Washington, D. C. 20549

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(Mark One)

For the transition period from __________ to __________

Commission file number 0-17321

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(Exact name of small business issuer as specified in its charter)

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(Registrant's telephone number, including area code)

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Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.

State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date.

Transitional Small Business Disclosure Format (check one):

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See Notes to Consolidated Financial Statements

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See Notes to Consolidated Financial Statements

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See Notes to Consolidated Financial Statements

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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 & Trade BV (TP&T). All significant inter-company 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. Malaysia imposed capital controls and fixed its ringgit currency at 3.8 ringgits per 1 U.S. dollar in September 1998. The Malaysian government has not changed the fixed exchange rate since that time. However, there can be no assurance that the Malaysian government will maintain the fixed rate of currency exchange.

TP&T uses the U.S. dollar as its functional currency. As a result of the changes in the exchange rate, gains and losses due to fluctuations in the value of any Euro denominated transactions are recorded on the Company's consolidated statement of operations.

In preparing financial statements in conformity with generally accepted accounting principles, 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.

The Company has not recorded any income tax expense during 2003 as it expects to utilize net operating loss carry-forwards to offset substantially all taxable income.

On January 1, 2003, the Company adopted FASB Statement 148, Accounting for Stock Based Compensation - Transition and Disclosure. Statement 148 amends FASB Statement 123, Accounting for Stock-Based Compensation, to provide alternative methods of transition to Statement 123's fair value method of accounting for stock-based employee compensation. Statement 148 also amends the disclosure in the summary of significant accounting policies of the effects of an entity's accounting policy with respect to stock-based employee compensation on reported net income and earnings per share in annual and interim financial statements.

Upon adoption of Statement 148, effective January 1, 2003, the Company elected to change its method of accounting for stock options from the intrinsic value method of Opinion 25 to the fair value method of Statement 123. The Company will utilize the "Modified Prospective Method" of transition as provided for in Statement 148. Under the Modified Prospective Method, the Company has recorded compensation expense of $204,000 for the three-month period ending June 30, 2003 and year to date compensation expense of $213,000 related to all options outstanding through June 30, 2003.

Pro forma information regarding net income and earnings per share is required by Statement 148, which also requires that the information be determined as if the Company had accounted for its employee stock options granted subsequent to December 31, 1994 under the fair value method of that Statement. The fair value of these options was estimated at the date of grant using a Black-Scholes option-pricing model.

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For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information for the three-month and six-month periods ending June 30, 2002 follows:

Exercise prices on options outstanding at June 30, 2003, ranged from $0.92 to $4.125 per share. The weighted-average remaining contractual life of the options is 8.06 years. The number of options exercisable at June 30, 2003 and 2002 was 426,800 and 332,676.

On January 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations. Statement 143 applies to legal obligations associated with the retirement of long-lived assets that result from acquisition, construction, development and/or normal operation of a long-lived asset. Management does not believe adoption of this statement will materially impact the Company's financial position or results of operations.

On January 1, 2003, the Company adopted Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities. Statement 146 address the accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Terminations Benefits and Other Costs to Exit an Activity." It also substantially nullifies EITF Issue No. 88-10, "Costs Associated with Lease Modification or Termination." Management does not believe that adoption of this statement will materially impact the Company's financial position or results of operations.

In January 2003, the Financial Accounting Standards Board issued Financial Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN 46"). FIN 46 addresses consolidation of business enterprises of variable interest entities. FIN 46 is effective immediately for all variable interest entities created after January 31, 2003 and for the first fiscal year or interim period beginning after June 15, 2003 for variable interest entities in which an enterprise holds a variable interest that it acquired before February 1, 2003. The Company has not acquired any variable interest entities subsequent to January 31, 2003 and will therefore adopt FIN 46 for its quarterly report for the period ending September 30, 2003. The Company is currently evaluating the provisions of FIN 46 and any potential impact of the adoption.

The Company entered into a loan and security agreement on April 5, 2001 with the Company's Chairman of the Board, Bernard Paulson a 17.0% shareholder, through Paulson Ranch, Ltd. under which Paulson Ranch made a loan to the Company in the amount of $600,000. The principal balance outstanding on June 30, 2003 was $231,000. The new loan agreement with the bank limits the payment of principal and interest on the loan with Paulson Ranch.

