TOR MINERALS INTERNATIONAL INC (Form: 10-K, Received: 03/24/2010 14:03:26)

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

FORM 10-K

(Mark One)

[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

[_]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-17321

TOR Minerals International, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

74-2081929
(I.R.S. Employer Identification No.)

722 Burleson Street

Corpus Christi , Texas
(Address, including zip code, of principal executive offices)

(361) 883-5591
Registrant's telephone number, including area code)

78402

Securities registered under section 12(b) of the Act:

Title of each class
Common Stock, $0.25 par value

Name of exchange on which registered
NASDAQ Capital Market

Securities registered pursuant to section 12(g) of the Act: None .

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act of 1933. Yes [_] No [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act of 1934. Yes [_] No [X]

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ _]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this form 10-K. [_]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company as defined in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ _]

Accelerated filer [_]

Non-accelerated filer [_]

Smaller reporting company [X]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ _] No [X]

The aggregate market value of the common stock, the Registrant's only common equity, held by non-affiliates of the registrant (based upon the closing sale price of the registrant's Common Stock on the NASDAQ Capital Market tier of the NASDAQ Stock Market on June 30, 2009) was approximately $1,725,283. Shares of common stock held by each executive officer and director and by each entity that owns 10% or more of the outstanding common stock have been excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

As of March 16, 2010, there were 1,891,354 shares of the registrant's common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: Portions of the definitive proxy statement to be filed with the Securities and Exchange Commission relative to the Company's 2010 Annual Meeting of Stockholders are incorporated by reference into Part III of this Report.

TOR MINERALS INTERNATIONAL, INC. Annual Report on Form 10-K Table of Contents
		Page
PART I
Item 1.	Business	3
Item 1 A.	Risk Factors	9
Item 1 B.	Unresolved Staff Comments	16
Item 2.	Properties	16
Item 3.	Legal Proceedings	17
Item 4.	Submission of Matters to a Vote of Security Holders	17
PART II
Item 5.	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	19
Item 6.	Selected Financial Data	22
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 8.	Financial Statements and Supplementary Data	45
Item 9.	Changes In and Disagreements With Accountants on Accounting and Financial Disclosure	45
Item 9 A.(T)	Controls and Procedures	45
Item 9 B.	Other Information	46
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	46
Item 11.	Executive Compensation	47
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	47
Item 13.	Certain Relationships and Related Transaction, and Director Independence	47
Item 14.	Principal Accountant Fees and Services	47
PART IV
Item 15.	Exhibits and Financial Statement Schedules	48
SIGNATURES		52

Forward-Looking Statement

This Annual Report on Form 10-K (the "Report"), including "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Item 7, contains forward-looking statements about the business, financial condition and prospects of the Company. The actual results of the Company could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties including, without limitation, changes in demand for the Company's products, changes in competition, economic conditions, fluctuations in exchange rates, changes in the cost of energy, fluctuations in market price for TiO ₂ pigments, interest rate fluctuations, changes in the capital markets, changes in tax and other laws and governmental rules and regulations applicable to the Company's business, and other risks indicated in the Company's filing with the Security and Exchange Commission, including those set forth in this report under Item 1A. Risk Factors - Risks Related to Our Business. These risks and uncertainties are beyond the ability of the Company to control, and, in many cases, the Company cannot predict all of the risks and uncertainties that could cause its actual results to differ materially from those indicated by the forward-looking statements. When used in this report, the words "believes," "estimates," "plans," "expects," "anticipates" and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements.

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PART I

Item 1.

Business

General

TOR Minerals International, Inc. ("TOR", "we", "us", "our" or the "Company") is a global specialty chemical company engaged in the business of manufacturing and marketing mineral products for use as pigments, pigment extenders and flame retardants used in the manufacture of paints, industrial coatings, plastics, catalysts and solid surface applications.

We were organized by Benilite Corporation of America ("Benilite") in 1973. Benilite, which was incorporated in Delaware in 1969, developed the then patented "Benilite process" for producing synthetic rutile ("SR"), the principal ingredient used in the manufacture of HITOX® ( hi gh-grade t itanium di ox ide), from ilmenite ore. Benilite licensed and helped design several synthetic rutile plants located throughout the world which utilize this process (including the plant located in Ipoh, Malaysia, owned by the Company, as discussed below). Benilite concluded that synthetic rutile produced by the Benilite process could be further processed into a buff-colored titanium dioxide pigment having many of the characteristics of standard white titanium dioxide at a significant cost savings. These efforts by Benilite were the beginning of the Company's business. In 1980, the subsidiary of Benilite engaged in the development of HITOX was spun off by Benilite to its shareholders. In December 1988, the Company became a publicly owned company after completing a public offering of 1.38 million shares of its common stock. Our stock symbol is TORM.

Going Concern

The consolidated financial statements included in this report have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business, as to which uncertainty exists. As discussed in the Liquidity section of this report on page 28, we have significant borrowings which require, among other things, compliance with certain financial covenants, specifically a Consolidated Fixed Charge Ratio and a Consolidated Funded Debt to EBITDA Ratio, on a quarterly basis. As a result of the operating losses incurred throughout 2008, we were not in compliance with these ratio covenants under our US Credit Agreement (the "Credit Agreement") with Bank of America, N.A. (the "Bank") for the quarters ended December 31, 2008 and March 31, 2009. The Company and the Bank have amended the Credit Agreement to extend the maturity date from April 1, 2009 to August 15, 2010. The Company does not currently have the cash resources or access to alternative financing to repay the Bank. As described in Note 1 to our consolidated financial statements, there is substantial doubt about the Company's ability to continue as a going concern, as noted in the audit opinion with respect to our 2010 financial statements. Our 2010 financial statements do not include any adjustment that might result from the outcome of this uncertainty.

Global Headquarters

We are headquartered in Corpus Christi, Texas, USA. This location houses senior management, customer service, logistics, and corporate research and development/technical service laboratories. Our financial and accounting functions also operate from this location. Our principal offices in Corpus Christi are located at 722 Burleson Street, Corpus Christi, Texas 78402, and our telephone number is (361) 883-5591. Our website is located at www.torminerals.com. Information contained in our website or links contained on our website is not part of this Annual Report on Form 10-K.

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US Operation

Our US manufacturing plant, located in Corpus Christi, Texas, is situated on the north side of the Corpus Christi Ship Channel and has its own dock frontage at the plant. We also utilize the Bulk Terminal, operated by the Port of Corpus Christi Authority, to discharge bulk shipments of SR and Barite from cargo vessels directly into trucks for delivery to our plant. The site has its own railhead and easy access to major highways linking it to the rest of the US and to Mexico. HITOX®, BARTEX®, HALTEX®, OPTILOAD® and TIOPREM® are all produced at this location.

Asian Operation

We acquired our Asian Operation, TOR Minerals Malaysia, Sdn. Bhd. ("TMM"), in 2000. Located in Ipoh, Perak, Malaysia, close to the port of Lumut, TMM is a processor of local ilmenite, upgrading it to SR. This material is the basic building block for HITOX, but also is used as feed stock for white TiO ₂ and used as a component in welding rod flux. The site also has its own processing lines to manufacture HITOX and TIOPREM. The sales team and the quality assurance laboratory for Asia are located at the offices in Ipoh.

European Operation

In 2001, we acquired our European Operations, TOR Processing and Trade, B.V. ("TPT"). Situated within reach of the major shipping port of Rotterdam, TPT, located in Hattem, Netherlands, specializes in the manufacturing of premium alumina products ("ALUPREM®") for use worldwide. Customer applications, quality assurance laboratory and support facilities for Europe are located in Hattem. TOR Minerals' global headquarters in Texas provides customer service and shipping logistics for TPT's North American customers.

Our Products

TOR and our subsidiaries operate in the business of pigment manufacturing and related products in three geographic segments. All United States manufacturing is done at the facility located in Corpus Christi, Texas. Foreign manufacturing is done by the Company's wholly-owned subsidiaries, TMM, located in Malaysia and TPT, located in the Netherlands. Our products are currently marketed in the United States and in more than 60 other countries. We sell our products through a network of direct sales representatives employed by the Company and independent stocking distributors in the United States, as well as distributors and agents overseas. Our sales representatives sell directly to end-users and provide marketing support and guidance for our independent distribution network.

As noted in "Management's Discussion and Analysis of Financial Condition and Results of Operations", our global HITOX sales decreased 23% in 2009 and 11 % in 2008 primarily due to a decrease in volume related to the decline in the global economy. Due to the close correlation between HITOX and the construction industry, our US HITOX sales declined 19% and 11% in 2009 and 2008, respectively, following three years of relatively flat sales in the US.

Sales of HITOX in Asia declined 36% and 5% in 2009 and 2008, respectively, primarily due to the impact of the economy in both Asia and the US as HITOX is used to manufacture a variety of products for export to the US. In addition, the completion of new infrastructure construction in China related to the 2008 Olympic Games resulted in reduced HITOX demand in China and further impacted sales. The decline in 2009 and 2008 followed two years of relatively flat sales in Asia.

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While there is no way to accurately predict the impact of the global recession on our future HITOX sales, we anticipate market conditions will improve overtime. We saw significant improvements in our HITOX sales during the fourth quarter of 2009, which has continued during the first two months of 2010, although it is difficult to ascertain whether this is a continuing trend due to the short time period involved of increased sales during these two months. In addition to improving market conditions in the US and Asia, HITOX sales are benefiting from new niche markets and customers, which we are hopeful will generate additional revenue going forward.

Following is a summary of our consolidated products sales for 2009, 2008 and 2007 (in thousands), exclusive of inter-company sales:

Product		2009			2008			2007
HITOX	$	10,111	42%	$	13,182	52%	$	14,746	53%
ALUPREM		9,450	39%		7,425	30%		8,493	30%
BARTEX		2,601	11%		3,123	12%		3,215	11%
HALTEX / OPTILOAD		1,646	7%		1,219	5%		996	4%
TIOPREM		12	<1%		30	<1%		-	0%
SR		-	0%		-	0%		12	<1%
OTHER		373	1%		325	1%		499	2%
Total	$	24,193	100%	$	25,304	100%	$	27,961	100%

HITOX

Our principal product, HITOX, a light buff-colored titanium dioxide pigment, is made from SR. Titanium dioxide is the most widely used primary pigment in paints, coatings, plastics, paper and many other types of products. Titanium dioxide, or TiO ₂ , gives opacity and whiteness to end products. Most TiO ₂ is white; however, HITOX is a unique color pigment that is beige. HITOX occupies a special marketing niche as a high quality, color pigment that can replace some of the other more costly color pigments and some of the white TiO ₂ . HITOX pigments are used by major international paint and plastics manufacturers. Uses include architectural paints, primers, metal finishes and coatings, caulks and sealants, floor tiles and plastic profiles, sheets and film.

HITOX, manufactured at plants located in both the US and Malaysia, utilizes SR manufactured at TMM as its primary raw material. The manufacturing process for producing HITOX is not simple and the details of the process and the operating parameters of the systems are not widely known. The HITOX manufacturing process is not patented.

In May 2008, we commissioned a new HITOX production process in Malaysia. The new process, which replaced fuel oil with electricity as the primary energy source, significantly reduced HITOX manufacturing costs at the Malaysian facility.

ALUPREM

Our alumina trihydrate ("ATH") products were expanded in 2001 with the introduction of ALUPREM, which is manufactured at our European operation, TPT, in the Netherlands. ALUPREM, which stands for premium alumina, was developed by TOR's President and Chief Executive Officer, Dr. Olaf Karasch. The details of the manufacturing process and the operating parameters of the systems are not widely known. The ALUPREM manufacturing process is not patented.

ALUPREM products are used for color critical applications as fillers and flame retardants, such as Solid Surface/Onyx and performance driven uses such as specialty wire and cable insulation, catalysts, high-tech polishing, pigments and specialty papers.

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BARTEX

BARTEX is manufactured at our US operation from high grade barites (barium sulfate) utilizing a milling process. Barium Sulfate's high density is one of the primary reasons it is used in coatings. As an inert extender pigment, BARTEX, characterized as ultra fine with high brightness and narrow particle size distribution, gives weight and body to products ranging from powder coatings used in appliance and office furniture finishes to rubber products such as carpet and curtain backings and plastics including billiard balls and poker chips. BARTEX allows more expensive prime white pigments, such as white TiO ₂ , to be supplemented or replaced to some degree. BARTEX is manufactured in several different grades which are differentiated by average particle size and whiteness.

HALTEX / OPTILOAD

HALTEX, manufactured at our US operation, is produced from Bayer grade alumina trihydrate (ATH) using some of the same production technologies as our other products. It is an environmentally-friendly flame retardant, smoke suppressant filler used in plastic and rubber products.

HALTEX features high purity and engineered particle sizing for optimum physical properties. The quality of our HALTEX is suitable for a broad range of technical applications including SMC/BMC thermoset molding compounds, thermoplastic profiles, electrical wire & cable insulation, mining conveyor belts, specialty coatings as well as adhesives and sealants.

In 2008 we introduced and began commercial sales of a new line of low viscosity ATH products under the name OPTILOAD. The new line allows for higher filler loadings (compared to standard products) into SMC/BMC and other plastic compounds to meet higher levels of flame retardant and smoke suppressant behavior. TOR Minerals foresees a growing demand for OPTILOAD products in line with more stringent flame retardant/smoke suppressant legislative regulations, including the possible future elimination of halogen flame retardants.

TIOPREM

TIOPREM, manufactured at our US and Malaysian operations, is produced from a proprietary process based on modified SR feedstock made at TOR Minerals' Malaysian plant. Introduced in 2008, TIOPREM is a series of high performance, heat stable colored TiO2 hybrid pigments offering cost savings through the partial replacement of expensive color pigments and white TiO2 in plastics and specialty paints & coatings. End use applications include engineered plastics, laminates, window profiles, plastic lumber, roofing granules and ceramic coatings.

SYNTHETIC RUTILE

SR, the basic building block for HITOX and TIOPREM, is manufactured at our Asian operation using the Benilite process for producing SR. Ilmenite, the raw material used in the manufacturing process, is first treated in a reduction kiln and then subjected to leaching in hydrochloric acid where soluble iron and other impurities are removed. SR is also used as feed stock for white TiO ₂ and as a component in welding rod flux.

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Raw Materials and Energy

We utilize a variety of raw materials in the manufacture of our products. Outlined below are the principal raw materials for TOR's products.

SR: Titanium dioxide pigment can be produced using ilmenite, natural rutile, SR or titanium slag. SR is produced from ilmenite and typically has a titanium dioxide content ranging from 92% to 95%. Ilmenite is a black material found in natural mineral deposits and typically has a titanium dioxide content ranging from 44% to 60%. Ilmenite is found throughout the world, including China, India, Australia and North America. In Malaysia, ilmenite historically has been recovered incidental to tin mining, but as tin mining has decreased in Malaysia, the source and quality of ilmenite has been declining.

As a result, our current supply is mainly obtained from available stockpiles around Malaysia with virtually no replenishment. The average price for the local ilmenite has been going up and increased approximately 7% in 2009. Although we have been actively developing alternative sources of supply for ilmenite, we expect to utilize offshore material only when necessary as the cost is much higher due to additional freight and handling.

HITOX: TMM is the Company's sole supplier of SR, the raw material for HITOX and TIOPREM. The cost of SR has decreased approximately 7% in 2009 after an increase of approximately 14% in 2008 primarily due to a reduction in the cost of energy. Other than TMM, there is only one other available source for the quality of SR required for the production of HITOX. If supplies of SR from TMM are interrupted and we are unable to arrange for SR from this alternative source, our ability to produce HITOX would likely suffer, which would adversely affect our business.

ALUPREM: Alumina trihydrate, the chief raw material for ALUPREM, is manufactured throughout the world including Europe and North America. The ATH material used for chemicals, fillers and flame-retardants is produced by the Bayer alumina process. This grade of ATH accounts for approximately 95% of the total ATH produced worldwide. The Company purchases ATH from various suppliers in Europe. The average prices for ATH remained stable in both 2009 and 2008.

BARTEX: High grade barites (barium sulfate) are mined in China, India, Turkey and Mexico and are the raw materials used to produce BARTEX. The average price for this grade of barites increased approximately 12% in 2009 and 19% in 2008.

HALTEX: Bayer grade aluminum hydroxide, used to produce HALTEX, is purchased from one of four suppliers located in the US. The average price for the Bayer grade aluminum decreased approximately 24% in 2009, following an increase of approximately 6% in 2008.

ENERGY: We are highly dependent on energy in our manufacturing processes. Natural gas is the predominate source of energy in Corpus Christi. Electricity is the predominate source of energy at TMM and at TPT. The average energy price, primarily natural gas, in Corpus Christi decreased approximately 53% in 2009 after an increase of approximately 26% in 2008. Average energy prices at TMM, primarily electricity, remained stable in 2009 and 2008. Energy prices at TPT, primarily electricity, increased approximately 22% in 2009 and remained stable in 2008.

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Research and Development / Technical Services

Our expenditures for research and development and technical services remained relatively flat in both 2009 and 2008. We conduct our research and technical service primarily at our facilities in Corpus Christi and our efforts are principally focused on process technology, product development and technical service to our customers. There are no research and development costs borne directly by our customers.

Marketing and Customers

Sales and Marketing Department Organization

TOR's sales efforts are managed out of Corpus Christi, Texas, by the Executive Vice President. We have sales offices at our US, Asian and European operations. The Executive Vice President has a number of area and product managers that work for the Company and help him both deal directly with customers and manage agent and distributor relations.

Independent Distributors and Agents

We utilize a network of both domestic and foreign independent distributors and agents. Within North America there are multiple agents serving us on either a regional or a product basis. In most other countries there is one stocking distributor who purchases directly from TOR and resells in their territory. In certain large countries there may be multiple distributors. In this way we get the benefit of sales specialists with specific trade knowledge in each country.

Customers

Our end use customers include companies in the paints, coatings, plastics, catalyst and solid surface industries. For the year ended December 31, 2009, BASF Corporation represented 18.2% of our total consolidated sales. For the years ended December 31, 2008 and 2007, no single customer accounted for 10% or more of our total consolidated sales.

Geographic Distribution

We sell our products globally and market them in North, Central and South America, Asia and Europe to customers located in more than 60 countries. No individual foreign country accounted for 10% or more of our foreign sales in 2009, 2008 or 2007. Sales to external customers are attributed to geographic area based on country of distribution.

A summary of the Company's sales by geographic area is presented below:

(In thousands)		2009			2008			2007
Summary by Geographic Area		Sales Revenue	% of Total Sales		Sales Revenue	% of Total Sales		Sales Revenue	% of Total Sales
United States	$	14,391	59%	$	12,796	51%	$	16,237	58%
Canada, Mexico & South/Central America		2,115	9%		2,536	10%		2,966	11%
Pacific Rim		1,933	8%		3,048	12%		2,273	8%
Europe, Africa & Middle East		5,754	24%		6,924	27%		6,485	23%
Total Sales	$	24,193	100%	$	25,304	100%	$	27,961	100%

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Competition

We experience competition with respect to each of our products. Each product sold by TOR is in direct competition in the market with products which are similar. In order to maintain sales volumes, we must rely on our ability to manufacture and distribute products at competitive prices. We believe that quality, delivery on schedule and price are the principal competitive factors. However, due to the nature of our main product, HITOX, and the size of our company as compared to others in the industry, we are not price leaders, but are price followers and while we generally attempt to increase prices to offset cost increases, these actions tend to lag the cost increases.

Competitors range from large corporations with a full line of production capabilities and products to small local firms specializing in one or two products. A number of these competitors are owned and operated by large diversified corporations. Many of these competitors, such as E.I. DuPont de Nemours & Co., Inc., Millennium Chemicals, Kronos Inc. and J.M. Huber, have substantially greater financial and other resources, and their share of industry sales is substantially larger than TOR's.

Environmental Regulations and Product Safety

Our plant in Corpus Christi is subject to regulations promulgated by the Federal Environmental Protection Agency ("EPA") and state and local authorities with respect to the discharge of substances into the environment. We believe that the Corpus Christi plant is in compliance with all applicable federal, state and local laws and regulations relating to the discharge of substances into the environment, and we do not expect that any material capital expenditures for environmental control facilities will be necessary in order to continue such compliance.

TMM's SR plant is required to be licensed by the Malaysian Atomic Energy Licensing Board ("AELB") because the ilmenite used by the plant is derived from tin tailings, which are a source of small amounts of monazite and hafnium which are radioactive rare earth compounds. As part of the licensing requirements, TMM is required to maintain a monitoring program for various emissions from the plant. The monitoring is done in-house by TMM personnel and results are reported to the AELB as required. The plant is subject to various other licensing and permitting requirements, all of which TMM is currently in compliance.

TPT operates an alumina processing plant in Hattem, the Netherlands, and is governed by rules promulgated by both The Netherlands and the European Community. We believe that the Hattem plant is in compliance with all environmental and safety regulations.

HITOX and the ingredient from which it is produced, SR, are non-toxic and non-hazardous. HITOX complies with all applicable laws and regulations enforced by the United States Food and Drug Administration (the "FDA") and is an acceptable component of packaging materials used in direct contact with meat, poultry and other food products; of paints used in incidental contact with such products; and of other packaging materials, such as paper and paperboard. HITOX also complies with current color additive regulations promulgated by the FDA. In addition, HITOX has been tested for compliance with the applicable standards promulgated by the National Sanitation Foundation (the "NSF"), and we are authorized to use applicable NSF seals and/or logos in connection with the marketing of HITOX. This authorization is significant in that end users of titanium dioxide pigments who wish their products to be NSF approved must use component materials that also meet NSF standards.

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Backlog

We normally manufacture our pigment products in anticipation of, and not in response to, customer orders and generally fill orders within a short time after receipt. Consequently, we seek to maintain adequate inventories of our pigment products in order to permit us to fill orders promptly after receipt. As of March 16, 2010, we did not have a significant backlog of customer orders.

Seasonality

Our business is closely correlated with the construction industry and its demand for materials that use pigments, such as paints and plastics. This has generally led to higher sales in our second and third quarters due to increases in construction and maintenance during warmer weather. Also, pigment consumption is closely correlated with general economic conditions. When the economy is in an expansionary state, there is typically an increase in pigment consumption while a slow down typically results in decreased pigment consumption. When the construction industry or the economy is in a period of decline, TOR's sales and profit are likely to be adversely affected.

Patents and Trademarks

We currently hold no patents on the processes for manufacturing any of our products. Ten of TOR's products, HITOX (4/30/2015), ALUPREM (7/29/2013), HALTEX (7/28/2012), BARTEX (2/24/2017), TIOPREM (8/5/2014), OPTILOAD (10/27/2015), BARYPREM® (8/30/2016), TITOX® (5/26/2012), TOR BRIGHT® (9/10/2014) and TOR COAT® (9/10/2013), are marketed under names which have been registered with the United States Patent and Trademark Office. Trademarks are also registered in certain foreign countries.

Employees

As of December 31, 2009, our US operation had 23 full-time employees, our European operation employed 18, and our Asian operation had 93 employees, of which 63 are covered by a collective bargaining agreement with an in-house union. We have not experienced any work stoppages and believe that our relations with all our employees are good.

Available Information

TOR's internet website address is www.torminerals.com. Our Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 are available through our internet website as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. Our internet website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.

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Item 1 A.

Risk Factors

In addition to the factors discussed in the Forward-Looking Statement section provided at the beginning of this Annual Report on Form 10-K, the following are important factors that could cause actual results or events to differ materially from those contained in any forward-looking statements made by or on behalf of the Company. In addition, you should know that the risks and uncertainties described below are not the only ones we face. Unforeseen risks could arise and problems or issues that we now view as minor could become more significant. If we were unable to adequately respond to any risks, our business, financial condition and results of operations could be materially adversely affected. Additionally, we cannot be certain or give any assurances that any actions taken to reduce known risks or uncertainties will work.

• Our principal lender for our US operations has demanded repayment of all of the indebtedness that we owe the lender and we do not have the liquidity or alternative financing arrangements to pay off this lender. As a result, there is a substantial risk that we may not be able to continue as a going concern.

As further described herein under "Item 7 Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity", the Company has a Credit Agreement with Bank of America, N.A. (the "Bank"), under which approximately $2,100,000 of indebtedness is owed by us to the Bank as of December 31, 2009. The accounts receivable and inventory of our US operations have been pledged to the Bank as security for such indebtedness. As a result of our failure to comply with a cash flow financial covenant in our Credit Agreement as of December 31, 2008 and March 31, 2009, the Bank notified us of its decision to terminate the Credit Agreement, however, the Bank has extended the maturity date on the Credit Agreement to August 15, 2010. The Company is working diligently to establish a corporate lending relationship with a new financial institution for the Company's US operations prior to August 15, 2010, the revised maturity date under the Credit Agreement, to refinance outstanding debt with the Bank prior to its revised maturity. However, there can be no assurance that the Company will be able to successfully refinance the debt due to the Bank. If the Company is unable to refinance the debt due to the Bank prior to its revised maturity or if the Company defaults under the terms of the Credit Agreement prior to its revised maturity and the Bank were to accelerate the maturity of such indebtedness, the Company does not have sufficient liquidity to pay off the indebtedness owed to the Bank, and the Bank would be entitled to exercise all of its rights and remedies as a secured lender under the Credit Agreement.

In addition, the Company's two subsidiaries, TMM and TPT have short-term credit facilities and term loans at banks in Malaysia and the Netherlands, respectively. At December 31, 2009, TMM's borrowings under the credit facilities and term loans with HSBC Bank Malaysia, Bhd. ("HSBC") and RHB Bank, Bhd. ("RHB") totaled $332,000 and TPT's borrowings under the credit facility and term loans with Rabobank totaled $2,709,000. The credit facilities with HSBC, RHB and Rabobank are subject to demand provisions and are subject to certain subjective acceleration covenants based on the judgment of the banks. While the banks have made no indication that they will demand payment of the debt in Malaysia or in the Netherlands, there can be no assurances that this debt will not be called for payment. If it is called for repayment, we may be unable to refinance such indebtedness, and if we are unable, the lenders could foreclose on the assets of TMM and TPT.

Our ability to continue to operate as a going concern is dependent on our ability to improve our operating cash flows to a sufficient level, successfully negotiate with our US lending institution or establish a corporate lending relationship with a new financial institution, and/or raise sufficient new capital. There can be no assurance these changes in our operations or our financing initiatives will be successful.

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• Our foreign debt is subject to subjective acceleration provisions and demand provisions that allow our lending institutions to accelerate payment at any time. If our foreign debt were accelerated under the demand provisions, our working capital and financial condition would be severely impacted.

Our subsidiaries have loan agreements with banks in Malaysia and the Netherlands that provide short-term credit facilities and term loans. These borrowings are subject to certain subjective acceleration provisions based on the judgment of the banks and demand provisions that provide that the banks may demand repayment at any time. We believe such a demand provision is customary in Malaysia and the Netherlands for such facilities. At December 31, 2009, our foreign debt consisted of $1,213,000 under the short-term credit facilities and $1,950,000 under the term loans and financial lease agreements.

The foreign banks have made no indication that they will demand payment of any of our loans in Malaysia or the Netherlands; however, there can be no assurances that this debt will not be called in the future, particularly in light of the financial difficulties being currently experienced by the Company.

If demand is made by the banks, we may require additional debt or equity financing to meet our working capital and operational requirements or, if required, to refinance maturing or demanded indebtedness. Should we find it necessary to raise additional funds, we may find that such funds are either not available or available only on terms that are unattractive in terms of shareholders' interest, or both, and if this debt could not be repaid or refinanced, the banks could foreclose and sell our foreign operations or hold same as collateral security for these loans, and pursue collection against our guarantees of such loans which would adversely affect our financial condition and liquidity. (See "Liquidity, Capital Resources and Other Financial Information" on page 33).

• We may be delisted from the NASDAQ Capital Market if the price of our common shares drop under $1.00 per share.

Under NASDAQ rules, a stock listed on the NASDAQ Capital Market must maintain a minimum bid price of at least $1.00 per share. On September 15, 2009, we received notice from the NASDAQ Stock Market stating that for thirty (30) consecutive business days, the bid price of the Company's common stock had closed below the minimum $1.00 per share requirement for continued inclusion on NASDAQ under Marketplace Rule 5550(a)(2). The Company had until March 15, 2010 to regain compliance with the minimum bid price. As a result, the Company effected a one for five reverse stock split effective February 19, 2010, which resulted in the price of our common shares closing at an amount greater than $1.00 per share. If the trading price of our common stock falls below $1.00 again, we may not be able to take any measures to regain compliance, and our common stock may be delisted from the NASDAQ Capital Market.

- 12 -

• Our business is affected by global economic factors including risks associated with declining economic conditions.

Our financial results are substantially dependent upon overall economic conditions in the United States, the European Union and Asia. Declining economic conditions in all or any of these locations - or negative perceptions about economic conditions - could result in a substantial decrease in demand for our products and could adversely affect our business. Indeed, as a result of the current economic downturn, we have experienced decreased demand for many of our products. This, in turn, caused us to breach financial ratio covenants in our Credit Agreement for the quarters ended December 31, 2008 and March 31, 2009.

Uncertain economic conditions and market instability make it difficult for us, our customers and our suppliers to forecast demand trends. Continued declines in demand would place additional pressure on our results of operations. The timing and extent of any changes to currently prevailing market conditions is uncertain and supply and demand may be unbalanced at any time. As a consequence, at present, we are unable to accurately predict future economic conditions or the effect of such conditions on our financial conditions or results of operations, and we can give no assurances as to the timing, extent or duration of the current or future economic cycles impacting our industry.

