##### Table of Contents



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, 2009
 Commission File Number 0-20600
 ZOLTEK COMPANIES, INC.
  Missouri
(State or other jurisdiction of 
incorporation or organization)
    
    43-1311101
(I.R.S. Employer Identification No.)3101 McKelvey Road, St. Louis, Missouri
(Address of principal executive offices)
    
    63044
(Zip Code)
     Yes o No þ
 Yes o No þ
 Yes þ No o
 Yes o No o
 þ
  Large Accelerated Filer o
    
    Accelerated Filer þ
    
    Non-Accelerated Filer o
    
    Smaller Reporting Company o
 Yes o No þ
   DOCUMENTS INCORPORATED BY REFERENCE
  Document
    
    Part of Form 10-KProxy Statement for the 2010
Annual 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
    
    
    16Item 7. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    17Item 7A. Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 8. Financial Statements and Supplementary Data
    
    
    29Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
    
    
    52Item 9A. Controls and Procedures
    
    
    52Item 9B. Other Information
    
    
    52PART III.Item 10. Directors, Executive Officers and Corporate Governance
    
    
    53Item 11. Executive Compensation
    
    
    53Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters
    
    
    53Item 13. Certain Relationships and Related Transactions and Director Independence
    
    
    53Item 14. Principal Accounting Fees and Services
    
    
    53PART IV.Item 15. Exhibits and Financial Statement Schedules
    
    
    54Signatures
    
    
    56Exhibit Index
    
    
    57Exhibit 23.1Exhibit 23.2Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   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 Long-Term Demand Growth.
 Develop Model for Long-Term Joint Ventures with Strategic Partners.
  4




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Emerging Applications
  
    
    Wind Energy
   
    
    Deep Sea Drilling
  
    
    Aerospace Secondary Structures
  
    
    Automotive
  
    
    Aircraft Brakes
  Customers
  Backlog
   5




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Company Operations
      Competition
     International
   6




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Sources of Supply
  Environmental
  Employees
   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 dependent 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 2009, 2007 and each of the five fiscal
years preceding it.
  Demand for our carbon fiber products may be adversely affected by the current economic and credit
environment.
   8




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Our operations and sales in foreign countries are subject to risks.
  Our ability to fund and manage our anticipated growth will affect our operating results.
  Our operations are dependent upon our senior management and technical personnel.
  Our operating results may fluctuate.
  Developments by competitors may reduce demand for our products and technologies, which may
adversely affect our sales.
  The price volatility of many of our raw materials and energy costs may result in increased
production costs, which we may not be able to pass on to our customers.
  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.
  Our existing credit facilities expire on January 1, 2010 and failure to extend or replace
these facilities could have a material adverse effect on us.
  We have incurred and will continue to incur increased costs and demands upon our management as a
result of complying with the laws and regulations affecting public companies, which could affect
our operating results and make it more difficult to attract and retain qualified management.
  Our stock price has been volatile and may continue to fluctuate.
  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
    
    
    30,000
    
    
    Ownedcentral engineering officesSt. Charles, Missouri
    
    Carbon and Technical fiber
    
    
    107,000
    
    
    Ownedmanufacturing and R&D facilityAbilene, Texas
    
    Carbon fiber manufacturing
    
    
    278,000
    
    
    OwnedSalt Lake City, Utah I
    
    Composite fabrication equipment
    
    
    65,000
    
    
    Owned/Mortgageddesign and manufacturingSalt 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, 2009
    
    
    September 30, 2008High
    
    
    Low
    
    
    High
    
    
    LowFirst Quarter
    
    $
    17.77
    
    
    $
    4.28
    
    
    $
    47.83
    
    
    $
    34.10Second Quarter
    
    
    9.39
    
    
    
    5.02
    
    
    
    42.44
    
    
    
    20.97Third Quarter
    
    
    12.60
    
    
    
    6.50
    
    
    
    32.25
    
    
    
    22.79Fourth Quarter
    
    
    11.44
    
    
    
    7.84
    
    
    
    24.97
    
    
    
    15.26
   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
    
    
    408,337
    
    
    $
    23.60
    
    
    
    2,163,501Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    Total
    
    
    408,337
    
    
    $
    23.60
    
    
    
    2,163,501
   14




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Performance Graph
  
 9/30/2004
    
    
    9/30/2005
    
    
    9/30/2006
    
    
    9/30/2007
    
    
    9/30/2008
    
    
    9/30/2009Zoltek Companies, Inc.
    
    
    100.00
    
    
    
    146.44
    
    
    
    284.52
    
    
    
    485.86
    
    
    
    190.53
    
    
    
    116.93NASDAQ Industrial Index
    
    
    100.00
    
    
    
    112.55
    
    
    
    120.53
    
    
    
    144.51
    
    
    
    105.61
    
    
    
    102.35The Russell 2000 Index
    
    
    100.00
    
    
    
    116.47
    
    
    
    126.64
    
    
    
    140.58
    
    
    
    118.61
    
    
    
    105.47
  15




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Item 6. Selected Financial Data
 
 Fiscal Year Ended September 30,Statement of Operations Data:
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Net sales
    
    $
    138,756
    
    
    $
    185,616
    
    
    $
    150,880
    
    
    $
    92,357
    
    
    $
    55,377Cost of sales, excluding available unused capacity costs
    
    
    100,744
    
    
    
    134,393
    
    
    
    107,506
    
    
    
    69,994
    
    
    
    52,809Available unused capacity costs (1)
    
    
    7,352
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,347Gross profit
    
    
    30,660
    
    
    
    51,223
    
    
    
    43,374
    
    
    
    22,363
    
    
    
    221Application and development costs
    
    
    7,589
    
    
    
    8,093
    
    
    
    7,230
    
    
    
    4,887
    
    
    
    3,324Litigation charge (2)
    
    
    238
    
    
    
    4,884
    
    
    
    5,400
    
    
    
    22,795
    
    
    
    Selling, general and administrative expenses
    
    
    19,438
    
    
    
    26,332
    
    
    
    19,865
    
    
    
    15,243
    
    
    
    7,847Operating income (loss) from continuing operations
    
    
    3,395
    
    
    
    20,007
    
    
    
    18,109
    
    
    
    (15,675
    )
    
    
    (7,626
    )Other (expense) income
    
    
    (5,492
    )
    
    
    (7,150
    )
    
    
    (18,095
    )
    
    
    (49,202
    )
    
    
    (29,877
    )Income tax expense
    
    
    (2,105
    )
    
    
    (5,416
    )
    
    
    (1,986
    )
    
    
    (888
    )
    
    
    (708
    )Net (loss) income from continuing operations
    
    
    (4,202
    )
    
    
    7,441
    
    
    
    (1,972
    )
    
    
    (65,765
    )
    
    
    (38,211
    )Discontinued operations:Operating loss, net of taxes
    
    
    
    
    
    
    
    
    
    
    (545
    )
    
    
    (187
    )
    
    
    (2,182
    )Gain on disposal of discontinued operation,
net of taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150
    
    
    
    Net loss on discontinued operations, net of taxes
    
    
    
    
    
    
    
    
    
    
    (545
    )
    
    
    (37
    )
    
    
    (2,182
    )Net income (loss)
    
    $
    (4,202
    )
    
    $
    7,441
    
    
    $
    (2,517
    )
    
    $
    (65,802
    )
    
    $
    (40,393
    )Net income (loss) per share:Basic and diluted (loss) income per share:Continuing operations
    
    $
    (0.12
    )
    
    $
    0.22
    
    
    $
    (0.07
    )
    
    $
    (2.91
    )
    
    $
    (2.12
    )Discontinued operations
    
    
    0.00
    
    
    
    0.00
    
    
    
    (0.02
    )
    
    
    (0.00
    )
    
    
    (0.12
    )Total
    
    $
    (0.12
    )
    
    $
    0.22
    
    
    $
    (0.09
    )
    
    $
    (2.91
    )
    