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The majority of the Company's non-related party debt is either floating rate or has been recently negotiated and carrying value approximates fair value.

During 2002, the Company entered into a new loan agreement (the "Agreement") with Bank of America, N.A. (the "Bank"). The Agreement between the Company and the Bank was amended on May 5, 2003. The Amendment to the Loan Agreement (the "Amendment"), which matures on August 31, 2004, increased the Company's line of credit (the "Line") from $3,000,000 to $3,500,000. The interest rate on the Line is the Bank's prime. The amount of credit available to the Company under the Line is limited to the lesser of (a) $3,500,000 or (b) 80% of eligible accounts receivable and 50% of eligible inventory. At June 30, 2003, the Company had $3,350,000 outstanding on the Line and $150,000 was available to the Company on that date. The Company increased its borrowing on the Line to fund the purchase of raw materials.

The Agreement, which prohibits the Company from paying dividends without the prior approval of the Bank, contains covenants that, among other things, require maintenance of certain financial ratios based on the results of both the stand-alone US operations and the consolidated operations. The covenants are calculated at the end of each quarter. One of the provisions of the Company's loan agreement with the Bank requires a fixed charge ratio to be maintained at the end of each quarterly reporting period based on the US operation. As a result of the US operation's accumulated loss over the last four quarters, the Company's fixed charge ratio did not meet this requirement for the quarter ending June 30, 2003. The Company has received a waiver from the Bank addressing the deficiency for the quarter ending June 30, 2003. The Company was in compliance with all other debt covenants as of June 30, 2003. Under the terms of the Agreement, payment of the Line and the term loan are secured by the Company's property, plant and equipment, as well as inventory and accounts receivable.

The Company has one term loan with the Bank. The loan proceeds of $850,000 were used to refinance the Company's term loan that was due to mature on June 1, 2002. The interest rate for the loan is the Bank's prime rate plus 1% per annum. Monthly principal payments of $14,167 plus interest commenced on June 1, 2002 and continue through May 1, 2007. At June 30, 2003, the balance on the term loan was $665,000.

In April 2001, the Company raised $3,010,000 in a private placement of common stock and convertible debentures. In the private placement, the Company issued 301,000 shares of its common stock and $2,709,000 principal amount of convertible debentures. On April 3, 2003, the Renaissance Group exercised its option to convert the remaining 200,000 debentures for common stock at the $1.80 per share conversion rate.

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TMM has two term loans with HSBC Bank Labuan and RHB Bank Labuan. At June 30, 2003, the outstanding principal balance on each of the two term loans was $140,000 for total outstanding borrowings of $280,000. The loans are secured by TMM's inventory, accounts receivable, and property, plant and equipment and are payable in monthly payments of $17,500 each, plus interest. The term loans are subject to certain subjective acceleration covenants based on the judgement of the banks. Additionally, if repayment of the short-term credit facilities are demanded, these term loans would also become due immediately.

The Company's subsidiary, TP&T, has a loan agreement with a bank in The Netherlands, Rabobank, which provides a total short-term credit facility of $375,000. The credit facility is secured by TP&T's inventory and accounts receivable. At June 30, 2003, TP&T had utilized $251,000 of that facility. TP&T's borrowings are also subject to a demand provision.

Management believes that it has adequate liquidity for fiscal year 2003 and expects to maintain compliance with all financial covenants throughout 2003. However, if material shortfalls in anticipated results of the Company's performance cause a violation in its covenants, the Company may be required to seek further amendments to its credit agreements or alternative sources of financing or to limit capital expenditures.

The terms of the Company's borrowings contain restrictions and covenants, including covenants based on the performance of the Company, and the failure of the Company to comply with such restrictions and covenants could also adversely affect the Company's financial position.

The Company has direct operations in The Netherlands and Malaysia. Certain of the Company's foreign operations are measured in their local currencies. As a result, the Company's financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which the Company has operations.

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 disposition of such claims will have no material effect on the financial statements of the Company.

The Company believes that the plants in Corpus Christi, Texas, Ipoh, Malaysia and Hattem, The Netherlands are in compliance with all applicable federal, state, and local laws and regulations relating to the discharge of substances into the environment. The Company does not expect that any material capital expenditures for environmental control facilities will be necessary in order to continue such compliance.

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The Company has no indefinite-lived intangible assets.