• Costs of raw materials and energy have resulted, and may continue to result, in increased operating expenses and reduced results of operations.

We purchase large amounts of raw materials and energy for our manufacturing operations. The cost of these raw materials and energy, in the aggregate, represent a substantial portion of our operating expenses. The costs of raw materials and energy generally follow price trends of, and vary with the market conditions for crude oil and natural gas, which may be highly volatile and cyclical. Many raw material and energy costs have recently experienced significant fluctuations, reaching historically record high levels. Moreover, the fluctuation of the US dollar to other currencies adds to the volatility in raw material costs. There have been, and will likely continue to be, periods of time when we are unable to pass raw material and energy cost increases on to our customers quickly enough to avoid adverse impacts on our results of operations. For example, in 2008 we reduced production in the US approximately 31% primarily due to the increased cost of natural gas and freight related to shipping SR from Malaysia to our US operation Our results of operations have been, and could be in the future, significantly affected by increases and volatility in these costs. Cost increases also may increase working capital needs, which could reduce our liquidity and cash flow. In addition, when raw material and energy costs increase rapidly and are passed along to customers as product price increases, the credit risks associated with certain customers can be compounded. To the extent we increase our product sales prices to reflect rising raw material and energy costs, demand for products may decrease as customers reduce their consumption and use substitute products, which may have an adverse impact on our results of operations.

• Climate change poses both regulatory and physical risks that could adversely impact our results of operations.

In addition to the possible direct economic impact that climate change could have on us, climate change regulation could significantly increase our costs. Energy costs are a significant component of our overall costs, and climate change regulation may result in significant increases in the cost of energy.

- 13 -

• We have one primary source for SR and, if that source was not available, we could not produce our primary product, HITOX.

TMM is our primary source for SR. There is only one other available source for the quality of SR required for the production of HITOX. If supplies of SR from TMM are interrupted and we are unable to arrange for this alternative source, this could result in our inability to produce HITOX which accounted for approximately 42% of our sales for the year ended December 31, 2009.

• We are dependent on a limited number of customers and could experience significant revenue reductions if they use alternative sources.

We derive a significant portion of our revenue each quarter from a limited number of customers. Our top 10 customers accounted for 42%, 37% and 38% of our sales revenues in 2009, 2008 and 2007, respectively. As a result, a decrease in sales volume of any one of our top 10 customers could have a material impact on our business, operating results, and financial condition. For the year ended December 31, 2009, BASF Corporation represented 18.2% of our total consolidated sales, and the loss of this customer could have a material impact on our business, operating results and financial condition.

• Foreign currency fluctuations could adversely impact our financial condition.

Because we own assets located outside the United States and have revenues and expenses in currencies other than the US Dollar, we may incur currency transaction and translation losses due to changes in the values of foreign currencies and in the value of the US Dollar. Foreign currency exposure from transactions and commitments denominated in currencies other than the functional currency are managed by selectively entering into derivative transactions. Translation exposure associated with translating the functional currency financial statements of our foreign subsidiaries into US Dollars is generally not hedged. Upon translation to the US Dollar, operating results could be significantly affected by foreign currency exchange rate fluctuations. We cannot predict the effect of changes in exchange rate fluctuations upon future operating results. (See "Foreign Operations - Impact of Exchange Rate" on page 43).

• We borrow funds from time to time from members of our board of directors for working capital purposes.

In the past, we have had to borrow funds from members of our board of directors for working capital purposes. We most likely will require additional working capital loans in the future, but it is also possible that such loans from our board members would not be available because they have made no commitment to provide additional loans.

- 14 -

• We are required to make estimates and assumptions that may differ from actual results.

In preparing our financial statements in conformity with GAAP, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amount of revenues and expenses during the reporting period. Actual results may differ from previously estimated amounts under different conditions and assumptions.

• Our competitors are established companies that have greater experience than us in a number of crucial areas, including manufacturing and distribution.

There is intense competition with respect to each of our products. In order to maintain sales volume, we must consistently deliver high quality products on schedule at competitive prices. Our competitors range from large corporations with full lines of production capabilities and products, such as E. I. DuPont de Nemours & Co., Inc., Millenium Chemicals, Kronos, Inc., and J. M. Huber, to small local firms specializing in one or two products. The established companies have significantly greater experience than us in manufacturing and distributing products and have considerably more resources and market share. We may have difficulty in competing with these companies.

• Our US operation is located on the Gulf of Mexico coastline and could be adversely affected by hurricanes.

We may be subject to work stoppages for hurricanes, particularly during the period ranging from June to November. If a hurricane is severe and our Corpus Christi plant incurs heavy damage and prolonged downtime, which may not be fully covered by insurance, our financial results would be adversely affected.

• Doing business in foreign countries carries certain risks that are not found in doing business in the US.

We currently derive a portion of our revenues from operations in Malaysia and the Netherlands and we source our SR from Malaysia, which is the critical raw material we require for the production of our primary product, HITOX. We believe that currently the risks of doing business in Malaysia and the Netherlands are not significant, however, future risks of doing business in these countries which could result in losses against which we are not insured include, but are not limited to, the following:

• Potential adverse changes in diplomatic relations of foreign countries with the United States of America

• Terrorism

• Disruptions caused by possible foreign conflicts

• Hostility from local populations

• Adverse effect of currency exchange controls

• Restrictions on the withdrawal of foreign investment and earnings

• Government policies against businesses owned by foreigners

• Foreign exchange restrictions

• Changes in taxation structure

- 15 -

Item 1 B.

Unresolved Staff Comments

As of the date of this report, we did not have any unresolved staff comments.

Item 2.

Properties

We believe that all of the facilities and equipment of the Company are adequately insured, in generally good condition, well maintained, and generally suitable and adequate to carry on our business.

United States Operation

We operate a plant in Corpus Christi, Texas, that manufactures HITOX, BARTEX, HALTEX, OPTILOAD and TIOPREM. During 2009, the Corpus Christi plant operated at approximately 30% of capacity. The facility is located in the Rincon Industrial Park on approximately 15 acres of land, with 13 acres leased from the Port of Corpus Christi Authority (the "Port") and approximately two acres which we own. The lease payment is subject to adjustment every five years for what the Port calls the "equalization valuation". This is used as a means of equalizing rentals on various Port lands and is determined solely at the discretion of the Port. We executed an amended lease agreement with the Port on July 11, 2000, which extended the expiration date of the lease to June 30, 2027.

We own the improvements on the plant site, including a 3,400 square-foot office, a 5,000 square-foot laboratory building, a maintenance shop and several manufacturing and warehousing buildings containing a total of approximately 90,000 square feet of space. The leased premises include approximately 350 lineal feet of bulkheaded industrial canal frontage, which provides access to the Gulf of Mexico intercoastal waterway system through the Corpus Christi ship channel. This property is also serviced by a Company owned railroad spur that runs through our property to the canal.

European Operation

Our European Operation, TOR Processing and Trade ("TPT"), is located in Hattem, Netherlands, near the major shipping port of Rotterdam. TPT operated at approximately 70% of capacity in 2009. The factory site, which the Company owns, was expanded in 2004 from approximately one acre to two acres and consists of a 20,000 square foot steel frame metal building, a 2,000 square foot office building which was purchased in July 2004, and a 10,000 square foot warehouse with a loading dock which was purchased in January 2005.

The Netherlands plant and improvements are encumbered by a mortgage held by Rabobank. (See "Liquidity - European Operation" on page 38).

Asian Operation

Our Asian Operations, TOR Minerals Malaysia ("TMM"), operates the SR manufacturing plant in Ipoh, Malaysia, and is close in proximity to the present source of their major raw material - ilmenite. The plant site has 38 acres of land that TMM has a commitment to use through 2074. The TMM plant operated at approximately 30% of capacity in 2009.

TMM owns the improvements on the plant site, including a 3,960 square-foot office, a 1,980 square-foot laboratory, a spare parts storage warehouse, an employee cafeteria, and several manufacturing and warehousing buildings containing a total of approximately 106,500 square feet of space.

The Malaysian plant and improvements are encumbered by liens held by HSBC Bank and RHB Bank. (See "Liquidity - Asian Operation" on page 39).

- 16 -

Item 3.

Legal Proceedings

In late July 2008, we learned that our former chief financial officer, Steven H. Parker, filed a complaint with the Occupational Safety and Health Administration, US Department of Labor. Parker's complaint was filed on or about July 21, 2008, and alleges that TOR violated the whistleblower provisions of the Sarbanes-Oxley Act of 2002 by terminating Parker's employment in response to Parker's reporting to our CEO and a board member of the negative accounting treatment of a potential transaction. In addition, Parker has claimed that he was terminated for refusing to perform an illegal act in violation of Texas law. Parker subsequently notified the Department of Labor that he intended to bring an action against the Company in the United States District Court for the Southern District of Texas. Because of Parker's election to proceed in the United States District Court, the Department of Labor has dismissed Parker's complaint. Relief sought by Parker includes back pay, reinstatement or front pay in lieu of reinstatement and reasonable attorney's fees and costs. We intend to vigorously defend such legal action. The Company believes that a material loss is remote, and therefore, has not recorded a liability related to this matter.

Item 4.

Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of security holders during the fourth quarter of the Company's fiscal year ended December 31, 2009.

On February 18, 2010, at a special meeting of stockholders, the security holders approved an amendment to the Company's Certificate of Incorporation to effect a one-for-five reverse stock split and, in connection therewith, to reduce the number of authorized shares of common stock by the same ratio. The following table reflects the results:

For		Against		Abstain		Broker Non-Vote
8,572,829		170,306		19,418		0

- 17 -

Management - Executive Officers

The names of the members of the Company's executive officers at March 16, 2010, each of whom is elected annually, are set forth below:

Name	Age	Position	Since
Olaf Karasch	53	President and Chief Executive Officer	2006
Mark Schomp	50	Executive Vice President	2006
Hee Chew Lee	54	Vice President, Asian Operations	2002
Barbara Russell	57	Chief Financial Officer, Treasurer and Secretary	2010

Dr. Olaf Karasch, President and Chief Executive Officer - Dr. Olaf Karasch was appointed President and Chief Executive Officer by the Board on July 1, 2006. Dr. Karasch resides in Germany and offices at our European operation, TP&T, located in Hattem, Netherlands. Prior to appointment as President and Chief Executive Officer, Dr. Karasch had served as Executive Vice President, Operations, since September 4, 2002. Prior to that, Dr. Karasch served as Managing Director of TP&T since joining the Company on May 16, 2001. In January 1996, Dr. Karasch was managing director for Flohme Chrome Plating and Plasma Coating. In 1997, he joined the Royal Begemann Group in the Netherlands until its purchase by TOR in 2001. Dr. Karasch received his Ph.D. in Mineralogy at Reinisch-Westfalische University in Aachen, Germany where he specialized in submicronization (particle size reduction below one micron).

Mark Schomp, Executive Vice President - Mark Schomp was appointed Executive Vice President by the Board on July 1, 2006. Prior to that, Mr. Schomp served as Vice President, Sales and Marketing since September 4, 2002. Mr. Schomp is a Chemical Engineer who spent 15 years in sales and sales management with Alusuisse-Lonza, a large European manufacturer of aluminum, specialty aluminas, and other products. He has wide experience in selling pigments and fillers for plastics and coatings applications. Mr. Schomp joined the Company's sales department in 2001.

Lee Hee Chew, Vice President, Asian Operations - Lee Hee Chew was appointed Vice President, Asian Operations, by the Board on December 5, 2002. Mr. Lee, a Chemical Engineer, joined TOR in 1994 as General Manager and has served as the Managing Director of our Asian operation, TMM, since 1998.

Barbara Russell, Chief Financial Officer, Treasurer and Secretary - Barbara Russell was appointed Chief Financial Officer by the Board of Directors on February 12, 2010; and has served as Treasurer and Secretary since May 23, 2008, when she was also appointed as interim Chief Financial Officer. Ms. Russell has served as the Company's Controller since 1999 and served as Acting Chief Financial Officer since May 2008. Prior to joining the Company in 1997, she was Chief Executive Officer of the South Texas Lighthouse for the Blind.

No executive officer of the Company has any family relationship with any other director or executive officer of the Company.

- 18 -

PART II

Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters
and Issuer Purchases of Equity Securities

Market for Common Equity

Our Common Stock trades on the NASDAQ Capital Market under the symbol: "TORM". The table below sets forth the high and low sales prices for our common stock for the periods indicated, according to NASDAQ. Amounts shown in this table do not reflect the one-for-five reverse stock split effected on February 19, 2010. On March 16, 2010, the closing trading price of our Common Stock was $4.55 and 2,800 shares (after giving effect to the one-for-five reverse stock split) were traded.

Quarter Ended		Mar 31		Jun 30		Sep 30		Dec 31
2009	High	$	0.840	$	0.460	$	0.630	$	0.580
	Low		0.240		0.240		0.360		0.460
2008	High	$	2.210	$	2.230	$	1.870	$	1.100
	Low		1.950		1.810		1.020		0.500
2007	High	$	3.410	$	2.980	$	2.490	$	2.330
	Low		2.500		2.280		1.850		1.950

No cash dividends have ever been paid on our Common Stock. Except and as otherwise required by the terms of our Series A Convertible Preferred Stock, we currently intend to retain future earnings, if any, for use in our business, and therefore, we do not currently anticipate declaring or paying any dividends on our Common Stock in the foreseeable future.

The approximate number of holders of record of TOR's Common Stock as of March 16, 2010 was 190.

One-for-Five Reverse Stock Split

As noted in the Company's Form 8-K filed with the Securities and Exchange Commission on February 18, 2010, the shareholders approved a one for five reverse stock split, which the Company effected on February 19, 2010.

Series A 6% Convertible Preferred Stock Dividends

On December 6, 2009, we declared a dividend, in the amount of $15,000, for the quarterly period ending December 31, 2009, payable on January 1, 2010, to the holders of record of the Series A Convertible Preferred Stock as of the close of business on December 6, 2009. Dividends declared on the Series A Convertible Preferred Stock totaled $60,000 in 2009 and 2008.

Indemnification of Directors and Officers

The Company maintains a "Directors and Officers" insurance policy under which the Directors and Officers of the Company are indemnified against liability, which he/she may incur in his/her capacity as such.

- 19 -

Issuer Purchases of Equity Securities

The Company has no reportable purchases of equity securities.

Equity Compensation Plan

The following table provides information as of December 31, 2009, about our Common Stock that may be issued upon the exercise of options, warrants and rights under all of our existing equity compensation plans (including individual arrangements). The options, exercise price and weighted average exercise price have been adjusted to reflect the impact of the one for five reverse stock split which was effective February 19, 2010.

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)	Weighted-average exercise price of outstanding options, warrants and rights (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders	174,220	$11.200	50,562
Equity compensation plans not approved by security holders	--		--
Total	174,220	$11.200	50,562

The Company's 1990 Incentive Stock Option Plan ("ISO") for TOR Minerals International, Inc. (the "1990 Plan") provided for the award of a variety of incentive compensation arrangements to such employees and directors as may be determined by a Committee of the Board. At December 31, 2009, there were outstanding options to purchase 1,600 shares of common stock under the 1990 Plan.

On February 21, 2000, the Company's Board of Directors approved the adoption of the 2000 Incentive Stock Option Plan (the "Plan") for TOR Minerals International, Inc. The Plan provides for the award of a variety of incentive compensation arrangements, including restricted stock awards, performance units or other non-option awards, to such employees and directors as may be determined by a Committee of the Board. At the Annual Shareholders' meeting on May 23, 2008, the maximum number of shares of the Company's common stock that may be sold or issued under the Plan was increased to 250,000 shares subject to certain adjustments upon recapitalization, stock splits and combinations, merger, stock dividend and similar events; in addition the plan was extended to May 23, 2018. At December 31, 2009, there were 172,620 options outstanding, 26,818 exercised and 50,562 available for future issuance under the Plan.

For the twelve-month periods ended December 31, 2009, 2008 and 2007, the Company recorded $266,000, $145,000 and $172,000, respectively, in stock-based employee compensation. This compensation cost is included in the general and administrative expenses and cost of sales in the accompanying consolidated income statements.

- 20 -

The Company granted options to purchase 27,500, 3,000 and 48,500 shares of common stock during the twelve-month periods ended December 31, 2009, 2008 and 2007, respectively. The weighted average fair value per option at the date of grant for options granted in the twelve-month periods ended December 31, 2009, 2008 and 2007 was $2.70, $10.45 and $12.60, respectively, as valued using the Black-Scholes option-pricing model with the following weighted average assumptions:

	Twelve Months Ended December 31,
	2009	2008	2007
Risk-free interest rate	3.17%	3.52%	4.37%
Expected dividend yield	0.00%	0.00%	0.00%
Expected volatility	0.73	0.70	0.73
Expected term (in years)	7.00	7.00	7.00

The risk free interest rate is based on the Treasury Constant Maturity Rate as quoted by the Federal Reserve at the time of the grant for a term equivalent to the expected term of the grant. The estimated volatility is based on the historical volatility of our stock and other factors. The expected term of options represents the period of time the options are expected to be outstanding from grant date.

The number of shares of common stock underlying options exercisable at December 31, 2009, 2008 and 2007 was 174,220, 117,900 and 113,196, respectively. The weighted-average remaining contractual life of those options is 5.4 years. Exercise prices on options outstanding at December 31, 2009, ranged from $1.75 to $30.55 per share as noted in the following table.

Options Outstanding
2009	2008	2007	Range of Exercise Prices
39,480	12,980	14,820	$ 1.75 - $ 9.99
113,680	114,680	137,380	$ 10.00 - $ 14.99
120	120	120	$ 15.00 - $ 19.99
12,800	12,800	14,100	$ 20.00 - $ 24.99
2,740	2,740	4,040	$ 25.00 - $ 29.99
5,400	5,400	5,400	$ 30.00 - $ 30.55
174,220	148,720	175,860

As of December 31, 2009, all outstanding options were fully vested, therefore, there was no option compensation expense related to non-vested awards.

As all options issued under the Plan are Incentive Stock Options, the Company does not receive any excess tax benefits relating to the compensation expense recognized on vested options.

- 21 -

Item 6.

Selected Financial Data
(in thousands, except per share data)

		Year Ended December 31,
		2009		2008		2007		2006		2005
Consolidated Statement of Operations Data:
NET SALES	$	24,193	$	25,304	$	27,961	$	26,079	$	32,669
Cost of sales		20,382		22,032		22,768		20,939		26,318
GROSS MARGIN		3,811		3,272		5,193		5,140		6,351
Technical services and research/development		200		244		245		239		376
Selling, general and administrative expenses		3,215		4,673		4,290		4,160		4,506
Goodwill impairment		-		1,976		-
Loss on assets held for sale		-		679		-
Loss (gain) on disposal of assets		35		98		(12)		1		(12)
OPERATING INCOME (LOSS)		361		(4,398)		670		740		1,481
OTHER INCOME (EXPENSE):
Interest income		2		2		18		17		10
Interest expense		(558)		(524)		(684)		(547)		(412)
Gain (loss) on foreign currency exchange rate		59		(38)		25		(135)		(125)
Other, net		4		15		-		20		-
INCOME (LOSS) BEFORE INCOME TAX		(132)		(4,943)		29		95		954
Income tax expense (benefit)		4		19		(42)		2		471
NET INCOME (LOSS)	$	(136)	$	(4,962)	$	71	$	93	$	483
Less: Preferred Stock Dividends		60		60		60		60		60
Income (Loss) Available to Common Shareholders	$	(196)	$	(5,022)	$	11	$	33	$	423

Income (loss) per common shareholder:
Basic	$	(0.10)	$	(3.19)	$	0.01	$	0.02	$	0.27
Diluted	$	(0.10)	$	(3.19)	$	0.01	$	0.02	$	0.26

Weighted average common shares outstanding:
Basic		1,891		1,576		1,570		1,567		1,562
Diluted		1,891		1,576		1,577		1,575		1,626
		December 31,
		2009		2008		2007		2006		2005
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	1,002	$	191	$	376	$	896	$	1,280
Working capital		7,587		5,559		7,300		9,638		7,630
Total assets		32,876		34,337		38,736		38,011		34,035
Total long-term debt and capital leases		3,223		3,693		7,178		7,659		6,667
Shareholders' equity		23,215		22,515		26,405		24,829		22,952

- 22 -

TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Item 7.

Management's Discussion and Analysis of Financial Condition
and Results of Operations

Company Overview:

We are a global specialty chemical company engaged in the business of manufacturing and marketing mineral products for use as pigments, pigment extenders and flame retardants used in the manufacture of paints, industrial coatings, plastics, catalysts and solid surface applications. We have operations in the US, Asia and Europe.

Our US Operation, located in Corpus Christi, Texas, manufactures HITOX, BARTEX, HALTEX/OPTILOAD and TIOPREM. The facility is also the Global Headquarters for the Company. The Asian Operation, located in Ipoh, Malaysia, manufactures SR , HITOX and TIOPREM and our European Operation, located in Hattem, Netherlands, manufactures Alumina based products. (See "Our Products" on page 4).

Approximately 41% of the 2009 sales are outside of the United States. Of these sales, approximately 58% are in currencies other than the US Dollar, primarily Euro based.

Operating expenses in the foreign locations are primarily in local currencies. Accordingly, we have exposure to fluctuation in foreign currency exchange rates. These fluctuations impact the translation of sales, earnings, assets and liabilities from local currency to the US Dollar. (See "Foreign Operations - Impact of Exchange Rate" on page 43).

- 23 -

TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Following are our results for the twelve-month periods ended December 31, 2009, 2008 and 2007. The income (loss) per common share and the weighted average common shares outstanding have been adjusted to reflect the one-for-five reverse stock split which was effective February 19, 2010.

(In thousands, except per share amounts)		Year Ended December 31,
		2009		2008		2007
NET SALES	$	24,193	$	25,304	$	27,961
Cost of sales		20,382		22,032		22,768
GROSS MARGIN		3,811		3,272		5,193
Technical services and research and development		200		244		245
Selling, general and administrative expenses		3,215		4,673		4,290
Goodwill impairment		-		1,976		-
Loss on assets held for sale		-		679		-
Loss (gain) on disposal of assets		35		98		(12)
OPERATING INCOME (LOSS)		361		(4,398)		670
OTHER INCOME (EXPENSES):
Interest income		2		2		18
Interest expense		(558)		(524)		(684)
Gain (loss) on foreign currency exchange rate		59		(38)		25
Other, net		4		15		-
INCOME (LOSS) BEFORE INCOME TAX		(132)		(4,943)		29
Income tax expense (benefit)		4		19		(42)
NET INCOME (LOSS)	$	(136)	$	(4,962)	$	71
Less: Preferred Stock Dividends		60		60		60
Income (Loss) Available to Common Shareholders	$	(196)	$	(5,022)	$	11
Income (loss) per common share:
Basic	$	(0.10)	$	(3.19)	$	0.01
Diluted	$	(0.10)	$	(3.19)	$	0.01
Weighted average common shares outstanding:
Basic		1,891		1,576		1,570
Diluted		1,891		1,576		1,577

- 24 -

TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Management Review of 2009 and Outlook for the Future:

In 2009, we were faced with the challenge of preserving TOR's future while navigating the Company through a global economic downturn which began in the second half of 2008. In response to this situation, we initiated various actions, including: introducing new low-cost production technologies in both the US and Malaysia, instituting programs to identify procurement efficiencies, reducing employment levels in both our manufacturing plants and in our administration, improving our working capital and issuing new debt instruments. All these actions were aimed at reducing costs and improving cash levels and liquidity. As a result, our results from operations improved each quarter during 2009 and during the fourth quarter we achieved the first quarterly positive results in over two years.

Certain financial and nonfinancial information reflecting these challenges and our actions were as follows:

• We reduced indirect costs at our manufacturing operations by approximately $1,098,000, of which approximately 49% related to a reduction in indirect labor.

• We reduced selling, general and administrative expenses ("SG&A") approximately $1,458,000, of which approximately 37% related to a reduction in administrative staff, as well as a temporary reduction in SG&A salaries.

• We increased cash from operations by $993,000 and cash on hand at the end of the year increased by $811,000.

• We increased working capital $2,028,000 or approximately 36%

• We decreased our total debt, including revolving lines of credit, capital leases and long-term debt by $711,000 or approximately 10%

2010 Outlook:

In 2010, we anticipate market conditions for our products in certain end markets to improve. Based on our conversations with customers, economic data and information from other market participants, it appears that the worldwide demand in the paint and plastics markets has started to stabilize. We saw significant improvement in our more mature HITOX sales during the last quarter of 2009, which has continued during the first two months of 2010. In Asia, HITOX sales for in-country use have increased and we are now starting to see production rates for HITOX used in export products increase, which should allow for continued growth in the quarters to come. In addition to improving market conditions in the US and Asia, HITOX sales are benefiting from new niche markets, which we are hopeful will generate additional incremental revenue for HITOX this year.

We introduced TIOPREM, a titanium dioxide colored pigment, into the market in 2008. While the rate of adoption has been slower than we had originally anticipated, customer activity has picked up over the past several months and we are now shipping this product to customers in both the US and Europe.

The second product we recently introduced, OPTILOAD, is a specialty alumina used in high performance flame retardant applications. Our new alumina product offers a high performance, cost effective and environmentally friendly solution for the new flame retardant and smoke suppression standards that are being implemented in the US. This is an emerging market with large growth opportunity in the US during 2010 and beyond.

From the cost side, increases in energy prices and continued currency movements are expected to be a challenge; and while we do not plan to fill the positions eliminated in 2008 and 2009, we have reinstated our employees' salaries back to the 2008 level. We are committed to securing and improving on the savings realized in 2009 from procurement, overhead and working capital programs and continuing to strengthen the balance sheet using operating cash flows to further reduce debt levels.

Actual results could differ materially from those indicated by these forward looking statements because of various risks and uncertainties. See the information under the caption "Forward Looking Information" appearing below the Table of Contents of this report.

- 25 -

TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Results of Operations

Consolidated Net Sales : Consolidated net sales for 2009 decreased approximately 4% compared with 2008. The decrease in net sales is primarily due to a decrease in volume of HITOX and BARTEX relating to the decline in the global economy, partially offset by an increase in volume of ALUPREM and HALTEX product lines.

Consolidated net sales for 2008 decreased approximately 11% compared with 2007. The decrease in net sales was primarily due to a decrease in volume relating to the decline in the global economy, partially offset by an increase in prices and the effects of fluctuations in the foreign exchange rate.

Following is a summary of our consolidated products sales for 2009, 2008 and 2007 (in thousands), excluding inter-company sales:

Product		2009			2008			2007
HITOX	$	10,111	42%	$	13,182	52%	$	14,746	53%
ALUPREM		9,450	39%		7,425	30%		8,493	30%
BARTEX		2,601	11%		3,123	12%		3,215	11%
HALTEX / OPTILOAD		1,646	7%		1,219	5%		996	4%
TIOPREM		12	<1%		30	<1%		-	0%
SR		-	0%		-	0%		12	<1%
OTHER		373	1%		325	1%		499	2%
Total	$	24,193	100%	$	25,304	100%	$	27,961	100%

HITOX sales decreased approximately 23% worldwide in 2009 primarily due to a decrease in volume related to the decline in the global economy which was partially offset by the effect of fluctuations in the foreign exchange rate. In 2008, HITOX sales decreased approximately 11% worldwide primarily due to a decrease in volume related to the slowing US economy.

ALUPREM sales increased approximately 27% worldwide in 2009 primarily due to an increase in the sales volume of our specialty grade ALUPREM in the US market. The increase in the US market was partially offset by a decline in our European market of approximately 17% primarily due to a decline in volume as a result of the European economy. In 2008, ALUPREM sales decreased approximately 13% worldwide primarily due to a decline in the sales volume of our commodity grade ALUPREM in the US market. Sales of this product line deceased approximately 83% compared to 2007. We expect to see our commodity grade ALUPREM sales in the US to continue to decline. Also contributing to the 2008 decrease was a decline in our specialty grade ALUPREM of approximately 53% due to the buying pattern of a large customer. Partially offsetting the decrease in US volume was an increase in volume in our European market of approximately 3% and the effect of fluctuations in the foreign exchange rate of approximately 10%.

BARTEX sales decreased approximately 17% and 3% in 2009 and 2008, respectively, primarily due to a decrease in volume related to the US economy.

HALTEX/OPTILOAD sales increased approximately 35% and 22% in 2009 and 2008, respectively, primarily due to an increase in volume and the introduction of our new OPTILOAD product line in late 2008.

TIOPREM and SR sales were not material in either 2009 or 2008.

Other Product sales increased approximately 15% in 2009 following a decline in 2008 of approximately 35% primarily relating to changes in volume in both the US and Asian markets.

- 26 -

TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

United States Operation

Following is a summary of net sales for our US operation for 2009, 2008 and 2007 (in thousands). All inter-company sales have been eliminated.

