117
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Risk-free interest rate at issuance
    
    
    4.88
    %
    
    
    4.88
    %
    
    
    4.65
    %Principal shares converted
    
    Partial
    
    
    Partial
    
    
    PartialWarrants exercised
    
    No
    
    
    No
    
    
    Partial
 
 (1)
    
    The May 2006, July 2006 and October 2006 issuances had a beneficial conversion feature.      23




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24




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##### Table of Contents



Warrant and Conversion Features
   Fiscal Year Ended September 30, 2007ConversionWarrants
    
    
    Features
    
    
    TotalJanuary 2004 issuance  mark to market
    
    $
    (314
    )
    
    $
    
    
    
    $
    (314
    )Loss on value of warrants and conversion feature
    
    $
    (314
    )
    
    $
    
    
    
    $
    (314
    )
 Fiscal Year Ended September 30, 2006ConversionWarrants
    
    
    Features
    
    
    TotalJanuary 2004 issuance  mark to market
    
    $
    (1,413
    )
    
    $
    
    
    
    $
    (1,413
    )March 2004 issuance  mark to market
    
    
    (730
    )
    
    
    
    
    
    
    (730
    )October 2004 issuance  mark to market
    
    
    (2,902
    )
    
    
    (5,671
    )
    
    
    (8,573
    )February 2005 issuance  mark to market
    
    
    (1,788
    )
    
    
    (16,799
    )
    
    
    (18,587
    )Loss on value of warrants and conversion feature
    
    $
    (6,833
    )
    
    $
    (22,470
    )
    
    $
    (29,303
    )
 Amortization of Financing Fees and Debt Discount
     Fiscal Year Ended September 30, 2008ConversionWarrants
    
    
    Features
    
    
    TotalMay 2006 issuance
    
    $
    1,943
    
    
    $
    2,867
    
    
    
    4,810July 2006issuance
    
    
    230
    
    
    
    280
    
    
    
    510October 2006 issuance
    
    
    392
    
    
    
    452
    
    
    
    844$
    2,565
    
    
    
    3,599
    
    
    
    6,164Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    518Total
    
    
    
    
    
    
    
    
    
    $
    6,682
  25




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##### Table of Contents



Fiscal Year Ended September 30, 2007ConversionWarrants
    
    
    Features
    
    
    TotalSeptember 2005 issuance
    
    $
    158
    
    
    $
    
    
    
    $
    158December 2005 issuance
    
    
    285
    
    
    
    
    
    
    
    285February 2006 issuance
    
    
    1,830
    
    
    
    1,882
    
    
    
    3,712May 2006 issuance
    
    
    1,560
    
    
    
    2,302
    
    
    
    3,862July 2006 issuance
    
    
    113
    
    
    
    138
    
    
    
    251October 2006 issuance
    
    
    235
    
    
    
    269
    
    
    
    504$
    4,181
    
    
    $
    4,591
    
    
    $
    8,772Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    999Total
    
    
    
    
    
    
    
    
    
    $
    9,771
 Fiscal Year Ended September 30, 2006ConversionWarrants
    
    
    Features
    
    
    TotalOctober 2004 issuance
    
    $
    204
    
    
    $
    400
    
    
    $
    604February 2005 issuance
    
    
    834
    
    
    
    7,830
    
    
    
    8,664September 2005 issuance
    
    
    905
    
    
    
    
    
    
    
    905December 2005 issuance
    
    
    548
    
    
    
    
    
    
    
    548February 2005 issuance
    
    
    312
    
    
    
    694
    
    
    
    1,006May 2006 issuance
    
    
    3,524
    
    
    
    332
    
    
    
    3,856July 2006 issuance
    
    
    28
    
    
    
    34
    
    
    
    62$
    6,355
    
    
    $
    9,290
    
    
    $
    15,645Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    887Total
    
    
    
    
    
    
    
    
    
    $
    16,532
  26




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##### Table of Contents



September 30, 2008ConversionWarrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    1,566
    
    
    
    2,313
    
    
    $
    3,879July 2006 issuance
    
    
    259
    
    
    
    311
    
    
    
    570October 2006 issuance
    
    
    370
    
    
    
    426
    
    
    
    796$
    2,195
    
    
    $
    3,050
    
    
    
    5,245Debt acquisition cost and financing fees
    
    
    
    
    
    
    
    
    
    
    416Total
    
    
    
    
    
    
    
    
    
    $
    5,661
 September 30, 2007ConversionWarrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    4,728
    
    
    $
    6,981
    
    
    $
    11,709July 2006 issuance
    
    
    403
    
    
    
    485
    
    
    
    888October 2006 issuance
    
    
    1,236
    
    
    
    1,422
    
    
    
    2,658$
    6,367
    
    
    $
    8,888
    
    
    
    15,255Debt acquisition cost and financing fees
    
    
    
    
    
    
    
    
    
    
    985Total
    
    
    
    
    
    
    
    
    
    $
    16,240
 Earnings Per Share
   Fiscal Year Ended September 30,2008
    
    
    2007
    
    
    2006Numerators:Net income (loss)
    
    $
    7,441
    
    
    $
    (2,517
    )
    
    $
    (65,802
    )Denominators:Average
shares outstanding  basic
    
    
    34,042
    
    
    
    28,539
    
    
    
    22,575Impact of convertible debt, warrants and stock options
    
    
    130
    
    
    
    
    
    
    
    Average
shares outstanding  diluted
    
    
    34,172
    
    
    
    28,539
    
    
    
    22,575Income
(loss) per share  basic:Continuing operations
    
    $
    0.22
    
    
    $
    (0.07
    )
    
    $
    (2.91
    )Discontinued operations
    
    
    0.00
    
    
    
    (0.02
    )
    
    
    0.00Basic income (loss) per share
    
    $
    0.22
    
    
    $
    (0.09
    )
    
    $
    (2.91
    )Income
(loss) per share  diluted:Continuing operations
    
    $
    0.22
    
    
    $
    (0.07
    )
    
    $
    (2.91
    )Discontinued operations
    
    
    0.00
    
    
    
    (0.02
    )
    
    
    0.00Diluted income (loss) per share
    
    $
    0.22
    
    
    $
    (0.09
    )
    
    $
    (2.91
    )
  27




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##### Table of Contents



Legal Contingencies
   CRITICAL ACCOUNTING ESTIMATES
  ACCOUNTS RECEIVABLE COLLECTIBILITY
  INVENTORIES
  VALUATION OF LONG-LIVED ASSETS
  CONTINGENT LIABILITIES
    28




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INCOME TAXES
   STOCK-BASED COMPENSATION
  RECENT ACCOUNTING PRONOUNCEMENTS
   29




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
       30




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##### Table of Contents



Item 8. Financial Statements and Supplementary Data
 ZOLTEK COMPANIES, INC.
 
 REPORT OF MANAGEMENT
     /s/ Zsolt RumyZsolt RumyChief Executive Officer and Chief Financial OfficerDecember 1, 2008
  31




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     Internal ControlIntegrated
Framework
 /s/ GRANT THORNTON LLPChicago, IllinoisDecember 1, 2008
  32




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Internal ControlIntegrated Framework
    Internal Control  Integrated Framework
  /s/ GRANT THORNTON LLPChicago, IllinoisDecember 1, 2008
  33




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
  /s/ PricewaterhouseCoopers LLPSt. Louis, MissouriDecember 27, 2006
  34




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##### Table of Contents



ZOLTEK COMPANIES, INC.
 
 CONSOLIDATED BALANCE SHEETS
  September 30,2008
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    29,224
    
    
    $
    121,761Restricted cash
    
    
    23,500
    
    
    
    13,815Accounts receivable, less allowance for doubtful accounts of $1,754 and $729, respectively
    
    
    42,690
    
    
    
    37,495Inventories, net
    
    
    45,659
    
    
    
    27,941Other current assets
    
    
    9,432
    
    
    
    10,858Total current assets
    
    
    150,505
    
    
    
    211,870Property and equipment, net
    
    
    288,894
    
    
    
    188,801Other assets
    
    
    765
    
    
    
    2,928Total assets
    
    $
    440,164
    
    
    $
    403,599Liabilities and shareholders equityCurrent liabilities:Construction payables
    
    $
    8,450
    
    
    $
    4,859Current maturities of long-term debt
    
    
    12,601
    
    
    
    13,813Trade accounts payable
    
    
    15,093
    
    
    
    12,394Legal liabilities
    
    
    29,083
    
    
    
    24,543Accrued expenses and other liabilities
    
    
    9,278
    
    
    
    8,305Total current liabilities
    
    
    74,505
    
    
    
    63,914Long-term debt, less current maturities
    
    
    3,562
    
    
    
    6,851Hungarian grant, long-term
    
    
    10,882
    
    
    
    7,969Deferred tax liabilities
    
    
    4,521
    
    
    
    4,046Other long-term liabilities
    
    
    28
    
    
    
    52Total liabilities
    
    
    93,498
    
    
    