The Company adopted the provisions of SFAS 142 effective January 1, 2002. Under the provisions of SFAS 142, the value of the Company's goodwill (with a carrying value of $1,283,000) is no longer subject to amortization but will be reviewed at least annually for impairment or more frequently if impairment indicators exist. The Company completed the first annual impairment test October 1, 2002, and concluded that there was no impairment of recorded goodwill, as the fair value of the reporting unit exceeded the carrying amount as of October 1, 2002. There can be no assurance that future goodwill impairment tests will not result in a charge to net earnings.

The following table sets forth the computation of basic and diluted earnings per share:

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Excluded from the calculation of diluted earnings per share were a total of 193,300 options at June 30, 2003 and 336,400 options at June 30, 2002. The options were not included in 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.

During the first quarter 2002, the Company had a swap agreement with Coral Energy Holdings, LP ("Coral Energy") to exchange monthly payments on notional quantities amounting to 57,000 MM Btu's. This contract was a derivative that had not been designated as a hedge. Under the swap agreement, the Company paid fixed prices averaging $4.6265 per MM Btu. For the year ended December 31, 2001, the Company marked the gas contract to market, recording a loss of $113,000. The Company recorded the loss as a component of "Cost of Goods Sold" on the income statement. The Company settled this swap agreement during the first quarter 2002, by paying cash of $136,000, recording an additional loss of $23,000.

On September 3, 2002, the Company entered into a natural gas contract with Bank of America, N.A. to achieve the objectives of the hedging program. The Company designated the contract as a cash flow hedge, with the expectation that it would be highly effective in helping the Company meet its cash flow objectives. The contract was settled based on natural gas market prices from January 1, 2003 through April 30, 2003. The Company paid fixed prices averaging $3.90 per MM Btu on notional quantities amounting to 60,000 MM Btu's. The fair value of the hedge decreased $56,000 from December 31, 2002 to April 30, 2003 due to the settlement of the hedge.

To protect its exposure to foreign exchange risks, TMM enters into foreign currency forwards contracts. Gains and losses on foreign exchange contracts, designated as hedges of identified exposure, are offset against the foreign currency exchange gains and losses on the hedged financial assets and liabilities. Where the instrument is used to hedge against anticipated future transactions, gains and losses are not recognized until the transaction occurs. For the quarter ended June 30, 2003, the Company marked the foreign currency forwards contracts to market, recording the fair value of the hedge of $16,000 as a component of "Other Comprehensive Income" and also recorded it as an asset on the balance sheet at June 30, 2003. The fair value of the hedge increased $3,000 from December 31, 2002 to June 30, 2003. The recognition of this gain had no effect on the Company's cash flow.

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The Company and its subsidiaries operate in one reportable segment of pigment manufacturing and related products. 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 located in Malaysia and The Netherlands. A summary of the Company's manufacturing operations by geographic area is presented below:

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

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Sales by product for the second quarter 2003 as compared to the same period 2002 are presented below.

For the six-month period ending June 30, 2002, sales increased $1,745,000 from $8,157,000 for the second quarter 2002 to $9,902,000 for the same period 2003, a net increase of 21.4%. Net sales at the Corpus Christi location increased $1,015,000 or 15.9% during the six-month period ending June 30, 2003. Of this increase, $955,000 relates to the sale of Aluprem which was sold exclusively from the Company's plant in The Netherlands (TP&T) during the same period 2002. TMM's net sales to third party customers increased $748,000 or 74.4% as the result of an increased demand for Hitox. TP&T's sales of Aluprem to third party customers decreased $18,000 or 2.3%. The decrease in TP&T's sales is a direct result of shifting the US sales to the Corpus Christi location.

Sales by product for the first six months of 2003 and 2002 are as follows:

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The most significant factor affecting the gross profit during the three-month period ending June 30, 2003 was natural gas, the primary source of energy at the Corpus Christi plant. Natural gas increased $120,000 or 61.5% in the second quarter 2003 as compared to the same period 2002 on the same number of MM/Btu's. The average price paid for natural gas increased from $3.24 per MM/Btu during the second quarter 2002 to $5.27 per MM/Btu for the same period 2003.

For the first six-months of 2003, cost of sales increased 22.9% or $1,358,000 on higher sales volume. Cost of sales represented 73.6% of sales compared 72.7% for the same six-month period 2002. The consolidated gross profit increased $387,000 or 17.4% from $2,226,000 for the six-month period ending June 30, 2002 to $2,613,000 for the same period 2003.