Product		2009			2008			2007
HITOX	$	7,528	45%	$	9,300	61%	$	10,409	57%
ALUPREM		4,419	27%		1,397	9%		3,325	18%
BARTEX		2,601	16%		3,123	20%		3,215	18%
HALTEX / OPTILOAD		1,646	10%		1,219	8%		996	5%
TIOPREM		7	<1%		-	0%		-	0%
OTHER		317	2%		293	2%		345	2%
Total	$	16,518	100%	$	15,332	100%	$	18,290	100%

HITOX sales decreased approximately 19% in 2009 primarily due to a decrease in volume related to the decline in the US economy. During the fourth quarter 2009, HITOX sales volume increased approximately 28% as compared to the fourth quarter 2008 due to both an increase in demand from existing customers, as well as new customers. In 2008, HITOX sales decreased approximately 11% primarily due to a decrease in volume related to the decline in the US economy. HITOX sales volume decreased approximately 30% during the fourth quarter 2008 as compared to the fourth quarter 2007.

ALUPREM sales increased approximately 216% in 2009 primarily due to an increase in the sales volume of our specialty grade ALUPREM sold in the US market. In 2008, ALUPREM sales decreased approximately 58% primarily due to a decline in the sales volume of our commodity grade ALUPREM sold in the US market. Sales of this product line decreased approximately 83% compared to 2007. We expect to see our commodity grade ALUPREM sales in the US to continue decline as solid surface manufacturing moves to China. Also contributing to the 2008 decrease was a decline in our specialty grade ALUPREM of approximately 53% due to the buying pattern of a large customer.

- 27 -

TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

European Operation

Our subsidiary in the Netherlands, TPT, manufactures and sells ALUPREM to third party customers, as well as to our US operation for distribution to our North American customers. TPT purchases HITOX from our Asian operation for distribution in Europe. The following table represents TPT's ALUPREM and HITOX sales (in thousands) for 2009, 2008 and 2007 to third party customers. All inter-company sales have been eliminated.

Product		2009			2008			2007
ALUPREM	$	5,031	89%	$	6,028	88%	$	5,168	82%
HITOX		612	11%		825	12%		1,106	18%
TIOPREM		3	<1%		26	<1%		-	0%
Total	$	5,646	100%	$	6,879	100%	$	6,274	100%

ALUPREM sales decreased approximately 17% in 2009 due to a decrease in volume primarily related to a decline in the European economy. In 2008, ALUPREM sales increased approximately 17% primarily due to an increase in volume related to TPT expanding the European customer base and the effect of fluctuations in the exchange rate.

HITOX sales volume decreased approximately 26% and 25% in 2009 and 2008, respectively, primarily related to a decrease in volume as a result of the decline in the European economy.

Asian Operation

Our subsidiary in Malaysia, TMM, manufactures and sells SR and HITOX to third party customers, as well as to our US and European operations. The following table represents TMM's sales (in thousands) for 2009, 2008 and 2007 to third party customers. All inter-company sales have been eliminated.

Product		2009			2008			2007
HITOX	$	1,971	97%	$	3,057	99%	$	3,231	95%
TIOPREM		2	<1%		4	<1%		-	0%
SR		-	0%		-	0%		12	<1%
OTHER		56	3%		32	1%		154	5%
Total	$	2,029	100%	$	3,093	100%	$	3,397	100%

HITOX sales decreased approximately 36% in 2009 primarily related to a decrease in demand as a result of the decline in the economy in Asia. In 2008, HITOX sales decreased approximately 5% primarily related to a decrease in volume which was partially offset by the effect of fluctuations in the exchange rate.

SR sales were not material in either 2009 or 2008.

Other product sales increased 75% in 2009 following a decrease of 79% in 2008.

- 28 -

TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Gross Margin : The following table represents our net sales, cost of sales and gross margin (in thousands) for the years ended December 31, 2009, 2008 and 2007.

		Year Ended December 31,
		2009		2008		2007
NET SALES	$	24,193	$	25,304	$	27,961
Cost of sales		20,382		22,032		22,768
GROSS MARGIN	$	3,811	$	3,272	$	5,193
GROSS MARGIN %		15.8%		12.9%		18.6%

Gross margin increased 2.9% from 12.9% in 2008 to 15.8% in 2009. The primary factors affecting gross margin in 2009 include the following:

decrease in the cost of natural gas, the primary source of energy at our US operation,
decease in indirect manufacturing costs, and
decrease in the cost of freight.

Gross margin decreased 5.7% from 18.6% in 2007 to 12.9% in 2008. The primary factors affecting gross margin in 2008 include an increase in the cost of natural gas, fuel oil, freight and raw materials, as well as an increase in idle plant facility expense due to a reduction in production output at each of our three operations.

Selling, General and Administrative Expenses : Selling, general and administrative expenses ("SG&A") in 2009 decreased approximately $1,458,000 from 2008 primarily due to cost cutting initiatives implemented during the first quarter of 2009. Primary factors contributing to the decrease in SG&A include a decrease in salaries, accounting and legal fees, travel related expenses, sales commissions and bad debt expense. Partially offsetting the above reductions was an increase in option compensation expense as a result of all unvested options becoming fully vested during the fourth quarter of 2009.

In 2008, SG&A increased approximately $383,000 from 2007. Primarily factors contributing to the increase in SG&A included an increase in bad debt expense, as well as legal and accounting fees. Partially offsetting these increases were decreases in salaries, option compensation and travel related expense.

Interest Expense : Interest expense increased approximately $34,000 in 2009 and decreased approximately $160,000 in 2008. In 2009, interest expense at the US operation increased approximately $55,000 due primarily to interest on warrants and convertible debentures, offset by a lower average outstanding balance on our line of credit and long term debt; and in 2008, interest expense decreased approximately $229,000 due primarily to a lower average outstanding balance on our line of credit and long term debt. TPT's interest expense decreased approximately $28,000 in 2009 primarily due to a reduction in long-term debt, as compared to an increase in 2008 of approximately $16,000 due primarily to a larger average outstanding balance on its line of credit. TMM's interest expense increased approximately $7,000 and $51,000 in 2009 and 2008, respectively, primarily due to an increase in its long term debt and an increase in the utilization of its line of credit and ECR financing.

- 29 -

TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Income Taxes : We recorded an income tax expense of approximately $4,000 and $19,000 in 2009 and 2008, respectively. In 2007, we recorded a tax benefit of approximately $42,000. The following table represents the components of our income tax expense:

		Components of Income Tax Expense (Benefit)
		Year Ended December 31,
		2009						2008						2007
(In thousands)		Current		Deferred		Total		Current		Deferred		Total		Current		Deferred		Total
Federal	$	-	$	-	$	-	$	-	$	199	$	199	$	-	$	-	$	-
State		3		-		3		2		-		2		10		-		10
Foreign		-		1		1		-		(182)		(182)		5		(57)		(52)
Total Income Tax Expense (Benefit)	$	3	$	1	$	4	$	2	$	17	$	19	$	15	$	(57)	$	(42)

- 30 -

TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Liquidity, Capital Resources and Other Financial Information

Cash and Cash Equivalents

As noted in the following table, cash and cash equivalents increased $811,000 from the end of 2008 to the end of 2009. Operating activities provided cash of $2,490,000. We used cash of $922,000 relating to investing activities and $572,000 in financing activities. The effect of the exchange rate fluctuations accounted for a decrease in cash of $185,000.

		Year Ended December 31,
(In thousands)		2009		2008		2007
Net cash provided by (used in)
Operating activities	$	2,490	$	1,497	$	851
Investing activities		(922)		(2,392)		(1,021)
Financing activities		(572)		873		(375)
Effect of exchange rate fluctuations		(185)		(163)		25
Net change in cash and cash equivalents	$	811	$	(185)	$	(520)

Operating Activities: Cash provided by operating activities increased approximately $993,000 and $646,000 in 2009 and 2008, respectively. The following are the major changes in working capital affecting cash provided by operating activities:

Accounts Receivable : Accounts receivable increased approximately $762,000 from the end of 2008 to the end of 2009. Accounts receivable increased $933,000 and $95,000 at the US operation and the Asian operation, respectively, primarily due to an increase in sales in the fourth quarter of 2009 as compared to the same period 2008. Accounts receivable decreased at the European operation $266,000. In 2008, accounts receivable decreased approximately $1,049,000 from the end of 2007 to the end of 2008. Accounts receivable decreased $357,000, $254,000 and $438,000 at the US operation, European operation and Asian operation, respectively, primarily due to the global slowdown in the economy resulting in lower sales in the fourth quarter of 2008 as compared to the same period 2007.

Inventories : Inventories decreased approximately $2,807,000 from the end of 2008 to the end of 2009. Inventories at the US, European and Asian operations decreased $2,332,000, $15,000 and $460,000, respectively. The decrease in US inventories was primarily the result of a decrease in finished goods and raw materials and the decrease in inventories at the European and Asian operations was due to a decrease in finished goods, partially offset by an increase in raw materials. In 2008, inventories increased approximately $685,000 from the end of 2007 to the end of 2008. Inventories at the US and European operations increased $946,000 and $21,000, respectively. The increase in US inventories was primarily the result an increase in finished goods as a result of lower sales in the fourth quarter 2008 than anticipated. Inventory at the Asian operation decreased $282,000 primarily related to a decrease in finished goods and supplies.

Other Current Assets : Other current assets increased approximately $91,000 primarily related to deposits at the Asian operation. In 2008, other current assets decreased approximately $134,000 primarily related to deposits at the Asian operation.

Accounts Payable and Accrued Expenses : Trade accounts payable and accrued expenses decreased approximately $1,428,000 from the end of 2008 to the end of 2009 primarily relating to a decrease in accounts payable at both the US and Asian operations, as well as accrued inventory at the Asian operation. In 2008, trade accounts payable and accrued expenses increased approximately $709,000 from the end of 2007 to the end of 2008 primarily related to an increase in accounts payable and accrued inventory at the Asian operation.

- 31 -

TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Investing Activities: Investing activities used cash of approximately $922,000 and $2,392,000 during the twelve-month periods ended December 31, 2009 and 2008, respectively. Net investments for each of the Company's three operations are as follows:

US Operation : We invested approximately $815,000 in 2009 primarily related to the completion of new process technologies started in 2008. In 2008, we invested approximately $1,112,000 primarily related to new process technologies that converted a large portion of the US manufacturing process from natural gas to electricity.

European Operation : We invested approximately $44,000 in 2009 primarily new production equipment. In 2008, our European operation invested approximately $60,000 primarily new lab equipment and computers.

Asian Operation : We invested approximately $63,000 in 2009 at TMM primarily related to new production equipment. In 2008, we invested approximately $1,220,000 at TMM primarily related to new process technologies that converted the finished goods processing plant from fuel oil to electricity.

Financing Activities: Financing activities used cash of approximately $572,000 for the twelve-month period ended December 31, 2009. In 2008, financing activities provided approximately $873,000 in cash. Significant factors relating to financing activities include the following:

Lines of Credit : Borrowings on our US line of credit increased approximately $1,350,000 for the twelve-month period ended December 31, 2009 and decreased approximately $2,550,000 during the same period of 2008. TPT's line of credit decreased approximately $230,000 for the twelve-month period ended December 31, 2009 and increased approximately $185,000 during the same period of 2008.

Export Credit Refinancing - Borrowings on TMM's ECR decreased approximately $1,471,000 for the twelve-month period ended December 31, 2009 as compared to an increase of approximately $1,458,000 during the same period of 2008.

Capital Leases - Capital leases provided net proceeds to the US operation of approximately $38,000 and $18,000 for the twelve-month periods ended December 31, 2009 and 2008, respectively, and TPT's capital lease was reduced approximately $80,000 and $72,000 during the twelve-month periods ended December 31, 2009 and 2008, respectively.

Long-term Debt - US Operation : Our US long-term debt to financial institutions decreased approximately $955,000 and $132,000 during the twelve-month periods ended December 31, 2009 and 2008, respectively.

Long-term Debt - European Operation : TPT's long-term debt decreased approximately $223,000 and $312,000 during the twelve-month periods ended December 31, 2009 and 2008, respectively.

Long-term Debt - Asian Operation : TMM's long-term debt decreased approximately $441,000 for the twelve-month period ended December 31, 2009 and increased approximately $436,000 during the same period of 2008.

6% Convertible Subordinated Debentures : We received subscription agreements for 60 Units ($1,500,000) of our six percent convertible subordinated debentures with warrants during 2009. The proceeds from the first 40 Units ($1 million) were used to reduce inter-company debt between the US operation and TMM related to the purchase of inventory. Proceeds from the remaining 20 Units ($500,000) were used to reduce our debt to Bank of America.

Issuance of Common Stock and Options : For the twelve-month period ended December 31, 2009, we did not receive proceeds from the issuance of common stock. We received proceeds of approximately $1,902,000 related to the issuance of common stock and the exercise of common stock options during the twelve-month period ended December 31, 2008.

Preferred Stock Dividends : The Company paid dividends of $60,000 on its Series A convertible preferred stock, or $0.30 per share in both 2009 and 2008.

- 32 -

TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Liquidity

Going Concern

The condensed consolidated financial statements included in this report have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As discussed below, the Company has significant borrowings which require, among other things, compliance with certain financial covenants, specifically a Consolidated Fixed Charge Ratio and a Consolidated Funded Debt to EBITDA Ratio, on a quarterly basis. As a result of the operating losses incurred throughout 2008 and the first quarter of 2009, the Company was not in compliance with these ratio covenants under our US Credit Agreement (the "Credit Agreement") with Bank of America, N.A. (the "Bank") as of December 31, 2008 and March 31, 2009, and the Company received notice from the Bank on March 5, 2009 of the Bank's decision to terminate the Credit Agreement and require us to pay off all outstanding debt due to the Bank on April 1, 2009.

As reported in the Company's Form 8-K filed with the Securities and Exchange Commission (the "SEC") on May 6, 2009 the Company and the Bank amended the Credit Agreement. Under the terms of the amendment, the Bank revised the stated maturity date to October 1, 2009 and, subject to the Company's compliance with the terms and conditions contained in the amendment, including revised financial covenants, the Bank agreed not to exercise any of its rights or remedies relating to the existing events of default under the Credit Agreement.

As reported in the Company's Form 8-K filed with the SEC on September 28, 2009, the Bank extended the maturity date on our Line of Credit (the "Line") and our term loan (the "Term Loan") from October 1, 2009 to February 15, 2010. In addition, the September amendment reduced the amount available for borrowing under the Line from $2,500,000 to $2,225,000 and increased the interest rate on the Line and Term Loan from prime plus two and one-half percent to prime plus three percent, which was 5.75% at September 30, 2009.

As reported in the Company's Form 8-K filed with the SEC on February 16, 2010, the Bank extended the maturity date on our Line from February 15, 2010 to August 15, 2010. As a result, all of the Company's debt owed to the Bank matures on August 15, 2010. The Company repaid the outstanding balance on its term loan with the Bank in December 2009, and as of February 15, 2010, the Company had $1,650,000 drawn on the line of credit. In addition, the Company was in compliance with the revised financial covenants for the quarters ended June 30, September 30, and December 31, 2009.

As reported in the Company's Form 8-K filed with the SEC on May 6, 2009, the Company's Board of Directors authorized the issuance of up to $4 million of its six-percent (6%) convertible subordinated debentures with detachable warrants (the "Debentures") for the purpose of refinancing, in whole or in part, its debt to the Bank and for general corporate purposes. Under the current authorization, the Company received, on May 4, 2009, $1 million from the sale of Debentures due May 4, 2016, from three of the Company's directors.

As reported in the Company's Form 10-Q filed with the SEC on August 10, 2009, the Company received proceeds of $500,000 from the sale of additional Debentures to six additional accredited investors, one of which is a director and another of which is a greater than 5% shareholder. Under the terms of the Credit Agreement, the Company agreed to use all proceeds in excess of $1 million from the issuance of any of its capital stock, from capital contributions in respect to its capital stock, from the issuance of debentures or the incurrence of permitted subordinated indebtedness (as defined in the Credit Agreement) to prepay the loans and other obligations under the Credit Agreement. As a result, the Company applied the $500,000 received from the sale of Debentures to its outstanding real estate loan with the Bank in August 2009.

- 33 -

TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

The Company is working diligently to establish a corporate lending relationship with a new financial institution for the Company's US operations prior to August 15, 2010, the revised maturity date under the Credit Agreement, to refinance outstanding debt with the Bank prior to its revised maturity. However, there can be no assurance that the Company will be able to successfully refinance the debt due to the Bank. If the Company is unable to refinance the debt due to the Bank prior to its revised maturity or if the Company defaults under the terms of the Credit Agreement prior to its revised maturity and the Bank were to accelerate the maturity of such indebtedness, the Company does not have sufficient liquidity to pay off the indebtedness owed to the Bank, and the Bank would be entitled to exercise all of its rights and remedies as a secured lender under the Credit Agreement.

The Company's two subsidiaries, TOR Minerals Malaysia, Sdn. Bhd. ("TMM") and TOR Processing and Trade, BV ("TPT") have short-term credit facilities and term loans at banks in Malaysia and the Netherlands, respectively. At December 31, 2009, TMM's borrowings under the credit facilities and term loans with HSBC Bank Malaysia, Bhd. ("HSBC") and RHB Bank, Bhd. ("RHB") totaled $332,000 and TPT's borrowings under the credit facility and term loans with Rabobank totaled $2,709,000. TMM's credit facilities with HSBC matures on April 30, 2010.

Additionally, the credit facilities with HSBC, RHB and Rabobank are subject to demand provisions and are subject to certain subjective acceleration covenants based on the judgment of the banks. While the banks have made no indication that they will demand payment of the debt in Malaysia or in the Netherlands, in light of the Company's liquidity difficulties, there can be no assurances that this debt will not be called for payment prior to the stated maturity date or that the stated maturity date will be extended when this debt becomes due.

Since early 2007, the Company has actively pursued new production methods and new product development. As a result, the Company introduced new products to the market in 2008 and completed a new powder treatment facility in Malaysia in May 2008. In addition, the Company has invested in a new powder treatment facility at the US operation which was commissioned in April 2009. With the new process equipment, the Company replaced natural gas with electricity as the primary energy source at the US operation. The Company believes that the changes in the manufacturing process in the US and Malaysia, as well as the potential acceptance of its new products in the market, will improve cash flows. However, the introduction of new products and the sales volume of existing product lines may be negatively impacted by the decline in the global economy. To offset the possible decline in sales revenue associated with the economy, the Company has implemented numerous cost cutting measures at each of the three operations, including, but not limited to, reductions in staff, salaries, travel and other discretionary expenses.

The events described above raise substantial doubt about the Company's ability to continue as a going concern. Our ability to continue to operate as a going concern is dependent on our ability to successfully establish a corporate lending relationship with a new financial institution for the US operation, and/or raise sufficient new capital and improve our operating cash flows to a sufficient level.

- 34 -

TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Following is a summary of our long-term debt and notes payable:

(In thousands)		December 31,
		2009		2008
Term note payable to a U.S. bank, secured by real estate and leasehold improvements of our US operation, prepaid on August 25, 2009.	$	-	$	576
Term note payable to a U.S. bank, secured by property, plant and equipment, inventory and accounts receivable of our US operation, prepaid on December 30, 2009.		-		342
Term note payable to a U.S. equipment financing company, with an interest rate of 5.24% at December 31, 2009, due April 1, 2013, secured by a Caterpillar front-end loader.		84		106
Fixed rate Euro term note payable to a Netherlands bank, secured by TPT's assets, matured June 1, 2009.		-		94
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 7.8% at December 31, 2009, due July 1, 2029, secured by TPT's land and office building purchased July 2004. (382 Euro)		547		560
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.7% at December 31, 2009, due January 31, 2030, secured by TPT's land and building purchased January 2005. (379 Euro)		543		556
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 6.1% at December 31, 2009, due July 31, 2015, secured by TPT's assets. (283 Euro)		406		465
U.S. Dollar term note payable to a Malaysian bank, with an interest rate of 2.0% at December 31, 2009, due June 30, 2010, secured by TMM's property, plant and equipment.		191		525
U.S. Dollar term note payable to a Malaysian bank, with an interest rate of 1.385% at December 31, 2009, due April 1, 2010, secured by TMM's property, plant and equipment.		141		242
Total		1,912		3,466
Less current maturities		435		1,590
Total long-term debt and notes payable	$	1,477	$	1,876

- 35 -

TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

United States Operation

Bank of America Credit Facility and Term Loans

On April 30, 2009, we and the Bank amended the Credit Agreement. Under the terms of the amendment, subject to our compliance with the terms and conditions contained in the amendment, including revised financial covenants, the Bank agreed not to exercise any of its rights or remedies relating to the existing events of default under the Credit Agreement.

Under the terms of the April 30, 2009 amendment, the financial covenants were replaced with the following:

Covenants to be based solely on the results of the US operation
Current Ratio - Maintain a ratio of current assets to current liabilities of at least 1.0 to 1.0 (1.46 to 1.0 as of the quarter ending December 31, 2009)
Fixed Charge Coverage Ratio - Maintain a fixed charge coverage ratio of at least 0.85 to 1.0 (2.91 to 1.0 as of the quarter ending December 31, 2009)

We also agreed that we will use all proceeds in excess of $1 million that we received after May 1, 2009 from the issuance of any of our capital stock, from capital contributions in respect to our capital stock, from the issuance of debentures or the incurrence of permitted subordinated indebtedness (as defined in the Credit Agreement) to prepay the loans and other obligations under the Credit Agreement. As a result, the Company applied $500,000 received from the sale of Debentures to its outstanding real estate loan with the Bank in August 2009.

On September 28, 2009 we amended the Credit Agreement with the Bank to extend the maturity date on the Line and Term Loan from October 1, 2009 to February 15, 2010. Under the terms of the amendment, the interest rate on the Line and the Term Loan was increased from prime plus two and one-half percent to prime plus three percent. In addition, the Line was reduced from $2,500,000 to $2,250,000.

At December 31, 2009, the outstanding balance on the Credit Agreement consisted of $2,100,000 on the Line and we had $150,000 available on that date based on eligible accounts receivable and inventory borrowing limitations. The interest rate at December 31, 2009 was 6.25%. We prepaid the remaining term loan with the Bank in December 2009.

On February 12, 2010, we amended the Credit Agreement with the Bank to extend the maturity date on the Line from February 15, 2010 to August 15, 2010. As a result of this amendment, all of our debt owed to the Bank will mature on August 15, 2010, provided, if we default on obligations contained in the amendment, the Bank will have the rights and remedies available to it under the Credit Agreement and applicable law. The Line is secured by the accounts receivable and inventory of the US Operation.

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TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Six-percent Convertible Subordinated Debentures

Other Term Loans

On March 31, 2008, we entered into a term loan with Holt Financing in the amount of $120,000. The proceeds of the loan were used to purchase a new Caterpillar front-end loader. The loan provides for amortization over five years with interest fixed at a rate of 5.24%. Monthly principal and interest payments commenced on May 1, 2008, and will continue through April 1, 2013. The monthly principal and interest payment is $2,275. The loan balance at December 31, 2009 was $84,000.

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TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

European Operation

On March 20, 2007, our subsidiary, TPT, entered into a short-term credit facility (the "Credit Facility") with Rabobank which increased TPT's line of credit from Euro 650,000 to Euro 1,100,000. The Credit Facility, which has a variable interest rate of Bank prime plus 2.8% (currently at 7.65%) is secured by TPT's accounts receivable and inventory. At December 31, 2009, TPT had utilized Euro 847,000 ($1,213,000) of its short-term credit facility.

On July 7, 2004, TPT entered into a mortgage loan (the "First Mortgage") with Rabobank. The First Mortgage, in the amount of Euro 485,000, will be repaid over 25 years with interest fixed at 5.2% per year for the first four years. Under the terms of the agreement, the interest was adjusted to a fixed rate of 7.8%, effective August 1, 2008, for a period of five years. Thereafter, the rate will change to Rabobank prime plus 1.75%. TPT utilized Euro 325,000 of the loan to finance the July 14, 2004, purchase of land and an office building, as well as to remodel the office building. The balance of the loan proceeds, Euro 160,000, was used for the expansion of TPT's existing building. Monthly principal and interest payments commenced on September 1, 2004, and will continue through July 1, 2029. The monthly principal payment is Euro 1,616. The loan balance at December 31, 2009 and 2008 was Euro 382,000 and Euro 401,000, respectively ($547,000 and $560,000, respectively). The mortgage loan is secured by the land and office building purchased on July 7, 2004.

On January 3, 2005, TPT entered into a second mortgage loan (the "Second Mortgage") with Rabobank to fund the acquisition of a 10,000 square foot warehouse with a loading dock that is located adjacent to TPT's existing production facility. The Second Mortgage, in the amount of Euro 470,000, will be repaid over 25 years with interest fixed at 4.672% per year for the first five years. Thereafter, the rate will change to Rabobank prime plus 1.75%. Monthly principal and interest payments commenced on February 28, 2005 and will continue through January 31, 2030. The monthly principal payment is Euro 1,566. The mortgage is secured by the land and building purchased by TPT on January 3, 2005. The loan balance at December 31, 2009 and 2008 was Euro 379,000 and Euro 398,000, respectively ($543,000 and $556,000, respectively).

On July 19, 2005, TPT entered into a new term loan with Rabobank to fund the completion of its building expansion. The loan, in the amount of Euro 500,000, will be repaid over 10 years with interest fixed at 6.1% per year for the first five years. Thereafter, the rate will change to Rabobank prime plus 1.75%. Monthly principal and interest payments commenced on August 31, 2005 and will continue through July 31, 2015. The monthly principal payment is Euro 4,167. The loan is secured by TPT's assets. The loan balance at December 31, 2009 and 2008 was Euro 283,000 and Euro 333,000, respectively ($406,000 and $465,000, respectively).

TPT's loan agreements covering both the credit facility and the term loans include subjective acceleration clauses that allow Rabobank to accelerate payment if, in the judgment of the bank, there are adverse changes in our business. We believe that such subjective acceleration clauses are customary in the Netherlands for such borrowings. However, if demand is made by Rabobank, we may be unable to refinance the demanded indebtedness, in which case, the lenders could foreclose on the assets of TPT.

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TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Asian Operation

On December 15, 2009, the Company's subsidiary, TMM, amended its banking facility with HSBC Bank Malaysia Berhad ("HSBC") to extend the maturity date from October 1, 2009 to April 30, 2010. In addition, the HSBC facility includes the following in Malaysian Ringgits ("RM"): (1) a banker's acceptance ("BA") of RM 500,000; (2) an export line ("ECR") of RM 2,500,000; and (3) a foreign exchange contract limit of RM 5,000,000 ($146,000, $730,000 and $1,460,000, respectively).

On September 14, 2005, TMM amended the banking facility with HSBC to include a US Dollar loan (the "HSBC Loan") in the amount of $1,000,000 for the purpose of upgrading TMM's plant and machinery. Monthly interest payments began in December 2005. Monthly principal payments of $27,778 began on August 26, 2007 and will continue through June 30, 2010. The interest rate at December 31, 2009 was 2.0%. The loan balance at December 31, 2009 and 2008 was $191,000 and $525,000, respectively.

TMM is currently in the process of renewing its banking facility with RHB Bank Berhad ("RHB") which matured on October 31, 2009. The RHB facility includes the following: (1) an overdraft line of credit up to RM 1,000,000; (2) an ECR of RM 9,300,000; and (3) a foreign exchange contract limit of RM 25,000,000 ($292,000, $2,716,000 and $7,300,000, respectively).

On May 30, 2008, TMM entered into a US Dollar term loan with RHB to fund the completion of its new powder processing facility. The loan, in the amount of $292,000, will be repaid over a period of 22 months with an interest rate of 0.75% above the RHB prime. Monthly principal payments ($8,350 per month) and interest payments commenced on July 1, 2008, and will continue through April 1, 2010. The interest rate at December 31, 2009 was 1.385%. The loan balance at December 31, 2009 and 2008 was $141,000 and $242,000, respectively.

The banking facilities with both HSBC and RHB bear an interest rate on the overdraft facilities at 1.25% over bank prime and the ECR facilities bear interest at 1.0% above the funding rate stipulated by the Export-Import Bank of Malaysia Berhad. The ECR, a government supported financing arrangement specifically for exporters, is used by TMM for short-term financing of up to 180 days against customers' and inter-company shipments. At December 31, 2008, the outstanding balance on their ECR facilities was RM 5,039,000 ($1,458,000). At December 31, 2009, TMM was not utilizing the overdraft or the ECR facilities.

TMM is currently negotiating with RHB to extend the maturity date of the bank facilities from October 31, 2009 to October 31, 2010. The Company is confident that the bank facility will be extended; however, there can be no assurance as to the terms and conditions of the extension of the facility. If RHB is unwilling to extend the maturity dates of the facility, TMM may not have sufficient liquidity to pay off this indebtedness.

The borrowings under both the HSBC and the RHB short term credit facilities are subject to certain subjective acceleration covenants based on the judgment of the banks and a demand provision that provide that the banks may demand repayment at any time. We believe such a demand provision is customary in Malaysia for such facilities. The loan agreements are secured by TMM's property, plant and equipment. However, if demand is made by HSBC or RHB, we may be unable to refinance the demanded indebtedness, in which case, the lenders could foreclose on the assets of TMM. The credit facilities prohibit TMM from paying dividends and the HSBC facility further prohibits loans to related parties without the prior consent of HSBC.

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TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Critical Accounting Policies

General - TOR's discussion and analysis of its financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debt, inventories, investments, intangible assets, income taxes, financing operations, and contingencies and litigation. TOR bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Depreciation - All property, plant and equipment is depreciated using the straight-line method over the estimated useful lives of depreciable assets which range from 3 to 39 years. Maintenance and repair costs are charged to operations as incurred and major improvements extending asset lives are capitalized.