    82,832Commitments and contingencies (see Note 8)
    
    
    
    
    
    
    Shareholders equity:Preferred stock, $.01 par value, 1,000,000 shares authorized, no shares issued and outstanding
    
    
    
    
    
    
    Common stock, $.01 par value, 50,000,000 shares authorized,
34,389,428 and 33,653,735 shares issued and outstanding in 2008 and 2007, respectively
    
    
    344
    
    
    
    337Additional paid-in capital
    
    
    491,175
    
    
    
    476,205Accumulated other comprehensive income
    
    
    11,730
    
    
    
    8,249Accumulated deficit
    
    
    (156,583
    )
    
    
    (164,024
    )Total shareholders equity
    
    
    346,666
    
    
    
    320,767Total liabilities and shareholders equity
    
    $
    440,164
    
    
    $
    403,599
 The accompanying notes are an integral part of the consolidated financial statements.
  35




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ZOLTEK COMPANIES, INC.
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
  Fiscal Year Ended September 30,2008
    
    
    2007
    
    
    2006Net sales
    
    $
    185,616
    
    
    $
    150,880
    
    
    $
    92,357Cost of sales
    
    
    134,393
    
    
    
    107,506
    
    
    
    69,994Gross profit
    
    
    51,223
    
    
    
    43,374
    
    
    
    22,363Application and development costs
    
    
    8,093
    
    
    
    7,230
    
    
    
    4,887Litigation charge (see Note 8)
    
    
    4,884
    
    
    
    5,400
    
    
    
    22,795Selling, general and administrative expenses
    
    
    18,239
    
    
    
    12,635
    
    
    
    10,356Operating income (loss) from continuing operations
    
    
    20,007
    
    
    
    18,109
    
    
    
    (15,675
    )Other income (expense):Interest expense, excluding amortization of financing fees, debt discount and
beneficial conversion feature
    
    
    (1,862
    )
    
    
    (2,346
    )
    
    
    (2,645
    )Warrant issue expense
    
    
    
    
    
    
    (6,362
    )
    
    
    Amortization of financing fees and debt discount
    
    
    (6,682
    )
    
    
    (9,771
    )
    
    
    (16,532
    )Loss on value of warrants and beneficial conversion feature
    
    
    
    
    
    
    (314
    )
    
    
    (29,303
    )Interest income
    
    
    2,904
    
    
    
    1,829
    
    
    
    281Loss on foreign currency transactions
    
    
    (385
    )
    
    
    (707
    )
    
    
    (341
    )Other, net
    
    
    (1,125
    )
    
    
    (424
    )
    
    
    (662
    )Income (loss) from continuing operations before income taxes
    
    
    12,857
    
    
    
    14
    
    
    
    (64,877
    )Income tax expense
    
    
    5,416
    
    
    
    1,986
    
    
    
    888Net income (loss) from continuing operations
    
    
    7,441
    
    
    
    (1,972
    )
    
    
    (65,765
    )Discontinued operations:Operating loss, net of taxes
    
    
    
    
    
    
    (545
    )
    
    
    (187
    )Gain on disposal of discontinued operation, net of taxes
    
    
    
    
    
    
    
    
    
    
    150Net loss on discontinued operations, net of taxes
    
    
    
    
    
    
    (545
    )
    
    
    (37
    )Net income (loss)
    
    $
    7,441
    
    
    $
    (2,517
    )
    
    $
    (65,802
    )Net income (loss) per share:Basic and diluted income (loss) per share:Continuing operations
    
    $
    0.22
    
    
    $
    (0.07
    )
    
    $
    (2.91
    )Discontinued operations
    
    
    
    
    
    
    (0.02
    )
    
    
    Total
    
    $
    0.22
    
    
    $
    (0.09
    )
    
    $
    (2.91
    )Weighted
average common shares outstanding  basic
    
    
    34,042
    
    
    
    28,539
    
    
    
    22,575Weighted
average common shares outstanding  diluted
    
    
    34,172
    
    
    
    28,539
    
    
    
    22,575
 The accompanying notes are an integral part of the consolidated financial statements.
  36




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ZOLTEK COMPANIES, INC.
 
 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
  Total
    
    
    
    
    
    Additional
    
    
    Accumulated OtherShareholders
    
    
    Common
    
    
    Paid-In
    
    
    Comprehensive
    
    
    AccumulatedEquity
    
    
    Stock
    
    
    Capital
    
    
    Income (Loss)
    
    
    DeficitBalance, September 30, 2005
    
    
    40,645
    
    
    
    189
    
    
    
    148,982
    
    
    
    (12,821
    )
    
    
    (95,705
    )Net loss
    
    
    (65,802
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (65,802
    )Foreign currency translation adjustment
    
    
    (1,568
    )
    
    
    
    
    
    
    
    
    
    
    (1,568
    )Comprehensive loss
    
    
    (67,370
    )Value of warrants and conversion
feature at time of conversion
    
    
    57,451
    
    
    
    
    
    
    
    57,451Unamortized value of convertible debt
discount at time of conversion
    
    
    (10,165
    )
    
    
    
    
    
    
    (10,165
    )Warrants exercised
    
    
    10,456
    
    
    
    17
    
    
    
    10,439Value of warrants and beneficial conversion
feature issued with convertible debt
    
    
    30,992
    
    
    
    
    
    
    
    30,992Convertible debt converted
    
    
    47,308
    
    
    
    47
    
    
    
    47,261Issuance cost related to convertible
debt conversions
    
    
    (1,403
    )
    
    
    
    
    
    
    (1,403
    )Stock option awards
    
    
    969
    
    
    
    
    
    
    
    969Exercise of stock options
    
    
    2,778
    
    
    
    5
    
    
    
    2,773Balance, September 30, 2006
    
    $
    111,661
    
    
    
    258
    
    
    
    287,299
    
    
    
    (14,389
    )
    
    
    (161,507
    )Net loss
    
    
    (2,517
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,517
    )Foreign currency translation adjustment
    
    
    22,638
    
    
    
    
    
    
    
    
    
    
    
    22,638Comprehensive income
    
    
    20,121Convertible debt converted
    
    
    34,497
    
    
    
    30
    
    
    
    34,467Unamortized value of convertible debt
discount at time of conversion
    
    
    (2,785
    )
    
    
    
    
    
    
    (2,785
    )Warrants exercised
    
    
    12,405
    
    
    
    9
    
    
    
    12,396Warrants issued in December 2006
    
    
    6,362
    
    
    
    
    
    
    
    6,362Value of warrants related to January
2004 issuance
    
    
    1,218
    
    
    
    
    
    
    
    1,218Issuance cost related to convertible
debt conversions
    
    
    2,796
    
    
    
    
    
    
    
    2,796Interest paid in stock
    
    
    322
    
    
    
    
    
    
    
    322Stock option awards
    
    
    1,253
    
    
    
    
    
    
    
    1,253Exercise of stock options
    
    
    1,392
    
    
    
    1
    
    
    
    1,392Secondary offering funds received, less
issue costs of $760
    
    
    131,525
    
    
    
    39
    
    
    
    131,486Balance, September 30, 2007
    
    $
    320,767
    
    
    $
    337
    
    
    $
    476,205
    
    
    $
    8,249
    
    
    $
    (164,024
    )Net income
    
    
    7,441
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,441Foreign currency translation adjustment
    
    
    3,481
    
    
    
    
    
    
    
    
    
    
    
    3,481Comprehensive income
    
    
    10,922Convertible debt converted
    
    
    11,151
    
    
    
    6
    
    
    
    11,145Warrants exercised
    
    
    150
    
    
    
    
    
    
    
    150Restricted stock expense
    
    
    329
    
    
    
    
    
    
    
    329Stock option awards
    
    
    1,987
    
    
    
    1
    
    
    
    1,986Exercise of stock options
    
    
    1,360
    
    
    
    
    
    
    
    1,360Balance, September 30, 2008
    
    $
    346,666
    
    
    $
    344
    
    
    $
    491,175
    
    
    $
    11,730
    
    
    $
    (156,583
    )
 The
accompanying notes are an integral part of the consolidated financial statements.
  37




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ZOLTEK COMPANIES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  Fiscal Year Ended September 30,2008
    
    
    2007
    
    
    2006Cash flows from operating activities:Net income (loss)
    
    $
    7,441
    
    
    $
    (2,517
    )
    
    $
    (65,802
    )Net loss from discontinued operations
    
    
    
    
    
    
    545
    
    
    
    37Net income (loss) from continuing operations
    
    
    7,441
    
    
    
    (1,972
    )
    
    
    (65,765
    )Adjustments to reconcile net loss to net cash from operating activities:Depreciation and amortization
    
    
    16,476
    
    
    
    9,205
    
    
    
    5,853Amortization of financing fees and debt discount
    
    
    6,682
    
    
    
    9,771
    
    
    
    16,532Deferred taxes
    
    
    1,501
    
    
    
    828
    
    
    
    Warrant issue expense
    
    
    