Significant factors affecting the gross profit during the first six-months of 2003 are as follows: (1) Natural gas was $413,000 higher during the six-month period ending June 30, 2003 compared to the same period 2002. The Company's 2003 natural gas consumption increased approximately 29,000 MM/Btu compared to the same period 2002. Year to date, the average price paid for natural gas increased from $3.08 per MM/Btu during 2002 to $5.27 per MM/Btu for the same period 2003. (2) As a result of plant upgrades taking place in 2003, TMM's production costs were under absorbed $236,000 compared to $87,000 in 2002.

General, administrative and selling expenses ("SG&A") increased from $851,000 during the second quarter of 2002 to $1,108,000 for the same period 2003, an increase of $257,000 or 30.2%. SG&A for the Corpus Christi operation, which includes the expenses for the Company's corporate headquarters, increased $278,000 or 48.4% compared to the second quarter 2002. The primary factors contributing to the increase in SG&A during the quarter ending June 30, 2003 include (1) the Company's decision to begin expensing options in 2003 resulted in the Company recorded non-cash option compensation expense of $204,000; and (2) termination expenses of $85,000 related to personnel terminations in the second quarter 2003. SG&A for The Netherlands operation decreased $26,000 or 17.0%

Year to date, SG&A increased $308,000 or 17.6% from $1,746,000 for the first six-months of 2002 to $2,054,000 for the same period 2003. SG&A for the Corpus Christi operation, which includes the expenses for the Company's corporate headquarters, increased $393,000 or 34.1% compared to the same period 2002. The primary factors contributing to the increase in SG&A include (1) the Company's decision to begin expensing options in 2003 (for the six-month period ending June 30, the Company recorded non-cash option compensation expense of $213,000); (2) termination expenses of $85,000 related to personnel terminations in the second quarter 2003; (3) an increase in accounting fees; and (4) an increase in building and contents insurance. SG&A for The Netherlands operation decreased $84,000 or 25.2%.

The Company did not recognize any interest income during either the first or the second quarter of 2003 or 2002.

Interest expense decreased $10,000 in the second quarter of 2003 as compared with the same quarter 2002. For the six-month period ending June 30, 2003, interest expense decreased $33,000. The reduction in interest expense was the result of a reduction in long-term debt at both the Corpus Christi and Malaysian operations and the elimination of short-term debt to the Royal Begemann Group that was repaid in May 2002.

Due to the utilization of operating loss carry-forwards, the Company recorded no income tax expense during the second quarters of 2003 or 2002.

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During the second quarter 2003, working capital decreased from $1,236,000 at December 31, 2002 to $1,016,000 at June 30, 2003. Accounts receivable increased $1,419,000 due to an expanded customer base resulting in higher sales of both Hitox and Aluprem during the second quarter 2003 compared to the fourth quarter 2002. Inventory increased $641,000 due the production of orders scheduled for shipment during the third quarter 2003. Accounts payable and accrued expenses increased $905,000 due to the timing of inventory purchases and plant upgrades.

Cash increased $67,000 from $121,000 at December 31, 2002 to $188,000 at June 30, 2003. During the six-month period ended June 30, 2003, net cash used in operating activities totaled $87,000, resulting from changes in working capital, with the largest change being the increase in accounts receivable. The Company used $1,246,000 in investing activities for the purchase of production equipment. Financing activities provided $1,400,000 primarily from the domestic line of credit.

During 2002, the Company entered into a new loan agreement (the "Agreement") Bank of America, N.A. (the "Bank"). The Agreement between the Company and the Bank was amended on May 5, 2003. The Amendment to the Loan Agreement (the "Amendment"), which matures on August 31, 2004, increased the Company's line of credit (the "Line") from $3,000,000 to $3,500,000. The interest rate on the Line is the Bank's prime. The amount of credit available to the Company under the Line is limited to the lesser of (a) $3,500,000 or (b) 80% of eligible accounts receivable and 50% of eligible inventory. At June 30, 2003, the Company had $3,350,000 outstanding on the Line and $150,000 was available to the Company on that date. The Company increased its borrowing on the Line to fund the purchase of raw materials.