Bad Debts - We perform ongoing credit evaluations of our customers' financial condition and, generally, require no collateral from our customers. The allowance for doubtful accounts is based upon the expected collectability of all accounts receivable including review of agings and current economic conditions. At December 31, 2009 and 2008, we maintained a reserve for doubtful accounts of approximately $79,000 and $357,000, respectively. Accounts are written off when all reasonable internal and external collection efforts have been performed. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Income Taxes - Our effective tax rate is based on our level of pre-tax income, statutory rates and tax planning strategies. Significant management judgment is required in determining the effective rate and in evaluating our tax position. We have domestic and foreign net deferred tax assets resulting primarily from net operating loss carryforwards. At December 31, 2009 we had federal net operating loss carryforward of approximately $4,200,000 at our US operation. In addition, we had net operating carryforwards at our European operation, TPT, of approximately $1,913,000 and at our Asian operation, TMM, of approximately $3,842,000.

Inventory - We write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. At December 31, 2009 and 2008, we maintained a reserve for obsolescence and unmarketable inventory of approximately $271,000 and $224,000, respectively. If actual future demand or market conditions are less favorable than those projected by management, additional inventory write-downs may be required.

Overhead is charged to inventory based on normal capacity and we expense abnormal amounts of idle facility expense, freight and handling costs in the period incurred. For the years ended December 31, 2009 and 2008, the Company recorded approximately $1,872,000 and $2,020,000, respectively, related to idle facility expense primarily at the US and Malaysian operations.

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TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Impairment of Goodwill - As a result of our 2008 annual impairment review, we concluded that the carrying value of our goodwill was impaired. As a result, our fourth quarter and full year 2008 financial results included an aggregate non-cash pretax impairment charge of approximately $1,976,000. The impairment charge was the result of the annual assessment for impairment and reflected factors impacted by market conditions and the completion of our annual budget and forecasting process. This non-cash charge had no effect on our cash balances or cash flows.

Valuation of Long-Lived Assets - The impairment of tangible and intangible assets is assessed when changes in circumstances (such as, but not limited to, a decrease in market value of an asset, current and historical operating losses or a change in business strategy) indicate that their carrying value may not be recoverable. This assessment is based on management's estimates of future undiscounted cash flows, salvage values or net sales proceeds. These estimates take into account management's expectations and judgments regarding future business and economic conditions, future market values and disposal costs. Actual results and events could differ significantly from management's estimates. Based upon our most recent analysis, we believe that no impairment exists at December 31, 2009. There can be no assurance that future impairment tests will not result in a charge to net earnings (loss).

During the fourth quarter 2008, the Company's Board of Directors and the Bank approved the classification of certain assets of the US operation as "held for sale". As a result, the Company reduced the book value of the assets to fair market value, less costs to sell, and recorded an expense of approximately $679,000. In addition, the US operation recorded an expense in 2008 of approximately $98,000 related to the sale/disposal of assets.

Share Based Compensation - We calculate share based compensation using the Black-Scholes-Merton ("Black-Scholes") option-pricing model, which requires the input of highly subjective assumptions including the expected stock price volatility. For the twelve-month periods ended December 31, 2009, 2008 and 2007, we recorded $266,000, $145,000 and $172,000, respectively, in share-based employee compensation. This compensation cost is included in the general and administrative expenses and cost of sales in the accompanying consolidated income statements.

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TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Off-Balance Sheet Arrangements and Contractual Obligations

Operating Leases - As of December 31, 2009, we lease 13 acres of the land at the facility located in Corpus Christi, Texas, from the Port of Corpus Christi Authority and manufacturing equipment from Bank of America Leasing & Capital, LLC. The minimum future rental payments under these and other non-cancelable operating leases as of December 31, 2009 are as follows:

Years Ending December 31,
(In thousands)
2010	$	672
2011		79
2012		54
2013		54
2014		54
Thereafter		678
Total minimum lease payments	$	1,591

In 2010, we plan to exercise the early buy-out option included in our leases with Bank of America Leasing & Capital, LLC. for manufacturing equipment. As a result, we will incur approximately $385,000 for capital expenditures relating to the buy-out which is included in the table above.

Except as noted above, we did not have any off-balance sheet arrangements that have, or are likely to have, a material current or future effect on our financial conditions, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Contractual Obligations - The following is a summary of all significant contractual obligations, both on and off Balance Sheet, as of December 31, 2009, that will impact our liquidity.

(In thousands)		Payments due by period
Contractual Obligations		Total		2010		2011		2012		2013		2014		2015 +
Long-term Debt	$	1,912	$	435	$	191	$	150	$	147	$	128	$	861
Lines of Credit		3,313		3,313		-		-		-		-		-
Capital Leases		189		140		43		6		-		-		-
Operating Leases		1,591		672		79		54		54		54		678
Convertible Debentures		1,500		-		-		94		94		94		1,219
Total	$	8,505	$	4,560	$	313	$	304	$	295	$	276	$	2,758

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TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Other matters

Anticipated Capital Expenditures: Except for the early buy-out of our existing operating leases with Bank of America Leasing & Capital, LLC noted above, we do not anticipate any significant capital expenditures in 2010.

Inflation: Other than the increases in energy prices and transportation costs as described in Item 1 under "Raw Materials and Energy", general inflation has not had a significant impact on our business, and it is not expected to have a major impact in the foreseeable future. Increases in energy pricing adversely affect our results of operations and are expected to continue to do so.

Global Economy: The recent global economic crisis has had a significant impact on our business. Because a significant portion of our sales revenue is tied to the construction industry, we expect our sales revenue of existing products to remain relatively flat in 2010 which could adversely affect our results of operations.

Foreign Operations - Impact of Exchange Rate: We have two foreign operations, TMM in Malaysia and TPT in the Netherlands. TMM measures and records its transactions in terms of the local Malaysian currency, the Ringgit, which is also the functional currency. As a result, gains and losses resulting from translating the Balance Sheet from Ringgits to US Dollars are recorded as cumulative translation adjustments (which are included in accumulated other comprehensive income, a separate component of shareholders' equity) on the Consolidated Balance Sheet. As of December 31, 2009 and 2008, the cumulative translation adjustment related to the change in functional currency to the US Dollar totaled $1,294,000 and $1,206,000, respectively. From the beginning of 2009 to the end of 2009, the US Dollar weakened against the Malaysian Ringgit, as a result, net income increased approximately $18,000.

TPT's functional currency is the Euro. As a result, gains and losses resulting from translating the Balance Sheet from Euros to US Dollars are recorded as cumulative translation adjustments on the Consolidated Balance Sheet. As of December 31, 2009 and 2008, the cumulative translation adjustment related to the change in functional currency to the US Dollar totaled $2,154,000 and $2,015,000, respectively. From the beginning of 2009 to the end of 2009, the US Dollar weakened against the Euro, as a result, net income increased approximately $60,000.

Foreign Currency Forward Contracts: We manage the risk of changes in foreign currency exchange rates, primarily at our Malaysian operation, through the use of foreign currency contracts. Foreign exchange contracts are used to protect the Company from the risk that the eventual cash flows resulting from transactions in foreign currencies, including sales and purchases transacted in a currency other than the functional currency, will be adversely affected by changes in exchange rates. We report the fair value of the derivatives on our balance sheet and changes in the fair value are recognized in earnings in the period of the change.

At December 31, 2009, we had foreign currency contracts not designated as hedges. We marked these contracts to market, recording a net gain of approximately $3,000 as a component of our 2009 net loss and as a current asset on the balance sheet at December 31, 2009.

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TOR Minerals International, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial Condition and Results of Operations
December 31, 2009, 2008 and 2007

Natural Gas Contracts: We manage the risk of changes in natural gas supply prices at our Corpus Christi operation using derivative financial instruments. Natural gas market prices are volatile and we effectively fix prices for a portion of our natural gas production requirements through the use of swaps. A swap is a contract between us and a third party to exchange cash based on a designated natural gas price. Swap contracts require payment to or from us for the amount, if any, that the monthly published gas prices from the source specified in the contract differ from the prices of the New York Mercantile Exchange (NYMEX) natural gas futures during a specified period. There are no initial cash requirements related to the swap. The contracts are traded in months forward and settlement dates are scheduled to coincide with gas purchases during that future period. We report the fair value of the derivatives on our balance sheet and changes in fair value are recognized in cost of sales in the period of the change.

On November 18, 2008, we entered into a natural gas contract with Bank of America, N.A. for 40,000 MM/Btu's of natural gas. The contract, which was not designated as a hedge, was marked to market at December 31, 2008 and we recorded a net loss of approximately $26,000 as a component of our 2008 net loss and as a current liability on the balance sheet at December 31, 2008. The contract matured on March 18, 2009 at which time we recorded an additional net loss of approximately $27,000 which was included as a component of our 2009 net loss.

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Item 8.

Financial Statements and Supplementary Data

The Financial Statements are set out in this annual report on Form 10-K commencing on page F-1.

Item 9.

Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure

None.

Item 9 A.

Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, management of the Company has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by the report ("Evaluation Date"). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective (i) to ensure that information required to be disclosed by us in reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms; and (ii) to ensure that the information required to be disclosed in the reports that the Company files or submits under the Exchange Act is accumulated and communicated to our management, including the Company's Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosures.

Management's Report on Internal Control over Financial Reporting

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company's internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that:

1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;

2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on management's assessment and those criteria, management has concluded that the Company's internal control over financial reporting was effective as of December 31, 2009.

- 45 -

This annual report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management's report in this annual report.

Changes in Internal Controls

During the quarter ended December 31, 2009, there were no changes in the Company's internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the quarter ended December 31, 2009, that have materially affected or are reasonably likely to materially affect the Company's internal controls over financial reporting.

Item 9 B.

Other Information

The Company has previously disclosed all items required to be reported on a Form 8-K for the quarter ended December 31, 2009.

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

Directors, Executive Officers, Promoters and Control Persons

Information which will be contained under the caption "Election of Directors" and "Principal Stockholders" in the Company's Definitive Proxy Statement for its 2010 Annual Meeting of Shareholders is incorporated by reference in response to this Item 10. See Item 4, Part I of this Form 10-K for the caption "Management-Executive Officers" for information concerning executive officers.

Section 16(a) Beneficial Ownership Reporting Compliance

Information under the caption "Election of Directors - Section 16(a) Beneficial Ownership Reporting Compliance" which will be contained in the Company's Definitive Proxy Statement for its 2010 Annual Meeting of Shareholders, is incorporated herein by reference.

Code of Ethics

The Company had adopted a Code of Ethics that applies to all of its directors, officers (including its chief executive officer, chief financial officer, controller and any person performing similar functions) and employees. The Code of Ethics can be viewed on the Company's web site at www.torminerals.com. The Company intends to post amendments to, or waivers from, its Code of Ethics that apply to its Chief Executive Officer, Chief Financial Officer, Controller and any other person performing similar functions, on its website.

The Company will provide to any person, without charge, upon written request, a copy of the Code of Ethics. Such requests should be sent to the Company's Corporate Secretary, Sonya Sconiers, at 722 Burleson Street, Corpus Christi, Texas 78402.

Corporate Governance

Information under the caption "Executive Compensation - Nomination of Directors", and "Election of Directors - Audit Committee" which will be contained in the Company's Definitive Proxy Statement for its 2010 Annual Meeting of Shareholders, is incorporated herein by reference.

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Item 11.

Executive Compensation

Information under the caption "Executive Compensation", which will be contained in the Company's Definitive Proxy Statement for its 2010 Annual Meeting of Shareholders, is incorporated herein by reference.

Item 12.

Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters

Information under the captions "Principal Stockholders" and "Executive Compensation - Security Ownership of Management", which will be contained in the Company's Definitive Proxy Statement for its 2010 Annual Meeting of Shareholders, is incorporated herein by reference.

Item 13.

Certain Relationships, Related Transactions and Director Independence

Information under the captions "Certain Transactions" and "Election of Directors - Attendance and Independence", which will be contained in the Company's Definitive Proxy Statement for its 2010 Annual Meeting of Shareholders, is incorporated herein by reference.

Item 14.

Principal Accountant Fees and Services

Information under the caption "Principal Accountant Fees and Services", which will be contained in the Company's Definitive Proxy Statement for its 2010 Annual Meeting of Shareholders, is incorporated herein by reference.

- 47 -

PART IV

Item 15.

Exhibits

(a)		The following documents are being filed as part of this annual report on Form 10-K:
	1.		The Financial Statements are set out in this annual report on Form 10-K commencing on page F-1.
Exhibit No.				Description
3.1				Certificate of Incorporation of the Company as amended through February 28, 2010
3.2				By-laws of the Company, as amended through February 28, 2010
4.1(1)				Form of Common Stock Certificate
10.1(1)				Lease from Port of Corpus Christi Authority, dated April 14, 1987
10.2(1)				Lease from Port of Corpus Christi Authority, dated January 12, 1988, as amended on December 24, 1992
10.3(1) **				Summary Plan Description for the 1990 HITOX Profit Sharing Plan & Trust
10.4(2) **				Summary Plan Description for the 2000 Incentive Plan for TOR Minerals International, Inc.
10.5(3)				Amendment of Leases from Port of Corpus Christi Authority, dated July 11, 2000
10.6(4)				Subordination Agreement between the Company, Paulson Ranch, Ltd., and Bank of America, dated May 1, 2002
10.7(5)				Form of Series A Convertible Preferred Stock Purchase Agreement, dated January 15, 2004
10.8(6)				Master Lease Agreement with Bank of America Leasing & Capital, LLC ("BALC"), dated August 9, 2004
10.9(6) *				Schedule No. 1 to Master Lease Agreement with BALC, dated September 27, 2004
10.10(7)				Schedule No. 2 to Master Lease Agreement with BALC, dated December 21, 2004
10.11(8)				Loan Agreement with Bank of America, N.A., dated December 21, 2004
10.12(8)				Loan Agreement with HSBC Bank, dated November 23, 2004
10.13(8)				Loan Agreement with RHB Bank, dated November 23, 2004
10.14(8) **				Form of Incentive Stock Option Agreement for Officers A
10.15(8) **				Form of Incentive Stock Option Agreement for Officers B
10.16(8) **				Form of Nonqualified Option Agreement for Directors
10.17(9)				Loan Agreement with Rabobank, dated March 1, 2004
10.18(9)				Loan Agreement with Rabobank, dated July 6, 2004
10.19(10)				Capital Lease Agreement with De Lage Landen Financial Services, B.V., dated June 27, 2005

- 48 -

Exhibit No.

Description

10.20(11)	Schedule No. 3 to Master Lease Agreement with BALC, dated July 8, 2005
10.21(12)	Loan Agreement with Rabobank, dated July 19, 2005
10.22(13)	Amendment to Loan Agreement with HSBC Bank, dated September 14, 2005
10.23(14)	First Amendment to Second Amended and Restated Loan Agreement with Bank of America, N.A., dated December 13, 2005
10.24(14)	Real Estate Term Loan with Bank of America, N.A., dated December 13, 2005
10.25(14)	Assignment of Leases and Rents (Deed of Trust) with Bank of America, N.A., dated December 13, 2005
10.26(14)	Assignment of Leases and Rents (Leasehold Deed of Trust) with Bank of America, N.A., dated December 13, 2005
10.27(14)	Deed of Trust with Bank of America, N.A., dated December 13, 2005
10.28(14)	Leasehold Deed of Trust with Bank of America, N.A., dated December 13, 2005
10.29(15)	Amendment to Loan Agreement with HSBC Bank, dated December 22, 2005
10.30(15)	Amendment to Loan Agreement with RHB Bank, dated December 22, 2005
10.31(16)	Schedule No. 4 to Master Lease Agreement with BALC, dated July 17, 2006
10.32(17)	Second Amendment to Second Amended and Restated Loan Agreement with Bank of America, N.A., dated November 29, 2006
10.33(18)	Schedule No. 5 to Master Lease Agreement with BALC, dated December 29, 2006
10.34(19)	Third Amendment to Second Amended and Restated Loan Agreement with Bank of America, N.A., dated February 28, 2007
10.35(20)	Loan Agreement with Rabobank, dated March 20, 2007
10.36(21)	Service Agreement between Dr. Olaf Karasch and TOR Process and Trade, BV, (TPT) dated May 11, 2001
10.37(22)	Fourth Amendment to Second Amended and Restated Loan Agreement with Bank of America, N.A., dated May 7, 2007
10.38(23)	Fifth Amendment to Second Amended and Restated Loan Agreement with Bank of America, N.A., dated March 19, 2008
10.39(24)	Waiver and Sixth Amendment to Second Amended and Restated Loan Agreement with Bank of America, N.A., dated August 14, 2008
10.40(25)	Form of Subscription Agreement with respect to the Company's September - October 2008 Private Placement
10.41(25)	Form of Warrant with respect to the Company's September - October 2008 Private Placement
10.42(26)	Waiver and Seventh Amendment to Second Amended and Restated Loan Agreement with Bank of America, N.A., dated November 13, 2008

- 49 -

Exhibit No.

Description

10.43(27)	Eighth Amendment to Second Amended and Restated Loan Agreement with Bank of America, N.A., dated April 30, 2009
10.44(28)	Form of Subscription Agreement with respect to the Company's May - August 2009 issuance of 6% Convertible Subordinated Debentures
10.45(28)	Form of 6% Convertible Subordinated Debenture with respect to the Company's May - August 2009 issuance of 6% Convertible Subordinated Debentures
10.46(28)	Form of Warrant with respect to the Company's May - August 2009 issuance of 6% Convertible Subordinated Debentures
10.47(29)	Ninth Amendment to Second Amended and Restated Loan Agreement with Bank of America, N.A., dated, September 28, 2009
10.48(29)	Subordination Agreement between Bank of America, N.A. and holders of the Company's 6% Convertible Subordinated Debentures, dated September 28, 2009
10.49(30)	Tenth Amendment to Second Amended and Restated Loan Agreement with Bank of America, N.A., dated February 12, 2010
14.1	Code of Ethics
21	Subsidiaries of Registrant: TOR Minerals Malaysia Sdn Bhd and TOR Processing & Trade BV
23.1	Consent of UHY LLP
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

- 50 -

(1)	Incorporated by reference to the exhibit filed with the Registrant's Registration Statement on Form S-1 (No. 33-25354) filed November 3, 1988, which registration statement becameeffective December 14, 1988.
(2)	Incorporated by reference to the exhibit filed with the Company's May 25, 2000 Form S-8
(3)	Incorporated by reference to the exhibit filed with the Company's December 31, 2000 Form 10-K
(4)	Incorporated by reference to the exhibit filed with the Company's March 31, 2002 Form 10-QSB
(5)	Incorporated by reference to the January 19, 2004 Form 8-K filed with the Commissionon January 21, 2004
(6)	Incorporated by reference to the exhibit filed with the Company's October 5, 2004 Form 8-K
(7)	Incorporated by reference to the exhibit filed with the Company's December 22, 2004 Form 8-K
(8)	Incorporated by reference to the exhibit filed with the Company's December 31, 2004 Form 10-K
(9)	Incorporated by reference to the exhibit filed with the Company's January 3, 2005 Form 8-K
(10)	Incorporated by reference to the exhibit filed with the Company's June 27, 2005 Form 8-K
(11)	Incorporated by reference to the exhibit filed with the Company's July 8, 2005 Form 8-K
(12)	Incorporated by reference to the exhibit filed with the Company's July 19, 2005 Form 8-K
(13)	Incorporated by reference to the exhibit filed with the Company's September 14, 2005 Form 8-K
(14)	Incorporated by reference to the exhibit filed with the Company's December 13, 2005 Form 8-K
(15)	Incorporated by reference to the exhibit filed with the Company's December 22, 2005 Form 8-K
(16)	Incorporated by reference to the exhibit filed with the Company's July 17, 2006 Form 8-K
(17)	Incorporated by reference to the exhibit filed with the Company's November 29, 2006 Form 8-K
(18)	Incorporated by reference to the exhibit filed with the Company's December 29, 2006 Form 8-K
(19)	Incorporated by reference to the exhibit filed with the Company's February 28, 2007 Form 8-K
(20)	Incorporated by reference to the exhibit filed with the Company's March 20, 2007 Form 8-K
(21)	Incorporated by reference to the exhibit filed with the Company's December 31, 2006 Form 10-K
(22)	Incorporated by reference to the exhibit filed with the Company's May 7, 2007 Form 8-K
(23)	Incorporated by reference to the exhibit filed with the Company's March 19, 2008 Form 8-K
(24)	Incorporated by reference to the exhibit filed with the Company's June 30, 2008 Form 10-Q
(25)	Incorporated by reference to the exhibit filed with the Company's September 15, 2008 Form 8-K
(26)	Incorporated by reference to the exhibit filed with the Company's September 30, 2008 Form 10-Q
(27)	Incorporated by reference to the exhibit filed with the Company's May 6, 2009 Form 8-K
(28)	Incorporated by reference to the exhibit filed with the Company's May 6, 2009 and August 26, 2009 Form 8-K
(29)	Incorporated by reference to the exhibit filed with the Company's September 28, 2009 Form 8-K
(30)	Incorporated by reference to the exhibit filed with the Company's February 16, 2010 Form 8-K
*	Confidential treatment has been granted for certain portions of the exhibit
**	Constitutes a compensation plan or agreement under which executive officers may participate

- 51 -

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		TOR MINERALS INTERNATIONAL, INC. (Registrant)
Date: March 24, 2010	By:	OLAF KARASCH Olaf Karasch, President and CEO

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Signatures	Capacity with the Company	Date
OLAF KARASCH (Olaf Karasch)	President and Chief Executive Officer	March 24, 2010
BERNARD A. PAULSON (Bernard A. Paulson)	Chairman of the Board	March 24, 2010
BARBARA RUSSELL (Barbara Russell)	Treasurer and Chief Financial Officer (Principal Accounting Officer)	March 24, 2010
JULIE BUCKLEY (Julie Buckley)	Director	March 24, 2010
DAVID HARTMAN (David Hartman)	Director	March 24, 2010
DOUG HARTMAN (Doug Hartman)	Director	March 24, 2010
THOMAS W. PAUKEN (Thomas W. Pauken)	Director	March 24, 2010
STEVEN PAULSON (Steven Paulson)	Director	March 24, 2010
CHIN YONG TAN (Chin Yong Tan)	Director	March 24, 2010

- 52 -

TOR MINERALS INTERNATIONAL, INC. AND SUBSIDIARIES
Annual Report on Form 10-K

Item 8. Financial Statements and Supplementary Data

TOR Minerals International, Inc.	Page
Report of Independent Registered Public Accounting Firm	F - 2
Consolidated Statements of Operations - Years ended December 31, 2009, 2008 and 2007	F - 3
Consolidated Statements of Comprehensive Income (Loss) - Years ended December 31, 2009, 2008 and 2007	F - 4
Consolidated Balance Sheets - December 31, 2009 and 2008	F - 5
Consolidated Statements of Shareholders' Equity - Years ended December 31, 2009, 2008 and 2007	F - 6
Consolidated Statements of Cash Flows - Years ended December 31, 2009, 2008 and 2007	F - 7
Notes to the Consolidated Financial Statements	F - 8

F - 1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of
TOR Minerals International, Inc.

We have audited the accompanying consolidated balance sheets of TOR Minerals International, Inc. and Subsidiaries (collectively, the "Company") as of December 31, 2009 and 2008, and the related consolidated statements of operations, comprehensive income (loss), shareholders' equity and cash flows for each of the three years in the period ended December 31, 2009. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

We were not engaged to examine management's assertion about the effectiveness of the Company's internal control over financial reporting as of December 31, 2009 included in the accompanying Annual Report on Form 10-K and, accordingly, we do not express an opinion thereon.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of TOR Minerals International, Inc. and Subsidiaries as of December 31, 2009 and 2008, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company's credit facility with a financial institution in the United States matures on August 15, 2010, at which time the credit facility will be terminated as indicated by the financial institution. As a result, the Company will be required to raise additional capital, find alternative means of financial support, or both. The Company may have difficulty in obtaining the necessary financing to repay this credit facility. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding these matters are also described in Note 1. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ UHY LLP

UHY LLP
Houston, Texas
March 24, 2010

F - 2

TOR Minerals International, Inc. and Subsidiaries Consolidated Statements of Operations (In thousands, except per share amounts)
		Year Ended December 31,
		2009		2008		2007
NET SALES	$	24,193	$	25,304	$	27,961
Cost of sales		20,382		22,032		22,768
GROSS MARGIN		3,811		3,272		5,193
Technical services and research and development		200		244		245
Selling, general and administrative expenses		3,215		4,673		4,290
Goodwill impairment		-		1,976		-
Loss on assets held for sale		-		679		-
Loss (gain) on disposal of assets		35		98		(12)
OPERATING INCOME (LOSS)		361		(4,398)		670
OTHER INCOME (EXPENSES):
Interest income		2		2		18
Interest expense		(558)		(524)		(684)
Gain (loss) on foreign currency exchange rate		59		(38)		25
Other, net		4		15		-
INCOME (LOSS) BEFORE INCOME TAX		(132)		(4,943)		29
Income tax expense (benefit)		4		19		(42)
NET INCOME (LOSS)	$	(136)	$	(4,962)	$	71
Less: Preferred Stock Dividends		60		60		60
Income (Loss) Available to Common Shareholders	$	(196)	$	(5,022)	$	11

Income (loss) per common share:
Basic	$	(0.10)	$	(3.19)	$	0.01
Diluted	$	(0.10)	$	(3.19)	$	0.01

Weighted average common shares outstanding:
Basic		1,891		1,576		1,570
Diluted		1,891		1,576		1,577
See accompanying notes.

F - 3

TOR Minerals International, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income (Loss) (In thousands)
		Year Ended December 31,
		2009		2008		2007
NET INCOME (LOSS)	$	(136)	$	(4,962)	$	71

OTHER COMPREHENSIVE INCOME (LOSS) , net of tax
Net gain (loss) on derivative instruments designated and qualifying as cash flow hedges, net of tax:
Net loss arising during the period		-		-		(567)
Net gain reclassified to income		-		1		485
Currency translation adjustment, net of tax:
Net foreign currency translation adjustment gains (losses)		207		(916)		1,418
Other comprehensive income (loss), net of tax		207		(915)		1,336
COMPREHENSIVE INCOME (LOSS)	$	71	$	(5,877)	$	1,407
See accompanying notes.

F - 4

TOR Minerals International, Inc. and Subsidiaries Consolidated Balance Sheets (In thousands, except share and per share amounts)
		December 31,
		2009		2008
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	1,002	$	191
Trade accounts receivable, net		3,380		2,310
Inventories		9,101		11,839
Other current assets		540		444
Total current assets		14,023		14,784
PROPERTY, PLANT AND EQUIPMENT, net		18,800		19,515
OTHER ASSETS		53		38
Total Assets	$	32,876	$	34,337

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1,452	$	2,268
Accrued expenses		1,036		1,611
Notes payable under lines of credit		3,313		2,156
Export credit refinancing facility		-		1,458
Current deferred tax liability		60		56
Current maturities - capital leases		140		86
Current maturities of long-term debt - financial institutions		435		1,590
Total current liabilities		6,436		9,225
LONG-TERM DEBT, EXCLUDING CURRENT MATURITIES
Capital leases		49		141
Long-term debt - financial institutions		1,477		1,876
Long-term debt - convertible debentures, net		1,122		-
DEFERRED TAX LIABILITY		577		580
Total liabilities		9,661		11,822
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Series A 6% convertible preferred stock $.01 par value: authorized, 5,000 shares; 200 shares issued and outstanding at 12/31/2009 and 12/31/2008		2		2
Common stock $.25 par value: authorized, 6,000 shares; 1,891 shares issued and outstanding at 12/31/2009 and 12/31/2008		2,363		2,363
Additional paid-in capital		25,214		24,525
Accumulated deficit		(7,807)		(7,611)
Accumulated other comprehensive income:
Cumulative translation adjustment		3,443		3,236
Total shareholders' equity		23,215		22,515
Total Liabilities and Shareholders' Equity	$	32,876	$	34,337
See accompanying notes.

F - 5

TOR Minerals International, Inc. and Subsidiaries Consolidated Statements of Shareholders' Equity Years ended December 31, 2009, 2008 and 2007
	Preferred Stock			Common Stock				Additional Paid-In		Accumulated		Accumulated Other Comprehensive
	Shares		Amount	Shares		Amount		Capital		Deficit		Income		Total
Balance at December 31, 2006	200	$	2	1,568	$	1,960	$	22,652	$	(2,600)	$	2,815	$	24,829
Exercise of stock options				6		8		50						58
Share based compensation expense								172						172
Dividends declared - Preferred										(60)				(60)
Net income										71				71
Cumulative translation adjustment												1,418		1,418
Net unrealized loss on foreign currency hedge												(82)		(82)
Balance at December 31, 2007	200	$	2	1,574	$	1,967	$	22,874	$	(2,589)	$	4,151	$	26,405
Issuance of Common Stock				315		394		1,496						1,890
Exercise of stock options				2		2		10						12
Share based compensation expense								145						145
Dividends declared - Preferred										(60)				(60)
Net loss										(4,962)				(4,962)
Cumulative translation adjustment												(916)		(916)
Net unrealized loss on foreign currency hedge												1		1
Balance at December 31, 2008	200	$	2	1,891	$	2,363	$	24,525	$	(7,611)	$	3,236	$	22,515
Issuance of Common Stock Warrants								423						423
Share based compensation expense								266						266
Dividends declared - Preferred										(60)				(60)
Net loss										(136)				(136)
Cumulative translation adjustment												207		207
Balance at December 31, 2009	200	$	2	1,891	$	2,363	$	25,214	$	(7,807)	$	3,443	$	23,215
See accompanying notes.