    $
    (2.24
    )Basic weighted average common shares outstanding
    
    
    34,402
    
    
    
    34,042
    
    
    
    28,539
    
    
    
    22,575
    
    
    
    18,050Diluted weighted average common shares outstanding
    
    
    34,402
    
    
    
    34,172
    
    
    
    28,539
    
    
    
    22,575
    
    
    
    18,050
 September 30,Balance Sheet Data:
    
    2009
    
    
    2008
    
    
    2007
    
    
    2006
    
    
    2005Working capital (3)
    
    $
    76,127
    
    
    $
    76,000
    
    
    $
    147,956
    
    
    $
    20,042
    
    
    $
    19,072Total assets (3)
    
    
    366,845
    
    
    
    440,164
    
    
    
    403,599
    
    
    
    187,684
    
    
    
    130,429Current maturities of long-term debt and credit lines
    
    
    16,436
    
    
    
    12,601
    
    
    
    13,813
    
    
    
    1,365
    
    
    
    374Long-term debt, less current maturities
    
    
    981
    
    
    
    3,562
    
    
    
    6,851
    
    
    
    32,002
    
    
    
    40,421Shareholders equity (3)
    
    
    315,465
    
    
    
    346,666
    
    
    
    320,767
    
    
    
    111,661
    
    
    
    40,645
 
 (1)
    
    These costs include depreciation and other costs associated with the available unused
capacity. The Company believes maintaining this available unused capacity has been necessary
to encourage development of significant large-scale applications and maintain a level of
readiness as we anticipate a return to more robust market conditions.(2)
    
    Litigation expenses related to the Scott-Macon case in fiscal 2007 and the SP Systems case in
fiscal 2009, 2008 and 2006, as discussed in Note 8 of the Notes to Consolidated Financial
Statements.(3)
    
    The Company completed a public offering of shares in August 2007 and realized net proceeds of
$131.5 million, recorded as increases to cash and equity. During fiscal 2008 a substantial
portion of those proceeds were used to fund capital expenditure projects in Mexico.  16




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




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BUSINESS TRENDS
   
    
    Increased Sales Efforts in Selected International Markets.We have identified
international markets with high growth potential for our existing and emerging commercial
applications. Accordingly, we have added sales personnel and
increased our marketing efforts in India, China and Korea, which have shown growth for wind
energy and other applications.
 
    
    Business Development in Emerging Applications. We have identified emerging applications
for our products with high growth potential across a variety of industries and regions. In
addition to producing carbon fibers for the existing prepreg technology used by many of our
large wind turbine customers, we have recently begun shipments of carbon fibers qualified
for use in the infusion process utilized by other wind turbine blade
manufacturers. We also are seeking to qualify our products for use in aerospace secondary
structures such as floor, luggage bins and seats, and anticipate increased sales in this
market as the production of new jetliners increases. Additionally, we are gearing up for
the anticipated next phase of wider use of carbon fibers in automotive applications.
 
    
    Operating Cash Flows and Cash Management.Despite a 25% decrease in sales, we had
positive operating cash flows of $15.2 million in fiscal 2009, compared to $20.2 million
during fiscal 2008. Increased inventory levels used $4.3 million in fiscal 2009. The
Company seeks to reduce inventory levels going forward. In order to accomplish this goal
the Company is focused on increasing sales and reducing production levels to better match
current sales rates. During fiscal 2009, we established collection targets and payment
schedules for all customers and suppliers to improve better control our days sales
outstanding and days payables outstanding. The Company paid down $10.6 million of its
convertible debt and $22.2 million of capital expenditures and construction payables
related primarily to the expansion of precursor and carbon fiber lines in Mexico. Even
with these cash outlays which are not expected to recur in fiscal 2010, the Companys cash
balance only declined by $8.3 million. We feel that we are in a position to pay down our
remaining debt with operating cash flows and revolving credit borrowings and increase our
cash balance during fiscal 2010.
 RESULTS OF OPERATIONS
 FISCAL YEAR ENDED SEPTEMBER 30, 2009 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 2008
    18




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19




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FISCAL YEAR ENDED SEPTEMBER 30, 2008 COMPARED TO FISCAL YEAR ENDED SEPTEMBER 30, 2007
             20




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




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HUNGARIAN GRANT
   FINANCING ACTIVITY
 Public offering
  Bond Related to SP Systems Case
    Revolving Credit Facility
    Convertible Debt
   22




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2009
    
    
    2008
    
    
    2007Number
    
    
    
    
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    
    
    
    
    Numberof shares
    
    
    Conversion
    
    
    
    
    
    
    of shares
    
    
    Conversion
    
    
    
    
    
    
    of shares
    
    
    Conversionconverted
    
    
    price
    
    
    Equity value
    
    
    converted
    
    
    price
    
    
    Equity value
    
    
    converted
    
    
    price
    
    
    Equity valueFebruary 2003
    
    
    
    
    
    $
    3.50
    
    
    $
    
    
    
    
    
    
    
    $
    3.50
    
    
    $
    
    
    
    
    771,431
    
    
    $
    3.50
    
    
    $
    2,700,009December 2005
    
    
    
    
    
    
    12.50
    
    
    
    
    
    
    
    
    
    
    
    12.50
    
    
    
    
    
    
    
    1,444,489
    
    
    
    12.50
    
    
    
    18,056,112February 2006
    
    
    
    
    
    
    13.07
    
    
    
    
    
    
    
    
    
    
    
    13.07
    
    
    
    
    
    
    
    760,622
    
    
    
    13.07
    
    
    
    9,941,330May 2006
    
    
    
    
    
    
    25.51
    
    
    
    
    
    
    
    203,679
    
    
    
    25.51
    
    
    
    5,195,856
    
    
    
    141,120
    
    
    
    25.51
    
    
    
    3,599,971July 2006
    
    
    16,264
    
    
    
    15.40
    
    
    
    250,466
    
    
    
    117,840
    
    
    
    25.51
    
    
    
    3,006,092
    
    
    
    
    
    
    
    25.51
    
    
    
    October 2006
    
    
    
    
    
    
    25.51
    
    
    
    
    
    
    
    115,578
    
    
    
    25.51
    
    
    
    2,948,383
    
    
    
    
    
    
    
    25.51
    
    
    
    16,264
    
    
    
    
    
    
    $
    250,466
    
    
    
    437,097
    
    
    
    
    
    
    $
    11,150,331
    
    
    
    3,117,662
    
    
    
    
    
    
    $
    34,297,422
 As of September 30, 2009
    
    
    As of September 30, 2008Number
    
    
    
    
    
    
    
    
    
    
    Numberof shares
    
    
    Conversion
    
    
    Principal
    
    
    of shares
    
    
    Conversion
    
    
    Principaloutstanding
    
    
    price
    
    
    outstanding
    
    
    outstanding
    
    
    price
    
    
    outstandingMay 2006
    
    
    70,560
    
    
    
    25.51
    
    
    
    1,799,986
    
    
    
    352,803
    
    
    
    25.51
    
    
    
    9,000,005July 2006
    
    
    19,640
    
    
    
    25.51
    
    
    
    501,016
    
    
    
    58,800
    
    
    
    25.51
    
    
    
    1,499,988October 2006
    
    
    76,381
    
    
    
    25.51
    
    
    
    1,948,479
    
    
    
    178,342
    
    
    
    25.51
    
    
    
    4,549,504166,581
    
    
    
    
    
    
    $
    4,249,481
    
    
    
    589,945
    
    
    
    
    
    
    $
    15,049,497
   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
    
    Libor plus 4
    %
    
    Libor plus 4
    %
    
    Libor plus 4
    %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. Amortization of Financing Fees and Debt Discount
   23




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##### Table of Contents



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




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##### Table of Contents



EARNINGS PER SHARE
   Fiscal Year Ended September 30,2009
    
    
    2008
    
    
    2007Numerators:Net income (loss)
    
    $
    (4,202
    )
    
    $
    7,441
    
    
    $
    (2,517
    )Denominators:Average shares outstanding  basic
    
    
    34,402
    
    
    