    
    
    
    6,362
    
    
    
    Loss on value of warrants and conversion feature
    
    
    
    
    
    
    314
    
    
    
    29,303Foreign currency transaction gains
    
    
    (431
    )
    
    
    606
    
    
    
    Stock option compensation expense
    
    
    2,316
    
    
    
    1,253
    
    
    
    969Changes in assets and liabilities:Increase in accounts receivable
    
    
    (4,381
    )
    
    
    (18,320
    )
    
    
    (6,772
    )(Increase) decrease in inventories
    
    
    (17,427
    )
    
    
    (5,388
    )
    
    
    2,318Increase in other current assets and other assets
    
    
    (214
    )
    
    
    (725
    )
    
    
    (3,686
    )Increase in
trade accounts payable
    
    
    1,902
    
    
    
    3,224
    
    
    
    658Decrease (increase) in accrued expenses and other liabilities
    
    
    2,002
    
    
    
    (278
    )
    
    
    1,922Increase in legal liabilities
    
    
    4,355
    
    
    
    818
    
    
    
    21,948Increase (decrease) in other long-term liabilities
    
    
    (27
    )
    
    
    171
    
    
    
    (25
    )Net cash provided by continuing operations
    
    
    20,195
    
    
    
    5,869
    
    
    
    3,255Net cash provided by (used in) discontinued operations
    
    
    
    
    
    
    1,010
    
    
    
    (450
    )Net cash provided by operating activities
    
    
    20,195
    
    
    
    6,879
    
    
    
    2,805Cash flows from investing activities:Purchases of property and equipment
    
    
    (107,715
    )
    
    
    (53,412
    )
    
    
    (40,795
    )Increase in construction payables
    
    
    3,591
    
    
    
    
    
    
    
    Proceeds received from Hungarian grant
    
    
    3,253
    
    
    
    9,435
    
    
    
    Change in cash restricted for letters of credit
    
    
    (9,685
    )
    
    
    (7,181
    )
    
    
    (6,634
    )Net cash used for investing activities by continuing operations
    
    
    (110,556
    )
    
    
    (51,158
    )
    
    
    (47,429
    )Net cash used for investing activities by discontinued operations
    
    
    
    
    
    
    
    
    
    
    (11
    )Net cash used in investing activities
    
    
    (110,556
    )
    
    
    (51,158
    )
    
    
    (47,440
    )Cash flows from financing activities:Proceeds from exercise of stock options and warrants
    
    
    1,510
    
    
    
    13,797
    
    
    
    13,234Payment of issue costs related to secondary stock offering
    
    
    
    
    
    
    (760
    )
    
    
    Proceeds from secondary stock offering
    
    
    
    
    
    
    132,284
    
    
    
    Proceeds from issuance of convertible debt
    
    
    
    
    
    
    7,495
    
    
    
    47,505Payment of financing fees
    
    
    
    
    
    
    (900
    )
    
    
    (1,541
    )Repayment (borrowings) of notes payable and long-term debt
    
    
    (3,786
    )
    
    
    3,538
    
    
    
    (3,744
    )Net cash (used) provided by financing activities
    
    
    (2,276
    )
    
    
    155,454
    
    
    
    55,454Effect of exchange rate changes on cash and cash equivalents
    
    
    100
    
    
    
    (216
    )
    
    
    (272
    )Net (decrease) increase in cash and cash equivalents
    
    
    (92,537
    )
    
    
    110,959
    
    
    
    10,547Cash and cash equivalents at beginning of year
    
    
    121,761
    
    
    
    10,802
    
    
    
    255Cash and cash equivalents at end of year
    
    $
    29,224
    
    
    $
    121,761
    
    
    $
    10,802Supplemental disclosures of cash flow information:Net cash paid during the year for:Interest
    
    $
    1,491
    
    
    $
    3,856
    
    
    $
    3,793Income taxes
    
    
    2,800
    
    
    
    
    
    
    
    888Non-cash conversion of convertible debentures
    
    
    11,150
    
    
    
    34,497
    
    
    
    47,308
 The accompanying notes are an integral part of the consolidated financial statements.
  38




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##### Table of Contents



ZOLTEK COMPANIES, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
  USE OF ESTIMATES
  REVENUE RECOGNITION
  ACCOUNTS RECEIVABLE
  CONCENTRATION OF CREDIT RISK
   CASH AND CASH EQUIVALENTS
   39




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##### Table of Contents



INVENTORIES
  PROPERTY AND EQUIPMENT
   Buildings and improvements
    
    
    30 to 40 yearsMachinery and equipment
    
    
    3 to 20 yearsFurniture and fixtures
    
    
    7 to 10 yearsComputer hardware and software
    
    
    2 to 5 years
   FOREIGN CURRENCY TRANSLATION
  FINANCIAL INSTRUMENTS
     40




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##### Table of Contents



APPLICATION AND DEVELOPMENT EXPENSES
  INCOME TAXES
  EARNINGS PER SHARE
  RECENT ACCOUNTING PRONOUNCEMENTS
        41




---



##### Table of Contents



.
 2. FINANCING TRANSACTIONS
 Bond Related to SP Systems Case
   Revolving Credit Facility
     42




---



##### Table of Contents



Hungarian Grant
   Financing Activity
  Convertible Debt
  2008
    
    
    2007
    
    
    2006Number
    
    
    
    
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    
    
    
    
    Numberof shares
    
    
    Conversion
    
    
    
    
    
    
    of shares
    
    
    Conversion
    
    
    
    
    
    
    of shares
    
    
    Conversionconverted
    
    
    price
    
    
    Equity value
    
    
    converted
    
    
    price
    
    
    Equity value
    
    
    converted
    
    
    price
    
    
    Equity valueFebruary 2003
    
    
    
    
    
    $
    3.50
    
    
    $
    
    
    
    
    771,431
    
    
    $
    3.50
    
    
    $
    2,700,009
    
    
    
    1,457,147
    
    
    $
    3.50
    
    
    $
    5,100,015October 2004
    
    
    
    
    
    
    9.50
    
    
    
    
    
    
    
    
    
    
    
    9.50
    
    
    
    
    
    
    
    2,108,199
    
    
    
    9.50
    
    
    
    20,027,891February 2005
    
    
    
    
    
    
    20.00
    
    
    
    
    
    
    
    
    
    
    
    20.00
    
    
    
    
    
    
    
    1,006,035
    
    
    
    20.00
    
    
    
    20,120,700September 2005
    
    
    
    
    
    
    12.50
    
    
    
    
    
    
    
    
    
    
    
    12.50
    
    
    
    
    
    
    
    167,105
    
    
    
    12.50
    
    
    
    2,088,812December 2005
    
    
    
    
    
    
    12.50
    
    
    
    
    
    
    
    1,444,489
    
    
    
    12.50
    
    
    
    18,056,112
    
    
    
    
    
    
    
    12.50
    
    
    
    February 2006
    
    
    
    
    
    
    13.07
    
    
    
    
    
    
    
    760,622
    
    
    
    13.07
    
    
    
    9,941,330
    
    
    
    
    
    
    
    13.07
    
    
    
    May 2006
    
    
    203,679
    
    
    
    25.51
    
    
    
    5,195,856
    
    
    
    141,120
    
    
    
    25.51
    
    
    
    3,599,971
    
    
    
    
    
    
    
    25.51
    
    
    
    July 2006
    
    
    117,840
    
    
    
    25.51
    
    
    
    3,006,092
    
    
    
    
    
    
    
    25.51
    
    
    
    
    
    
    
    
    
    
    
    25.51
    
    
    
    October 2006
    
    
    115,578
    
    
    
    25.51
    
    
    
    2,948,383
    
    
    
    
    
    
    
    25.51
    
    
    
    
    
    
    
    
    
    
    
    25.51
    
    
    
    437,097
    
    
    
    
    
    
    $
    11,150,331
    
    
    
    3,117,662
    
    
    
    
    
    
    $
    34,297,422
    
    
    
    4,738,486
    
    
    
    
    
    
    $
    47,337,418
 As of September 30, 2008
    
    
    As of September 30, 2007
    
    
    As of September 30, 2006Number
    
    
    
    
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    
    
    
    
    Numberof shares
    
    
    Conversion
    
    
    Proceeds
    
    
    of shares
    
    
    Conversion
    
    
    Proceeds
    
    
    of shares
    
    
    Conversion
    
    
    Proceedsoutstanding
    
    
    price
    
    
    outstanding
    
    
    outstanding
    
    
    price
    
    
    outstanding
    
    
    outstanding
    
    
    price
    
    
    outstandingFebruary 2003
    
    
    
    
    
    $
    3.50
    
    
    $
    
    
    
    
    
    
    
    $
    3.50
    
    
    $
    
    
    
    
    771,431
    
    
    $
    3.50
    
    
    $
    2,700,008December 2005
    
    
    
    
    
    
    12.50
    
    
    
    
    
    
    
    
    
    
    