F - 6

TOR Minerals International, Inc. and Subsidiaries Consolidated Statements of Cash Flows
(In thousands)		Year Ended December 31,
		2009		2008		2007
*CASH FLOWS FROM OPERATING ACTIVITIES:*
Net Income (Loss)	$	(136)	$	(4,962)	$	71
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation		1,812		1,954		1,785
Goodwill impairment		-		1,976		-
Loss on assets held for sale		-		679		-
Loss (gain) on disposal of assets		35		98		(12)
Share-based compensation		266		145		172
Warrant interest expense		44		-		-
Deferred income taxes		4		19		(42)
Provision for bad debts		(61)		381		-
Changes in working capital:
Trade accounts receivables		(762)		1,049		(49)
Inventories		2,807		(685)		61
Other current assets		(91)		134		(79)
Accounts payable and accrued expenses		(1,428)		709		(1,056)
Net cash provided by operating activities		2,490		1,497		851

*CASH FLOWS FROM INVESTING ACTIVITIES:*
Additions to property, plant and equipment		(922)		(2,396)		(1,037)
Proceeds from sales of property, plant and equipment		-		4		16
Net cash used in investing activities		(922)		(2,392)		(1,021)

*CASH FLOWS FROM FINANCING ACTIVITIES:*
Net proceeds from (payments on) lines of credit		1,120		(2,365)		154
Net (payments on) proceeds from export credit refinancing facility		(1,471)		1,458		-
Proceeds from capital lease		69		26		12
Payments on capital lease		(111)		(80)		(72)
Proceeds from long-term bank debt		-		914		1,057
Payments on long-term bank debt		(1,604)		(931)		(1,134)
Proceeds from convertible debentures		1,500		-		-
Payments on related party long-term debt		-		-		(400)
Loan origination costs		(15)		9		11
Proceeds from the issuance of common stock, and exercise of common stock options		-		1,902		57
Preferred stock dividends paid		(60)		(60)		(60)
Net cash (used in) provided by financing activities		(572)		873		(375)
Effect of exchange rate fluctuations on cash and cash equivalents		(185)		(163)		25
Net increase (decrease) in cash and cash equivalents		811		(185)		(520)
Cash and cash equivalents at beginning of year		191		376		896
Cash and cash equivalents at end of year	$	1,002	$	191	$	376

Supplemental cash flow disclosures:
Interest paid	$	558	$	524	$	684
Income taxes paid	$	3	$	10	$	10

See accompanying notes.

F - 7

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

1.	Going Concern

F - 8

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

F - 9

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

2.	Summary of Significant Accounting Policies

Business Description: TOR Minerals International, Inc. and Subsidiaries (the "Company"), a Delaware Corporation, is engaged in a single industry, the manufacture and sale of mineral products for use as pigments and extenders, primarily in the manufacture of paints, industrial coatings plastics, catalysts and solid surface applications. The Company's global headquarters and US manufacturing plant are located in Corpus Christi, Texas ("TOR US" or "US Operation"). The Asian Operation, TMM, is located in Ipoh, Malaysia, and the European Operation, TPT, is located in Hattem, The Netherlands.

Basis of Presentation and Use of Estimates: The consolidated financial statements include accounts of TOR Minerals International, Inc. and its wholly-owned subsidiaries, TOR Minerals Malaysia, Sdn. Bhd. ("TMM") and TOR Processing and Trade, BV ("TPT"). All significant intercompany transactions are eliminated in the consolidation process.

TMM measures and records its transactions in terms of the local Malaysian currency, the Ringgit, which is also the functional currency. As a result, gains and losses resulting from translating the Balance Sheet from Ringgits to US Dollars are recorded as cumulative translation adjustments (which are included in accumulated other comprehensive income, a separate component of shareholders' equity) on the Consolidated Balance Sheets. As of December 31, 2009 and 2008, the cumulative translation adjustment related to the change in functional currency to the US Dollar totaled $1,294,000 and $1,206,000, respectively.

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from these estimates.

Cash and Cash Equivalents: The Company considers all highly liquid investments readily convertible to known cash amounts and with a maturity of three months or less at the date of purchase to be cash equivalents.

Accounts Receivable: The Company performs ongoing credit evaluations of its customers' financial condition and, generally, requires no collateral from its customers. The allowance for non-collection of accounts receivable is based upon the expected collectability of all accounts receivable including review of agings and current economic conditions. Accounts are written off when all reasonable internal and external collection efforts have been performed. At December 31, 2009 and 2008, the Company maintained a reserve for doubtful accounts of approximately $79,000 and $357,000, respectively. The reduction in the allowance for doubtful accounts was primarily related to the current global economic conditions and its effects on the collectability of customer balances.

F - 10

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

Foreign Currency: Results of operations for the Company's foreign operations, TMM and TPT, are translated from the designated functional currency to the US dollar using average exchange rates during the period, while assets and liabilities are translated at the exchange rate in effect at the reporting date. Resulting gains or losses from translating foreign currency financial statements are reported as other comprehensive income (loss). The effect of changes in exchange rates between the designated functional currency and the currency in which a transaction is denominated are recorded as foreign currency transaction gains (losses) in earnings.

Inventories: Inventories are stated at the lower of cost or market with cost being determined principally by use of the average-cost method. The Company writes down inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. At December 31, 2009 and 2008, we maintained a reserve for obsolescence and unmarketable inventory of approximately $271,000 and $224,000, respectively.

Overhead is charged to inventory based on normal capacity and the Company expenses abnormal amounts of idle facility expense, freight and handling costs in the period incurred. For the years ended December 31, 2009 and 2008, the Company recorded approximately $1,872,000 and $2,020,000, respectively, related to idle facility expense primarily at the US and Malaysian operations.

TMM is our primary source for SR. There is only one other available source for the quality of SR required for the production of HITOX. If supplies of SR from TMM are interrupted and we are unable to arrange for an alternative source, this could result in our inability to produce HITOX, which accounted for approximately 42%, 52% and 53% of our sales for the years ended December 31, 2009, 2008 and 2007, respectively.

Property, Plant and Equipment: Property, plant and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of depreciable assets which range from 3 to 39 years. Maintenance and repair costs are charged to operations as incurred and major improvements extending asset lives are capitalized.

Valuation of Long-Lived Assets: The impairment of tangible and intangible assets is assessed when changes in circumstances (such as, but not limited to, a decrease in market value of an asset, current and historical operating losses or a change in business strategy) indicate that their carrying value may not be recoverable. This assessment is based on management's estimates of future undiscounted cash flows, salvage values or net sales proceeds. These estimates take into account management's expectations and judgments regarding future business and economic conditions, future market values and disposal costs. Actual results and events could differ significantly from management's estimates. Based upon our most recent analysis, we believe that no impairment exists at December 31, 2009. There can be no assurance that future impairment tests will not result in a charge to net earnings (loss).

F - 11

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

Impairment of Goodwill: As the result of our 2008 annual impairment review, the Company concluded that the carrying value of our goodwill was impaired. As a result, our fourth quarter and full year 2008 financial results included an aggregate non-cash pretax impairment charge of approximately $1,976,000. The impairment charge was the result of the annual assessment for impairment and reflected factors impacted by market conditions and the completion of our annual budget and forecasting process. This non-cash charge had no effect on our cash balances or cash flows.

Revenue Recognition: The Company recognizes revenue when each of the following four criteria are met: 1) a contract or sales arrangement exists; 2) title and risk of loss transfers to the customer upon shipment for FOB shipping point sales and when the Company receives confirmation of receipt and acceptance by the customer for FOB destination sales; 3) the price of the products is fixed or determinable; 4) collectability is reasonably assured.

Shipping and Handling: The Company records shipping and handling costs, associated with the outbound freight on products shipped to customers, as a component of cost of goods sold.

Earnings Per Share: Basic earnings per share are based on the weighted average number of shares outstanding and exclude any dilutive effects of options, warrants and/or convertible preferred stock. Diluted earnings per share reflect the effect of all dilutive items.

Income Taxes: The Company records income taxes using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

When accounting for uncertainties in income taxes, we evaluate all tax years still subject to potential audit under the applicable state, federal and foreign income tax laws. We are subject to taxation in the United States, Malaysia and The Netherlands. Our federal income tax returns in the United States are subject to examination for the tax years ended December 31, 2006 through December 31, 2009. Our state returns, which are filed in Texas, Ohio and Michigan, are subject to examination for the tax years ended December 31, 2006 through December 31, 2009. Our tax returns in various non-US jurisdictions are subject to examination for various tax years ended December 31, 2004 through December 31, 2009.

As of January 1, 2009, we did not have any unrecognized tax benefits and there was no change during the twelve month period ended December 31, 2009. In addition, we did not recognize any interest and penalties in our consolidated financial statements during the twelve month period ended December 31, 2009. If any interest or penalties related to any income tax liabilities are imposed in future reporting periods, we expect to record both of these items as components of income tax expense.

F - 12

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

Derivatives and Hedging Activities : The Company records the fair value of all outstanding derivative instruments on the Consolidated Balance Sheets in other current assets and current liabilities. Derivatives are held as part of a formally documented risk management (hedging) program. All derivatives are straightforward and are held for purposes other than trading. The Company measures hedge effectiveness by formally assessing, at least quarterly, the historical and probable future high correlation of changes in the fair value or expected future cash flows of the hedged item. The ineffective portions, if any, are recorded in current earnings in the current period. If the hedging relationship ceases to be highly effective or if it becomes probable that an expected transaction will no longer occur, gains or losses on the derivative are recorded in current earnings. Changes in the fair value of derivatives are recorded in current earnings along with the change in fair value of the underlying hedged item if the derivative is designated as a fair value hedge or in other comprehensive income if the derivative is designated as a cash flow hedge. If no hedging relationship is designated, the derivative is marked to market through current earnings. The Company has utilized natural gas forward contracts to hedge a portion of its US Operation's natural gas needs and has utilized foreign currency forward contracts at both the US and Asian Operations to hedge a portion of its foreign currency risk. (See Note 15, Derivatives and Other Financial Instruments).

On January 1, 2009, we adopted changes issued by the FASB to disclosures about derivative instruments and hedging activities. These changes require enhanced disclosures about an entity's derivative and hedging activities, including (1) how and why an entity uses derivative instruments, (2) how derivative instruments and related hedged items are accounted for, and (3) how derivative instruments and related hedged items affect an entity's financial position, financial performance and cash flows. Other than the required disclosures (see Note 15, Derivatives and Other Financial Instruments), the adoption of these changes had no impact on the condensed consolidated financial statements.

Share Based Compensation: The Company calculates share based compensation using the Black-Scholes-Merton ("Black-Scholes") option-pricing model, which requires the input of highly subjective assumptions including the expected stock price volatility. For the twelve-month periods ended December 31, 2009, 2008 and 2007, we recorded $266,000, $145,000 and $172,000, respectively, in share-based employee compensation. This compensation cost is included in the general and administrative expenses and cost of sales in the accompanying consolidated income statements.

Fair Value Accounting: On June 30, 2009, we adopted changes issued by the FASB to fair value disclosures of financial instruments. These changes require a publicly traded company to include disclosures about the fair value of its financial instruments whenever it issues summarized financial information for interim reporting periods. Such disclosures include the fair value of all financial instruments, for which it is practicable to estimate that value, whether recognized or not recognized in the statements of financial position, the related carrying amount of these financial instruments and the method(s) and significant assumptions used to estimate the fair value. Other than the required disclosure (see Note 4, Fair Value Measurements), the adoption of these changes had no impact on the condensed consolidated financial statements.

F - 13

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

On June 30, 2009, we adopted changes issued by the FASB to fair value accounting. These changes provide additional guidance for estimating fair value when the volume and level of activity for an asset or liability have significantly decreased and includes guidance for identifying circumstances that indicate a transaction is not orderly. This guidance is necessary to maintain the overall objective for fair value measurements, which is that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current market conditions. The adoption of these changes had no impact on the condensed consolidated financial statements.

On June 30, 2009, we adopted changes issued by the FASB to the recognition and presentation of other-than-temporary impairments. These changes amend existing other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities. The adoption of these changes had no impact on the condensed consolidated financial statements.

On January 1, 2009, we adopted changes issued by the FASB to fair value accounting and reporting as it relates to nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value in the financial statements on at least an annual basis. These changes define fair value, establish a framework for measuring fair value in GAAP, and expand disclosures about fair value measurements. This guidance applies to other GAAP that require or permit fair value measurements and is to be applied prospectively with limited exceptions. The adoption of these changes, as it relates to nonfinancial assets and nonfinancial liabilities, had no impact on the condensed consolidated financial statements. These provisions will be applied at such time a fair value measurement of nonfinancial assets or nonfinancial liabilities is required, which may result in a fair value that is materially different than would have been calculated prior to the adoption of these changes.

Fair Value Accounting for Financial Liabilities: In August 2009, the FASB issued changes to fair value accounting for liabilities. These changes clarify existing guidance that in circumstances in which a quoted price in an active market for the identical liability is not available, an entity is required to measure fair value using either a valuation technique that uses a quoted price of either a similar liability or a quoted price of an identical or similar liability when traded as an asset, or another valuation technique that is consistent with the principals of fair value measurements, such as an income approach (e.g., present value technique). This guidance also states that both a quoted price in an active market for the identical liability and a quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. These changes became effective for TOR on October 1, 2009. Management has determined that the adoption of these changes does not have an impact on the condensed consolidated financial statements.

F - 14

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

Business Combinations and Consolidation Accounting: Effective January 1, 2009, we adopted changes issued by the FASB on April 1, 2009 to accounting for business combinations. These changes apply to all assets acquired and liabilities assumed in a business combination that arise from certain contingencies and requires (1) an acquirer to recognize at fair value, at the acquisition date, an asset acquired or liability assumed in a business combination that arises from a contingency if the acquisition date fair value of that asset or liability can be determined during the measurement period otherwise the asset or liability should be recognized at the acquisition date if certain defined criteria are met; (2) contingent consideration arrangements of an acquiree assumed by the acquirer in a business combination initially at fair value; (3) subsequent measurements of assets and liabilities arising from contingencies be based on systematic and rational method depending on the nature and contingent consideration arrangements be measured subsequently; and (4) disclosures of amounts and measurements basis of such assets and liabilities and the nature of the contingencies. The impact of these changes on our condensed consolidated financial statements is dependent upon acquisitions entered into by the Company after January 1, 2009.

On January 1, 2009, we adopted changes issued by the FASB to accounting for business combinations. While retaining the fundamental requirements of accounting for business combinations, as noted above, including that the purchase method be used for all business combinations and for an acquirer to be identified for each business combination, these changes define the acquirer as the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as the date the acquirer achieves control instead of the date that the consideration is transferred. These changes require an acquirer in a business combination, including business combinations achieved in stages (step acquisition), to recognize the assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions. This guidance also requires the recognition of assets acquired and liabilities assumed arising from certain contractual contingencies as of the acquisition date, measured at the acquisition date fair values. Additionally, these changes require acquisition related costs to be expensed in the period in which the costs are incurred and the services are received instead of including such costs as part of the acquisition price. As the Company has not entered into any acquisitions since the adoption on January 1, 2009, there was no impact on our condensed consolidated financial statements.

On January 1, 2009, we adopted changes issued by the FASB to consolidation accounting and reporting. These changes establish accounting and reporting for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This guidance defines a noncontrolling interest, previously called a minority interest, as the portion of equity in a subsidiary not attributable, directly or indirectly, to a parent. These changes require, among other items, that a noncontrolling interest be included in the consolidated statements of financial position within equity separate from the parent's equity; consolidated net income to be reported at amounts inclusive of both the parent's and noncontrolling interest's share and, separately, the amounts of consolidated net income attributable to the parent and noncontrolling interest all on the consolidated statement of operations; and if a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be measured at fair value and a gain or loss be recognized in net income based on such fair value. As the Company has not entered into any acquisitions since the adoption on January 1, 2009, there was no impact on our condensed consolidated financial statements.

F - 15

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

Codification: On September 30, 2009, we adopted changes issued by the Financial Accounting Standards Board (the "FASB") to the authoritative hierarchy of GAAP. These changes established the FASB Accounting Standards Codification (the "Codification") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission ("SEC") under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead, the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they only serve to update the Codification. These changes and the Codification itself do not change GAAP. Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the condensed consolidated financial statements.

Subsequent Events: On June 30, 2009, we adopted changes issued by the FASB to accounting for and disclosure of events that occur after the balance sheet date but before the financial statements are issued or are available to be issued, otherwise known as "subsequent events". Specifically, these changes set forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements, the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its condensed consolidated financial statements, and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. The adoption of these changes had no impact on the condensed consolidated financial statements as management already followed a similar approach prior to the adoption of this new guidance.

The Company evaluated all activity of TOR through the issue date of the condensed consolidated financial statements, and concluded that all subsequent events that would require recognition in the condensed consolidated financial statements or disclosure in the notes to the condensed consolidated financial statements have been incorporated into this Annual Report on Form 10-K. (See Note 20, Subsequent Events, on page F-38.)

F - 16

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

3.	Long-Term Debt and Notes Payable

(In thousands)		December 31,
		2009		2008
Term note payable to a U.S. bank, secured by real estate and leasehold improvements of our US operation, prepaid on August 25, 2009.	$	-	$	576
Term note payable to a U.S. bank, secured by property, plant and equipment, inventory and accounts receivable of our US operation, prepaid on December 30, 2009.		-		342
Term note payable to a U.S. equipment financing company, with an interest rate of 5.24% at December 31, 2009, due April 1, 2013, secured by a Caterpillar front-end loader.		84		106
Fixed rate Euro term note payable to a Netherlands bank, secured by TPT's assets, matured June 1, 2009.		-		94
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 7.8% at December 31, 2009, due July 1, 2029, secured by TPT's land and office building purchased July 2004. (382 Euro)		547		560
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 4.7% at December 31, 2009, due January 31, 2030, secured by TPT's land and building purchased January 2005. (379 Euro)		543		556
Fixed rate Euro term note payable to a Netherlands bank, with an interest rate of 6.1% at December 31, 2009, due July 31, 2015, secured by TPT's assets. (283 Euro)		406		465
U.S. Dollar term note payable to a Malaysian bank, with an interest rate of 2.0% at December 31, 2009, due June 30, 2010, secured by TMM's property, plant and equipment.		191		525
U.S. Dollar term note payable to a Malaysian bank, with an interest rate of 1.385% at December 31, 2009, due April 1, 2010, secured by TMM's property, plant and equipment.		141		242
Total		1,912		3,466
Less current maturities		435		1,590
Total long-term debt and notes payable	$	1,477	$	1,876

F - 17

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

US Bank Credit Facility and Term Loans

Bank of America Credit Facility and Term Loans

Under the terms of the April 30, 2009 amendment, the financial covenants were replaced with the following:

Covenants to be based solely on the results of the US operation
Current Ratio - Maintain a ratio of current assets to current liabilities of at least 1.0 to 1.0 (1.46 to 1.0 as of the quarter ending December 31, 2009)
Fixed Charge Coverage Ratio - Maintain a fixed charge coverage ratio of at least 0.85 to 1.0 (2.91 to 1.0 for the quarter ending December 31, 2009)

F - 18

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

Six-percent Convertible Subordinated Debentures

Other Term Loans

F - 19

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

Netherlands Bank Credit Facility, Mortgage and Term Loan

On July 7, 2004, TPT entered into a mortgage loan (the "First Mortgage") with Rabobank. The First Mortgage, in the amount of Euro 485,000, will be repaid over 25 years with interest fixed at 5.2% per year for the first four years. Under the terms of the agreement, the interest was adjusted to a fixed rate of 7.8%, effective August 1, 2008, for a period of five years. Thereafter, the rate will change to Rabobank prime plus 1.75%. TPT utilized Euro 325,000 of the loan to finance the July 14, 2004, purchase of land and an office building, as well as to remodel the office building. The balance of the loan proceeds, Euro 160,000, was used for the expansion of TPT's existing building. Monthly principal and interest payments commenced on September 1, 2004, and will continue through July 1, 2029. The monthly principal payment is Euro 1,616. The loan balance at December 31, 2009 and 2008 was Euro 381,000 and Euro 401,000, respectively ($547,000 and $560,000, respectively). The mortgage loan is secured by the land and office building purchased on July 7, 2004.

F - 20

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

Malaysian Bank Credit Facility and Term Loan

F - 21

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

4.	Fair Value Measurements

The following table presents the Company's financial assets and financial liabilities that are measured and recognized at fair value on a recurring basis, classified under the appropriate level of fair value hierarchy, as of December 31, 2009. The Company did not hold any non-financial assets and/or non-financial liabilities subject to fair value measurements at December 31, 2009.

	December 31, 2009
(In thousands)	Balance at December 31, 2009		Quoted Prices in Active Markets for Identical Items (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Asset for foreign currency derivative financial instruments (including forward contracts)	$	3	$	-	$	3	$	-

Our foreign currency derivative financial instruments mitigate foreign exchange risks and include forward contracts.

The fair value of the Company's debt is based on estimates using standard pricing models that take into account the present value of future cash flows as of the balance sheet date. The computation of the fair value of these instruments is generally performed by the Company. The carrying amounts and estimated fair values of the Company's long-term debt, including current maturities, are summarized below:

		December 31, 2009				December 31, 2008
(In thousands)		Carrying Value		Fair Value		Carrying Value		Fair Value
Long-term debt, including current portion	$	1,912	$	1,603	$	3,466	$	3,143
Long-term debt - convertible debentures		1,500		569		-		-
	$	3,412	$	2,172	$	3,466	$	3,143

The carrying amounts reported in the balance sheet for cash and cash equivalents, trade receivables, payables and accrued liabilities, accrued income taxes and short-term borrowings approximate fair value due to the short term nature of these instruments, Accordingly, these items have been excluded from the above table.

5.	Series A 6% Convertible Preferred Stock Dividend

On December 6, 2009, the Company declared a dividend, in the amount of $15,000, for the quarterly period ended December 31, 2009, payable on January 1, 2010, to the holders of record of the Series A Convertible Preferred Stock as of the close of business on December 6, 2009. The Company declared total dividends of $60,000 in both 2009 and 2008 on the Series A Convertible Preferred Stock.

F - 22

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

6.	Capital Lease

On June 27, 2005, TPT entered into a financial lease agreement with De Lage Landen Financial Services, BV for equipment related to the production of ALUPREM. The cost of the equipment under the capital lease is included in the balance sheets as property, plant and equipment and was $381,181. Accumulated amortization of the leased equipment at December 31, 2009 was approximately Euro 128,000 ($183,000). Amortization of assets under capital leases is included in depreciation expense. The capital lease is in the amount of Euro 377,351 including interest of Euro 62,113 (implicit interest rate 6.3%) and Euro 238 in executory costs. The lease term is 72 months with equal monthly installments of Euro 4,071 ($5,831). The net present value of the lease at December 31, 2009 was Euro 89,000 ($121,000).

On October 30, 2007, the Company entered into a financial lease agreement with Dell Financial Services for two computer servers. The cost of the equipment under the capital lease, in the amount of $12,420, is included in the balance sheets as property, plant and equipment. Accumulated amortization of the leased equipment at December 31, 2009 was approximately $10,000. The capital lease is in the amount of $13,217 including interest of $800 (implicit interest rate 4.1%). The lease term is 36 months with equal monthly installments of $367. The net present value of the lease at December 31, 2009 was $3,000.

On March 13, 2008, the Company entered into a financial lease agreement with Toyota Financial Services for a forklift. The cost of the equipment under the capital lease, in the amount of $26,527, is included in the balance sheets as property, plant and equipment. Accumulated amortization of the leased equipment at December 31, 2009 was approximately $8,000. The capital lease is in the amount of $31,164 including interest of $4,637 (implicit interest rate 6.53%). The lease term is 60 months with equal monthly installments of $519. The net present value of the lease at December 31, 2009 was $18,000.

On September 24, 2009, the Company entered into a financial lease agreement with Sympatec for a particle analyzer. The cost of the equipment under the capital lease, in the amount of $68,722, is included in the balance sheets as property, plant and equipment. Accumulated amortization of the leased equipment at December 31, 2009 was approximately $3,000. The capital lease is in the amount of $74,220 including interest of $5,498 (implicit interest rate 14.45%). The lease term is 12 months with equal monthly installments of $6,185. The net present value of the lease at December 31, 2009 was $47,000.

The following table sets forth the minimum future lease payments (in thousands) under these leases as of December 31, 2009:

Year Ending December 31,		Amount
2010	$	140
2011		52
2012		6
2013		1
2014		-
Total minimum lease payments		199
Less: Amount representing executory costs		-
Net minimum lease payments		199
Less: Amount representing interest		(10)
Present value of net minimum lease payments		189
Less: Current maturities of capital lease obligations		(140)
Long-term capital lease obligations	$	49

F - 23

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

7.	Inventories

A summary of inventories follows:

(In thousands)		December 31,
		2009		2008
Raw materials	$	4,178	$	5,208
Work in progress		1,173		1,327
Finished goods		3,311		4,828
Supplies		710		700
Total Inventories		9,372		12,063
Inventory reserve		(271)		(224)
Net Inventories	$	9,101	$	11,839

Inventory is stated at the lower of cost or market, including adjustments for inventory expected to be sold below cost as a result of damage, deterioration, obsolescence or pricing factors. At December 31, 2009 and 2008, the Company maintained a reserve for inventory obsolescence of $271,000 and $224,000, respectively.

8.	Property, Plant and Equipment

Major classifications and expected lives of property, plant and equipment are summarized below:

(In thousands)			December 31,
	Expected Life		2009		2008
Land and office buildings	39 years	$	3,494	$	3,411
Production facilities	10 - 20 years		7,651		6,294
Machinery and equipment	3 - 15 years		26,064		25,499
Furniture and fixtures	3 - 20 years		1,082		1,002
Total			38,291		36,206
Less accumulated depreciation			(19,575)		(17,605)
Property, plant and equipment, net			18,716		18,601
Construction in progress			84		914
		$	18,800	$	19,515

The amounts of depreciation expense calculated on the Company's property, plant and equipment for the years ended December 31, 2009, 2008 and 2007 were $1,812,000, $1,954,000 and $1,785,000, respectively.

F - 24

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

9.	Segment Information

The Company and its subsidiaries operate in the business of pigment manufacturing and related products in three geographic segments. All United States manufacturing is done at the facility located in Corpus Christi, Texas. Foreign manufacturing is done by the Company's wholly-owned foreign operations, TMM, located in Malaysia and TPT, located in the Netherlands.

Product sales of inventory between the US, Asian and European operations are based on inter-company pricing, which includes an inter-company profit margin. In the geographic information, the location profit (loss) from all locations is reflective of these inter-company prices, as is inventory at the Corpus Christi location prior to elimination adjustments. Such presentation is consistent with the internal reporting reviewed by the Company's chief operating decision maker. The elimination entries include an adjustment to the cost of sales resulting from the adjustment to ending inventory to eliminate inter-company profit, and the reversal of a similar adjustment from a prior period. To the extent there are net increases/declines period over period in Corpus Christi inventories that include an inter-company component, the net effect of these adjustments can decrease/increase location profit.

For the twelve-month period ended December 31, 2009, the US operation received approximately 27% of its total third party sales revenue from a single customer and the European operation received approximately 16% of its total third party sales revenue from a single customer. No single customer represented 10% or more of the Asian operation's total third party sales. One customer, BASF Corporation, represented 18% of the 2009 total consolidated sales.

For the twelve-month period ended December 31, 2008, no single customer represented 10% or more of the US operation's total third party sales revenue. The European operation received approximately 23% and 10% of its total third party sales revenue from two customers, respectively; and the Asian operation received approximately 22% and 12% of its total third party sales revenue from two customers, respectively. No single customer represented 10% or more of the 2008 total consolidated sales.

Sales from the subsidiary to the parent company are based upon profit margins which represent competitive pricing of similar products. Intercompany sales consisted of SR, HITOX and ALUPREM.

The Company's principal product, HITOX, accounted for approximately 42%, 52% and 53% of net consolidated sales in 2009 , 2008 and 2007, respectively.

The Company sells its products to customers located in more than 60 countries. Sales to external customers are attributed to geographic area based on country of distribution. Sales to customers located in the US represented 59%, 51% and 58% for the years ended December 31, 2009, 2008 and 2007, respectively.

No individual foreign country accounted for 10% or more of foreign sales in either 2009, 2008 or 2007.

Approximately 47% of the Company's employees are represented by an in-house collective bargaining agreement.