    34,042
    
    
    
    28,539Impact of convertible debt, warrants and stock options
    
    
    
    
    
    
    130
    
    
    
    Average shares outstanding  diluted
    
    
    34,402
    
    
    
    34,172
    
    
    
    28,539Income (loss) per share  basic:Continuing operations
    
    $
    (0.12
    )
    
    $
    0.22
    
    
    $
    (0.07
    )Discontinued operations
    
    
    0.00
    
    
    
    0.00
    
    
    
    (0.02
    )Basic income (loss) per share
    
    $
    (0.12
    )
    
    $
    0.22
    
    
    $
    (0.09
    )Income (loss) per share  diluted:Continuing operations
    
    $
    (0.12
    )
    
    $
    0.22
    
    
    $
    (0.07
    )Discontinued operations
    
    
    0.00
    
    
    
    0.00
    
    
    
    (0.02
    )Diluted income (loss) per share
    
    $
    (0.12
    )
    
    $
    0.22
    
    
    $
    (0.09
    )
 FUTURE CONTRACTUAL OBLIGATIONS
  Payments Due by PeriodLess than
    
    
    
    
    
    
    3-5
    
    
    OverTotal
    
    
    1 year
    
    
    1-3 years
    
    
    years
    
    
    5 yearsConvertible debentures (a)
    
    $
    4,249
    
    
    $
    4,249
    
    
    $
    
    
    
    $
    
    
    
    $
    Credit lines
    
    $
    12,277
    
    
    
    12,277
    
    
    
    
    
    
    
    
    
    
    
    Other debt
    
    
    1,083
    
    
    
    102
    
    
    
    981
    
    
    
    
    
    
    
    Total obligations
    
    
    17,609
    
    
    
    16,628
    
    
    
    981
    
    
    
    
    
    
    
    Operating lease obligations (b)
    
    
    2,812
    
    
    
    1,076
    
    
    
    1,681
    
    
    
    55
    
    
    
    Capital leases obligations
    
    
    182
    
    
    
    153
    
    
    
    29
    
    
    
    
    
    
    
    Total debt and leases
    
    
    20,603
    
    
    
    17,857
    
    
    
    2,691
    
    
    
    55
    
    
    
    Contractual interest payments (c)
    
    
    114
    
    
    
    94
    
    
    
    20
    
    
    
    
    
    
    
    Purchase obligations (d)
    
    
    2,089
    
    
    
    2,089
    
    
    
    
    
    
    
    
    
    
    
    Total contractual obligations
    
    $
    22,806
    
    
    $
    20,040
    
    
    $
    2,711
    
    
    $
    55
    
    
    $
    
 
 (a)
    
    Convertible debentures are presented on the balance sheet net of debt discount of $0.2
million.(b)
    
    Includes four-year contract for nitrogen gas facility and equipment at approximately $0.9
million per year.(c)
    
    Amounts represent the expected cash payment of 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.  25




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##### Table of Contents



SUPPLY CONTRACTS
    LEGAL CONTINGENCIES
   CRITICAL ACCOUNTING ESTIMATES
  ACCOUNTS RECEIVABLE COLLECTIBILITY
  INVENTORIES
  ®
  26




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##### Table of Contents



VALUATION OF LONG-LIVED ASSETS
  CONTINGENT LIABILITIES
   INCOME TAXES
   STOCK-BASED COMPENSATION
  RECENT ACCOUNTING PRONOUNCEMENTS
   27




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
  Foreign Currency Risk
    Commodity Price Risk
   28




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##### Table of Contents



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

Zsolt RumyChief Executive OfficerNovember 30, 2009
  29




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
       
  30




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
      .
   
  31




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
     
  32




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##### Table of Contents



ZOLTEK COMPANIES, INC.CONSOLIDATED BALANCE SHEET
 September 30,2009
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    20,943
    
    
    $
    29,224Restricted cash
    
    
    
    
    
    
    23,500Accounts receivable, less allowance for doubtful accounts of $2,356 and $1,754, respectively
    
    
    30,507
    
    
    
    42,690Inventories, net
    
    
    48,058
    
    
    
    45,659Other current assets
    
    
    10,100
    
    
    
    9,432Total current assets
    
    
    109,608
    
    
    
    150,505Property and equipment, net
    
    
    256,910
    
    
    
    288,894Other assets
    
    
    327
    
    
    
    765Total assets
    
    $
    366,845
    
    
    $
    440,164Liabilities and shareholders equityCurrent liabilities:Legal liabilities
    
    $
    
    
    
    $
    29,083Credit lines
    
    
    12,277
    
    
    
    5,175Current maturities of long-term debt
    
    
    4,159
    
    
    
    7,426Trade accounts payable
    
    
    9,408
    
    
    
    15,093Accrued expenses and other liabilities
    
    
    6,845
    
    
    
    9,278Construction payables
    
    
    792
    
    
    
    8,450Total current liabilities
    
    
    33,481
    
    
    
    74,505Long-term debt, less current maturities
    
    
    981
    
    
    
    3,562Hungarian grant, long-term
    
    
    10,228
    
    
    
    10,882Deferred tax liabilities
    
    
    6,690
    
    
    
    4,521Other long-term liabilities
    
    
    
    
    
    
    28Total liabilities
    
    
    51,380
    
    
    
    93,498Commitments 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,
34,424,441 and 34,389,428 shares issued and outstanding in 2009 and 2008, respectively
    
    
    344
    
    
    
    344Additional paid-in capital
    
    
    494,311
    
    
    
    491,175Accumulated other comprehensive (loss) income
    
    
    (18,405
    )
    
    
    11,730Accumulated deficit
    
    
    (160,785
    )
    
    
    (156,583
    )Total shareholders equity
    
    
    315,465
    
    
    
    346,666Total liabilities and shareholders equity
    
    $
    366,845
    
    
    $
    440,164
 The accompanying notes are an integral part of the consolidated financial statements.
  33




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##### Table of Contents



ZOLTEK COMPANIES, INC.CONSOLIDATED STATEMENT OF OPERATIONS
 Fiscal Year Ended September 30,2009
    
    
    2008
    
    
    2007Net sales
    
    $
    138,756
    
    
    $
    185,616
    
    
    $
    150,880Cost of sales, excluding available unused capacity costs
    
    
    100,744
    
    
    
    134,393
    
    
    
    107,506Available unused capacity costs
    
    
    7,352
    
    
    
    
    
    
    
    Gross profit
    
    
    30,660
    
    
    
    51,223
    
    
    
    43,374Application and development costs
    
    
    7,589
    
    
    
    8,093
    
    
    
    7,230Litigation charge (see Note 8)
    
    
    238
    
    
    
    4,884
    
    
    
    5,400Selling, general and administrative expenses
    
    
    19,438
    
    
    
    18,239
    
    
    
    12,635Operating income
    
    
    3,395
    
    
    
    20,007
    
    
    
    18,109Other income (expense):Interest income
    
    
    350
    
    
    
    2,904
    
    
    
    1,829Gain (loss) on foreign currency transactions
    
    
    2,161
    
    
    
    (385
    )
    
    
    (707
    )Other, net
    
    
    (1,228
    )
    
    
    (1,125
    )
    
    
    (424
    )Interest expense, excluding amortization of financing fees, debt discount and
beneficial conversion feature
    
    
    (1,411
    )
    
    
    (1,862
    )
    
    
    (2,346
    )Warrant issue expense
    
    
    
    
    
    
    
    
    
    
    (6,362
    )Amortization of financing fees and debt discount
    
    
    (5,364
    )
    
    
    (6,682
    )
    
    
    (9,771
    )Loss on value of warrants and beneficial conversion feature
    
    
    
    
    
    
    
    
    
    
    (314
    )Income (loss) from continuing operations before income taxes
    
    
    (2,097
    )
    
    
    12,857
    
    
    
    14Income tax expense
    
    
    2,105
    
    
    