    12.50
    
    
    
    
    
    
    
    1,444,489
    
    
    
    12.50
    
    
    
    February 2006
    
    
    
    
    
    
    13.07
    
    
    
    
    
    
    
    
    
    
    
    13.07
    
    
    
    
    
    
    
    760,622
    
    
    
    13.07
    
    
    
    May 2006
    
    
    352,803
    
    
    
    25.51
    
    
    
    9,000,005
    
    
    
    556,482
    
    
    
    25.51
    
    
    
    14,195,860
    
    
    
    697,602
    
    
    
    25.51
    
    
    
    17,795,832July 2006
    
    
    58,800
    
    
    
    25.51
    
    
    
    1,499,988
    
    
    
    176,640
    
    
    
    25.51
    
    
    
    4,506,080
    
    
    
    176,640
    
    
    
    25.51
    
    
    
    4,506,080October 2006
    
    
    178,342
    
    
    
    25.51
    
    
    
    4,549,504
    
    
    
    293,919
    
    
    
    25.51
    
    
    
    7,497,887
    
    
    
    293,919
    
    
    
    25.51
    
    
    
    7,497,887589,945
    
    
    
    
    
    
    $
    15,049,497
    
    
    
    1,027,041
    
    
    
    
    
    
    $
    26,199,827
    
    
    
    4,144,703
    
    
    
    
    
    
    $
    32,499,807
   43




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##### Table of Contents



Outstanding Convertible Debt Issuances
 May 2006 (1)
    
    
    July 2006 (1)
    
    
    October 2006 (1)Original principal amount of debentures (millions)
    
    $
    20.0
    
    
    $
    2.5
    
    
    $
    7.5Per share conversion price on debenture
    
    $
    25.51
    
    
    $
    25.51
    
    
    $
    25.51Interest rate
    
    
    7.5
    %
    
    
    7.5
    %
    
    
    7.5
    %Term of debenture
    
    42 months
    
    
    42 months
    
    
    42 monthsWarrants issued
    
    274,406 shares
    
    
    34,370 shares
    
    
    102,835 sharesTerm of warrants
    
    60 months
    
    
    60 months
    
    
    60 monthsPer share exercise price of warrants
    
    $
    28.06
    
    
    $
    28.06
    
    
    $
    28.06Fair value per warrant at issuance
    
    $
    26.03
    
    
    $
    23.89
    
    
    $
    22.13Value per share of conversion feature at issuance
    
    $
    18.80
    
    
    $
    19.21
    
    
    $
    19.57Stock price on date of agreement
    
    $
    32.25
    
    
    $
    29.28
    
    
    $
    26.81Stock volatility at issuance
    
    
    106
    %
    
    
    111
    %
    
    
    117
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Risk-free interest rate at issuance
    
    
    4.88
    %
    
    
    4.88
    %
    
    
    4.65
    %Principal shares converted
    
    Partial
    
    
    Partial
    
    
    PartialWarrants exercised
    
    No
    
    
    No
    
    
    Partial
 
 (1)
    
    The May 2006, July 2006 and October 2006 issuances had a beneficial conversion feature.      44




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45




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##### Table of Contents



Warrant and Conversion Features
   Fiscal Year Ended September 30, 2007ConversionWarrants
    
    
    Features
    
    
    TotalJanuary 2004 issuance  mark to market
    
    $
    (314
    )
    
    $
    
    
    
    $
    (314
    )Loss on value of warrants and conversion feature
    
    $
    (314
    )
    
    $
    
    
    
    $
    (314
    )
 Fiscal Year Ended September 30, 2006ConversionWarrants
    
    
    Features
    
    
    TotalJanuary 2004 issuance  mark to market
    
    $
    (1,413
    )
    
    $
    
    
    
    $
    (1,413
    )March 2004 issuance  mark to market
    
    
    (730
    )
    
    
    
    
    
    
    (730
    )October 2004 issuance  mark to market
    
    
    (2,902
    )
    
    
    (5,671
    )
    
    
    (8,573
    )February 2005 issuance  mark to market
    
    
    (1,788
    )
    
    
    (16,799
    )
    
    
    (18,587
    )Loss on value of warrants and conversion feature
    
    $
    (6,833
    )
    
    $
    (22,470
    )
    
    $
    (29,303
    )
 Amortization of Financing Fees and Debt Discount
     Fiscal Year Ended September 30, 2008ConversionWarrants
    
    
    Features
    
    
    TotalMay 2006 issuance
    
    $
    1,943
    
    
    $
    2,867
    
    
    
    4,810July 2006 issuance
    
    
    230
    
    
    
    280
    
    
    
    510October 2006 issuance
    
    
    392
    
    
    
    452
    
    
    
    844$
    2,565
    
    
    
    3,599
    
    
    
    6,164Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    518Total
    
    
    
    
    
    
    
    
    
    $
    6,682
  46




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##### Table of Contents



Fiscal Year Ended September 30, 2007ConversionWarrants
    
    
    Features
    
    
    TotalSeptember 2005 issuance
    
    $
    158
    
    
    $
    
    
    
    $
    158December 2005 issuance
    
    
    285
    
    
    
    
    
    
    
    285February 2006 issuance
    
    
    1,830
    
    
    
    1,882
    
    
    
    3,712May 2006 issuance
    
    
    1,560
    
    
    
    2,302
    
    
    
    3,862July 2006 issuance
    
    
    113
    
    
    
    138
    
    
    
    251October 2006 issuance
    
    
    235
    
    
    
    269
    
    
    
    504$
    4,181
    
    
    $
    4,591
    
    
    $
    8,772Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    999Total
    
    
    
    
    
    
    
    
    
    $
    9,771
 Fiscal Year Ended September 30, 2006ConversionWarrants
    
    
    Features
    
    
    TotalOctober 2004 issuance
    
    $
    204
    
    
    $
    400
    
    
    $
    604February 2005 issuance
    
    
    834
    
    
    
    7,830
    
    
    
    8,664September 2005 issuance
    
    
    905
    
    
    
    
    
    
    
    905December 2005 issuance
    
    
    548
    
    
    
    
    
    
    
    548February 2005 issuance
    
    
    312
    
    
    
    694
    
    
    
    1,006May 2006 issuance
    
    
    3,524
    
    
    
    332
    
    
    
    3,856July 2006 issuance
    
    
    28
    
    
    
    34
    
    
    
    62$
    6,355
    
    
    $
    9,290
    
    
    $
    15,645Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    887Total
    
    
    
    
    
    
    
    
    
    $
    16,532
  47




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##### Table of Contents



September 30, 2008ConversionWarrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    1,566
    
    
    
    2,313
    
    
    $
    3,879July 2006 issuance
    
    
    259
    
    
    
    311
    
    
    
    570October 2006 issuance
    
    
    370
    
    
    
    426
    
    
    
    796$
    2,195
    
    
    $
    3,050
    
    
    
    5,245Debt acquisition cost and financing fees
    
    
    
    
    
    
    
    
    
    
    416Total
    
    
    
    
    
    
    
    
    
    $
    5,661
 September 30, 2007ConversionWarrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    4,728
    
    
    $
    6,981
    
    
    $
    11,709July 2006 issuance
    
    
    403
    
    
    
    485
    
    
    
    888October 2006 issuance
    
    
    1,236
    
    
    
    1,422
    
    
    
    2,658$
    6,367
    
    
    $
    8,888
    
    
    
    15,255Debt acquisition cost and financing fees
    
    
    
    
    
    
    
    
    
    
    985Total
    
    
    
    
    
    
    
    
    
    $
    16,240
 Earnings Per Share
   Fiscal Year Ended September 30,2008
    
    
    2007
    
    
    2006Numerators:Net income (loss)
    
    $
    7,441
    
    
    $
    (2,517
    )
    
    $
    (65,802
    )Denominators:Average shares outstanding  basic
    
    
    34,042
    
    
    
    28,539
    
    
    
    22,575Impact of convertible debt, warrants and stock options
    
    
    130
    
    
    
    
    
    
    
    Average shares outstanding  diluted
    
    
    34,172
    
    
    
    28,539
    
    
    
    22,575Income (loss) per share  basic:Continuing operations
    
    $
    0.22
    
    
    $
    (0.07
    )
    
    $
    (2.91
    )Discontinued operations
    
    
    0.00
    
    
    
    (0.02
    )
    
    
    0.00Basic income (loss) per share
    
    $
    0.22
    
    
    $
    (0.09
    )
    
    $
    (2.91
    )Income (loss) per share  diluted:Continuing operations
    
    $
    0.22
    
    
    $
    (0.07
    )
    
    $
    (2.91
    )Discontinued operations
    
    
    0.00
    
    
    
    (0.02
    )
    
    
    0.00Diluted income (loss) per share
    
    $
    0.22
    
    
    $
    (0.09
    )
    
    $
    (2.91
    )
  48




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##### Table of Contents



3. DISCONTINUED OPERATIONS
   2007
    
    
    2006Net sales
    
    $
    1,843
    
    
    $
    4,964Cost of sales
    
    
    2,220
    
    
    