F - 25

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

A summary of the Company's manufacturing operations by geographic area is presented below:

(In thousands)		United States (Corpus Christi)		Netherlands (TP&T)		Malaysia (TMM)		Inter-Company Eliminations		Consolidated
As of and for the years ended:
*December 31, 2009*
Net Sales:
Customer sales	$	16,518	$	5,646	$	2,029	$	-	$	24,193
Intercompany sales		6		2,432		2,984		(5,422)		-
Total Net Sales	$	16,524	$	8,078	$	5,013	$	(5,422)	$	24,193
Share based compensation	$	266	$	-	$	-	$	-	$	266
Depreciation	$	584	$	531	$	697	$	-	$	1,812
Interest expense	$	267	$	228	$	63	$	-	$	558
Income tax expense (benefit)	$	3	$	-	$	1	$	-	$	4
Location profit (loss)	$	(219)	$	94	$	(72)	$	61	$	(136)
Capital expenditures	$	815	$	44	$		63	-	$	922
Location long-lived assets	$	4,908	$	6,186	$	7,706	$	-	$	18,800
Location assets	$	11,323	$	7,852	$	13,701	$	-	$	32,876
*December 31, 2008*
Net Sales:
Customer sales	$	15,332	$	6,879	$	3,093	$	-	$	25,304
Intercompany sales		69		1,106		5,947		(7,122)		-
Total Net Sales	$	15,401	$	7,985	$	9,040	$	(7,122)	$	25,304
Share based compensation	$	145	$	-	$	-	$	-	$	145
Depreciation	$	665	$	558	$	731	$	-	$	1,954
Goodwill impairment	$	-	$	1,976	$	-	$	-	$	1,976
Loss on assets held for sale	$	679	$	-	$	-	$	-	$	679
Interest income	$	-	$	-	$	2	$	-	$	2
Interest expense	$	212	$	256	$	56	$	-	$	524
Income tax expense (benefit)	$	199	$	(89)	$	(91)	$	-	$	19
Location profit (loss)	$	(2,681)	$	(2,150)	$	12	$	(143)	$	(4,962)
Capital expenditures	$	1,116	$	60	$	1,220	$	-	$	2,396
Location long-lived assets	$	4,698	$	6,534	$	8,283	$	-	$	19,515
Location assets	$	12,156	$	8,238	$	13,943	$	-	$	34,337
*December 31, 2007*
Net Sales:
Customer sales	$	18,290	$	6,274	$	3,397	$	-	$	27,961
Intercompany sales		53		2,037		4,594		(6,684)		-
Total Net Sales	$	18,343	$	8,311	$	7,991	$	(6,684)	$	27,961
Share based compensation	$	172	$	-	$	-	$	-	$	172
Depreciation	$	641	$	513	$	631	$	-	$	1,785
Interest income	$	-	$	-	$	18	$	-	$	18
Interest expense	$	441	$	239	$	4	$	-	$	684
Income tax expense (benefit)	$	10	$	105	$	(157)	$	-	$	(42)
Location profit (loss)	$	111	$	285	$	(374)	$	49	$	71
Goodwill	$	-	$	2,131	$	-	$	-	$	2,131
Capital expenditures	$	442	$	354	$	241	$	-	$	1,037
Location long-lived assets	$	5,045	$	7,320	$	8,056	$	-	$	20,421
Location assets	$	12,158	$	11,718	$	14,860	$	-	$	38,736

F - 26

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

10.

Quarterly Data (Unaudited)

TOR Minerals International, Inc. and Subsidiaries Consolidated Statements of Operations (In thousands, except per share amounts)
		2009
(In thousands, except per share amounts)		1st Qtr		2nd Qtr		3rd Qtr		4th Qtr		Total
NET SALES	$	5,703	$	5,654	$	6,441	$	6,395	$	24,193
Cost of sales		4,889		4,789		5,492		5,212		20,382
GROSS MARGIN		814		865		949		1,183		3,811
Technical services and research and development		52		40		54		54		200
Selling, general and administrative expenses		1,011		725		687		792		3,215
Loss on disposal of assets		-		-		-		35		35
OPERATING INCOME (LOSS)		(249)		100		208		302		361
OTHER INCOME (EXPENSES):
Interest income		2		-		-		-		2
Interest expense		(112)		(136)		(159)		(151)		(558)
Gain (loss) on foreign currency exchange rate		54		(12)		(5)		22		59
Other, net		2		2		-		-		4
INCOME (LOSS) BEFORE INCOME TAX		(303)		(46)		44		173		(132)
Income tax expense (benefit)		(34)		(38)		61		15		4
NET INCOME (LOSS)	$	(269)	$	(8)	$	(17)	$	158	$	(136)
Less: Preferred Stock Dividends		15		15		15		15		60
Income (Loss) Available to Common Shareholders	$	(284)	$	(23)	$	(32)	$	143	$	(196)

Income (loss) per common share:
Basic	$	(0.15)	$	(0.01)	$	(0.02)	$	0.08	$	(0.10)
Diluted	$	(0.15)	$	(0.01)	$	(0.02)	$	0.08	$	(0.10)
Weighted average common shares outstanding:
Basic		1,891		1,891		1,891		1,891		1,891
Diluted		1,891		1,891		1,891		1,891		1,891

F - 27

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

TOR Minerals International, Inc. and Subsidiaries Consolidated Statements of Operations (In thousands, except per share amounts)
		2008
(In thousands, except per share amounts)		1st Qtr		2nd Qtr		3rd Qtr		4th Qtr		Total
NET SALES	$	6,746	$	6,916	$	7,503	$	4,139	$	25,304
Cost of sales		6,086		5,912		6,527		3,507		22,032
GROSS MARGIN		660		1,004		976		632		3,272
Technical services and research and development		66		61		62		55		244
Selling, general and administrative expenses		1,075		1,154		1,058		1,386		4,673
Goodwill impairment		-		-		-		1,976		1,976
Loss on assets held for sale		-		-		-		679		679
(Gain) Loss on disposal of assets		(2)		-		-		100		98
OPERATING LOSS		(479)		(211)		(144)		(3,564)		(4,398)
OTHER INCOME (EXPENSES):
Interest income		1		-		-		1		2
Interest expense		(144)		(131)		(134)		(115)		(524)
Gain (loss) on foreign currency exchange rate		1		(2)		(4)		(33)		(38)
Other, net		1		9		1		4		15
LOSS BEFORE INCOME TAX		(620)		(335)		(281)		(3,707)		(4,943)
Income tax expense (benefit)		(31)		3		89		(42)		19
NET LOSS	$	(589)	$	(338)	$	(370)	$	(3,665)	$	(4,962)
Less: Preferred Stock Dividends		15		15		15		15		60
Loss Available to Common Shareholders	$	(604)	$	(353)	$	(385)	$	(3,680)	$	(5,022)

Loss per common share:
Basic	$	(0.38)	$	(0.22)	$	(0.24)	$	(2.33)	$	(3.19)
Diluted	$	(0.38)	$	(0.22)	$	(0.24)	$	(2.33)	$	(3.19)
Weighted average common shares outstanding:
Basic		1,574		1,576		1,576		1,579		1,576
Diluted		1,574		1,576		1,576		1,579		1,576

F - 28

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

11.

Calculation of Basic and Diluted Earnings per Share

(in thousands, except per share amounts)		Year Ended December 31,
		2009		2008		2007
Numerator:
Net Income (Loss)	$	(136)	$	(4,962)	$	71
Preferred Stock Dividends		(60)		(60)		(60)
Numerator for basic earnings per share - income (loss) available to common shareholders		(196)		(5,022)		11
Effect of dilutive securities:		-		-		-
Numerator for diluted earnings per share - income (loss) available to common shareholders after assumed conversions	$	(196)	$	(5,022)	$	11

Denominator:
Denominator for basic earnings per share - weighted-average shares		1,891		1,576		1,570
Effect of dilutive securities:
Employee stock options		-		-		7
Dilutive potential common shares		-		-		7
Denominator for diluted earnings per share - weighted-average shares and assumed conversions		1,891		1,576		1,577

*Basic earnings per common share:*
Net Income (Loss)	$	(0.10)	$	(3.19)	$	0.01

*Diluted earnings per common share:*
Net Income (Loss)	$	(0.10)	$	(3.19)	$	0.01

Excluded from the calculation of diluted earnings per share were a total of 111,111 common shares issuable upon conversion of the 200,000 convertible preferred shares for the years ended December 31, 2009, 2008 and 2007. The convertible preferred shares were not included in the computation of diluted earnings per share as the effect would be antidilutive.

A total of 1,447,080 warrants (adjusted for the one-for-five reverse stock split) excluded from the calculation of diluted earnings per share because the exercise price was greater than the average market price of the common shares and, therefore, the effect would be antidilutive.

For the twelve-month periods ended December 31, 2009, 2008 and 2007, stock options excluded from diluted earnings per share were 224,782, 148,720 and 59,140, respectively (adjusted for the one-for-five reverse stock split). The options were excluded from the computation of diluted earnings per share because the exercise price was greater than the average market price of the common shares and, therefore, the effect would be antidilutive.

F - 29

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

12.

Income Taxes

The Company provides for deferred taxes on temporary differences between the financial statements and tax bases of assets using the enacted tax rates that are expected to apply to taxable income when the temporary differences are expected to reverse.

Our US and European operations had net deferred tax assets of $1,402,000 and $487,000 that were fully reserved by the valuation allowance due to uncertainties as to the Company's ability to utilize the net deferred tax asset.

At December 31, 2009, 2008 and 2007, we had federal net operating loss ("NOL") carryforwards of approximately $4,200,000, $13,990,000 and $12,256,000, respectively. The US NOL carryforward will expire from 2018 to 2029.

TPT, our European operation, had NOL carryforwards at December 31, 2009, 2008 and 2007 of approximately $1,913,000, $1,907,000, and $1,827,000, respectively. The European NOL carryforward will expire from 2011 to 2017.

Our Asian operation, TMM, had NOL carryforwards of approximately $3,842,000, $3,807,000 and $4,288,000, at December 31, 2009, 2008 and 2007, respectively. Because these foreign NOL carryforwards have an indefinite carry forward period, we have elected not to reserve with a valuation allowance.

The undistributed earnings of the Company's foreign subsidiaries are considered to be indefinitely reinvested. Accordingly, no provision for US federal and state income taxes or foreign withholding taxes has been provided on approximately $6,000,000 of such cumulative undistributed earnings. Determination of the potential amount of unrecognized deferred US income tax liability and foreign withholding taxes is not practicable because of the complexities associated with its hypothetical calculation.

Components of Pretax Income (Loss)												Year Ended December 31,
(In thousands)												2009				2008						2007
Domestic									$			(217)			$	(2,482)					$	121
Foreign												85				(2,461)						(92)
Pretax income (loss)									$			(132)			$	(4,943)					$	29
		Components of Income Tax Expense (Benefit)
		Year Ended December 31,
		2009						2008										2007
(In thousands)		Current		Deferred		Total		Current			Deferred			Total				Current		Deferred				Total
Federal	$	-	$	-	$	-	$	-		$	199		$	199			$	-	$	-			$	-
State		3		-		3		2			-			2				10		-				10
Foreign		-		1		1		-			(182)			(182)				5		(57)				(52)
Total Income Tax Expense (Benefit)	$	3	$	1	$	4	$	2		$	17		$	19			$	15	$	(57)			$	(42)

F - 30

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

The following table accounts for the difference between the actual tax provision and the amounts obtained by applying the statutory US federal income tax rate of 34% to income before taxes.

Effective Tax Rate Reconciliation		Year Ended December 31,
(In thousands)		2009				2008				2007
Expense (benefit) computed at statutory rate	$	(44)			$	(1,679)			$	10
Change in valuation allowance - Domestic		(21)				986				(102)
Change in valuation allowance - Foreign		(24)				486				-
Effect of items deductible for book not tax, net
Option compensation		90				49				54
Other		8				-				11
Effect of foreign tax rate differential		(7)				175				(26)
State income taxes, net of Federal benefit		2				2				7
Other, net		-				-				4
	$	4			$	19			$	(42)
Significant Components of Deferred Taxes				Year Ended December 31,
(In thousands)				2009				2008
Deferred Tax Assets:
Net operating loss carryforwards - Domestic			$	1,402			$	4,757
Net operating loss carryforwards - Foreign				1,448				1,438
PP&E - Foreign				10				10
Intercompany profit				42				65
Alternative minimum tax credit carryforwards				65				65
Domestic reserves				17				44
Unrealized foreign currency losses - Foreign				1				13
Other deferred assets				19				29
				3,004				6,421
Valuation allowance				(1,881)				(5,243)
Total deferred tax assets			$	1,123			$	1,178

Deferred Tax Liabilities:
PP&E - Domestic				285				313
PP&E - Foreign				1,439				1,459
Goodwill - Foreign				11				17
Unrealized gain on derivatives				21				21
Unrealized foreign currency gains - Foreign				-				-
Other				4				4
Total deferred tax liabilities				1,760				1,814
Net deferred tax liability			$	(637)			$	(636)

F - 31

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

13.

Stock Options (adjusted for the one-for-five reverse stock split)

The Company's 1990 Incentive Stock Option Plan ("ISO") for TOR Minerals International, Inc. (the "1990 Plan") provided for the award of a variety of incentive compensation arrangements to such employees and directors as may be determined by a Committee of the Board. The ability to issue new options under the 1990 Plan expired in February of 2000. At December 31, 2009, there were outstanding options to purchase 1,600 share of common stock under the 1990 Plan.

On February 21, 2000, the Company's Board of Directors approved the adoption of the 2000 Incentive Stock Option Plan for TOR Minerals International, Inc. (the "Plan"). The Plan provides for the award of a variety of incentive compensation arrangements to such employees and directors as may be determined by a Committee of the Board. At the Annual Shareholders' meeting on May 23, 2008, the maximum number of shares of the Company's common stock that may be sold or issued under the Plan was increased to 250,000 shares subject to certain adjustments upon recapitalization, stock splits and combinations, merger, stock dividend and similar events; in addition the plan was extended to May 23, 2018. At December 31, 2009, there were 172,620 options outstanding, 26,818 exercised and 50,562 available for future issuance under the Plan.

Both the 1990 Plan and the 2000 Plan provide for the award of a variety of incentive compensation arrangements, including restricted stock awards, performance units or other non-option awards.

For the twelve-month periods ended December 31, 2009, 2008 and 2007, the Company recorded $266,000, $145,000 and $172,000, respectively, in stock-based employee compensation. This compensation cost is included in the general and administrative expenses and inventory/cost of sales in the accompanying consolidated income statements.

	Twelve Months Ended December 31,
	2009	2008	2007
Risk-free interest rate	3.17%	3.52%	4.37%
Expected dividend yield	0.00%	0.00%	0.00%
Expected volatility	0.73	0.70	0.73
Expected term (in years)	7.00	7.00	7.00

F - 32

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

The following table summarizes certain information regarding stock option activity:

		Options
	Total Reserved	Outstanding	Weighted Avg Exercise Price	Range of Exercise Prices
Balances at December 31, 2006	204,140	157,040	$15.80	$4.60	-	$30.55
Granted	-	48,500	$12.60	$10.50	-	$14.20
Exercised	(6,078)	(6,078)	$9.35	$7.65	-	$11.05
Forfeited or expired	(9,440)	(23,602)	$18.80	$6.25	-	$25.10
Balances at December 31, 2007	188,622	175,860	$13.00	$4.60	-	$30.55
Additional options authorized	40,000	-
Granted	-	3,000	$10.45	$10.45	-	$10.45
Exercised	(1,840)	(1,840)	$6.75	$5.75	-	$7.65
Forfeited or expired	(1,000)	(28,300)	$14.70	$10.30	-	$29.50
Balances at December 31, 2008	225,782	148,720	$13.00	$4.60	-	$30.55
Granted	-	27,500	$2.70	$1.75	-	$2.90
Forfeited or expired	(1,000)	(2,000)	$8.70	$2.90	-	$14.60
Balances at December 31, 2009	224,782	174,220	$11.20	$1.75	-	$30.55

The number of shares of common stock underlying options exercisable at December 31, 2009, 2008 and 2007 was 174,220, 117,900 and 131,196, respectively. The weighted-average remaining contractual life of those options is 5.6 years. Exercise prices on options outstanding at December 31, 2009, ranged from $1.75 to $30.55 per share as noted in the following table.

Options Outstanding
2009	2008	2007	Range of Exercise Prices
39,480	12,980	14,820	$ 1.75 - $ 9.99
113,680	114,680	137,380	$ 10.00 - $ 14.99
120	120	120	$ 15.00 - $ 19.99
12,800	12,800	14,100	$ 20.00 - $ 24.99
2,740	2,740	4,040	$ 25.00 - $ 29.99
5,400	5,400	5,400	$ 30.00 - $ 30.55
174,220	148,720	175,860

As of December 31, 2009, all outstanding options were fully vested, therefore, there is no unrecognized option compensation expense related to non-vested awards.

As all options issued under the Plan are Incentive Stock Options, the Company does not receive any excess tax benefits relating to the compensation expense recognized on vested options.

F - 33

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

14.

Profit Sharing Plan

The Company has a profit sharing plan that covers the US employees. Contributions to the plan are at the option of and determined by the Board of Directors and are limited to the maximum amount deductible by the Company for Federal income tax purposes. For the years ended December 31, 2009, 2008 and 2007, there were no contributions to the plan.

The Company also offers a 401(k) on US employees savings plan administered by an investment services company. Employees are eligible to participate in the plan after completing six months of service with the Company. The Company matches contributions up to 4% of the employee's eligible earnings. Total Company contributions to the 401(k) plan for the years ended December 31, 2009, 2008 and 2007 were approximately $35,000, $59,000 and $63,000, respectively.

15.

Derivatives and Other Financial Instruments

The Company has exposure to certain risks relating to its ongoing business operations, including financial, market, political and economic risks. The following discussion provides information regarding our exposure to the risks of changing energy prices and foreign currency exchange rates. The Company has not entered into these contracts for trading or speculative purposes in the past, nor do we currently anticipate entering into such contracts for trading or speculative purposes in the future. The natural gas and foreign exchange contracts are used to mitigate uncertainty and volatility, and to cover underlying exposures.

On November 18, 2008, the Company entered into a natural gas contract with Bank of America, N.A. for 40,000 MM/Btu's of natural gas which settled on March 1, 2009. At December 31, 2009, there were no natural gas contracts outstanding.

F - 34

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

The following table summarizes the gross fair market value of all derivative instruments, which are not designated as hedging instruments and their location in our Condensed Consolidated Balance Sheet:

(In thousands)
Asset Derivatives
			December 31,		December 31,
Derivative Instrument	Location		2009		2008
Foreign Currency Exchange Contracts	Other Current Assets	$	3	$	-
		$	3	$	-

Liability Derivatives
			December 31,		December 31,
Derivative Instrument	Location		2009		2008
Natural Gas Swap Contract	Accrued Expenses	$	-	$	26
Foreign Currency Exchange Contracts	Accrued Expenses		-		1
		$	-	$	27

The following table summarizes the impact of the Company's derivatives on the condensed consolidated financial statements of operations for the three and twelve month periods ended December 31, 2009 and 2008:

(In thousands)			Amount of Gain (Loss) Recognized in Operations
	Location of Gain		Three Months Ended				Twelve Months Ended
	(Loss) on Derivative		December 31,				December 31,
Derivative Instrument	Instrument		2009		2008		2009		2008
Natural Gas Swap Contract	Cost of Sales	$	-	$	(26)	$	(27)	$	(26)
Foreign Currency Exchange Contracts	Other Income (Expense)		3		101		34		(1)
		$	3	$	75	$	7	$	(27)

F - 35

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

16.

Commitments and Contingencies

Land Lease

The Company operates a plant in Corpus Christi, Texas. The facility is located in the Rincon Industrial Park on approximately 15 acres of land, with 13 acres leased from the Port of Corpus Christi Authority (the "Port") and approximately two acres owned by the Company. The lease payment is subject to an adjustment every 5 years for what the Port calls the "equalization valuation". This is used as a means of equalizing rentals on various Port lands and is determined solely at the discretion of the Port. The Company and the Port executed an amended lease agreement on July 11, 2000, which extended the expiration date of the lease to June 30, 2027.

Equipment Lease

The Company entered into a master lease agreement (the "Master Lease") with Bank of America Leasing & Capital, LLC ("BALC") dated August 9, 2004, effective August 13, 2004, for equipment related to the HITOX plant expansion. The latest date for any funding under the Master Lease was December 31, 2004. At the end of the lease term, we can either: 1) return the equipment; 2) extend the lease for a period to be agreed upon by the Company and BALC for an amount equal to the equipment's fair market rental value as determined by BALC; or 3) purchase the equipment at the then fair market value of the equipment.

On September 29, 2004, the Company entered into the first lease agreement schedule ("Schedule #1") under the Master Lease with BALC. The amount of the lease, $694,205, has a term of 84 months with equal installments of $8,792 per month. The Company has elected to exercise the early buyout option contained in Schedule #1 and will purchase the equipment after the payment of the 72 ^nd installment for $172,302.

On December 21, 2004, the Company entered into the second lease agreement schedule ("Schedule #2") under the Master Lease with BALC. The amount of the lease, $246,808, has a term of 84 months with equal installments of $3,132 per month. The Company has elected to exercise the early buyout option contained in Schedule #2 and will purchase the equipment after the payment of the 72 ^nd installment for $64,392.

On July 8, 2005, the Company entered into the third lease agreement schedule ("Schedule #3") under the Master Lease with BALC. The amount of the lease, $251,981, has a term of 78 months with equal installments of $3,903 per month. The Company has elected to exercise the early buyout option contained in Schedule #3 and will purchase the equipment after the payment of the 66 ^th installment for $49,287.

On July 17, 2006, the Company entered into the fourth lease agreement schedule ("Schedule #4") under the Master Lease with BALC. The amount of the lease, $91,480, has a term of 60 months with equal installments of $1,649 per month. The Company has elected to exercise the early buyout option contained in Schedule #4 and will purchase the equipment after the payment of the 48 ^th installment for $31,295.

On December 29, 2006, the Company entered into the fifth lease agreement schedule ("Schedule #5") under the Master Lease with BALC. The amount of the lease, $177,353, has a term of 60 months with equal installments of $2,962 per month. The Company has elected to exercise the early buyout option contained in Schedule #5 and will purchase the equipment after the payment of the 48 ^th installment for $67,926.

F - 36

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

Minimum future rental payments under these and other immaterial leases as of December 31, 2009 are as follows:

Years Ending December 31,
(In thousands)
2010	$	672
2011		79
2012		54
2013		54
2014		54
Thereafter		678
Total minimum lease payments	$	1,591

Rent expense under these leases was $321,000, $328,000 and $338,000 for the years ended 2009, 2008 and 2007, respectively.

Contingencies

There are claims arising in the normal course of business that are pending against the Company. While it is not feasible to predict or determine the outcome of any case, it is the opinion of management that the ultimate dispositions will have no material effect on the financial statements of the Company.

The Company believes that it is in compliance with all applicable federal, state and local laws and regulations relating to the discharge of substances into the environment, and it does not expect that any material expenditures for environmental control facilities will be necessary in order to continue such compliance.

17.

Significant Customers

For the years ended December 31, 2008 and 2007, no single customer accounted for 10% or more of our total revenues. For the year ended December 31, 2009, one customer, BASF, accounted for approximately 18% of our total revenues.

18.

Foreign Customer Sales

Revenues from sales to customers located outside the US for the years ended December 31, 2009, 2008 and 2007 are as follows:

		Year Ended December 31,
(In thousands)		2009		2008		2007
Canada, Mexico & South/Central America	$	2,115	$	2,536	$	2,966
Pacific Rim		1,933		3,048		2,273
Europe, Africa & Middle East		5,754		6,924		6,485
Total Sales	$	9,802	$	12,508	$	11,724

F - 37

TOR Minerals International, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements
December 31, 2009, 2008 and 2007

19.

Sales by Product

Revenues from sales by product for the years ended December 31, 2009, 2008 and 2007 are as follows (in thousands):

Product		2009			2008			2007
HITOX	$	10,111	42%	$	13,182	52%	$	14,746	53%
ALUPREM		9,450	39%		7,425	30%		8,493	30%
BARTEX		2,601	11%		3,123	12%		3,215	11%
HALTEX / OPTILOAD		1,646	7%		1,219	5%		996	4%
TIOPREM		12	<1%		30	<1%		-	0%
SR		-	0%		-	0%		12	<1%
OTHER		373	1%		325	1%		499	2%
Total	$	24,193	100%	$	25,304	100%	$	27,961	100%

20.

Subsequent Events

As noted in the Company's Form 8-K filed with the SEC on February 16, 2010, the Company amended its Credit Agreement with the Bank to extend the maturity date of the Credit Agreement from February 15, 2010 to August 15, 2010. (See Note 3, Long-term Debt and Notes Payable, on page F-17.)

As noted in the Company's Form 8-K filed with the SEC on February 19, 2010, the Board of Directors appointed Barbara Russell as the Company's Chief Financial Officer effective February 12, 2010.

As noted in the Company's Form 8-K filed with the SEC on February 19, 2010, the Shareholders approved an Amendment to the Company's Articles of Incorporation which effected a one for five reverse stock split of the Company's issued and outstanding common stock, effective February 19, 2010. F - 38

EXHIBIT 3.1

CERTIFICATE OF INCORPORATION
OF
HITOX CORPORATION OF AMERICA

FIRST: The name of the corporation is HITOX CORPORATION OF AMERICA.

SECOND: The address of its registered office in the State of Delaware is No. 100 West Tenth Street, in the City of Wilmington, County of New Castle. Then name of its registered agent at such address is The Corporation Trust Company.

THIRD: The nature of the business or objects or purposes to be transacted, promoted, or carried on by the corporation are as follows:

To engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware.

To manufacture, purchase or otherwise acquire, invest in, own mortgage, pledge, sell assign and transfer or otherwise dispose of, trade, deal in and deal with goods, wares and merchandise and personal property of every class and description.

To acquire and pay for in cash, stock or bonds of this corporation or otherwise, the good will, rights, assets and property, and to undertake or assume the whole or any part of the obligations or liabilities of any person, firm, association or corporation.

To acquire, hold, use, sell, assign, lease, grant licenses in respect of , mortgage or otherwise dispose of letters patent of the United States or any foreign country, patent rights, licenses and privileges, inventions, improvements and processes, copyrights, trademarks and trade names, relating to or useful in connection with the business of this corporation.

To acquire by purchase, subscription or otherwise, and to receive, hold, or own, guarantee, sell, assign, exchange, transfer, mortgage, pledge or otherwise dispose of or deal in and with any of the shares of the capital stock, or any voting trust certificates in respect of the shares of capital stock, scrip, warrants, rights, bonds, debentures, notes, trust receipts, and other securities, obligations, choses in action and evidences of indebtedness or interest issued or created by an corporations, joint stock companies, syndicates, associations, firms, trusts, or persons, public or private, or by the government of the United States of America, or by any foreign government, or by any State, territory, province, municipality o other political subdivision or by any governmental agency, and as owner thereof to possess and exercise all the rights, powers and privileges of ownership, including the right to execute consents and vote thereon, and to do any and all acts and things necessary or advisable for the presentation, protection, improvement and enhancement in value thereof.

To borrow or raise moneys for any of the purposes of the corporation and, from time to time without limit as to amount, to draw, make, accept, endorse, execute, and issue promissory notes, drafts, bills of exchange, warrants, bonds, debentures and other negotiable or non-negotiable instruments and evidences of indebtedness, and to secure the payment of any thereof and of the interest thereon by mortgage upon or pledge, conveyances or assignment in trust of the whole or any part of the property of the corporation, whether at the time owned or thereafter acquired, and to sell, pledge, or otherwise dispose of such bonds or other obligations of the corporation for its corporate purposes.

To purchase, receive, take by grant, gift, devise, bequest or otherwise, lease, or otherwise acquire, own, hold, improve, employ, use and otherwise deal in an with real or personal property, or any interest herein, wherever situated, and to sell, convey, lease, exchange, transfer or otherwise dispose of, or mortgage or pledge, all or any of the corporation's property and assets, or any interest herein, wherever situated.

In general, to carry on any business, contrary to the laws of the State of Delaware, and to have and exercise all of the powers conferred by the laws of said State upon corporations formed thereunder, and to do any or all of the things hereinbefore set forth to the same extent as natural persons could do, and in any part of the world, as principal, agent, or otherwise, and either alone or in company with others.

To conduct business in the State of Delaware, other States, the District of Columbia, the territories and colonies of the United States, and in foreign countries, an have one or more offices out of the State of Delaware, and to purchase, lease, or otherwise acquire, hold, use, develop, operate, maintain, sell, mortgage, pledge, or otherwise dispose of real and personal property within and without said state.

To do all and everything necessary, suitable or proper for the accomplishment of any of the purposes or the attainment of any of the objects or the furtherance of any of the powers herein set forth, and to do every other act or acts, thing or things, incidental or appurtenant to or growing out of or connected with the aforesaid business or powers or any part or parts thereof, provided the same be not inconsistent with the laws under which the corporation is organized.

The objects and purposes specified in the foregoing clauses of this Article THIRD shall, except where otherwise expressed in this Article, be in no wise limited or restricted by reference t, or interference from, the terms of any other clause of this or any other article in this certificate of incorporation, but shall be regarded as independent objects and purposes and shall be construed as powers as well as objects and purposes.

The corporation shall be authorized to engage in any lawful act or activity which corporations may be organized under the General Corporation Law of the State of Delaware, and all the powers conferred upon such corporations by the laws, as in force from time to time, of the State of Delaware so far as not in conflict herewith, or which may be conferred by all act heretofore or hereafter amendatory of or supplemental to said General Corporation Law or said laws, and the enumeration of certain power as herein specified is not intended as exclusive of , or as a waive of, any of the powers, rights, or privileges granted or conferred by said General Corporation Law or said laws now or hereafter in force; provided, however, that the corporation shall not in any state, district, territory, possession or country carry on any business, or exercise any powers, which a corporation organized under the laws of said state, district, territory, possession or country could not carry on or exercise.

The business and purposes specified in the foregoing clauses shall, except where otherwise expressed, be in nowise limited or restricted by reference to, or inference from, the terms of any other clause in this certificate of incorporation, but the business and purposes specified in each of the foregoing clauses of this article shall be regarded as independent business an purposes.