    5,416
    
    
    
    1,986Net income (loss)
    
    
    (4,202
    )
    
    
    7,441
    
    
    
    (1,972
    )Discontinued operations:Operating loss, net of taxes
    
    
    
    
    
    
    
    
    
    
    (545
    )Net income (loss)
    
    $
    (4,202
    )
    
    $
    7,441
    
    
    $
    (2,517
    )Basic and diluted income (loss) per share
    
    $
    (0.12
    )
    
    $
    0.22
    
    
    $
    (0.09
    )Weighted average common shares outstanding  basic
    
    
    34,402,046
    
    
    
    34,042,792
    
    
    
    28,538,501Weighted average common shares outstanding  diluted
    
    
    34,402,046
    
    
    
    34,171,629
    
    
    
    28,538,501
 The accompanying notes are an integral part of the consolidated financial statements.
  34




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##### Table of Contents



ZOLTEK COMPANIES, INC.CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
 Total Share-
    
    
    
    
    
    
    Additional
    
    
    Accumulated Otherholders
    
    
    Common
    
    
    Paid-In
    
    
    Comprehensive
    
    
    AccumulatedEquity
    
    
    Stock
    
    
    Capital
    
    
    Income (Loss)
    
    
    DeficitBalance, 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
    )Net loss
    
    
    (4,202
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,202
    )Foreign currency translation adjustment
    
    
    (30,135
    )
    
    
    
    
    
    
    
    
    
    
    (30,135
    )Comprehensive loss
    
    $
    (34,337
    )Convertible debt converted
    
    
    251
    
    
    
    
    
    
    
    251Cash settlement of restricted shares
    
    
    (75
    )
    
    
    
    
    
    
    (75
    )Restricted stock expense
    
    
    521
    
    
    
    
    
    
    
    521Stock option awards
    
    
    2,439
    
    
    
    
    
    
    
    2,439Balance, September 30, 2009
    
    $
    315,465
    
    
    $
    344
    
    
    $
    494,311
    
    
    $
    (18,405
    )
    
    $
    (160,785
    )
 The accompanying notes are an integral part of the consolidated financial statements.
  35




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##### Table of Contents



ZOLTEK COMPANIES, INC.CONSOLIDATED STATEMENT OF CASH FLOWS
 Fiscal Year Ended September 30,2009
    
    
    2008
    
    
    2007Cash flows from operating activities:Net income (loss)
    
    $
    (4,202
    )
    
    $
    7,441
    
    
    $
    (2,517
    )Net loss from discontinued operations
    
    
    
    
    
    
    
    
    
    
    545Net income (loss) from continuing operations
    
    
    (4,202
    )
    
    
    7,441
    
    
    
    (1,972
    )Adjustments to reconcile net income to net cash from operating activities:Depreciation
    
    
    16,351
    
    
    
    16,476
    
    
    
    9,205Amortization of financing fees and debt discount
    
    
    5,364
    
    
    
    6,682
    
    
    
    9,771Deferred taxes
    
    
    690
    
    
    
    1,501
    
    
    
    828Warrant issue expense
    
    
    
    
    
    
    
    
    
    
    6,362Loss on value of warrants and conversion feature
    
    
    
    
    
    
    
    
    
    
    314Foreign currency transaction (gains) losses
    
    
    (1,396
    )
    
    
    (431
    )
    
    
    606Stock option compensation expense
    
    
    2,960
    
    
    
    2,316
    
    
    
    1,253Loss on disposal of assets
    
    
    707
    
    
    
    
    
    
    
    Changes in assets and liabilities:Decrease (increase) in accounts receivable
    
    
    8,528
    
    
    
    (4,381
    )
    
    
    (18,320
    )Increase in inventories
    
    
    (4,327
    )
    
    
    (17,427
    )
    
    
    (5,388
    )Decrease (increase) in other current assets and other assets
    
    
    459
    
    
    
    (214
    )
    
    
    (725
    )(Decrease) increase in trade accounts payable
    
    
    (3,764
    )
    
    
    1,902
    
    
    
    3,224(Decrease) increase in accrued expenses and other liabilities
    
    
    (553
    )
    
    
    2,002
    
    
    
    (278
    )(Decrease) increase in legal liabilities
    
    
    (5,583
    )
    
    
    4,355
    
    
    
    818(Decrease) increase in other long-term liabilities
    
    
    
    
    
    
    (27
    )
    
    
    171Net cash provided by continuing operations
    
    
    15,234
    
    
    
    20,195
    
    
    
    5,869Net cash provided by discontinued operations
    
    
    
    
    
    
    
    
    
    
    1,010Net cash provided by operating activities
    
    
    15,234
    
    
    
    20,195
    
    
    
    6,879Cash flows from investing activities:Purchases of property and equipment
    
    
    (16,206
    )
    
    
    (107,715
    )
    
    
    (53,412
    )(Decrease) increase in construction payables
    
    
    (6,016
    )
    
    
    3,591
    
    
    
    Proceeds received from sale of fixed assets
    
    
    116
    
    
    
    
    
    
    
    Proceeds received from Hungarian grant
    
    
    1,588
    
    
    
    3,253
    
    
    
    9,435Change in cash restricted for letters of credit
    
    
    
    
    
    
    (9,685
    )
    
    
    (7,181
    )Net cash used in investing activities
    
    
    (20,518
    )
    
    
    (110,556
    )
    
    
    (51,158
    )Cash flows from financing activities:Proceeds from exercise of stock options and warrants
    
    
    
    
    
    
    1,510
    
    
    
    13,797Payment of issue costs related to secondary stock offering
    
    
    
    
    
    
    
    
    
    
    (760
    )Proceeds from secondary stock offering
    
    
    
    
    
    
    
    
    
    
    132,284Cash settlement of restricted shares
    
    
    (75
    )
    
    
    
    
    
    
    Proceeds (repayment) from issuance of convertible debt
    
    
    (10,550
    )
    
    
    
    
    
    
    7,495Payment of financing fees
    
    
    
    
    
    
    
    
    
    
    (900
    )Borrowings (repayment) of notes payable and credit lines
    
    
    7,594
    
    
    
    (3,786
    )
    
    
    3,538Net cash (used) provided by financing activities
    
    
    (3,031
    )
    
    
    (2,276
    )
    
    
    155,454Effect of exchange rate changes on cash and cash equivalents
    
    
    34
    
    
    
    100
    
    
    
    (216
    )Net (decrease) increase in cash and cash equivalents
    
    
    (8,281
    )
    
    
    (92,537
    )
    
    
    110,959Cash and cash equivalents at beginning of year
    
    
    29,224
    
    
    
    121,761
    
    
    
    10,802Cash and cash equivalents at end of year
    
    $
    20,943
    
    
    $
    29,224
    
    
    $
    121,761Supplemental disclosures of cash flow information:Net cash paid during the year for:Interest
    
    $
    1,200
    
    
    $
    1,491
    
    
    $
    3,856Income taxes
    
    
    1,510
    
    
    
    2,800
    
    
    
    Non-cash conversion of convertible debentures
    
    
    251
    
    
    
    11,150
    
    
    
    34,497
 The accompanying notes are an integral part of the consolidated financial statements.
  36




---



##### 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
    37




---



##### Table of Contents



CASH AND CASH EQUIVALENTS
  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
     38




---



##### Table of Contents



FINANCIAL INSTRUMENTS
    APPLICATION AND DEVELOPMENT EXPENSES
  INCOME TAXES
  EARNINGS PER SHARE
  RECENT ACCOUNTING PRONOUNCEMENTS
     39




---



##### Table of Contents



2. FINANCING TRANSACTIONS
 HUNGARIAN GRANT
   FINANCING ACTIVITY
 Public offering
  Bond Related to SP Systems Case
     40




---



##### Table of Contents



Revolving Credit Facility
    Convertible Debt
   2009
    
    
    2008
    
    
    2007Number
    
    
    
    
    
    
    
    
    
    
    Number
    
    
    
    
    