    4,369Gross profit
    
    
    (377
    )
    
    
    595Selling, general and administrative expenses
    
    
    (144
    )
    
    
    (383
    )Income (loss) from operations
    
    
    (521
    )
    
    
    212Other loss
    
    
    (24
    )
    
    
    (399
    )Net loss from operations
    
    
    (545
    )
    
    
    (187
    )Gain on disposal of discontinued operations
    
    
    
    
    
    
    150Loss on discontinued operations
    
    $
    (545
    )
    
    $
    (37
    )
 4. INVENTORIES
  September 30,2008
    
    
    2007Raw materials
    
    $
    10,749
    
    
    $
    7,941Work-in-process
    
    
    14,962
    
    
    
    11,832Finished goods
    
    
    18,844
    
    
    
    7,632Supplies and other
    
    
    1,104
    
    
    
    536$
    45,659
    
    
    $
    27,941
  5. PROPERTY, PLANT AND EQUIPMENT
  September 30,2008
    
    
    2007Land
    
    $
    15,450
    
    
    $
    2,265Buildings and improvements
    
    
    55,267
    
    
    
    46,153Machinery and equipment
    
    
    225,342
    
    
    
    166,021Furniture, fixtures and software
    
    
    6,788
    
    
    
    6,042Construction in progress
    
    
    72,214
    
    
    
    36,183375,061
    
    
    
    256,664Less: accumulated depreciation
    
    
    (86,167
    )
    
    
    (67,863
    )$
    288,894
    
    
    $
    188,801
  49




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##### Table of Contents



6. INCOME TAXES
  2008
    
    
    2007
    
    
    2006From continuing operations:Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    107
    
    
    
    
    
    
    
    Mexico
    
    
    80
    
    
    
    
    
    
    
    Hungary
    
    
    2,644
    
    
    
    1,158
    
    
    
    8882,831
    
    
    
    1,158
    
    
    
    888Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    State
    
    
    
    
    
    
    (157
    )
    
    
    Mexico
    
    
    
    
    
    
    
    
    
    
    Hungary
    
    
    2,585
    
    
    
    985
    
    
    
    2,585
    
    
    
    828
    
    
    
    Total continuing operations
    
    $
    5,416
    
    
    $
    1,986
    
    
    $
    888From discontinued operations:Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    
    
    
    
    Non-U.S
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    19
    
    
    
    Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    Non-U.S
    
    
    
    
    
    
    
    
    
    
    Total discontinued operations
    
    $
    
    
    
    $
    19
    
    
    $
    Total
    
    $
    5,416
    
    
    $
    2,005
    
    
    $
    888
  September 30,2008
    
    
    2007Deferred tax assets:Legal liabilities
    
    $
    7,990
    
    
    $
    1,812Accrued
employee compensation
    
    
    119
    
    
    
    117Other assets
    
    
    
    
    
    
    416Reserves
    
    
    181
    
    
    
    178Net operating loss and credit carryforwards
    
    
    24,933
    
    
    
    37,49333,223
    
    
    
    40,016Deferred tax liabilities:Property, plant and equipment
    
    
    (10,841
    )
    
    
    (9,943
    )Employee compensation
    
    
    
    
    
    
    (391
    )Prepaid expenses
    
    
    (118
    )
    
    
    (185
    )Other liabilities
    
    
    (664
    )
    
    
    (567
    )(11,623
    )
    
    
    (11,086
    )Total deferred taxes
    
    
    21,600
    
    
    
    28,930Less: valuation allowance
    
    
    (25,188
    )
    
    
    (29,758
    )Net deferred tax liability
    
    $
    (3,588
    )
    
    $
    (828
    )Classification of deferred taxes:Current deferred tax asset (included in Other current assets)
    
    $
    933
    
    
    $
    3,218Long-term deferred tax liability
    
    
    (4,521
    )
    
    
    (4,046
    )$
    (3,588
    )
    
    $
    (828
    )
   50




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##### Table of Contents



2008
    
    
    2007
    
    
    2006At statutory rate:Income taxes on income (loss) from continuing operations
    
    $
    4,507
    
    
    $
    5
    
    
    $
    (22,058
    )Increases (decreases):Lower effective tax rate on non-U.S. operations
    
    
    (1,446
    )
    
    
    (2,805
    )
    
    
    (985
    )Change in valuation allowance on net operating loss
    
    
    (3,416
    )
    
    
    1,428
    
    
    
    12,339Change in valuation allowance on capital loss
    
    
    
    
    
    
    
    
    
    
    (523
    )State taxes, net of federal benefit
    
    
    17
    
    
    
    (157
    )
    
    
    Local taxes, non-U.S
    
    
    2,724
    
    
    
    1,177
    
    
    
    888Amortization of warrant discount
    
    
    3,425
    
    
    
    3,926
    
    
    
    5,659Fair market value of warrants
    
    
    
    
    
    
    107
    
    
    
    9,963Non-qualified stock option expense
    
    
    (567
    )
    
    
    (1,115
    )
    
    
    (3,617
    )Other
    
    
    172
    
    
    
    (561
    )
    
    
    (778
    )$
    5,416
    
    
    $
    2,005
    
    
    $
    888
  2008
    
    
    2007
    
    
    2006Domestic
    
    $
    6,831
    
    
    $
    (16,093
    )
    
    $
    (71,069
    )Foreign
    
    
    6,026
    
    
    
    16,107
    
    
    
    6,192Income (loss) from continuing operations before income taxes
    
    $
    12,857
    
    
    $
    14
    
    
    $
    (64,877
    )
     7. DEBT
 Credit Facilities
      51




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##### Table of Contents



September 30,2008
    
    
    2007Note payable with interest at 7.2%, payable in monthly installments of
principal and interest of $15 to maturity in January 2009
    
    $
    1,184
    
    
    $
    1,272Non-interest bearing note payable (discounted at 8%) to the City of
Abilene, Texas to be repaid from real estate and personal property
tax abatements
    
    
    
    
    
    
    2,030Facilities with Hungarian banks (interest rate of 5.5% to 7.0%)
with maturity in February 2009
    
    
    5,175
    
    
    
    6,417Convertible debentures due November 2009 bearing interest of 7.5%
    
    
    9,000
    
    
    
    16,200Convertible debentures due January 2010 bearing interest of 7.5%
    
    
    1,500
    
    
    
    2,505Convertible debentures due April 2010 bearing interest of 7.5%
    
    
    4,549
    
    
    
    7,495Total debt
    
    
    21,408
    
    
    
    35,919Less: beneficial conversion feature and debt discount
associated with warrants
    
    
    (5,245
    )
    
    
    (15,255
    )Less: amounts payable within one year
    
    
    (12,601
    )
    
    
    (13,813
    )Total long-term debt
    
    $
    3,562
    
    
    $
    6,851
  AnnualSeptember 30,
    
    Maturities2009
    
    $
    16,3562010
    
    
    4,5462011
    
    
    506Total
    
    $
    21,408
 8. COMMITMENTS AND CONTINGENCIES
 LEASES
   FutureCommitmentsfor OperatingSeptember 30,
    
    Leases2009
    
    $
    2452010
    
    
    812011
    
    
    92012
    
    
    92013
    
    
    8Thereafter
    
    
    2Total
    
    $
    354
   52




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##### Table of Contents



FutureMinimumLeaseSeptember 30,
    
    Payments2009
    
    $
    2022010
    
    
    121Total
    
    $
    323
 LEGAL
       SOURCES OF SUPPLY
  9. PROFIT SHARING PLAN
   53




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##### Table of Contents



10. STOCK COMPENSATION EXPENSE
  Stock option awards.
  Wtd. Avg.
    
    
    Options
    
    
    Wtd. Avg.Options
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Exercise PriceBalance, September 30, 2006
    
    
    552,834
    
    
    $
    10.94
    
    
    
    343,495
    
    
    $
    12.65Granted
    
    
    77,500
    
    
    
    29.51Exercised
    
    
    (220,524
    )
    
    
    6.31Cancelled
    
    
    (40,000
    )
    
    
    28.01Balance, September 30, 2007
    
    
    369,810
    
    
    $
    16.02
    
    
    
    264,800
    
    
    $
    17.23Granted
    
    
    245,000
    
    
    
    27.92Exercised
    
    
    (169,223
    )
    
    
    8.03Cancelled
    
    
    (30,000
    )
    
    
    39.00Balance, September 30, 2008
    
    
    415,587
    
    
    $
    25.52
    
    
    
    220,587
    
    
    $
    23.50
  54




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##### Table of Contents



Options Outstanding
    
    
    Options ExercisableRange of
    
    
    
    
    
    
    Wtd. Avg.
    
    
    Wtd. Avg.
    