FOURTH: The total number of shares of stock which the corporation shall have authority to issue is Four Hundred Thousand (400,000) and the par value of each of such shares is Ten Cents ($.10), amounting in the aggregate to Forty Thousand Dollars ($40,000).

FIFTH: The name and mailing address of each incorporator is as follows:

Name	Mailing Address
David A. Rose	11 Broadway, New York, N.Y.
C. J. Head	11 Broadway, New York, N.Y.
Robert Cohen	11 Broadway, New York, N.Y.

SIXTH: The corporation is to have perpetual existence.

SEVENTH: The private property of the stockholders shall not be subject to the payment of corporate debts to any extent whatsoever.

EIGHTH: All corporate powers of the corporation shall be exercised by the Board of Directors except as otherwise provided by law. The Board of Directors may, by resolution or resolutions, passed by a majority of the whole Board, designate one or more committees, each committee to consist of two or more of the directors of the corporation, which, to the extent provided in said resolutions or in the by-laws of the corporation, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the corporation, and may have power to authorize the seal of the corporation to be affixed to all papers which may require it.

The number of the directors of the corporation shall be fixed from time to time by the by-laws and may be altered from time to time by amendment of the by-laws, but shall never be less than three. The Directors shall hold office for a term of one year or until the next annual meeting of stockholders and until their respective successors shall have been duly elected and shall have qualified, whichever shall first occur, provided however, that (i) at any special meeting of stockholders called for the purpose, the stockholders by the affirmative vote of the holders of a majority of the stock of the corporation having voting power, or (ii) the holder or holders of more than 50% of the outstanding stock entitled to vote for the election of the directors, by written demand therefore filed with or sent to the Secretary of the corporation, or in his absence any other officer of the corporation, may remove any Director or Directors, with or without cause, and elect his or their successors to hold office until the next annual meeting of stockholders and until their respective successor shall have been duly elected and shall have qualified, whichever shall first occur. In case of vacancies on the Board of Directors, other than upon removal by vote of the stockholders at a special meeting as aforesaid, a majority of the directors then in office may elect Directors to fill such vacancies until the next annual meeting of stockholders and until their respective successors shall have been duly elected and shall have qualified, whichever shall first occur.

The directors may hold their meetings and the corporation may have an office or offices outside the State of Delaware if the by-laws so provide.

The members of the Board of Directors and of any committee thereof shall be entitled to such reasonable compensation for their services and reimbursement of expenses as shall be fixed in accordance with the by-laws.

None of the directors or officers need be a stockholder or a resident of the State of Delaware.

The Board of Directors may make by-laws and from time to time alter, amend or repeal any by-laws, but any by-laws made by the Board of Directors may be altered, amended or repealed by the stockholders at any annual meeting or at any special meeting, provided that notice of such proposed alteration, amendment or repeal is included in the notice of such special meeting.

The Board of Directors shall have power from time to time to fix and determine and to vary the amount of working capital of the corporation, to direct and determine the use and disposition thereof, to set apart, out of any funds of the corporation available for dividends, a reserve or reserves for any proper purpose, an to abolish any such reserve in the manner in which it was created.

The Board of Directors may from time to time establish, reestablish, amend, alter or repeal and may put into effect and carry out such a plan or plans as may from time to time be approved by it for the distribution among or sale to the officers and employees of the corporation, or any of them, in addition to their regular salaries or wages, of any moneys or other property of the corporation, or of any shares of stock of the corporation, of any class, in consideration for or in recognition of the services rendered by such officers and employees.

The Board of Directors from time to time shall determine whether and to what extent and at what times and places and under what conditions and regulations the accounts and books of the corporation or any of them, shall be open to the inspection of the stockholders, an no stockholder shall have any right to inspect any account, book or document of the corporation except as conferred by statute or as authorized by resolution of the Board of Directors.

The Board of Directors shall have the power to authorize and cause to be executed mortgages and liens upon the real and personal property of the corporation.

When and as authorized by the affirmative vote of the holders of a majority of the stock of the corporation issued and outstanding having voting power given at stockholders' meeting duly called upon such notice as is required by the Laws of the State of Delaware, or when authorized by the written consent of the holder or holders of more than 50% of the voting stock of the corporation issued and outstanding, the Board of Directors may sell, lease or exchange all or substantially all of the property and assets of the corporation, including its goods will and its corporate franchises, upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property, including shares of stock in, and/or securities of, any other corporation or corporations.

In addition to the powers and authorities hereinbefore or by statue expressly conferred upon them, the directors may exercise all such powers and do all such acts and things as may be exercised or done by the corporation, subject, nevertheless, to the provisions of the laws of the State of Delaware, of this Certificate and of the By-Laws of the corporation.

NINTH: (a) No contract or transaction between the corporation and one or more of its directors or officers, or between the corporation and any other corporation, partnership, association, or other organization in which one or more of its director or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purposes, if:

(1) The material facts as to his interest and as to the contract or transaction are disclosed or are known to the board of directors or the committee, and the board or committee in good faith authorizes the contract or transaction by a vote sufficient for such purpose without counting the vote of the interested director or directors; or

(2) The material facts as to his interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, an the contract or transaction is specifically approved in good faith by vote of the shareholders; or

(3) The contract or transaction is fair as to the corporation as of the time it is authorized, approved, or ratified, by the board of directors, a committee thereof, or the shareholders.

(b) Common or interested directors may be counted in determining the presence of a quorum at a meeting of the board of directors or of a committee which authorizes the contract or transaction.

(c) Any director of the corporation may vote upon any contract or other transaction between the corporation and any subsidiary or affiliated corporation without regard to the fact that he is also a director and/or officer of such subsidiary or affiliated corporation.

TENTH: The corporation shall have the power to indemnify officers, directors, employees and agents and maintain indemnification insurance on behalf of any director, officer, employee or agent of the corporation to the fullest extent permitted by Section 145 of the General Corporation Law of the State of Delaware or otherwise.

ELEVENTH: No holder of stock of the corporation shall, as such holder, have any right to purchase or subscribe for any stock of any class which the corporation may issue or sell, whether or not exchangeable for any stock of the corporation of any or classes and whether out of unissued shares authorized by the Certificate of Incorporation of the corporation as originally filed or by an amendment thereof or out of shares of stock of the corporation acquired by it after the issue thereof; nor shall any holder of stock of the corporation, as such holder, have any right to purchase or subscribe for any obligation which the corporation may issue or sell that shall be convertible into, or exchangeable for, any stock of the corporation of any class or classes, or to which shall be attached or appurtenant any warrant or warrants or other instrument or instruments that shall confer upon the holder or holders of such obligation the right to subscribe for or purchase from the corporation any stock of any class or classes; except, in each such case, such right as may be granted by the Board of Directors.

TWELFTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation.

THIRTEENTH: Meetings of stockholders may be held within or without the State of Delaware, as the by-laws may provide. The books of the corporation may be kept (subject to any provision contained in the laws of the State of Delaware) outside the State of Delaware at such place or places as may be designated from time to time by the board of directors or in the by-laws of the corporation. Elections of directors need not be written ballot unless the by-laws of the corporation shall so provide.

FOURTEENTH: The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation.

WE, THE UNDERSIGNED, being each of the incorporators hereinbefore named, for the purpose of forming a corporation pursuant to the General Corporation Law of the State of Delaware, do make this certificate, hereby declaring and certifying that this is our act and deed and that facts herein stated are true, and accordingly have hereunto set our hands this 26th day of December, 1973.

___________________________________

David A. Ross

___________________________________

C.J. Head

___________________________________

Robert Cohen

STATE OF NEW YORK )

: s s. :

COUNTY OF NEW YORK )

BE IT REMEMBERED that on this 26th day of December, A.D. 1973, personally came before me, Joseph S. Libasci a Notary Public for the State of New York, DAVID A. ROSS, C.J. HEAD and ROBERT COHEN, all of the parties to the foregoing Certificate of Incorporation, known to me personally to be such, and severally acknowledged the said certificated to be the act and deed of the signers respectively and that the facts stated therein are true.

GIVEN under my hand and seal of office the day and year aforesaid.

Notary Public

CERTIFICATE OF AMENDMENT

CERTIFICATE OF INCORPORATION

HITOX CORPORATION OF AMERICA

(Pursuant to Section 242 of the General Corporation Law)

Hitox Corporation of America, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:

FIRST: That at a meeting of the Board of Directors of said Hitox Corporation of America duly convened and held, at which a quorum was present and acting throughout, resolutions were duly adopted setting forth a proposed amendment of the certificate of incorporation of said corporation for the purpose of considering said amendment. The resolution setting forth said amendment is as follows:

"RESOLVED, that Article Fourth of the Certificate of Incorporation of Hitox Corporation of America be and the same is hereby amended to read as follows:

FOURTH: The total number of shares of stock which the Corporation shall have the authority to issue is One Million Two Hundred Fifty Thousand (1,250,000) shares and the par value of each such share is twenty five cents ($0.25) amounting in the aggregate to Three Hundred Twelve Thousand Five Hundred Dollars ($312,500.00)."

IN WITNESS WHEREOF, said Hitox Corporation of America has caused this certificate to be signed by William T. Glynn, its Chairman, this 28th day of December, 1979.

HITOX CORPORATION OF AMERICA

By ________________________________

William T. Glynn

Chairman

ATTEST:

___________________________

CERTIFICATE OF AMENDMENT

CERTIFICATE OF INCORPORATION

HITOX CORPORATION OF AMERICA

Hitox Corporation of America, a corporation organized and existing under any by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:

"RESOLVED, that Article Fourth of the Certificate of Incorporation of Hitox Corporation of America be and the same is hereby amended to read as follows:

FOURTH: The total number of shares of stock which the Corporation shall have the authority issue to is Two Million (2,000,000) shares and the par value of each such share is twenty five cents ($0.25) amounting in the aggregate to Five Hundred Thousand Dollars ($500,000.00)."

IN WITNESS WHEREOF, said Hitox Corporation of America has caused this certificate to be signed by William T. Glynn, its Chairman, this 12th day of August, 1982.

HITOX CORPORATION OF AMERICA

By ________________________________

William T. Glynn

Chairman

ATTEST:

___________________________

CERTIFICATE OF AMENDMENT

CERTIFICATE OF INCORPORATION

HITOX CORPORATION OF AMERICA

Hitox Corporation of America, a corporation organized and existing under any by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:

FIRST: That at a meeting of the Shareholders of said Hitox Corporation of America duly convened and held, at which a quorum was present and acting throughout, resolutions were duly adopted setting forth a proposed amendment of the certificate of incorporation of said corporation for the purpose of considering said amendment. The resolution setting forth said amendment is as follows:

"RESOLVED, that Article Fourth of the Certificate of Incorporation of Hitox Corporation of America be and the same is hereby amended to read as follows:

FOURTH: The total number of shares of stock which the Corporation shall have the authority issue to is Two Million, Five Hundred Thousand (2,500,000) shares and the par value of each such share is twenty five cents ($0.25) amounting in the aggregate to Six Hundred Twenty-Five Thousand Dollars ($625,000.00)."

IN WITNESS WHEREOF, said Hitox Corporation of America has caused this certificate to be signed by Richard L. Bowers, its President, this 28th day of December, 1983.

HITOX CORPORATION OF AMERICA

By ________________________________

Richard L. Bowers, President

ATTEST:

___________________________

CERTIFICATE OF AMENDMENT

CERTIFICATE OF INCORPORATION

HITOX CORPORATION OF AMERICA

Hitox Corporation of America, a corporation organized and existing under any by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:

"RESOLVED, that Article Fourth of the Certificate of Incorporation of Hitox Corporation of America be and the same is hereby amended to read as follows:

FOURTH: The total number of shares of stock which the Corporation shall have the authority issue to is Five Million (5,000,000) shares and the par value of each such share is twenty five cents ($0.25) amounting in the aggregate to One Million Two Hundred Fifty Thousand Dollars ($1,250,000.00)."

IN WITNESS WHEREOF, said Hitox Corporation of America has caused this certificate to be signed by Richard L. Bowers, its President, this 22nd day of January, 1988.

HITOX CORPORATION OF AMERICA

Richard L. Bowers

ATTEST:

CERTIFICATE OF AME NDMENT

TO THE

CERTIFICATE OF INCORPORATION

HITOX CORPORATION OF AMERICA

Pursuant to the provisions of Section 242 of the Delaware General Corporation Law, it is hereby certified as follows:

1. The name of the corporation is Hitox Corporation of American ("the Corporation").

2. The Certificate of Incorporation of the Corporation is hereby amended by amending Article Fourth of the Certificate of Incorporation to read in its entirety as follows:

The total number of shares of stock that the Corporation shall have the authority to issue is Fifteen Million (15,000,000), consisting of Ten Million (10,000,000) shares of common stock of the par value of Twenty-Five Cents ($.25) per share and Five Million (5,000,000) shares of preferred stock of the par value of One Cent ($.01) per share.

The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of this Article FOURTH, to provide for the issuance of the shares of preferred stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof.

The authority of the Board with respect to each series shall include, but not be limited to, determination of the following:

(a) The number of shares constituting that series and the distinctive designation of that series;

(b) The dividend rate on the shares of that series, whether dividends shall be cumulative, and, if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series;

(c) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights;

(d) Whether that series shall have conversion privileges, and if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine;

(e) Whether the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates;

(f) Whether that series shall have a sinking fund for the redemption or purchase of shares of that series, and, if so, the terms and amount of such sinking fund;

(g) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the corporation, and the relative rights of priority, if any, of payment of shares of that series; and

(h) Any other relative rights, preferences and limitations of that series.

3. The amendment to the Certificate of Incorporation of the Corporation herein certified has been duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law.

Signed and attested to on May 28, 1991.

HITOX CORPORATION OF AMERICA

By ________________________________

Richard L. Bowers, President

ATTEST:

___________________________

CERTIFICATE OF AMENDMENT TO CERTIFICATE OF INCORPORATION

HITOX CORPORATION OF AMERICA

It is hereby certified that:

1. The name of the corporation (hereinafter called the "corporation") is Hitox Corporation of America.

2. The certificate of incorporation of the corporation is hereby amended by striking out Article FIRST thereof and by substituting in lieu of said Article the following new Article:

"FIRST: The name of the corporation is TOR Minerals International, Inc."

3. The amendment of the certificate of incorporation herein certified has been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

DATED as of May 5, 2000.

______________________________
Bernard A. Paulson, President and Chief Executive Officer

CERTIFICATE OF DESIGNATIONS, PREFERENCES, RELATIVE RIGHTS,

QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS

OF THE

SERIES A PREFERRED STOCK

TOR MINERALS INTERNATIONAL, INC.

Pursuant to Section 151 of the General Corporation Law of the State of Delaware, the undersigned corporation submits the following statement for the purpose of establishing and designating a series of shares and fixing and determining the relative rights and preferences thereof:

1. The name of the Corporation is TOR Minerals International, Inc., a Delaware corporation (the " Corporation ").

2. The Board of Directors duly adopted the following resolution in a meeting of the Board of Directors of the Corporation on January 15, 2004:

WHEREAS, the Corporation's directors have reviewed and approved the Certificate of Designation (" Certificate of Designation "), attached hereto and incorporated herein by reference, delineating the number of shares, the voting powers, designations, preferences and relative, participating, optional, redemption, conversion, exchange, dividend or other special rights and qualifications, limitations or restrictions of a series of Preferred Stock to be issued by the Corporation and designated Series A Convertible Preferred Stock, par value $0.01 per share (the " Series A Preferred Stock "); now, therefore, be it

RESOLVED, that 200,000 shares of authorized but unissued Preferred Stock be designated Series A Preferred Stock and that the Series A Preferred Stock have the rights, preferences, limitations and restrictions set forth herein; and, be it

FURTHER RESOLVED, that the President or any Vice President of the Corporation, individually or collectively, be, and such officers hereby are, authorized and directed to execute, acknowledge, attest, record and file with the Secretary of State of the State of Delaware the Certificate of Designation in accordance with Delaware General Corporation Law and to take all other actions that such officers deem necessary to effectuate the Certificate of Designation.

1. Series A Preferred Stock . The Series A Preferred Stock (the " Series A Preferred "), will consist of 200,000 shares and will have the designations, preferences, voting powers, relative, participating, optional or other special rights and privileges, and the qualifications, limitations and restrictions as follows:

2. Dividends and Distributions .

(a) Series A Preferred . The holders of record of shares of Series A Preferred shall be entitled to receive, for each outstanding share of Series A Preferred held by them, dividends at a rate per annum equal to 6% of the Per Share Purchase Price (as defined in that certain Securities Purchase Agreement, dated January 15, 2004, between the Corporation and the purchasers listed on the signature pages thereto (the " Securities Purchase Agreement ")) per share (as adjusted for any stock dividends, combinations or splits with respect to such shares) of Series A Preferred, calculated on the basis of 360 days comprised of twelve 30-day months, out of funds legally available therefore, prior and in preference to any declaration or payment of any dividend on the Common Stock or any other shares of stock of any class of the Corporation, whether or not presently authorized, ranking as to redemption, payment of dividends or distribution of assets junior to the Series A Preferred (collectively, the " Junior Stock ") of the Corporation. Such dividends shall be cumulative, shall begin to accrue as to each outstanding share from the date of original issuance thereof, and shall be due and payable quarterly in arrears on the first Business Day (as hereinafter defined) of January, April, July and October each year beginning April 1, 2004 (each, a " Dividend Date "). Accrued but unpaid dividends from and after any Dividend Date shall accrue interest at an interest rate equal to the dividend rate. No dividends shall be paid on or declared and set apart for any of the Junior Stock until all accumulated and unpaid dividends with respect to the shares of Series A Preferred shall have been paid on or declared and set aside for the shares of Series A Preferred. The foregoing provisions shall not prohibit or prevent dividends payable solely in the form of Common Stock being declared and delivered with respect to the outstanding shares of Common Stock. For purposes of this Section, a "Business Day" is defined as any day upon which the banks are open for the transacting of business in the State of Delaware.

(b) Other Permitted Distributions . Notwithstanding Section 2(a) hereof, the Corporation may at any time, out of funds legally available therefore, repurchase shares of Common Stock of the Corporation issued to employees, directors or consultants pursuant to agreements to repurchase such stock in existence as of the date of the Securities Purchase Agreement (provided that the purchase price shall not exceed the price paid by such employee, director or consultant for the purchase of such shares), in each case whether or not dividends on the Series A Preferred shall have been declared and paid or funds set aside therefore, and in each event subject to any other contractual restrictions entered into by the Corporation.

3. Liquidation Rights . In the event of any liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary (a " Liquidation "), distributions shall be made to the holders of Series A Preferred in respect of such Series A Preferred before any amount shall be paid to the holders of any other class or series of capital stock of the Corporation in the following manner:

(a) Series A Preferred . The holders of the Series A Preferred shall be entitled to be paid first out of the assets of the Corporation available for distribution to holders of its capital stock an amount equal to the sum of (i) the product of the Per Share Purchase Price multiplied by the number of shares of Series A Preferred then outstanding, plus (ii) all accrued but unpaid dividends and interest then owed (calculated through the date of Liquidation), prior to any distribution to the holders of any other Junior Stock. If the proceeds from a Liquidation are not sufficient to pay to the holders of Series A Preferred the full preference amount set forth above, then such holders shall instead be entitled to receive the entire assets and funds of the Corporation legally available for distribution to the holders of capital stock, which assets and funds shall be distributed ratably among the holders of the Series A Preferred based on the number of shares of Series A Preferred held by each holder bears to the total number of Series A Preferred held by all such holders.

(b) Remaining Assets . After payment to the holders of the Series A Preferred of the amounts set forth in Section 3(a) above, the entire remaining assets and funds of the Corporation legally available for distribution, if any, shall be distributed among the holders of the Junior Stock.

(c) Valuation of Securities and Property . In the event the Corporation proposes to distribute assets other than cash in connection with any Liquidation, the value of the assets to be distributed to the holders of shares of Series A Preferred shall be determined in good faith by the Board of Directors. Any securities not subject to an investment letter or similar restrictions on free marketability shall be valued as follows:

(i) if traded on a national securities exchange or the NASDAQ National Market System (or SmallCap Market System) (" NASDAQ "), the value shall be deemed to be the average of the security's closing prices on such exchange or NASDAQ over the thirty (30) trading day period ending three (3) days prior to the distribution;

(ii) if actively traded over-the-counter (other than NASDAQ), the value shall be deemed to be the average of the closing bid prices over the thirty (30) day period ending three (3) days prior to the distribution; or

(iii) if there is no active public market, the value shall be the fair market value thereof as determined in good faith by the Board of Directors.

The method of valuation of securities subject to an investment letter or other restrictions on free marketability shall be adjusted to make an appropriate discount from the market value determined as above in clauses (i), (ii) or (iii) to reflect the fair market value thereof as determined in good faith by the Board of Directors.

(d) Mergers, Consolidations and Asset Sales . Any consolidation or merger of the Corporation with or into any other corporation or the sale or other transfer in a single transaction or a series of related transactions of all or substantially all of the assets of the Corporation, or any other reorganization of the Corporation (including any reincorporation or other merger or reorganization involving solely the Company and one or more of its wholly-owned subsidiaries), shall not be treated as a Liquidation.

4. Conversion . The holders of Series A Preferred have conversion rights as follows (the " Conversion Rights "):

(a) Right to Convert . Each share of Series A Preferred shall initially be convertible, at the option of the holder thereof, at any time on or after the date of issuance thereof, into 0.84 shares of Common Stock (the " Per Share Conversion Price "). Upon conversion, all accrued but unpaid dividends and interest then owed on the Series A Preferred so converted shall be paid in cash, to the extent permitted by Delaware General Corporation Law (and if not then permitted, at such time as the Corporation is permitted by Delaware General Corporation Law to pay dividends). The Per Share Conversion Price shall not be subject to adjustment except in connection with a stock split, stock dividend, combination, recapitalization and the like.

(b) Mechanics of Conversion . Before any holder of Series A Preferred shall be entitled to convert the same into shares of Common Stock and to receive certificates therefore, such holder shall surrender the certificate or certificates therefore, duly endorsed, at the principal office of the Corporation or of any transfer agent for the Series A Preferred, and shall give written notice to the Corporation at such office that such holder elects to convert the same. The Corporation shall as soon as practicable after such delivery, or after agreement and indemnification in the case of lost or mutilated certificates, issue and deliver at such office to such holder of Series A Preferred, a certificate or certificates for the number of shares of Common Stock to which it, he or she shall be entitled as aforesaid. Such conversion shall be deemed to have been made immediately prior to the close of business on the date of such surrender of the shares of Series A Preferred to be converted, and the person or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the record holder or holders of such shares of Common Stock on such date.

(c) Adjustments to Per Share Conversion Price .

(1) Subdivisions, Combinations, or Consolidations of Common Stock . In the event the outstanding shares of Common Stock shall be subdivided, combined or consolidated, by stock split, stock dividend, combination or like event, into a greater or lesser number of shares of Common Stock, the Per Share Conversion Price of the Series A Preferred in effect immediately prior to such subdivision, combination, consolidation, stock split or stock dividend shall, concurrently with the effectiveness of such subdivision, combination, consolidation, stock split or stock dividend be proportionately adjusted.

(2) Reclassifications . In the case, at any time after the date hereof, of any capital reorganization or any reclassification of the stock of the Corporation (other than as a result of a stock dividend or subdivision, split-up or combination of shares), or the consolidation or merger of the Corporation with or into another person (other than a consolidation or merger in which the Corporation is the continuing entity and which does not result in any change in the ownership of the Common Stock), the shares of Series A Preferred shall, after such reorganization, reclassification, consolidation or merger be convertible into the kind and number of shares of stock or other securities or property of the Corporation or otherwise to which such holder would have been entitled if immediately prior to such reorganization, reclassification, consolidation or merger such holder had converted his shares of Series A Preferred into Common Stock. The provisions of this Section 4(c)(2) shall similarly apply to successive reorganizations, reclassifications, consolidations or mergers.

(d) Certificate as to Adjustments . Upon the occurrence of each adjustment or readjustment of the Per Share Conversion Price of the Series A Preferred pursuant to this Section 4 , the Corporation, at its expense, shall promptly thereafter compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series A Preferred a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any holder of Series A Preferred, furnish or cause to be furnished to such holder a like certificate setting forth (i) such adjustments and readjustments, if any, (ii) the Per Share Conversion Price of the Series A Preferred at the time in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would be received upon the conversion of the Series A Preferred.

(e) Status of Converted Stock . In case any shares of Series A Preferred shall be converted pursuant to Section 4 hereof, the shares so converted shall be canceled, shall not be reissuable and shall cease to be a part of the authorized capital stock of the Corporation.

(f) Fractional Shares . Any fractional shares shall be rounded down to the nearest whole.

(g) Miscellaneous .

(i) All calculations under this Section 4 shall be made to the nearest cent or to the nearest one hundredth (1/100) of a share, as the case may be.

(ii) No adjustment in the Per Share Conversion Price of the Series A Preferred will be made if such adjustment would result in a change in such Per Share Conversion Price of less than $0.01. Any adjustment of less than $0.01 which is not made shall be carried forward and shall be made at the time of and together with any subsequent adjustment which, on a cumulative basis, amounts to an adjustment of $0.01 or more in such Per Share Conversion Price.

(h) No Impairment . The Corporation will not through any reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 4 and in the taking of all action as may be necessary or appropriate in order to protect the conversion rights of the holders of Series A Preferred against impairment.

(i) Reservation of Stock Issuable Upon Conversion . The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Series A Preferred, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of Series A Preferred. If at any time the number of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of all then outstanding shares of Series A Preferred, the Corporation will take such corporate action as may, in the opinion of its counsel, be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purpose.

5. Voting Rights . The holders of the outstanding shares of Series A Preferred will not be entitled to vote except as otherwise required by the General Corporation Law of the State of Delaware and except that the Corporation shall not, without first obtaining the approval (by vote or written consent) of the holders of at least a majority of the shares of Series A Preferred then outstanding, voting as a separate class, take any action to:

(a) alter the rights, preferences or privileges of the Series A Preferred;

(b) create any new class or series of shares, or issue any such shares or options or convertible securities exercisable or convertible into such shares, that have a preference over or are on a parity with the Series A Preferred with respect to dividends or liquidation preferences;

(c) reclassify stock into shares having a preference over or parity with the Series A Preferred with respect to dividends or liquidation preferences;

(d) authorize or pay any dividend or other distribution (other than a stock dividend) with respect to the Preferred Stock or the Common Stock (other than the cash dividends or Payments-in-Kind payable to the holders of Series A Preferred and as permitted under Section 2(a) or as otherwise permitted under Section 2(b) ) if any dividends payable with respect to the Series A Preferred are in arrears;

(e) repurchase, redeem or retire any shares of capital stock of the Corporation other than (i) the redemption of the Series A Preferred in accordance with the terms hereof, or (ii) the purchase of Common Stock from employees, directors and consultants pursuant to agreements with the Corporation as of the date of the Securities Purchase Agreement to repurchase such stock; provided that the purchase price shall not exceed the price paid by such employee for such stock; or

(f) alter or amend the provisions of this Section 5 .

6. Redemptions .

(a) Optional Redemption . At any time following the second anniversary of the date of issuance of the Series A Preferred, the Corporation may elect, at its option, to redeem from time to time shares of Series A Preferred in an amount equal to at least five percent (5%) of the shares of Series A Preferred (an " Optional Redemption Date ") (such percentage to be based upon the number of shares of Series A Preferred outstanding on the day prior to the first Optional Redemption Date; provided that such number of outstanding shares shall be reduced by the number of shares of Series A Preferred converted after the first Optional Redemption Date) at a price per share equal to the Redemption Price (as defined herein).

(b) Redemption Price . The holders of Series A Preferred shall be entitled to receive from the Corporation on a Optional Redemption Date out of funds legally available therefore a cash amount equal to the sum of (A) the product of the Per Share Purchase Price multiplied by the number of shares of Series A Preferred held by such holder to be so redeemed, plus (B) all accrued but unpaid dividends and interest then owed (calculated through the Optional Redemption Date) with respect to the shares of Series A Preferred held by such holder to be so redeemed (the " Redemption Price ").

(c) Redemption Procedure . The Corporation shall designate by lot, or in such other manner as the Board of Directors may determine, the shares to be redeemed, or shall effect such redemption pro rata. Not more than 60 nor less than 30 days prior to the Optional Redemption Date, notice by first-class mail, postage prepaid, shall be given to the holders of record of the Series A Preferred to be redeemed, addressed to such stockholders at their last addresses as shown on the books of the Corporation. Each such notice of redemption shall specify the date fixed for redemption, the Redemption Price, the place or places of payment, that payment will be made upon presentation and surrender of the shares of Series A Preferred, that on and after the redemption date dividends will cease to accumulate on such shares, the then-effective conversion rate pursuant to Section 4 and that the right of holders to convert shall terminate at the close of business on the Optional Redemption Date.