    
    
    
    
    
    Numberof shares
    
    
    Conversion
    
    
    
    
    
    
    of shares
    
    
    Conversion
    
    
    
    
    
    
    of shares
    
    
    Conversionconverted
    
    
    price
    
    
    Equity value
    
    
    converted
    
    
    price
    
    
    Equity value
    
    
    converted
    
    
    price
    
    
    Equity valueFebruary 2003
    
    
    
    
    
    $
    3.50
    
    
    $
    
    
    
    
    
    
    
    $
    3.50
    
    
    $
    
    
    
    
    771,431
    
    
    $
    3.50
    
    
    $
    2,700,009December 2005
    
    
    
    
    
    
    12.50
    
    
    
    
    
    
    
    
    
    
    
    12.50
    
    
    
    
    
    
    
    1,444,489
    
    
    
    12.50
    
    
    
    18,056,112February 2006
    
    
    
    
    
    
    13.07
    
    
    
    
    
    
    
    
    
    
    
    13.07
    
    
    
    
    
    
    
    760,622
    
    
    
    13.07
    
    
    
    9,941,330May 2006
    
    
    
    
    
    
    25.51
    
    
    
    
    
    
    
    203,679
    
    
    
    25.51
    
    
    
    5,195,856
    
    
    
    141,120
    
    
    
    25.51
    
    
    
    3,599,971July 2006
    
    
    16,264
    
    
    
    15.40
    
    
    
    250,466
    
    
    
    117,840
    
    
    
    25.51
    
    
    
    3,006,092
    
    
    
    
    
    
    
    25.51
    
    
    
    October 2006
    
    
    
    
    
    
    25.51
    
    
    
    
    
    
    
    115,578
    
    
    
    25.51
    
    
    
    2,948,383
    
    
    
    
    
    
    
    25.51
    
    
    
    16,264
    
    
    
    
    
    
    $
    250,466
    
    
    
    437,097
    
    
    
    
    
    
    $
    11,150,331
    
    
    
    3,117,662
    
    
    
    
    
    
    $
    34,297,422
 As of September 30, 2009
    
    
    As of September 30, 2008Number
    
    
    
    
    
    
    
    
    
    
    Numberof shares
    
    
    Conversion
    
    
    Principal
    
    
    of shares
    
    
    Conversion
    
    
    Principaloutstanding
    
    
    price
    
    
    outstanding
    
    
    outstanding
    
    
    price
    
    
    outstandingMay 2006
    
    
    70,560
    
    
    
    25.51
    
    
    
    1,799,986
    
    
    
    352,803
    
    
    
    25.51
    
    
    
    9,000,005July 2006
    
    
    19,640
    
    
    
    25.51
    
    
    
    501,016
    
    
    
    58,800
    
    
    
    25.51
    
    
    
    1,499,988October 2006
    
    
    76,381
    
    
    
    25.51
    
    
    
    1,948,479
    
    
    
    178,342
    
    
    
    25.51
    
    
    
    4,549,504166,581
    
    
    
    
    
    
    $
    4,249,481
    
    
    
    589,945
    
    
    
    
    
    
    $
    15,049,497
   41




---



##### 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
    
    Libor plus 4
    %
    
    Libor plus 4
    %
    
    Libor plus 4
    %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. Amortization of Financing Fees and Debt Discount
    Fiscal Year Ended September 30, 2009ConversionWarrants
    
    
    Features
    
    
    TotalMay 2006 issuance
    
    $
    1,549
    
    
    $
    2,285
    
    
    $
    3,834July 2006 issuance
    
    
    242
    
    
    
    296
    
    
    
    538October 2006 issuance
    
    
    317
    
    
    
    364
    
    
    
    681$
    2,108
    
    
    $
    2,945
    
    
    
    5,053Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    311Total
    
    
    
    
    
    
    
    
    
    $
    5,364
 Fiscal Year Ended September 30, 2008ConversionWarrants
    
    
    Features
    
    
    TotalMay 2006 issuance
    
    $
    1,943
    
    
    $
    2,867
    
    
    $
    4,810July 2006 issuance
    
    
    230
    
    
    
    280
    
    
    
    510October 2006 issuance
    
    
    392
    
    
    
    452
    
    
    
    844$
    2,565
    
    
    
    3,599
    
    
    
    6,164Deferred financing costs
    
    
    
    
    
    
    
    
    
    
    518Total
    
    
    
    
    
    
    
    
    
    $
    6,682
 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
  42




---



##### Table of Contents



September 30, 2009ConversionWarrants
    
    
    Feature
    
    
    TotalMay 2006 issuance
    
    $
    18
    
    
    
    26
    
    
    $
    44July 2006 issuance
    
    
    15
    
    
    
    17
    
    
    
    32October 2006 issuance
    
    
    54
    
    
    
    62
    
    
    
    116$
    87
    
    
    $
    105
    
    
    
    192Debt acquisition cost and financing fees
    
    
    
    
    
    
    
    
    
    
    97Total
    
    
    
    
    
    
    
    
    
    $
    289
 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
 EARNINGS PER SHARE
   Fiscal Year Ended September 30,2009
    
    
    2008
    
    
    2007Numerators:Net income (loss)
    
    $
    (4,202
    )
    
    $
    7,441
    
    
    $
    (2,517
    )Denominators:Average shares outstanding  basic
    
    
    34,402
    
    
    
    34,042
    
    
    
    28,539Impact of convertible debt, warrants and stock options
    
    
    
    
    
    
    130
    
    
    
    Average shares outstanding  diluted
    
    
    34,402
    
    
    
    34,172
    
    
    
    28,539Income (loss) per share  basic:Continuing operations
    
    $
    (0.12
    )
    
    $
    0.22
    
    
    $
    (0.07
    )Discontinued operations
    
    
    0.00
    
    
    
    0.00
    
    
    
    (0.02
    )Basic income (loss) per share
    
    $
    (0.12
    )
    
    $
    0.22
    
    
    $
    (0.09
    )Income (loss) per share  diluted:Continuing operations
    
    $
    (0.12
    )
    
    $
    0.22
    
    
    $
    (0.07
    )Discontinued operations
    
    
    0.00
    
    
    
    0.00
    
    
    
    (0.02
    )Diluted income (loss) per share
    
    $
    (0.12
    )
    
    $
    0.22
    
    
    $
    (0.09
    )
 3. DISCONTINUED OPERATIONS
   43




---



##### Table of Contents



Net sales
    
    $
    1,843Cost of sales
    
    
    2,220Gross profit (loss)
    
    
    (377
    )Selling, general and administrative expenses
    
    
    (144
    )Loss from operations
    
    
    (521
    )Other loss
    
    
    (24
    )Loss on discontinued operations
    
    $
    (545
    )
 4. INVENTORIES
  September 30,2009
    
    
    2008Raw materials
    
    $
    7,349
    
    
    $
    10,749Work-in-process
    
    
    8,977
    
    
    
    14,962Finished goods
    
    
    26,758
    
    
    
    16,334Consigned inventory
    
    
    4,471
    
    
    
    2,510Supplies and other
    
    
    503
    
    
    
    1,104$
    48,058
    
    
    $
    45,659
  5. PROPERTY, PLANT AND EQUIPMENT
  September 30,2009
    
    
    2008Land
    
    $
    13,275
    
    
    $
    15,450Buildings and improvements
    
    
    66,510
    
    
    
    55,267Machinery and equipment
    
    
    230,502
    
    
    
    225,342Furniture, fixtures and software
    
    
    6,759
    
    
    
    6,788Construction in progress
    
    
    41,029
    
    
    
    72,214358,075
    
    
    
    375,061Less: accumulated depreciation
    
    
    (101,165
    )
    
    
    (86,167
    )$
    256,910
    
    
    $
    288,894
 6. INCOME TAXES
  2009
    
    
    2008
    
    
    2007From continuing operations:Current:Federal
    
    $
    130
    
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    107
    
    
    
    Non  U.S.
    