    
    
    
    
    
    Wtd. Avg.Exercise Prices
    
    
    Number
    
    
    Remaining Life
    
    
    Exercise Price
    
    
    Number
    
    
    Exercise Price$
    1.33-2.80
    
    
    
    2,000
    
    
    4 years
    
    $
    2.07
    
    
    
    2,000
    
    
    $
    2.076.25-9.25
    
    
    
    35,087
    
    
    6 years
    
    
    8.58
    
    
    
    35,087
    
    
    
    8.589.60-24.12
    
    
    
    91,000
    
    
    7 years
    
    
    14.30
    
    
    
    56,000
    
    
    
    8.3226.22-29.70
    
    
    
    175,000
    
    
    9 years
    
    
    29.20
    
    
    
    37,500
    
    
    
    28.5430.00-39.00
    
    
    
    90,000
    
    
    9 years
    
    
    33.43
    
    
    
    90,000
    
    
    
    33.431.33-39.00
    
    
    
    393,087
    
    
    8 years
    
    
    25.52
    
    
    
    220,587
    
    
    
    23.50
  Assumptions
    
    Fiscal 2008
    
    
    Fiscal 2007
    
    
    Fiscal 2006Expected life of option
    
    4 & 7.5 years
    
    
    3 & 7.5 years
    
    
    3 & 8 yearsRisk-free interest rate
    
    
    1.8
    %
    
    
    4.9
    %
    
    
    4.32
    %Volatility of stock
    
    
    66
    %
    
    
    68
    %
    
    
    96
    %Forfeiture experience
    
    
    30
    %
    
    
    30
    %
    
    
    30
    %
  Restricted stock awards.
 SharesBalance, September 30, 2007
    
    
    0Granted
    
    
    67,500Balance, September 30, 2008
    
    
    67,500
    11. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
   55




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##### Table of Contents



Fiscal Year Ended September 30, 2008Carbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalNet sales
    
    $
    156,033
    
    
    $
    25,910
    
    
    $
    3,673
    
    
    $
    185,616Cost of sales
    
    
    110,691
    
    
    
    20,378
    
    
    
    3,324
    
    
    
    134,393Gross profit
    
    
    45,342
    
    
    
    5,532
    
    
    
    349
    
    
    
    51,223Operating income (loss)
    
    
    33,961
    
    
    
    3,019
    
    
    
    (16,973
    )
    
    
    20,007Depreciation and amortization expense
    
    
    13,353
    
    
    
    2,030
    
    
    
    1,093
    
    
    
    16,476Capital expenditures
    
    
    101,628
    
    
    
    2,568
    
    
    
    3,519
    
    
    
    107,715
 Fiscal Year Ended September 30, 2007Carbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalNet sales
    
    $
    116,365
    
    
    $
    31,697
    
    
    $
    2,818
    
    
    $
    150,880Cost of sales
    
    
    82,223
    
    
    
    23,689
    
    
    
    1,594
    
    
    
    107,506Gross profit
    
    
    34,142
    
    
    
    8,008
    
    
    
    1,224
    
    
    
    43,374Operating income (loss)
    
    
    26,536
    
    
    
    7,435
    
    
    
    (15,862
    )
    
    
    18,109Depreciation and amortization expense
    
    
    7,387
    
    
    
    1,333
    
    
    
    485
    
    
    
    9,205Capital expenditures
    
    
    47,321
    
    
    
    2,148
    
    
    
    3,943
    
    
    
    53,412
 Fiscal Year Ended September 30, 2006Carbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalNet sales
    
    $
    65,677
    
    
    $
    25,195
    
    
    $
    1,485
    
    
    $
    92,357Cost of sales
    
    
    49,386
    
    
    
    19,211
    
    
    
    1,397
    
    
    
    69,994Gross profit
    
    
    16,291
    
    
    
    5,984
    
    
    
    88
    
    
    
    22,363Operating income (loss)
    
    
    10,383
    
    
    
    4,620
    
    
    
    (30,678
    )
    
    
    (15,675
    )Depreciation and amortization expense
    
    
    4,601
    
    
    
    1,125
    
    
    
    127
    
    
    
    5,853Capital expenditures
    
    
    31,742
    
    
    
    7,833
    
    
    
    1,220
    
    
    
    40,795
 Total AssetsCarbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalSeptember 30, 2008
    
    $
    344,974
    
    
    $
    32,705
    
    
    $
    62,485
    
    
    $
    440,164September 30, 2007
    
    
    217,662
    
    
    
    36,833
    
    
    
    149,104
    
    
    
    403,599September 30, 2006
    
    
    128,747
    
    
    
    25,199
    
    
    
    33,738
    
    
    
    187,684
  56




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##### Table of Contents



2008
    
    
    2007
    
    
    2006Net
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    NetLong Lived
    
    
    
    
    
    
    Long Lived
    
    
    
    
    
    
    Long LivedNet Sales(a)
    
    
    Assets(b)
    
    
    Net Sales(a)
    
    
    Assets(b)
    
    
    Net Sales(a)
    
    
    Assets(b)United States
    
    $
    42,205
    
    
    $
    47,617
    
    
    $
    38,505
    
    
    $
    48,744
    
    
    $
    36,359
    
    
    $
    49,497Europe
    
    
    133,286
    
    
    
    158,694
    
    
    
    106,798
    
    
    
    140,457
    
    
    
    47,829
    
    
    
    Asia
    
    
    10,106
    
    
    
    
    
    
    
    4,983
    
    
    
    
    
    
    
    598
    
    
    
    72,787Mexico
    
    
    
    
    
    
    82,583
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Other areas
    
    
    19
    
    
    
    
    
    
    
    594
    
    
    
    
    
    
    
    7,571
    
    
    
    Total
    
    $
    185,616
    
    
    $
    288,894
    
    
    $
    150,880
    
    
    $
    188,801
    
    
    $
    92,357
    
    
    $
    122,284
 (a)
    
    Revenues are attributed to countries based on the delivery location of the customer.(b)
    
    Property and equipment net of accumulated depreciation based on country location of assets. 12. SUMMARY OF QUARTERLY RESULTS (UNAUDITED)
  Fiscal year 2008
    
    1st Quarter
    
    
    2nd Quarter
    
    
    3rd Quarter
    
    
    4th QuarterNet sales
    
    $
    40,072
    
    
    $
    49,581
    
    
    $
    44,950
    
    
    $
    51,013Gross profit
    
    
    10,759
    
    
    
    14,025
    
    
    
    13,638
    
    
    
    12,801Net income (loss) from continuing operations
    
    
    2,604
    
    
    
    4,311
    
    
    
    2,316
    
    
    
    (1,790
    )Net income (loss)
    
    
    2,604
    
    
    
    4,311
    
    
    
    2,316
    
    
    
    (1,790
    )Basic and diluted income (loss) per share:Continuing operations  basic
    
    $
    0.08
    
    
    $
    0.13
    
    
    $
    0.07
    
    
    $
    (0.05
    )Continuing operations  diluted
    
    $
    0.08
    
    
    $
    0.13
    
    
    $
    0.07
    
    
    $
    (0.05
    )
 Fiscal year 2007
    
    1st Quarter
    
    
    2nd Quarter
    
    
    3rd Quarter
    
    
    4th QuarterNet sales
    
    $
    30,285
    
    
    $
    36,742
    
    
    $
    40,274
    
    
    $
    43,579Gross profit
    
    
    7,851
    
    
    
    10,588
    
    
    
    11,940
    
    
    
    12,995Net income (loss) from continuing operations
    
    
    (5,595
    )
    
    
    (57
    )
    
    
    5,020
    
    
    
    (1,340
    )Income
(loss) from discontinued operations, net of taxes
    
    
    (68
    )
    
    
    51
    
    
    
    (24
    )
    
    
    (504
    )Net income (loss)
    
    
    (5,663
    )
    
    
    (6
    )
    
    
    4,996
    
    
    
    (1,844
    )Basic and diluted income (loss) per share:Continuing operations  basic
    
    $
    (0.22
    )
    
    $
    (0.00
    )
    
    $
    0.17
    
    
    $
    (0.04
    )Discontinued operations  basic
    
    
    (0.00
    )
    
    
    0.00
    
    
    
    (0.00
    )
    
    
    (0.02
    )Total basic
    
    $
    (0.22
    )
    
    $
    (0.00
    )
    
    $
    0.17
    
    
    $
    (0.06
    )Continuing operations  diluted
    
    $
    (0.23
    )
    
    $
    (0.00
    )
    
    $
    0.17
    
    
    $
    (0.04
    )Discontinued operations  diluted
    
    
    (0.00
    )
    
    
    0.00
    
    
    
    (0.00
    )
    
    
    (0.02
    )Total diluted
    
    $
    (0.23
    )
    
    $
    (0.00
    )
    
    $
    0.17
    
    
    $
    (0.06
    )
 Fiscal year 2006
    
    1st Quarter
    
    
    2nd Quarter
    
    
    3rd Quarter
    
    
    4th QuarterNet sales
    
    $
    15,557
    
    
    $
    26,199
    
    
    $
    26,787
    
    
    $
    23,814Gross profit
    
    
    2,530
    
    
    
