ST. LOUIS, May 20 /PRNewswire-FirstCall/ -- Zoltek Companies, Inc.
(Nasdaq: ZOLTE) today announced its complete operating results for second
quarter of its 2005 fiscal year.  This report had been delayed because Zoltek
needed additional time to address unexpected financial accounting and
reporting issues related to the issuance of convertible debt in January, March
and October of 2004 and February 2005.  After carefully reviewing the matter,
Zoltek's management determined that the conversion feature and warrants to
purchase common stock associated with these instruments should be classified
as derivative liabilities, resulting in possible non-cash expense or income
arising from fluctuations in the market value of the Company's shares and
corresponding changes in the fair value of associated convertible debentures
and warrants and amortization expense associated with debt discount.
    "Zoltek management had concluded that the Company was obliged to comply
with the derivative accounting regulations, even though this may make it more
difficult for shareholders and others to evaluate the Company's financial
results," Zsolt Rumy, Zoltek's Chairman and Chief Executive Officer said.  He
added that shareholders should be prepared for the fact that the accounting
treatment could cause wide swings in reported results that have no bearing on
cash flows or underlying business fundamentals.  Moreover, shareholders should
keep in mind that the accounting treatment will result in "inverse
fluctuation" between the performance of the Company's stock price and reported
results of operations.  In future periods, further appreciation in share
prices -- while clearly desirable from a shareholder perspective -- would
result in substantial charges in the Company's income statements.
    For this reason, Rumy said that he would concentrate his remarks on the
Company's operating results rather than its net results for the just completed
quarter and next several quarters.
    For the quarter ended March 31, 2005, Zoltek reported that net sales
increased 37% to $15.8 million, from net sales of $11.5 million in the second
quarter of fiscal 2004.  For the first six months of fiscal 2005, Zoltek's net
sales increased 48% to $29.3 million compared to $19.7 million of sales in the
corresponding period of the prior fiscal year.  Carbon fiber sales accounted
for most of the increased sales for the quarter and six months.
    For the three months ended March 31, 2005, Zoltek reported an operating
loss from continuing operations of $2.0 million, compared to an operating loss
from continuing operations of $1.3 million in the second quarter of fiscal
2004.  For the six months ended March 31, 2005, Zoltek's operating loss from
continuing operations was $3.6 million, compared to an operating loss from
continuing operations of $4.0 million in the first six months of fiscal 2004.
Zoltek's operating losses from continuing operations during the first six
months of fiscal 2005 resulted in large measure from its capacity growth
initiatives.  The Company incurred start-up costs and production
inefficiencies associated with the restart of its Abilene, Texas carbon fibers
manufacturing facility, which had been idled for four years, and the expansion
of its acrylic precursor production capacity at its plant in Hungary.  For
example, management estimates that approximately $1.3 million and $3.2 million
of the operating losses reported from continuing operations for the three and
six months ended March 31, 2005, respectively, were attributable to the start-
up and post start-up operating inefficiency of the installed carbon fiber
lines in its Abilene facility.
    "We are working our way through some start-up problems.  We remain
confident that we can meet the rising demand for our carbon fibers and reach
break-even and, ultimately, begin to make a profit with our existing
production facilities when we are fully operational," Rumy said.  "The demand
for our fibers continues to be strong and, for the foreseeable future, the
only practical limitation on our sales is our ability to produce.  Along with
the restart of the Abilene facility, we continue to implement our program to
increase carbon fibers capacity in Hungary by 1,000 tons per year."
    He added:  "In order for Zoltek to refinance its debt and raise sufficient
funds to restart the Abilene facility, add new precursor capacity and to
increase the carbon fiber capacity, it was necessary for Zoltek to complete a
series of convertible debt financing transactions.  We were fortunate to have
accessed the needed capital.  However, the derivative accounting for these
transactions is complex and has the potential to cause very significant
fluctuations in Zoltek's financial performance until all the debentures are
converted and the warrants are exercised.  In the end, however, upon
settlement of the derivative liabilities through conversion or exercise, such
liabilities will be reclassified to equity.  There will be no impact on our
cash flows."
    In view of the accounting treatment mentioned above, the Company announced
that its financial results for the fiscal year ended September 30, 2004 and
interim periods ended June 30, September 30 and December 31, 2004 would be
restated to reflect additional non-operating gains and losses related to the
classification and accounting for the conversion feature and the related
warrants to purchase the Company's common stock associated with convertible
debt issued by the Company in January, March and October 2004.  As a result of
the restatement, the Company intends to file an amended Form 10-K and amended
Form 10-Q reports for the periods affected by the restatement.
    As a result of the delay in filing Zoltek's Form 10-Q for the fiscal
quarter ended March 31, 2005, on May 18, 2005 Zoltek received a notification
from Nasdaq that it is not in compliance with the filing requirements for
continued listing on Nasdaq, and that its common stock is therefore subject to
delisting from the Nasdaq National Market.  In addition, as of today Nasdaq
added a fifth character, "E," to the Company's trading symbol "ZOLT" to denote
the filing delinquency.  Zoltek expects to file the Form 10-Q shortly and
believes that, upon that filing it will be in compliance with all applicable
continued listing requirements.  The Company will seek to resolve the Nasdaq
action informally with its staff.  If that is unsuccessful, it intends to
submit a timely request for a hearing before a Nasdaq Listing Qualifications
Panel, which request will stay delisting action pending the hearing and a
determination by the Nasdaq Listing Qualifications Panel.  However, there can
be no assurance that the Panel will grant Zoltek 's request for continued
listing.
    Zoltek Companies, Inc. will host a conference call to review second
quarter 2005 results and answer questions on Monday, May 23, 2005, at 10:00 am
CT.  The conference dial-in number is (719) 457-2661.  The confirmation code
is 2349135.  Individuals who wish to participate should dial in five minutes
prior to the scheduled start time.