Any notice which is mailed as herein provided shall be conclusively presumed to have been duly given, whether or not the holder of the Series A Preferred receives such notice; and failure to give such notice by mail, or any defect in such notice, to the holders of any shares designated for redemption shall not affect the validity of the proceedings for the redemption of any other shares of Series A Preferred. On or after the date fixed for redemption as stated in such notice, each holder of the shares called for redemption shall surrender the certificate evidencing such shares to the Corporation at the place designated in such notice and shall thereupon be entitled to receive payment of the Redemption Price. If less than all the shares represented by any such surrendered certificate are redeemed, a new certificate shall be issued representing the unredeemed shares. If, on the date fixed for redemption, funds necessary for the redemption shall be available therefore and shall have been irrevocably deposited or set aside, then, notwithstanding that the certificates evidencing any shares so called for redemption shall not have been surrendered, the dividends with respect to the shares so called shall cease to accrue after the date fixed for redemption, the shares shall no longer be deemed outstanding, the holders thereof shall cease to be stockholders, and all rights whatsoever with respect to the shares so called for redemption (except the right of the holders to receive the Redemption Price without interest upon surrender of their certificates therefore) shall terminate.

(d) Continuing Obligation . If at any time the Corporation determines that in accordance with the General Corporation Law of the State of Delaware it is unable to redeem the shares of Series A Preferred on any Optional Redemption Date, such redemption obligation shall be suspended until such time and from time to time thereafter when additional funds of the Corporation are legally available for redemption of shares of Series A Preferred, whereupon such funds immediately will be used to redeem the balance of the shares of Series A Preferred which the Corporation has become obligated to redeem on any Optional Redemption Date but which it has not redeemed and such funds will not be used for any other purpose.

(e) Dividends; Rights of Holders . No share of Series A Preferred shall be entitled to any dividends (declared or otherwise) after the date on which the Redemption Price of such share of Series A Preferred is paid. On such date, all rights of the holder of such share of Series A Preferred will cease, and such share of Series A Preferred will be deemed to be not outstanding.

(f) Reissuance; New Certificates . Any shares of Series A Preferred which are redeemed or otherwise acquired by the Corporation will be canceled and will not be reissued, sold or transferred. If fewer than the total number of shares of Series A Preferred represented by any certificate are redeemed, a new certificate representing the number of unredeemed shares of Series A Preferred will be issued to the holder thereof without cost to such holder within fifteen (15) business days after surrender of the certificate representing the redeemed shares.

(g) Ratable Offers . Neither the Corporation nor any of its subsidiaries will redeem, repurchase or otherwise acquire any shares of Series A Preferred pursuant to this Section 6 , except as expressly authorized herein or pursuant to a purchase offer made pro-rata to all holders of shares of Series A Preferred on the basis of the number of shares of Series A Preferred owned by each such holder.

7. Notices of Record Date . In the event of any taking by the Corporation of a record of the holders of any class of securities for the purpose of determining the holders thereof who are entitled to receive any dividend or other distribution, or to receive any other right, the Corporation shall mail to each holder of Series A Preferred, at least twenty (20) days prior to the date specified therein, a notice specifying the date on which any such record is to be taken for the purpose of such dividend, distribution or right, and the anticipated amount and character of such dividend, distribution or right.

8. Notices . Any notice required by the provisions of this Certificate to be given to the holders of Series A Preferred shall be deemed to have been sufficiently received (except as otherwise provided herein) (a) upon receipt when personally delivered, (b) or one (1) day after sent by overnight delivery or telecopy providing confirmation or receipt of delivery, or (c) three (3) days after being sent by certified or registered mail, postage and charges prepaid, return receipt requested, and addressed to each holder of record at such holder's address appearing on the books of the Corporation.

3. The undersigned further certifies that the authorized number of shares of Preferred Stock is 5,000,000 and that the number of shares of the Series A Preferred Stock, none of which has been issued, is 200,000.

4. The resolution set forth above has been duly adopted by all necessary action on the part of the Corporation.

IN WITNESS WHEREOF, TOR Minerals International, Inc. has caused this Certificate to be executed by Richard L. Bowers, its President, and attested by Elizabeth K. Morgan, its Secretary, this 15 ^th day of January, 2004.

TOR MINERALS INTERNATIONAL, INC.

By:____________________________

Richard L. Bowers, President

ATTESTED:

By:____________________________

Elizabeth K. Morgan, Secretary

CERTIFICATE OF AMENDMENT

CERTIFICATE OF INCORPORATION

* * * * *

TOR Minerals International, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,

DOES HEREBY CERTIFY:

FIRST: That at a meeting of the Board of Directors of TOR Minerals International, Inc. resolutions were duly adopted setting forth a proposed amendment to the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:

RESOLVED, That the Certificate of Incorporation of this corporation be amended by changing the first paragraph of the Fourth Article thereof so that, as amended said Article shall be and read as follows:

"The total number of shares of stock that the Corporation shall have authority to issue is Twenty-Five million (25,000,000), consisting of Twenty Million (20,000,000) shares of common stock of the par value of Twenty-Five Cents ($.25) per share and Five Million (5,000,000) shares of preferred stock of the par value of One Cent ($.01) per share."

SECOND: That thereafter, pursuant to resolution of its Board of Directors, an annual meeting of the stockholders of said corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.

THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, said TOR Minerals International, Inc. has caused this certificate to be signed by ______________________________, its _______________________ , this ____ day of May, 2004.

By:____________________________

Elizabeth K. Morgan, Secretary

CERTIFICATE OF AMENDMENT

CERTIFICATE OF INCORPORATION

TOR MINERALS INTERNATIONAL, INC.

It is hereby certified that:

1. The name of the corporation (the "Corporation") is TOR Minerals International, Inc.

2. That at a meeting of the Board of Directors of the Corporation resolutions were duly adopted setting forth a proposed amendment to the Certificate of Incorporation of the Corporation, declaring said amendment to be advisable. The resolution setting forth the proposed amendment (the "Amendment") is as follows:

RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing the first paragraph of the Fourth Article thereof so that, as amended said Article shall be and read as follows:

"The total number of shares of stock that the Corporation shall have authority to issue is Thirty-Five Million (35,000,000), consisting of Thirty Million (30,000,000) shares of common stock of the par value of Twenty-Five Cents ($.25) per share and Five Million (5,000,000) shares of preferred stock of the par value of One Cent ($.01) per share."

3. The Amendment was duly adopted in accordance with the provisions of Sections 222 and 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, this Certificate of Amendment has been executed for TOR Minerals International, Inc. by Barbara Russell, its Corporate Secretary, this 21st day of August, 2009.

Barbara Russell

Corporate Secretary

CERTIFICATE OF AMENDMENT

CERTIFICATE OF DESIGNATIONS, PREFERENCES, RELATIVE RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF THE SERIES A PREFERRED STOCK

TOR MINERALS INTERNATIONAL, INC.

It is hereby certified that:

1. The name of the corporation (the "Corporation") is TOR Minerals International, Inc.

2. At a meeting of the Board of Directors of the Corporation resolutions were duly adopted setting forth a proposed amendment to the Corporation's Certificate of Designations, Preferences, Relative Rights, Qualifications, Limitations and Restrictions of the Series A Preferred Stock (the "Designations"), declaring said amendment to be advisable. The resolution setting forth the proposed amendment (the "Amendment") is as follows:

RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing Section 4(a) of the Corporation's Certificate of Designations, Preferences, Relative Rights, Qualifications, Limitations and Restrictions of the Series A Preferred Stock so that, as amended said Section 4(a) shall be and read as follows:

" Right to Convert . Each share of Series A Preferred shall be convertible, at the option of the holder thereof, at any time at the office of the Corporation or any transfer agent for such stock, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing $5.00 plus all accrued but unpaid dividends and interest thereon by the conversion price applicable to such share (the "Per Share Conversion Price") in effect on the date the certificate is surrendered for conversion. The Per Share Conversion Price at which the shares of Common Stock shall be deliverable upon conversion of shares of the Series A Preferred initially shall be $1.80 per share of Common Stock. Such initial Conversion Price shall be adjusted as hereinafter provided."

3. The Amendment was duly adopted in accordance with the provisions of Sections 222, 228 and 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, this Certificate of Amendment has been executed for TOR Minerals International, Inc. by Barbara Russell, its Corporate Secretary, this 21st day of August, 2009.

Barbara Russell

Corporate Secretary

EXHIBIT 3.2

TOR MINERALS INTERNATIONAL, INC.

BY-LAWS

______________________________________

ARTICLE I

STOCKHOLDERS

SECTION 1. ( Amended 04/06/09) The annual meetings of the stockholders of the Corporation shall be held in such city in the United States, and at such time and at such place in such city as the Board of Directors, from time to time, shall establish provided that at least ten days notice shall be given to the stockholders of the time and place so fixed by the Board of Directors each year, for the purpose of electing directors and for the transaction of such other business as may properly be brought before the meeting.

SECTION 2. Special meetings of the stockholders may be called upon the call of the Board of Directors or of the Executive Committee or of the Chairman or President (and shall be called by the Chairman or President at the request in writing of stockholders owning 10% of the outstanding shares of the Corporation entitled to vote at the meeting), at such time and at such place within or without the State of Delaware, as may be fixed by the Board of Directors or by the Executive Committee or by the Chairman or President (or by the stockholders owning 10% of the outstanding shares of the Corporation entitled to vote), as the case may be, and as may be stated in the notice setting forth such call.

If the Chairman or President, shall not, within five days after the receipt of such request from stockholders owning 10% of the outstanding shares of the Corporation entitled to vote; notify such holders of such stock in writing that such request will be complied with, or if notice of such meeting shall not be given within twenty-five days after the receipt of such request, such holders of outstanding stock of the Corporation entitled to vote shall have the power to call and convene such meeting of the stockholders. The record date for the determination of the holders of the outstanding stock entitled to vote at any such meeting called by such holders of such stock, as hereinabove provided, shall be the close of business on the thirtieth day next preceding the date on which such meeting shall be called to be held, unless such thirtieth day shall fall on a Saturday, Sunday or legal holiday, in which event such record date shall be the close of business on the next preceding business day which is not a Saturday.

SECTION 3. Notice of the time and place for every meeting of stockholders shall be delivered personally or mailed at least ten days previous thereto to each stockholder of record entitled to vote, who shall have furnished a written address to the Secretary of the Corporation for the purpose. Such further notice shall be given as may be required by law. Meetings may be held without notice, if all stockholders entitled to vote are present, or if notice is waived by those not present. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy; and if any stockholder shall, in person or by attorney thereunto authorized, in writing or by telegraph or cable, waive notice of any meeting, whether before or after such meeting be held, notice thereof need not be given him.

SECTION 4. The holders of record of a majority of the shares of the capital stock of the Corporation, issued and outstanding and entitled to vote, present in person or by proxy, shall except as otherwise provided by law, constitute a quorum at all meetings of the stockholders. If there be no such quorum, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time until a quorum shall have been obtained and no notice of the adjourned meeting need be given except as required by law. At any adjourned meeting at which a quorum shall be represented, any business may be transacted which might have been transacted if the meeting had been held on the date originally fixed.

SECTION 5. Meetings of the stockholders shall be presided over by the Chairman or in his absence, the President, or, in his absence, a Chairman chosen at the meeting. The Secretary of the Corporation, or an Assistant Secretary, or, a person chosen at the meeting shall act as Secretary of the meeting.

SECTION 6. Each stockholder entitled to vote at any meeting shall have one vote in person or by proxy for each share of stock held by him which has voting power upon the matter in question at the time; but no proxy shall be voted on after three years from its date, unless the proxy provides for a longer period.

SECTION 7. At all elections of directors by the stockholders the voting shall be by ballot, and a majority of the votes cast thereat shall elect. The vote upon any question before any meeting of stockholders, other than the election of directors, shall, in the discretion of the presiding officer at any such meeting, be either by ballot or viva voce. At all meetings of stockholders, all questions (except matters of procedure which shall be determined by the Chairman of the meeting), the manner of deciding which is not specifically regulated by statute, or by the Certificate of Incorporation, or by these By-Laws, shall be determined by the vote of a majority of the stockholders entitled to vote at the meeting present in person or by proxy.

SECTION 8. The presiding officer at each meeting of stockholders shall appoint an inspector or inspectors of election to conduct all votes by ballot unless such appointment shall be unanimously waived by those stockholders present or represented by proxy at the meeting and entitled to vote. In case any person appointed as an inspector shall fail to appear or to act, a substitute inspector shall be appointed by the presiding officer. Inspectors of election need not be stockholders of the Corporation and may be officers or employees of the Corporation, except that no director or candidate for the office of director shall be appointed as an inspector. Inspectors of election shall first take and subscribe to an oath or affirmation faithfully to execute the duties of inspector of such meeting with strict impartiality and according to the best of their respective abilities, and shall take charge of the polls and after the balloting shall make a certificate of the result of the vote taken.

SECTION 9. The officer who has charge of the stock ledger shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, said list of stockholders, or to vote in person or by proxy at any meeting of stockholders.

ARTICLE II

DIRECTORS

SECTION 1. (Amended 5/10/01) The number of directors which shall constitute the whole Board of Directors of the Corporation shall be fixed from time to time by resolution of the Board of Directors but shall not be less than five (5) nor more than nine (9), who shall serve and hold office until their respective successors are duly elected and qualified or until the annual meeting of the stockholders next ensuing or resignation or removal, whichever shall be first . A majority of the total number of directors shall constitute a quorum for the transaction of business. The vote of the majority of the directors present at a meeting at which a quorum is present, shall be the act of the Board of Directors. If at any meeting of the Board of Directors there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum shall have been obtained.

SECTION 2. In case of vacancies on the Board of Directors, other than upon removal in the manner authorized in Section 7 of this Article II of the By-Laws, a majority of the Directors then in office may elect Directors to fill such vacancies until the next annual meeting of stockholders or until their respective successors shall have been duly elected and shall have qualified, whichever shall first occur. In case of any increase in the number of Directors, the additional Directors may be elected by the Board of Directors to hold office until the next annual meeting of the stockholders and until their successors are elected and qualified.

SECTION 3. Meetings of the Board of Directors shall be held at such place, within or without the State of Delaware, as may from time to time be fixed by resolution of the Board, or as may be specified in the call of any meeting. Regular meetings of the Board of Directors shall be held at such times as may from time to time be fixed by resolution of the Board, and special meetings may be held at any time upon the call of the Executive Committee Chairman or President, or a majority of directors, by oral, telegraphic, electronic or written notice, duly served on or sent or mailed to each Director not less than one day before such meeting. A meeting of the Board may be held without notice immediately after the annual meeting of stockholders at the same place at which such meeting was held. Notice need not be given of regular meetings of the Board held at times fixed by resolution of the Board. Meetings, whether regular or special, may be held at any time without notice if all the Directors are present or if those not present waive notice of the meeting in writing.

SECTION 4. (Amended 6/14/94) The Board of Directors may, in its discretion, by resolution passed by a majority of the whole Board designate an Executive Committee to consist of such Directors as the Board may from time to time determine, which Committee shall have, and may exercise when the Board is not in session, the powers of the Board of Directors in the management of the business and affairs of the Corporation, and shall have power to authorize the seal of the Corporation to be affixed to all papers which may require it; but the Executive Committee shall not have the power to fill vacancies in the Board or to change the membership of or to fill vacancies in the said Committee, or to make or amend By-Laws of the Corporation. The Board shall have the power at any time to change the membership of said Committee, to fill vacancies in it, or to dissolve it. The Executive Committee may make rules for the conduct of its business. A majority of the members of the said Committee shall constitute a quorum.

SECTION 5. The Board of Directors may, in its discretion, appoint other committees which shall have and may exercise such powers as shall be respectively conferred or authorized by the resolutions appointing them. A majority of any such committee, composed of more than two members, may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board of Directors shall have power at any time to change the members of such committee, to fill vacancies therein, and to dissolve the same.

SECTION 6. Each Director shall be paid such compensation, if any, and such sum for expenses of attendance, if any, as shall be fixed by the Board of Directors for his services as a director or as a member of a committee or both.

SECTION 7. Notwithstanding anything to the contrary contained in the By-Laws of the Corporation, any one or more or all of the Directors may be removed either with or without cause at any time by the affirmative vote of a majority of issued and outstanding shares of stock of the Corporation at any special meeting which may be called by the Chairman or President at the request of the holder or holders of 10% of the outstanding shares entitled to vote for the election of Directors, at such time at such place within or without the State of Delaware as may be fixed in the notice of said meeting and thereupon the term of each Director or Directors who shall have been so removed shall forthwith terminate and there shall be a vacancy or vacancies in the Board of Directors, which vacancy or vacancies shall be filled by the election of a new Director or Directors at the same special meeting, which new Director or Directors shall serve until his successor or their successors shall be elected and shall qualify.

SECTION 8. Notwithstanding anything to the contrary contained in the By-Laws of the Corporation, a Director may also be removed from office at any time during his or her term with or without cause by written demand therefor by the holder or holders of more than 50% of the outstanding stock entitled to vote for the election of Directors filed with or sent to the Secretary of the Corporation, or in his or her absence any other officer of the Corporation.

ARTICLE III (Amended 3/3/93)

INDEMNIFICATION

SECTION 1. Indemnification of Directors and Officers .

(a) Right to Indemnification . The Corporation shall indemnify and hold harmless, to the fullest extent permissible under Delaware law, as the same exists or may hereafter exist in the future (but, in the case of any future change, only to the extent that such change permits the Corporation to provide broader indemnification rights than the law permitted prior to such change), each person who was or is made a party or is threatened to be made a party or is otherwise involved in any threatened, pending or completed action, suit or proceeding, whether formal or informal, whether of a civil, criminal, administrative or investigative nature (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation, whether the basis of such proceeding is an alleged action or inaction in an official capacity or in any other capacity, from and against all costs, charges, liabilities and losses (including, without limitation, judgments, fines, ERISA excise taxes, or penalties and amounts paid or to be paid in settlement) suffered and expenses (including, without limitation, attorneys' fees and expenses) reasonably incurred by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators. The Corporation shall be required to indemnify a director or officer in connection with a proceeding initiated by such person only if such proceeding was authorized by the Board of Directors of the Corporation.

(b) Prepayment of Expenses . The Corporation shall pay expenses actually incurred by a director or officer in connection with any proceeding in advance of its final disposition; provided, however, that if Delaware law then requires, the payment of such expenses incurred by a director or officer in advance of the final disposition of a proceeding shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Article or otherwise.

(c) Claims . If a claim under paragraph (a) of this Section 1 is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. Neither the failure of the Corporation (including its Board, independent legal counsel, or its stockholders) to have made a determination that indemnification of the claimant is permissible in the circumstances because the claimant has met the applicable standard of conduct, if any, nor an actual determination by the Corporation (including its Board, independent legal counsel, or its shareholders) that the claimant has not met the standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the standard of conduct. In any such action, the Corporation shall have the burden of proving that the director or officer was not entitled to the requested indemnification or payment of expenses under applicable law.

SECTION 2. Indemnification of Employees and Agents . The Corporation may, in the discretion of the Board of Directors of the Corporation, provide indemnification to employees and agents of the Corporation to the fullest extent permissible under Delaware law.

SECTION 3. Expenses as a Witness . To the extent that any director, officer, employee or agent of the Corporation is by reason of such position, or position with another entity at the request of the Corporation, a witness in any action, suit or proceeding, he or she shall be indemnified against all costs and expenses actually and reasonably incurred by him or her or on his or her behalf in connection therewith.

SECTION 4. Insurance . The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or of another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under Delaware law.

SECTION 5. Indemnity Agreements . The Corporation may enter into agreements with any director, officer, employee or agent of the Corporation providing for indemnification to the fullest extent permissible under Delaware law.

SECTION 6. Separability . Each and every paragraph, sentence, term and provision of this Article III is separate and distinct, so that if any paragraph, sentence, term or provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or unenforceability of any other paragraph, sentence, term or provision hereof. To the extent required, any paragraph, sentence, term or provision of this Article III may be modified by a court of competent jurisdiction to preserve its validity and to provide the claimant with, subject to the limitations set forth in this Article III and any agreement between the Corporation and claimant, the broadest possible indemnification permitted under applicable law.

SECTION 7. Contract Right . Each of the rights conferred on directors and officers of the Corporation by Sections 1 and 3 of this Article and on employees or agents of the Corporation by Section 3 of this Article shall be a contract right and any repeal or amendment of the provisions of this Article shall not adversely affect any right hereunder of any person existing at the time of such repeal or amendment with respect to any act or omission occurring prior to the time of such repeal or amendment, and, further, such repeal or amendment shall not apply to any proceeding, irrespective of when the proceeding is initiated, arising from the service of such person prior to such repeal or amendment.

SECTION 8. Nonexclusivity . The rights conferred on any person by Article III shall not be exclusive of any other rights that any person may have or hereafter acquire under any statute, bylaw, agreement, vote of stockholders or disinterested directors or otherwise.

SECTION 9. Other Indemnification . The Corporation's obligation, if any, to indemnify any person who was or is serving at its request as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, enterprise or non-profit entity shall be reduced by any amount such person has collected as indemnification from such other corporation, partnership, joint venture, trust, enterprise or non-profit enterprise.

SECTION 10. Indemnification For Proceedings Arising From Service Prior to Adoption of this Article III . The provisions of this Article III shall apply, subject to the limitations set forth in this Article III, to any proceeding, irrespective of when the proceeding is initiated, arising from the service of any person both prior to and from and after the adoption of this Article III; provided, however, if for any reason the provisions of this Article III shall not be valid or enforceable or applicable to any proceeding, irrespective of when the proceeding is initiated, arising from the service of any person prior to the adoption of this Article III, then the repeal of provisions of Article III of the Bylaws of the Corporation in effect prior to the adoption of this Article III shall not adversely affect any right or protection thereunder of any person in respect of any act or omission occurring prior to the time of such repeal, and in such circumstance, the provisions of the former Article III shall be contract rights that shall apply to any proceeding, irrespective of when the proceeding is initiated, arising from the service of such person prior to such repeal.

ARTICLE IV

OFFICERS

SECTION 1. The Board of Directors, as soon as may be practicable after the election thereof held in each year, shall choose a Chairman, a President, one or more Vice Presidents, a Secretary and a Treasurer. The Board of Directors or the Executive Committee may from time to time appoint such additional Vice Presidents, such Assistant Secretaries, Assistant Treasurers and such other officers as it may deem proper and may fill vacancies in any offices. The offices of Secretary and Treasurer may be held by the same person, and a Vice President of the Corporation may also be either the Secretary or the Treasurer. The Chairman and the President shall be chosen from the Directors. The Chairman shall be the Chief Executive Officer of the Corporation unless otherwise designated by the Board of Directors.

SECTION 2. The term of office of all officers shall be one year, or until their respective successors are chosen, but any officer may be removed from office with or without cause at any time by the affirmative vote of a majority of the members of the Board then in office.

SECTION 3. The officers of the Corporation shall each have such powers and duties as generally pertain to their respective offices, as well as such powers and duties as from time to time may be converted by the Board of Directors or by the Executive Committee. The Treasurer and the Assistant Treasurers may be required to give bond for the faithful discharge of their duties in such form and with such surety or sureties as the Board of Directors may from time to time prescribe.

ARTICLE V

CERTIFICATES OF STOCK

SECTION 1. The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock in such form as the Board of Directors may from time to time prescribe. The shares in the stock of the Corporation shall be transferred on the books of the Corporation by the holder thereof in person or by his duly authorized attorney, upon surrender for cancellation of certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require.

SECTION 2. The certificates of stock shall be signed by two of the Chairman, the President, a Vice President, the Secretary, the Treasurer, an Assistant Secretary, or an Assistant Treasurer, and registered in such manner, if any, as the Board of Directors or the Executive Committee may by resolution prescribe. Where any such certificate is signed by a transfer agent or transfer clerk and by a registrar, the signatures of any such Chairman, President, Vice President, Secretary, Treasurer, Assistant Secretary or Assistant Treasurer may be facsimiles, engraved or printed.

Any person claiming a certificate of stock of this corporation to be lost, destroyed or mutilated, shall make an affidavit or affirmation to that effect and shall, if the Board of Directors so requires, give the Corporation a bond of indemnity in form and with one or more sureties satisfactory to the Board of Directors in at least double the value of the Stock represented by such certificate; whereupon, in the discretion of the Board of Directors, a new certificate may be issued of the same tenor and for the same number of shares as the one alleged to be lost, destroyed or mutilated. The Board of Directors may, upon such conditions as the Board shall specify, authorize the issuance of a new certificate of the same tenor and for the same number of shares as the one alleged to be lost, destroyed or mutilated, without the necessity of further action by the Board of Directors in each particular case, upon the filing with the Corporation of an affidavit or affirmation and by the giving of a bond of indemnity to the Corporation for an amount and in such form as shall be satisfactory to officers of the Corporation designated by the Board of Directors from time to time.

SECTION 3. In order to determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action.

In the event no record date is so fixed:

(1)	The record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.
(2)	The record date for determining stockholders for any other purpose shall be at close of business on the day on which the Board of Directors adopts the resolution relating thereto.
(3)	A determination of stockholders of record entitled to a notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

ARTICLE VI

CHECKS, NOTES, ETC.

All checks and drafts on the Corporation's bank accounts and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, shall be signed by such officer or officers, agent or agents as shall be thereunto authorized from time to time by the Chairman, President, any Vice President, the Secretary, the Treasurer, or any Assistant Secretary or Assistant Treasurer.

ARTICLE VII

OFFICES, BOOKS, RECORDS, ETC.

The Corporation and the stockholders and the Directors may have offices and the books, records, documents and papers of the Corporation, except as may otherwise be required by the laws of the State of Delaware, may be kept within or without the State of Delaware at such place or places as may be determined from time to time by the Board of Directors or the Executive Committee.

ARTICLE VIII

AMENDMENTS

The By-Laws of the Corporation may be amended, added to, rescinded, or repealed at any meeting of the Board of Directors or of the stockholders provided notice of the proposed change is given in the notice of the meeting. No change of the time or place for the annual meeting of the stockholders for the election of Directors shall be made except in accordance with the laws of the State of Delaware in such case made or provided.

ARTICLE IX

PROVISIONS FOR NATIONAL EMERGENCIES

During the periods of emergency resulting from an attack on the United States or on a locality in which the Corporation conducts its business or customarily holds meetings of its Board of Directors or its stockholders, or during any nuclear or atomic disaster, or during the existence of any catastrophe, or other similar emergency condition, the following provisions shall apply, notwithstanding any different provision elsewhere contained in these By-Laws or in the Articles of Incorporation:

(1)	Whenever during such emergency and as a result thereof a quorum of the Board of Directors or a standing committee thereof cannot readily be convened for action, a meeting of such board or committee thereof may be called by any officer or director by a notice of the time and place given only to such of the directors as it may be feasible to reach at the time and by such means as may be feasible at the time, including publications or radio. The director or directors in attendance at the meeting shall constitute a quorum, provided, however, that the officers or other persons present designated on a list approved by the Board of Directors before the emergency, all in such order of priority and subject to such conditions and for such period of time as may be provided in the resolution approving such list, or in the absence of such a resolution, the officers of the Corporation who are present, in order of rank, and within the same rank in order of seniority, shall to the extent required to provide a quorum be deemed directors for such meeting.
(2)	The Board of Directors, either before or during any such emergency, may provide, and from time to time modify, lines of succession in the event that during such emergency any or all officers or agents of the Corporation shall for any reason be rendered incapable of discharging their duties.
(3)	The Board of Directors, either before or during any such emergency, may, effective in the emergency, change the head office or designate several alternative head offices or regional offices, or authorize the officers to do so.
(4)	No officer, director or employee acting in accordance with this article shall be liable except for willful misconduct.
(5)	To the extent not inconsistent with this article, all other articles of these By-Laws shall remain in effect during any emergency described in this article and upon its termination the provisions of this article covering the duration of such emergency shall cease to be operative.

Exhibit 21

Subsidiary of Registrant

Name of Subsidiary	TP&T (TOR Processing & Trade) B.V.
Jurisdiction of formation	The Netherlands
Subsidiary DBA	TP&T (TOR Processing & Trade) B.V. ("TP&T")


Name of Subsidiary	TOR Minerals Malaysia, Sdn. Bhd.
Jurisdiction of formation	Malaysia
Subsidiary DBA	TOR Minerals (M), Sdn. Bhd. ("TMM")

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Registration Nos. 33-61645, 333-37878); and on Form S-3 (Registration No. 333-114483) of TOR Minerals International, Inc. of our report dated March 22, 2010, with respect to the consolidated financial statements of TOR Minerals International, Inc. and Subsidiaries as of December 31, 2009 and 2008 and for each of the three years ended December 31, 2009 included in this Annual Report on Form 10-K for the year ended December 31, 2009.

/s/ UHY LLP
Houston, Texas
March 24, 2010

Exhibit 31.1

CERTIFICATIONS

I, Olaf Karasch, certify that:

1. I have reviewed this Form 10-K of TOR Minerals International, Inc.;

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

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

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

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

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

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

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

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

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

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

Date: March 24, 2010

/s/ Olaf Karasch

Olaf Karasch

President and CEO

Exhibit 31.2

CERTIFICATIONS

I, Barbara Russell, certify that:

1. I have reviewed this Form 10-K of TOR Minerals International, Inc.;

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

Date: March 24, 2010

/s/ Barbara Russell

Barbara Russell

Chief Financial Officer

Exhibit 32.1

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

In connection with the Annual Report of TOR Minerals International, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Olaf Karasch, President and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the year ended December 31, 2009.

/s/ OLAF KARASCH
Olaf Karasch
President and Chief Executive Officer
March 24, 2010

Exhibit 32.2

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

In connection with the Annual Report of TOR Minerals International, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Barbara Russell, Acting Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the year ended December 31, 2009.

/s/BARBARA RUSSELL
Barbara Russell
Chief Financial Officer
March 24, 2010