    7,275
    
    
    
    7,727
    
    
    
    4,831Net income (loss) from continuing operations
    
    
    6,128
    
    
    
    (27,784
    )
    
    
    (21,216
    )
    
    
    (22,893
    )Income (loss) from discontinued operations, net of taxes
    
    
    160
    
    
    
    41
    
    
    
    (252
    )
    
    
    14Net income (loss)
    
    
    6,288
    
    
    
    (27,743
    )
    
    
    (21,468
    )
    
    
    (22,879
    )Basic and diluted income (loss) per share:Continuing operations  basic
    
    $
    0.31
    
    
    $
    (1.31
    )
    
    $
    (0.90
    )
    
    $
    (0.89
    )Discontinued operations  basic
    
    
    0.01
    
    
    
    0.00
    
    
    
    (0.01
    )
    
    
    (0.00
    )Total basic
    
    $
    0.32
    
    
    $
    (1.31
    )
    
    $
    (0.91
    )
    
    $
    (0.89
    )Continuing operations  diluted
    
    $
    0.27
    
    
    $
    (1.31
    )
    
    $
    (0.90
    )
    
    $
    (0.89
    )Discontinued operations  diluted
    
    
    .01
    
    
    
    0.00
    
    
    
    (0.01
    )
    
    
    (0.00
    )Total diluted
    
    $
    0.28
    
    
    $
    (1.31
    )
    
    $
    (0.91
    )
    
    $
    (0.89
    )
   57




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##### Table of Contents



13. SUBSEQUENT EVENTS
   
 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
  
 Item 9A. Controls and Procedures
 Evaluation of Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
  Internal Control-Integrated
Framework
  Changes in Internal Control Over Financial Reporting
  1.
    
    Enhancements were enacted to entity level controls and procedures to prevent
certain accounting entries from being recorded prior to formal documentation of the
arrangements being obtained as more fully enumerated below:
 Contract Modifications  Customer Sales Arrangements
  
    
    Conducted periodic meetings involving senior management, accounting, financial
reporting and sales/operating personnel confirming documented terms, conditions and
terms have not been altered and are being adhered with;
    
    Memorialized in writing terms and arrangements with certain of the Companys
customers;
  58




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##### Table of Contents




    
    Employed reporting matrix to track and monitor activity between the Company and
certain of its customers;
    
    Periodically exchanged reporting matrix with impacted customers to confirm
Companys accounting treatment; and
    
    Ensured underlying accounting records, subsidiary and general ledgers, were in
agreement with that reflected in the reporting matrix.
 Stock Option Grants
  
    
    Enhanced the knowledge base of our personnel including providing instruction to
the share-based compensation administrator, Human Resources department,
Compensation Committee and Chief Executive Officer regarding the definition of
measurement date issues for administration and instruction regarding the
requirements of FAS 123(R) to properly account for share-based compensation;
    
    Developed protocol of inter-departmental communication whereby the share-based
compensation administrator timely notifies financial reporting personnel of grants,
modifications to grants, or other relevant information so that accounting can make
the necessary fair value adjustments; and
    
    Enacted policy ensuring agreement of measurement date and grant date for
accounting purposes.
 2.
    
    To ensure proper assessment of reserves for possible liability arising from certain
litigation matters, the Company:
 
    
    Enhanced communication of case status between interested parties  senior
management, accounting and financial reporting, and outside legal counsel;
    
    As facts and circumstances warrant, prepared memo with range of legal reserve
requirements, analyzing need for adjustment to accrued litigation liability; and
    
    As necessary and on a quarterly basis reviewed accounting treatment with the Audit
Committee.
 
 Item 9B. Other Information
   59




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##### Table of Contents



PART III
 
 Item 10. Directors and Executive Officers of the Registrant
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
   Number of securitiesremaining available forNumber of securities
    
    
    Weighted-average
    
    
    future issuance underto be issued upon
    
    
    exercise price
    
    
    equity compensationexercise of outstanding
    
    
    of outstanding
    
    
    plans (excludingoptions, warrants
    
    
    options, warrants
    
    
    securities reflected inand rights
    
    
    and rights
    
    
    column (a))Plan category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
    
    
    369,810
    
    
    
    16.02
    
    
    
    345,000Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    369,810
    
    
    
    16.02
    
    
    
    345,000
  
 Item 13. Certain Relationships and Related Transactions and Director Independence
  
 Item 14. Principal Accounting Fees and Services
   60




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##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedule
  Report of Management
    
    
    31Report of Independent Registered Public Accounting Firm  Grant Thornton LLP
    
    
    32Report
of Independent Registered Public Accounting Firm  Grant
Thornton LLP
    
    
    33Report of Independent Registered Public Accounting Firm  PricewaterhouseCooper LLP
    
    
    34Consolidated Balance Sheets as of September 30, 2008 and 2007
    
    
    35Consolidated Statements of Operations for the years ended September 30, 2008, 2007 and 2006
    
    
    36Consolidated Statements of Changes in Shareholders Equity for the years ended September 30, 2008, 2007 and 2006
    
    
    37Consolidated Statements of Cash Flows for the years ended September 30, 2008, 2007 and 2006
    
    
    38Notes to Consolidated Financial Statements
    
    
    39
      Column A
    
    Column B
    
    
    Column C
    
    
    Column D
    
    
    Column EAdditionsBalance at
    
    
    Charged to
    
    
    Charged to
    
    
    
    
    
    
    Balance atbeginning
    
    
    costs and
    
    
    other accounts
    
    
    Deductions
    
    
    endof period
    
    
    expenses
    
    
    describe
    
    
    describe
    
    
    of periodReserve for doubtful accounts
    
    $
    781
    
    
    $
    1,300
    
    
    $
    
    
    
    $
    327
    
    
    $
    1,754Reserve for inventory valuation
    
    $
    645
    
    
    $
    
    
    
    $
    
    
    
    $
    145
    (7)
    
    $
    500Deferred tax valuation
    
    $
    29,758
    
    
    $
    1,057
    
    
    $
    
    
    
    $
    
    
    
    $
    30,815
    Column A
    
    Column B
    
    
    Column C
    
    
    Column D
    
    
    Column EAdditionsBalance at
    
    
    Charged to
    
    
    Charged to
    
    
    
    
    
    
    Balance atbeginning
    
    
    costs and
    
    
    other accounts
    
    
    Deductions
    
    
    endof period
    
    
    expenses
    
    
    describe
    
    
    describe
    
    
    of periodReserve for doubtful accounts
    
    $
    729
    
    
    $
    52
    
    
    $
    
    
    
    $
    
    
    
    $
    781Reserve for inventory valuation
    
    $
    1,300
    
    
    $
    
    
    
    $
    
    
    
    $
    655
    (7)
    
    $
    645Deferred tax valuation
    
    $
    34,217
    
    
    $
    
    
    
    $
    628
    (5)
    
    $
    5,087
    (3) (4) (6)
    
    $
    29,758
  61




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##### Table of Contents



Column A
    
    Column B
    
    
    Column C
    
    
    Column D
    
    
    Column EAdditionsBalance at
    
    
    Charged to
    
    
    Charged to
    
    
    
    
    
    
    Balance atbeginning
    
    
    costs and
    
    
    other accounts
    
    
    Deductions
    
    
    endof period
    
    
    expenses
    
    
    describe
    
    
    describe
    
    
    of periodReserve for doubtful accounts
    
    $
    718
    
    
    $
    306
    
    
    $
    
    
    
    $
    295
    (1)
    
    $
    729Reserve for inventory valuation
    
    $
    3,100
    
    
    $
    
    
    
    $
    
    
    
    $
    1,800
    (2)
    
    $
    1,300Deferred tax valuation
    
    $
    22,401
    
    
    $
    14,233
    
    
    $
    
    
    
    $
    2,417
    (3)
    
    $
    34,217
 
 (1)
    
    Write-off of uncollectible receivable, net of recovery.(2)
    
    Reduction in inventory reserve for inventory items related to
discontinued operations.(3)
    
    Expiration of capital loss carryforward and utilization against current foreign income taxes
payable.(4)
    
    Removal of NOLs related to non-qualified stock options and the related valuation allowance.(5)
    
    Addition of a valuation allowance on the Texas tax credits that were created from prior years
Texas NOL. The credits are created
and calculated under the newly enacted Texas margin tax law.(6)
    
    Prior year true-ups.(7)
    
    Company used and sold materials for which reserves were established primarily for slow moving
product.   62




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##### Table of Contents



SIGNATURES
  ZOLTEK COMPANIES, INC.(Registrant)By
    
    /s/ Zsolt Rumy

Zsolt Rumy, Chairman of the Board, 
President and Chief Executive Officer
   Signature
    
    Title
    
    Date/s/ Zsolt Rumy

Zsolt Rumy
    
    Chairman, President, Chief
Executive Officer, 
Chief Financial Officer and Director
 (Principal  Executive Officer and 
Principal Financial Officer)
    