     For further information contact:
     Zsolt Rumy, CEO or Kevin Schott, CFO
     3101 McKelvey Road
     St. Louis, MO 63044
     (314) 291-5110

    This press release contains forward-looking statements, which are based
upon the current expectations of the Company.  Because these forward-looking
statements are inherently subject to risks and uncertainties, there are a
number of factors that could cause the Company's plans, actions and actual
results to differ materially.  Among these factors are the Company's ability
to: re-activate its formerly idle manufacturing facilities on a timely and
cost-effective basis, to meet current order levels for carbon fibers;
successfully add new capacity for the production of carbon fiber and precursor
raw material; execute plans to exit its specialty products business and reduce
costs; achieve profitable operations; maintain its Nasdaq National Market
listing and raise new capital and increase its borrowing at acceptable costs;
manage changes in customers' forecasted requirements for the Company's
products; continue investing in application and market development;
manufacture low-cost carbon fibers and profitably market them; and penetrate
existing, identified and emerging markets.  The timing and occurrence (or non-
occurrence) of transactions and events that determine the future effect of
these factors on the Company, as well as other factors, may be beyond the
control of the Company.  The Company undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date of
this press release.

    Zoltek is an applied technology and materials company.  Zoltek's Carbon
Fiber and Technical Fiber Business Units are primarily focused on the
manufacturing and application of carbon fibers used as reinforcement material
in composites, oxidized acrylic fibers for heat/fire barrier applications and
aircraft brakes, and composite design and engineering to support the Company's
materials business.  Zoltek's Hungarian-based Specialty Products Business
Unit, which the Company is pursuing plans to exit, manufactures and markets
industrial materials.



                            ZOLTEK COMPANIES, INC.
                          SUMMARY FINANCIAL RESULTS
                 (Amounts In Thousands Except Per Share Data)

                                                            (Unaudited)
                                                        Three Months Ended
                                                              March 31
                                                       2005           2004
                                                                   (Restated)

    Net sales                                        $15,772        $11,537
    Cost of sales, excluding
     available unused capacity costs                  14,860          9,523
    Available unused capacity costs                      524          1,259
    Application and development costs                    824            758
    Operating loss from continuing operations         (2,048)        (1,345)
    Interest expense and amortization
     of financing fees                                (3,762)        (1,203)
    Gain (loss) on value of warrants
     and conversion feature                            9,128         (5,574)
    Income tax expense                                   104            111
    Net income (loss) from continuing operations       2,240         (8,505)
    Net loss from discontinued operations,
     net of taxes                                        (94)        (1,192)
    Net income (loss)                                  2,146         (9,697)

    Net income (loss) per share:
      Basic income (loss) per share:
        Continuing operations                          $0.13         $(0.52)
        Discontinued operations                        (0.01)         (0.07)
          Total                                        $0.12         $(0.59)
      Diluted income (loss) per share:
        Continuing operations                          $0.12         $(0.52)
        Discontinued operations                        (0.01)         (0.07)
          Total                                        $0.11         $(0.59)

    Weighted average common shares outstanding
     - basic                                          17,783         16,341
    Weighted average common shares outstanding
     - diluted                                        23,425         16,341



                            ZOLTEK COMPANIES, INC.
                    SUMMARY FINANCIAL RESULTS (Continued)
                 (Amounts In Thousands Except Per Share Data)


                                                         Six Months Ended
                                                             March 31
                                                       2005           2004
                                                                   (Restated)

    Net sales                                        $29,290        $19,688
    Cost of sales, excluding available
     unused capacity costs                            27,256         16,526
    Available unused capacity costs                    1,049          2,686
    Application and development costs                  1,652          1,504
    Operating loss from continuing operations         (3,690)        (3,968)
    Interest expense and amortization of
     financing fees                                   (6,617)        (1,859)
    Loss on value of warrants and
     conversion feature                              (16,426)        (5,574)
    Income tax expense                                   219            189
    Net loss from continuing operations              (27,350)       (11,750)
    Net loss from discontinued operations,
     net of taxes                                       (467)        (1,638)
    Net loss                                         (27,817)       (13,388)

    Net loss per share:
      Basic and diluted loss per share:
        Continuing operations                         $(1.60)        $(0.72)
        Discontinued operations                        (0.03)         (0.10)
          Total net loss                              $(1.63)        $(0.82)

    Weighted average common shares outstanding        17,107         16,326

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