The Agreement, which prohibits the Company from paying dividends without the prior approval of the Bank, contains covenants that, among other things, require maintenance of certain financial ratios based on the results of both the stand-alone US operations and the consolidated operations. The covenants are calculated at the end of each quarter. One of the provisions of the Company's loan agreement with the Bank requires a fixed charge ratio to be maintained at the end of each quarterly reporting period based on the US operation. As a result of the US operation's accumulated loss over the last four quarters, the Company's fixed charge ratio did not meet this requirement for the quarter ending June 30, 2003. The Company has received a waiver from the Bank addressing the deficiency for the quarter ending June 30, 2003. The Company was in compliance with all other debt covenants as of June 30, 2003. Under the terms of the Agreement, payment of the Line and the term loan are secured by the Company's property, plant and equipment, as well as inventory and accounts receivable.

The Company has one term loan with the Bank. The loan proceeds of $850,000 were used to refinance the Company's term loan that was due to mature on June 1, 2002. The interest rate for the loan is the Bank's prime rate plus 1% per annum. Monthly principal payments of $14,167 plus interest commenced on June 1, 2002 and continue through May 1, 2007. At June 30, 2003, the balance on the term loan was $665,000.

In April 2001, the Company raised $3,010,000 in a private placement of common stock and convertible debentures. In the private placement, the Company issued 301,000 shares of its common stock and $2,709,000 principal amount of convertible debentures. On April 3, 2003, the Renaissance Group exercised its option to convert the remaining 200,000 debentures for common stock at the $1.80 per share conversion rate.

The Company's subsidiary, TMM, has loan agreements with two banks in Malaysia, HSBC Bank Malaysia Berhad and RHB Bank Berhad, which provide a total short-term credit facility of $5,921,000. At June 30, 2003, TMM had utilized $1,956,000 of that facility, including $104,000 on the line of credit and $1,852,000 outstanding under the ECR. The ECR, a government supported financing arrangement specifically for exporters, is used by TMM for short-term financing of 180 days or less against customers' purchase orders. The borrowings under the short-term credit facility are subject to a demand provision which is customary in Malaysia regarding short-term banking facilities. The facility is subject to annual review and renewal.

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TMM has two term loans with HSBC Bank Labuan and RHB Bank Labuan. At June 30, 2003, the outstanding principal balance on each of the two term loans was $140,000 for total outstanding borrowings of $280,000. The loans are secured by TMM's inventory, accounts receivable, and property, plant and equipment and are payable in monthly payments of $17,500 each, plus interest. The term loans are subject to certain subjective acceleration covenants based on the judgement of the banks. Additionally, if repayment of the short-term credit facilities are demanded, these term loans would also become due immediately.

The Company's subsidiary, TP&T, has a loan agreement with a bank in The Netherlands, Rabobank, which provides a total short-term credit facility of $375,000. The credit facility is secured by TP&T's inventory and accounts receivable. At June 30, 2003, TP&T had utilized $251,000 of that facility. TP&T's borrowings are also subject to a demand provision.

Management believes that it has adequate liquidity for fiscal year 2003 and expects to maintain compliance with all financial covenants throughout 2003. However, if material shortfalls in anticipated results of the Company's performance cause a violation in its covenants, the Company may be required to seek further amendments to its credit agreements or alternative sources of financing or to limit capital expenditures.

The terms of the Company's borrowings contain restrictions and covenants, including covenants based on the performance of the Company, and the failure of the Company to comply with such restrictions and covenants could also adversely affect the Company's financial position.

Certain portions of this report contain 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 market price for TiO₂ 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 Securities and Exchange Commission. 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.

During the period covered by this report, there were no significant changes in the Company's internal controls or, to management's knowledge, in other factors that could significantly affect these controls subsequent to the date of their evaluation.

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On April 3, 2003, the Renaissance Group exercised its option to convert the remaining 200,000 convertible debentures for common stock at the $1.80 per share conversion rate. The transaction did not involve an underwriter, and the Company relied on an exemption from registration pursuant to Section 4(2) of the Securities Act as not involving a public offering.

The Annual Meeting of Stockholders was held on May 23, 2003. The purpose of the meeting was to elect a board of eight (8) directors and to ratify the appointment of Ernst & Young LLP as independent auditors for 2003 by the board of directors. The results of the election are as follows:

Election of Board of Directors:

Proposal to ratify the appointment by the Board of Directors of Ernst & Young as the independent public accountants of the Company for 2003:

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Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

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