    
    1,284
    
    
    
    2,724
    
    
    
    1,1581,415
    
    
    
    2,831
    
    
    
    1,158Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    State
    
    
    (179
    )
    
    
    
    
    
    
    (157
    )Non  U.S.
    
    
    869
    
    
    
    2,585
    
    
    
    985690
    
    
    
    2,585
    
    
    
    828Total continuing operations
    
    $
    2,105
    
    
    $
    5,416
    
    
    $
    1,986From discontinued operations:Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    
    
    
    
    Non-U.S.
    
    
    
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    19Deferred:Federal
    
    
    
    
    
    
    
    
    
    
    Non-U.S.
    
    
    
    
    
    
    
    
    
    
    Total discontinued operations
    
    
    
    
    
    
    
    
    
    
    19Total
    
    $
    2,105
    
    
    $
    5,416
    
    
    $
    2,005
  44




---



##### Table of Contents



September 30,2009
    
    
    2008Deferred tax assets:Legal liabilities
    
    $
    
    
    
    $
    7,990Accrued employee compensation
    
    
    106
    
    
    
    119Reserves
    
    
    581
    
    
    
    181Net operating loss and credit carryforwards
    
    
    30,635
    
    
    
    24,93331,322
    
    
    
    33,223Deferred tax liabilities:Property, plant and equipment
    
    
    (12,291
    )
    
    
    (10,841
    )Prepaid expenses
    
    
    (110
    )
    
    
    (118
    )Unrealized currency losses on intercompany loan in Hungary
    
    
    (1,496
    )
    
    
    Other liabilities
    
    
    (715
    )
    
    
    (664
    )(14,612
    )
    
    
    (11,623
    )Total deferred taxes
    
    
    16,710
    
    
    
    21,600Less: valuation allowance
    
    
    (20,138
    )
    
    
    (25,188
    )Net deferred tax liability
    
    $
    (3,428
    )
    
    $
    (3,588
    )Classification of deferred taxes:Current deferred tax asset (included in Other current assets)
    
    $
    3,262
    
    
    $
    933Long-term deferred tax liability
    
    
    (6,690
    )
    
    
    (4,521
    )$
    (3,428
    )
    
    $
    (3,588
    )
   2009
    
    
    2008
    
    
    2007At statutory rate:Income taxes on income (loss) from continuing operations
    
    $
    (713
    )
    
    $
    4,507
    
    
    $
    5Increases (decreases):Lower effective tax rate on non-U.S. operations
    
    
    1,744
    
    
    
    (1,446
    )
    
    
    (2,805
    )Change in valuation allowance on net operating loss
    
    
    (5,696
    )
    
    
    (3,416
    )
    
    
    1,428State taxes, net of federal benefit
    
    
    (545
    )
    
    
    17
    
    
    
    (157
    )Local taxes, non-U.S.
    
    
    1,101
    
    
    
    2,724
    
    
    
    1,177Change of uncertain tax positions
    
    
    2,440
    
    
    
    
    
    
    
    559Intercompany transfer pricing adjustment
    
    
    1,662
    
    
    
    
    
    
    
    Reflection of tax rate change  non-U.S.
    
    
    370
    
    
    
    
    
    
    
    Amortization of warrant discount
    
    
    1,718
    
    
    
    3,425
    
    
    
    3,926Fair market value of warrants
    
    
    
    
    
    
    
    
    
    
    107Non-qualified stock option expense
    
    
    
    
    
    
    (567
    )
    
    
    (1,115
    )Other
    
    
    24
    
    
    
    172
    
    
    
    (1,120
    )$
    2,105
    
    
    $
    5,416
    
    
    $
    2,005
  45




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##### Table of Contents



2009
    
    
    2008
    
    
    2007Domestic
    
    $
    13,352
    
    
    $
    6,831
    
    
    $
    (16,093
    )Foreign
    
    
    (15,449
    )
    
    
    6,026
    
    
    
    16,107Income (loss) from continuing operations before income taxes
    
    $
    (2,097
    )
    
    $
    12,857
    
    
    $
    14
    7. DEBT
 Credit Facilities
     September 30,
    
    
    September 30,2009
    
    
    2008U.S. facility (current interest rate of 3.01%  variable with Libor)
    
    
    8,343
    
    
    
    Facility with Hungarian bank (interest rate of 3.1% to 10.5%, depending on currency)
    
    
    3,934
    
    
    
    5,175Total credit lines
    
    $
    12,277
    
    
    $
    5,175
  September 30,
    
    
    September 30,2009
    
    
    2008Note payable with interest currently at 4.15% (variable with Libor, payable in monthly
installments of interest and principle to maturity in January 2011)
    
    $
    1,083
    
    
    $
    1,184Convertible debentures final payment due November 2009 (interest rate of 5.58%

variable with Libor)
    
    
    1,800
    
    
    
    9,000Convertible debentures final payment due January 2010 (interest rate of 5.12%
 variable with Libor)
    
    
    501
    
    
    
    1,500Convertible debentures final payment due April 2010 (interest rate of 4.63%
 variable with Libor)
    
    
    1,948
    
    
    
    4,549Total long-term debt including current maturities
    
    
    5,332
    
    
    
    16,233Less: Debt discount associated with conversion feature and warrants
    
    
    (192
    )
    
    
    (5,245
    )Less: Amounts payable within one year, net of discount of $192 and $3,729
    
    
    (4,159
    )
    
    
    (7,426
    )Total long-term debt, less current maturities
    
    $
    981
    
    
    $
    3,562
  46




---



##### Table of Contents



AnnualSeptember 30,
    
    Maturities2010
    
    $
    512011
    
    
    930Total
    
    $
    981
 8. COMMITMENTS AND CONTINGENCIES
 LEASES
   FutureCommitmentsfor OperatingSeptember 30,
    
    Leases2010
    
    $
    1,0762011
    
    
    9702012
    
    
    7112013
    
    
    332014
    
    
    22Thereafter
    
    
    Total
    
    $
    2,812
   FutureMinimumLeaseSeptember 30,
    
    Payments2010
    
    $
    1532011
    
    
    182012
    
    
    11Total capital lease obligation
    
    $
    182
 LEGAL
      47




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##### Table of Contents



SOURCES OF SUPPLY
  9. PROFIT SHARING PLAN
  10. STOCK COMPENSATION EXPENSE
  Stock option awards.
  Wtd. Avg.
    
    
    Options
    
    
    Wtd. Avg.Options
    
    
    Exercise Price
    
    
    Exercisable
    
    
    Exercise PriceBalance, September 30, 2007
    
    $
    369,810
    
    
    $
    16.02
    
    
    
    264,800
    
    
    $
    17.23Granted
    
    
    245,000
    
    
    
    27.92Exercised
    
    
    (169,223
    )
    
    
    8.03Forfeited or expired
    
    
    (30,000
    )
    
    
    39.00Balance, September 30, 2008
    
    
    415,587
    
    
    $
    25.52
    
    
    
    220,587
    
    
    $
    23.50Granted
    
    
    52,500
    
    
    
    6.31Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (59,750
    )
    
    
    19.99Balance, September 30, 2009
    
    
    408,337
    
    
    $
    23.60
    
    
    
    301,670
    
    
    $
    22.64
  Options Outstanding
    
    
    Options ExercisableRange of
    
    
    
    
    
    
    Wtd. Avg.

    
    Wtd. Avg.
    