    December 1, 2008/s/ Andrew W. Whipple

Andrew W. Whipple
    
    Chief Accounting Officer 
(Principal Accounting Officer)
    
    December 1, 2008/s/ James W. Betts

James W. Betts
    
    Director
    
    December 1, 2008/s/ Charles A. Dill

Charles A. Dill
    
    Director
    
    December 1, 2008/s/ George E. Husman

George E. Husman
    
    Director
    
    December 1, 2008/s/ Michael D. Latta

Michael D. Latta
    
    Director
    
    December 1, 2008/s/ Linn H. Bealke

Linn H. Bealke
    
    Director
    
    December 1, 2008
  63




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##### Table of Contents



Exhibit Index
 ExhibitNumber
    
    Description3.1
    
    
    Restated Articles
of Incorporation of
the Registrant
dated October 7,
1992, filed as
Exhibit 3.1 to
Registrants
Registration
Statement on Form
S-3 (Reg.
No.333-143996) and
incorporated herein
by reference.3.2
    
    
    Certificate of
Amendment of
Restated Articles
of Incorporation of
the Registrant
dated February 15,
1996, filed as
Exhibit 3.2 to
Registrants
Registration
Statement on Form
S-3 (Reg.
No.333-143996) and
incorporated herein
by reference.3.3
    
    
    Certificate of
Amendment of
Restated Articles
of Incorporation of
the Registrant
dated February 7,
1997, filed as
Exhibit 3.3 to
Registrants
Registration
Statement on Form
S-3 (Reg.
No.333-143996) and
incorporated herein
by reference.3.4
    
    
    Restated By-Laws of
the Registrant
dated September 22,
1992, filed as
Exhibit 3.4 to
Registrants
Registration
Statement on Form
S-3 (Reg.
No.333-143996) and
incorporated herein
by reference.4.1
    
    
    Form of certificate
for Common Stock,
filed as
Exhibit 4.1 to
Registrants
Registration
Statement on
Form S-1 (Reg.
No. 33-51142) and
incorporated herein
by reference.4.2
    
    
    Form of Warrant,
dated May 11, 2001,
issued to Southwest
Bank of St. Louis
with respect to
12,500 shares of
Registrants Common
Stock, filed as
Exhibit 4.2 to
Registrants Annual
Report on Form 10-K
for the year ended
September 30, 2001
and incorporated
herein by
reference.4.3
    
    
    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 fiscal year ended
September 30, 2003 and incorporated
herein by reference.4.4
    
    
    Form of 6% Convertible Debenture,
filed as Exhibit 4.7 to
Registrants Annual Report on
Form 10-K for the fiscal year ended
September 30, 2003 and incorporated
herein by reference.4.17
    
    
    Form of Warrant, filed as
Exhibit 4.8 to Registrants Annual
Report on Form 10-K for the fiscal
year ended September 30, 2003 and
incorporated herein by reference.4.18
    
    
    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) and
incorporated herein by reference.4.19
    
    
    Form of 6% Convertible Debenture,
filed as Exhibit 4.3 to
Registrants Registration Statement
on Form S-3 (Reg. No. 333-115043)
and incorporated herein by
reference.4.20
    
    
    Form of Warrant, filed as
Exhibit 4.4 to Registrants
Registration Statement on Form S-3
(Reg. No. 333-115043) and
incorporated herein by reference.4.21
    
    
    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 and incorporated
herein by reference.4.22
    
    
    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 and incorporated
herein by reference.4.23
    
    
    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 and incorporated
herein by reference.4.24
    
    
    Form of Warrant, filed as
Exhibit 4.5 to Registrants Current
Report on Form 8-K dated
October 19, 2004 and incorporated
herein by reference.4.25
    
    
    Loan and Warrant Agreement, dated
as of February 9, 2005, by and
among the Registrant, the Lenders
and the Agent, filed as Exhibit 4.1
to the Registrants Quarterly
Report on Form 10-Q for the quarter
ended December 31, 2004 and
incorporated herein by reference.4.26
    
    
    Form of Senior Convertible Note,
dated as of February 9, 2005, filed
as Exhibit 4.2 to the Registrants
Quarterly Report on Form 10-Q for
the quarter ended December 31, 2004
and incorporated herein by
reference.4.27
    
    
    Form of Warrant, dated as of
February 9, 2005, filed as
Exhibit 4.3 to the Registrants
Quarterly Report on Form 10-Q for
the quarter ended December 31, 2004
and incorporated herein by
reference.4.28
    
    
    Form of Registration Rights
Agreement, dated as of February 9,
2005, filed as Exhibit 4.4 to the
Registrants Quarterly Report on
Form 10-Q for the quarter ended
December 31, 2004 and incorporated
herein by reference.4.29
    
    
    Loan and Warrant Agreement, dated
as of September 29, 2005, among the
Registrant, the Lenders and the
Agent, filed as Exhibit 4.1 to the
Registrants Current Report on
Form 8-K dated September 29, 2005
and incorporated herein by
reference.4.30
    
    
    Form of Note, filed as Exhibit 4.2
to the Registrants Current Report
on Form 8-K dated September 29,
2005 and incorporated herein by
reference.4.31
    
    
    Form of Warrant, filed as Exhibit 4.3 to the Registrants
Current Report on Form 8-K dated September 29, 2005 and
incorporated herein by reference.4.32
    
    
    Registration Rights Agreement, dated as of September 30,
2005, by and among the Registrant and the Lenders parties
thereto, filed as Exhibit 4.4 to the Registrants Current
Report on Form 8-K dated September 29, 2005 and incorporated
herein by reference.4.33
    
    
    Waiver and Consent, dated as of February 3, 2006, by and
among the Registrant and the Lender parties thereto, filed as
Exhibit 4.5 to the Registrants Current Report on Form 8-K
dated February 6, 2006, and incorporated herein by reference.
  64




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##### Table of Contents



ExhibitNumber
    
    Description4.34
    
    
    Amendment No. 1 to Loan and Warrant Agreement and
Registration Rights Agreement among the Registrant and the
Lender parties thereto, filed as Exhibit 4.2 to the
Registrants Current Report on Form 8-K dated April 28, 2006
and incorporated herein by reference.4.35
    
    
    Form of Note, filed as Exhibit 4.3 to the Registrants
Current Report on Form 8-K dated April 28, 2006 and
incorporated herein by reference.4.36
    
    
    Form of Warrant, filed as Exhibit 4.4 to the Registrants
Current Report on Form 8-K dated April 28, 2006 and
incorporated herein by reference.4.37
    
    
    Amendment No. 2 to Loan and Warrant Agreement and
Registration Rights Agreement, dated as of December 14, 2006,
among the Registrant and the Lenders, filed as Exhibit 4.3 to
the Registrants Current Report on Form 8-K dated
December 14, 2006 and incorporated herein by reference.4.38
    
    
    Form of Warrant, filed as Exhibit 4.4 to the Registrants
Current Report on Form 8-K dated December 14, 2006 and
incorporated herein by reference.10.1
    
    

Zoltek
Companies, Inc. 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.*10.2
    
    
    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.*10.3
    
    
    Credit Agreement, dated as of May 11, 2001, between Southwest
Bank of St. Louis and Zoltek Companies, Inc., Zoltek
Corporation, Cape Composites, Inc., Engineering Technology
Corporation, Zoltek Properties, Inc., and Hardcore Composites
Operations, LLC, filed as Exhibit 10.1 to Registrants
Quarterly Report on Form 10-Q for the quarter ended June 30,
2001, is incorporate herein by reference.10.4
    
    
    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.10.5
    
    
    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.*10.6
    
    
    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.10.7
    
    
    Zoltek Companies, Inc. 2008 Director Incentive Plan, filed as
Appendix A to the Registrants Proxy Statement on Schedule
14A filed on January 2, 2008 and incorporated herein by this
reference.*10.8
    
    
    Zoltek Companies, Inc. 2008 Long Term Incentive Plan, filed
as Appendix B to the Registrants Proxy Statement on Schedule
14A filed on January 2, 2008 and incorporated herein by this
reference.*10.9
    
    
    Employment Agreement, dated March 1, 2008, between the
Registrant and Karen Bomba, filed as Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q for the quarter
ended March 31, 2008 and incorporated herein by reference.10.10
    
    
    Employment Agreement, dated November 26, 2008, between the
Registrant and Andrew W. Whipple.21
    
    
    Subsidiaries of the Registrant filed as Exhibit 21 to the
Registrants Annual Report on Form 10-k for the fiscal year
ended September 30, 2007 and incorporated herein by
reference.23.1
    
    
    Consent of Grant Thornton LLP.23.2
    
    

Consent of PricewaterhouseCoopers LLP.31
    
    

Certification
of Chief Executive Officer and Chief Financial Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as
amended is filed herewith.32
    
    

Certification
of Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 is filed herewith.
 
 *
    
    Management compensatory plan or arrangement  65