    
    
    
    
    
    Wtd. Avg.Exercise Prices
    
    
    Number
    
    
    Remaining Life

    
    Exercise Price
    
    
    Number
    
    
    Exercise Price$
    1.335.67
    
    
    
    39,500
    
    
    4 years
    
    $
    5.30
    
    
    
    39,500
    
    
    $
    5.306.259.25
    
    
    
    42,587
    
    
    6 years
    
    
    8.53
    
    
    
    42,587
    
    
    
    8.539.6024.12
    
    
    
    87,500
    
    
    8 years
    
    
    19.71
    
    
    
    39,584
    
    
    
    16.7326.2229.70
    
    
    
    148,750
    
    
    8 years
    
    
    29.12
    
    
    
    90,000
    
    
    
    28.7330.0039.00
    
    
    
    90,000
    
    
    6 years
    
    
    33.43
    
    
    
    90,000
    
    
    
    33.431.3339.00
    
    
    
    408,337
    
    
    7 years
    
    
    23.60
    
    
    
    301,671
    
    
    
    22.64
  48




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##### Table of Contents



Assumptions
    
    Fiscal 2009
    
    
    Fiscal 2008
    
    
    Fiscal 2007Expected life of option
    
    3.8 & 4 years
    
    
    4 & 7.5 years
    
    
    3 & 7.5 yearsRisk-free interest rate
    
    
    0.5
    %
    
    
    1.8
    %
    
    
    4.9
    %Volatility of stock
    
    
    79
    %
    
    
    66
    %
    
    
    68
    %Forfeiture experience on employee options
    
    
    25
    %
    
    
    30
    %
    
    
    30
    %
  Restricted stock awards.
    11. BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION
   49




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##### Table of Contents



Fiscal Year Ended September 30, 2009Carbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalNet sales
    
    $
    115,348
    
    
    $
    20,996
    
    
    $
    2,412
    
    
    $
    138,756Cost of sales, excluding available unused capacity costs
    
    
    82,274
    
    
    
    16,411
    
    
    
    2,059
    
    
    
    100,744Available unused capacity costs
    
    
    6,404
    
    
    
    948
    
    
    
    
    
    
    
    7,352Gross profit
    
    
    26,670
    
    
    
    3,637
    
    
    
    353
    
    
    
    30,660Operating income (loss)
    
    
    14,186
    
    
    
    2,307
    
    
    
    (13,098
    )
    
    
    3,395Depreciation
    
    
    13,490
    
    
    
    1,667
    
    
    
    1,194
    
    
    
    16,351Capital expenditures
    
    
    14,983
    
    
    
    642
    
    
    
    581
    
    
    
    16,206
 Fiscal Year Ended September 30, 2008Carbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalNet sales
    
    $
    156,033
    
    
    $
    25,910
    
    
    $
    3,673
    
    
    $
    185,616Cost of sales
    
    
    110,691
    
    
    
    20,378
    
    
    
    3,324
    
    
    
    134,393Gross profit
    
    
    45,342
    
    
    
    5,532
    
    
    
    349
    
    
    
    51,223Operating income (loss)
    
    
    33,961
    
    
    
    3,019
    
    
    
    (16,973
    )
    
    
    20,007Depreciation
    
    
    13,353
    
    
    
    2,030
    
    
    
    1,093
    
    
    
    16,476Capital expenditures
    
    
    101,628
    
    
    
    2,568
    
    
    
    3,519
    
    
    
    107,715
 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
    
    
    7,387
    
    
    
    1,333
    
    
    
    485
    
    
    
    9,205Capital expenditures
    
    
    47,321
    
    
    
    2,148
    
    
    
    3,943
    
    
    
    53,412
 Total AssetsCarbon
    
    
    Technical
    
    
    Corporate/Fibers
    
    
    Fibers
    
    
    Other
    
    
    TotalSeptember 30, 2009
    
    $
    293,200
    
    
    $
    27,614
    
    
    $
    46,031
    
    
    $
    366,845September 30, 2008
    
    
    344,974
    
    
    
    32,705
    
    
    
    62,485
    
    
    
    440,164
  50




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##### Table of Contents



2009
    
    
    2008
    
    
    2007Net
    
    
    
    
    
    
    Net
    
    
    
    
    
    
    NetLong Lived
    
    
    
    
    
    
    Long Lived
    
    
    
    
    
    
    Long LivedNet Sales(a)
    
    
    Assets(b)
    
    
    Net Sales(a)
    
    
    Assets(b)
    
    
    Net Sales(a)
    
    
    Assets(b)United States
    
    $
    34,036
    
    
    $
    44,539
    
    
    $
    42,205
    
    
    $
    47,617
    
    
    $
    38,505
    
    
    $
    48,744Europe
    
    
    102,337
    
    
    
    132,880
    
    
    
    133,286
    
    
    
    158,694
    
    
    
    106,798
    
    
    
    140,457Asia
    
    
    2,205
    
    
    
    
    
    
    
    10,106
    
    
    
    
    
    
    
    4,983
    
    
    
    Mexico
    
    
    
    
    
    
    79,491
    
    
    
    
    
    
    
    82,583
    
    
    
    
    
    
    
    Other areas
    
    
    178
    
    
    
    
    
    
    
    19
    
    
    
    
    
    
    
    594
    
    
    
    Total
    
    $
    138.756
    
    
    $
    256,910
    
    
    $
    185,616
    
    
    $
    288,894
    
    
    $
    150,880
    
    
    $
    188,801
 (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 2009
    
    1st Quarter
    
    
    2nd Quarter
    
    
    3rd Quarter
    
    
    4th QuarterNet sales
    
    $
    38,629
    
    
    $
    36,006
    
    
    $
    30,306
    
    
    $
    33,815Gross profit
    
    
    10,264
    
    
    
    9,118
    
    
    
    6,160
    
    
    
    5,118Net income (loss) from continuing operations
    
    
    535
    
    
    
    473
    
    
    
    (1,429
    )
    
    
    (3,781
    )Net income (loss)
    
    
    535
    
    
    
    473
    
    
    
    (1,429
    )
    
    
    (3,781
    )Basic and diluted income (loss) per share:Continuing operations  basic
    
    $
    0.02
    
    
    $
    0.01
    
    
    $
    (0.04
    )
    
    $
    (0.11
    )Continuing operations  diluted
    
    $
    0.02
    
    
    $
    0.01
    
    
    $
    (0.04
    )
    
    $
    (0.11
    )
 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
    )
  13. SUBSEQUENT EVENTS
   51




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##### Table of Contents



Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosures
  
 Item 9A. Controls and Procedures
 Evaluation of Controls and Procedures
  Managements Report on Internal Control Over Financial Reporting
  Internal Control-Integrated
Framework
 Attestation Report of Independent Registered Public Accounting Firm
  Changes in Internal Control over Financial Reporting
  
 Item 9B. Other Information
   52




---



##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accounting Fees and Services
   53




---



##### Table of Contents



PART IV
 
 Item 15. Exhibits and Financial Statement Schedules
          *
    
    Report on financial statement schedule is included in Exhibit 23.1 hereto.      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
    
    $
    1,754
    
    
    $
    1,303
    (1)
    
    $
    
    
    
    $
    701
    (2)
    
    $
    2,356Reserve for inventory valuation
    
    $
    500
    
    
    $
    165
    (3)
    
    $
    
    
    
    $
    
    
    
    $
    665Deferred tax valuation
    
    $
    30,815
    
    
    $
    
    
    
    $
    
    
    
    $
    10,677
    (4)(5)
    
    $
    20,138
    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
    (1)
    
    $
    
    
    
    $
    327
    (2)
    
    $
    1,754Reserve for inventory valuation
    
    $
    645
    
    
    $
    
    
    
    $
    
    
    
    $
    145
    (7)
    
    $
    500Deferred tax valuation
    
    $
    29,758
    
    
    $
    1,057
    
    
    $
    
    
    
    $
    
    
    
    $
    30,815
    (6)
  54




---



##### 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
    
    $
    729
    
    
    $
    52
    (8)
    
    $
    
    
    
    $
    
    
    
    $
    781Reserve for inventory valuation
    
    $
    1,300
    
    
    $
    
    
    
    $
    
    
    
    $
    655
    (7)
    
    $
    645Deferred tax valuation
    
    $
    34,217
    
    
    $
    
    
    
    $
    628
    (9)
    
    $
    5,087
    (10)(11)(12)
    
    $
    29,758
 (1)
    
    Write off of uncollectible receivable(2)
    
    Recovery of receivables previously listed as doubtful(3)
    
    Increase reserve for slow-moving product(4)
    
    Reduction in required valuation allowance due to domestic
NOL utilization.(5)
    
    Reduction in required valuation allowance due to
non-qualified stock option deduction for which no cash benefit has
been realized.(6)
    
    Includes valuation allowance related to non-qualified stock options.(7)
    
    Company used and sold materials for which reserves were established primarily for
slow-moving product.(8)
    
    Write-off of uncollectible receivable, net of recovery.(9)
    
    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.(10)
    
    Expiration of capital loss carryforward and utilization against current foreign income
taxes payable.(11)
    
    Removal of NOLs related to non-qualified stock options and the related valuation allowance.(12)
    
    Prior year true ups   55




---



##### Table of Contents



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

Zsolt Rumy
    
    Chairman, President, Chief
Executive Officer and Director
    
    November 30, 2009/s/ ANDREW W. WHIPPLE

Andrew W. Whipple
    
    Chief Financial Officer
    
    November 30, 2009/s/ LINN H. BEALKE

Linn H. Bealke
    
    Director
    
    November 30, 2009/s/ CHARLES A. DILL

Charles A. Dill
    
    Director
    
    November 30, 2009/s/ GEORGE E. HUSMAN

George E. Husman
    
    Director
    
    November 30, 2009/s/ MICHAEL D. LATTA

Michael D. Latta
    
    Director
    
    November 30, 2009/s/ PEDRO REYNOSO

Pedro Reynoso
    
    Director
    
    November 30, 2009
  56




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##### Table of Contents



Exhibit Index
 ExhibitNumber
    
    Description3.1
    
    
    Restated Articles of Incorporation of the Registrant dated October 7,
1992, filed as Exhibit 3.1 to Registrants Registration Statement on
Form S-3 (Reg. No. 333-143996) and incorporated herein by reference.3.2
    
    
    Certificate of Amendment of Restated Articles of Incorporation of the
Registrant dated February 15, 1996, filed as Exhibit 3.2 to Registrants
Registration Statement on Form S-3 (Reg. No. 333-143996) and incorporated
herein by reference.3.3
    
    
    Certificate of Amendment of Restated Articles of Incorporation of the
Registrant dated February 7, 1997, filed as Exhibit 3.3 to Registrants
Registration Statement on Form S-3 (Reg. No. 333-143996) and incorporated
herein by reference.3.4
    
    
    Restated By-Laws of the Registrant dated September 22, 1992, filed as
Exhibit 3.4 to Registrants Registration Statement on Form S-3 (Reg.
No. 333-143996) and incorporated herein by reference.4.1
    
    
    Form of certificate for Common Stock, filed as Exhibit 4.1 to
Registrants Registration Statement on Form S-1 (Reg. No. 33-51142) and
incorporated herein by reference.4.2
    
    
    Form of Registration Rights Agreement, dated as of February 9, 2005, filed as Exhibit
4.4 to the Registrants Quarterly Report on Form 10-Q for the quarter ended December 31,
2004 and incorporated herein by reference.
  57




---



##### Table of Contents



ExhibitNumber
    
    Description4.3
    
    
    Registration Rights Agreement, dated as of September 30,
2005, by and among the Registrant and the Lenders parties
thereto, filed as Exhibit 4.4 to the Registrants Current
Report on Form 8-K dated September 29, 2005 and
incorporated herein by reference.4.4
    
    
    Waiver and Consent, dated as of February 3, 2006, by and
among the Registrant and the Lender parties thereto, filed
as Exhibit 4.5 to the Registrants Current Report on Form
8-K dated February 6, 2006, and incorporated herein by
reference.4.5
    
    
    Amendment No. 1 to Loan and Warrant Agreement and
Registration Rights Agreement among the Registrant and the
Lender parties thereto, filed as Exhibit 4.2 to the
Registrants Current Report on Form 8-K dated April 28,
2006 and incorporated herein by reference.4.6
    
    
    Form of Note, filed as Exhibit 4.3 to the Registrants
Current Report on Form 8-K dated April 28, 2006 and
incorporated herein by reference.4.7
    
    
    Form of Warrant, filed as Exhibit 4.4 to the Registrants
Current Report on Form 8-K dated April 28, 2006 and
incorporated herein by reference.4.8
    
    
    Amendment No. 2 to Loan and Warrant Agreement and
Registration Rights Agreement, dated as of December 14,
2006, among the Registrant and the Lenders, filed as
Exhibit 4.3 to the Registrants Current Report on Form 8-K
dated December 14, 2006 and incorporated herein by
reference.4.9
    
    
    Form of Warrant, filed as Exhibit 4.4 to the Registrants
Current Report on Form 8-K dated December 14, 2006 and
incorporated herein by reference.10.1
    
    
    Zoltek Companies, Inc. Amended and Restated Directors Stock
Option Plan filed as Exhibit 10.1 to Registrants Quarterly
Report on Form 10-Q dated August 13, 1999*10.2
    
    
    Credit Agreement, dated as of May 11, 2001, between
Southwest Bank of St. Louis and Zoltek Companies, Inc.,
Zoltek Corporation, Cape Composites, Inc., Engineering
Technology Corporation, Zoltek Properties, Inc., and
Hardcore Composites Operations, LLC, filed as Exhibit 10.1
to Registrants Quarterly Report on Form 10-Q for the
quarter ended June 30, 2001, is incorporate herein by
reference.10.3
    
    
    First Amendment to Credit Agreement, dated as of February
13, 2003, by and among Zoltek Companies, Inc., Zoltek
Corporation, Cape Composites, Inc., Engineering Technology
Corporation, Zoltek Properties, Inc. and Southwest
Bank of St. Louis, filed as Exhibit 10.1 to Registrants
Current Report on Form 8-k dated February 18, 2003 is
incorporated herein by reference.10.4
    
    
    Zoltek Companies, Inc. 2003 Long-Term Equity Incentive
Plan, filed as Appendix A to Registrants definitive proxy
statement for the 2002 Annual Meeting of Shareholders*10.5
    
    
    Second Amendment to Credit Agreement, dated as of January
13, 2003, by and among Zoltek Companies, Inc., Zoltek
Corporation, Cape Composites, Inc., Engineering Technology
Corporation, Zoltek Properties, Inc. and
Southwest Bank of St. Louis filed as Exhibit 10.14 to
Registrants Annual Report on Form 10-K for the fiscal year
ended September 30, 2003, is incorporated herein by this
reference10.6
    
    
    Zoltek Companies, Inc. 2008 Director Incentive Plan, filed
as Appendix A to the Registrants Proxy Statement on
Schedule 14A filed on January 2, 2008 and incorporated
herein by this reference.*10.7
    
    
    Zoltek Companies, Inc. 2008 Long Term Incentive Plan, filed
as Appendix B to the Registrants Proxy Statement on
Schedule 14A filed on January 2, 2008 and incorporated
herein by this reference.*10.8
    
    
    Employment Agreement, dated March 1, 2008, between the
Registrant and Karen Bomba, filed as Exhibit 10.1 to the
Registrants Quarterly Report on Form 10-Q for the quarter
ended March 31, 2008 and incorporated herein by reference.10.9
    
    
    Employment Agreement, dated November 26, 2008, between the
Registrant and Andrew W. Whipple, filed as Exhibit 10.10 to
the Registrants Annual Report on Form 10-K for the fiscal
year ended September 30, 2008, is incorporated herein by
this reference21
    
    
    Subsidiaries of the Registrant filed as Exhibit 21 to the
Registrants Annual Report on Form 10-K for the fiscal year
ended September 30, 2007 and incorporated herein by
reference.23.1
    
    
    Consent of Ernst & Young LLP.23.2
    
    
    Consent of Grant Thornton LLP.31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as
amended is filed herewith31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as
amended is filed herewith32.1
    
    
    Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 is filed herewith32.2
    
    
    Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 is filed herewith
 
 *
    
    Management compensatory plan or arrangement  58