Geratherm Medical AG

Quarterly Report • May 22, 2014

GERATHERM AT A GLANCE

Group financial ratio	January March 2014	January March 2013	Change
Turnover	3,847 kEUR	4,374 kEUR	-12.0%
Including export share	3,266 kEUR	3,792 kEUR	-13.9%
Export rate	85 %	87 %	-2.3%
Gross result (EBITDA)	501 kEUR	623 kEUR	-19.6%
EBITDA-Margin	13.0%	14.2%	-8.5%
Depreciation	-155 kEUR	-201 kEUR	-22.8%
Operating results (EBIT)	346 kEUR	422 kEUR	-18.0%
EBIT margin	9.0%	9.6%	-6.3%
Financial results	-46 kEUR	-51 kEUR	-9.1%
Result of ordinary activities	300 kEUR	371 kEUR	-19.2%
Net earnings of the parent company`s shareholders in the period concerned	190 kEUR	255 kEUR	-25.3%
Long-term assets	4,959 kEUR	5,512 kEUR	-10.0%
Short-term assets	23,905 kEUR	22,193 kEUR	7.7%
Balance sheet total	28,864 kEUR	27,705 kEUR	4.2%
Equity capital	20,325 kEUR	19,147 kEUR	6.2%
Return on equity	3.7%	5.3%	-29.8%
Equity ratio	70.4%	69.1%	1.9%
Cash and securities	15,159 kEUR	13,480 kEUR	12.5%
Result per share pursurant to IFRS (EPS)*	0.04 EUR	0.05 EUR	-20.0%
Result per share pursurant to DVFA*	0.04 EUR	0.05 EUR	-20.0%
Number of employees at end of the period	119	116	2.6%
No-par value shares * compared to registered shares in	4,949,999 4,949,999	4,949,999 4,949,999	- -
circulation

Business Performance from 1 January to 31 March 2014

• Sales revenues EUR 3.8 million -12.0%
• Gross result for first quarter of the year (EBITDA) 501 kEUR -19.6%
• Operating result (EBIT) 346 kEUR -18.0%
• Results from ordinary business activities 300 kEUR -19.2%
• Earnings after taxes (EAT) 190 kEUR -25.3%
• Temporary decrease in sales in Brazil and postponed orders adversely influence the business performance in the first quarter

Dear Shareholders and Parties Interested in Geratherm Medical,

The development of sales and earnings of Geratherm Medical was weaker compared to the same quarter last year. The reasons for that include a strong first quarter in the prior year and loss of sales during the first three months of this year on the market in South America. These two factors have a significant influence on the reported earnings. When viewed separately, the first quarter of 2014 was considerably stronger in terms of earnings compared to the past three quarters.

With an EBITDA margin of 13.0% and an EBIT margin of 9.0% during the first quarter, we were operationally stronger than during the previous quarters.

The sales decreased by -12.0% to EUR 3.8 million in the first quarter of 2014 for the aforementioned reasons. The decrease in sales was mainly attributed to Brazil (-429 kEUR). The company's export share was 84.9% (2013: 86.7%).

The gross profit was at about the same level as in the previous year (-1.4%) with 2,278 kEUR. That means the company's total gross profit margin for the first three months is 59.2% (2013: 52.8%).

The operating result (EBIT) was during the 1st. quarter 346 kEUR (2013: 422 kEUR). The result from ordinary activities amounted to 300 kEUR (2013: 371 kEUR). The shareholders' result after taxes was 190 kEUR (2013: 255 kEUR) or EUR 0.04 per share (2013: EUR 0.05 per share).

	I/14	IV/13	III/13	II/13	I/13
Sales	3,847	3,909	4,220	4,324	4,374
EBITDA	13.0%	5.8%	8.7%	8.9%	14.2%
EBIT	346	30	161	180	422
EPS (EUR)	0.04	0.14	0.01	0.07	0.05
Cash flow	479	179	266	216	611

Sales Development

The sales development varied greatly in the individual regions. The relevance with regard to the regional sales development is limited due to the relatively brief threemonth reporting period. The sales in Europe experienced a slight decrease of 2.1%. As already mentioned, the market in South America, Brazil in particular here, reported the largest decrease in sales of -41.7%. The sales in Germany did not change for the first three months. Market development in the Middle East was positive. Here the company was able to report a 35.3% increase in sales. The sales in the USA declined by -40.3%. This can essentially be attributed to a postponing of orders and will be offset in the next quarters. The sales in Other countries enjoyed an increase of 7.0%.

Sales by regions 01.01. - 31.03.2014

Sales by segments also provide a varied picture compared to the previous quarters. The sales revenues of the Healthcare Diagnostic segment declined by 11.8% due to the decrease in sales on the Brazilian market. The largest share of sales, the sales of gallium-filled thermometer, was slightly positive with a 42.1% share of the overall sales with a 1.7% growth.

The Respiratory segment, in which we offer products for testing pulmonary function, reported a 12.0% decline in sales during the first three months. We assume that we can more than compensate the temporary drop in sales in the next few months.

By comparison, the sales reported by the Medical Warming Systems segment were 32.7% lower for the first three months of this year due to the delivery of a larger order during the first quarter of last year. Even in this regard, we are expecting a prompt recovery of the decreased sales in the next few months.

The Cardio/Stroke segment was able to expand its quarterly sales again by +64.7%. The growth of this segment is expected to continue into the next quarters.

Earnings Situation

The operating result exhibited a negative development during the first quarter in light of the decline in sales. However, the gross profit remained with EUR 2.3 million almost on the same level as last year.

Higher personnel expenses did put a strain of the operating result compared to the prior year. With an EBIT of 346 kEUR and an EBIT margin of 9.0% we were still able to generate a good operating result for the quarter in spite of the decline in sales.

The financial result amounted to -46 kEUR, of which -54 kEUR (2013: -57 kEUR) accounted for interests and similar expenses. Here the interest charges of the subsidiary Geratherm do Brasil represented a burden with 36 kEUR. Income from dividends and securities were not reported during the first quarter. The result from ordinary activities for the first three months of the current fiscal year was 300 kEUR (2013: 372 kEUR).

Taxes on profit amounted to 120 kEUR (2013: 124 kEUR). The effective taxes amounted, however, to only 1 kEUR. The remaining amount of 119 kEUR accounted for the reduction of non-cash effective deferred tax assets due to the use of losses carried forward. All in all, a consolidated net profit for the first three months of 180 kEUR (2013: 247 kEUR) was reported.

During the first three months of the current fiscal year, a net result was generated for shareholders of the parent company in the amount of 190 kEUR (2013: 255 kEUR). The result per share for the first quarter of 2013 was EUR 0.04 (2013: EUR 0.05).

Net Assets and Financial Situation

The financial base of Geratherm Medical is stable. The balance sheet total of EUR 28.9 million is essentially formed by equity capital in the amount of EUR 20.3 million. The equity-to-assets ratio was 70.4% as of the reporting date (2013: 69.1%).

As of 31 March 2014 the company had cash, cash equivalents and securities in the amount of EUR 15.2 million (2013: EUR 13.5 million). Thus, the company's financial situation is above-average.

There were no significant changes with regard to long-term assets. On the whole, this position was reported with EUR 5.0 million (-3.9%).

The intangible assets were with 702 kEUR slightly above the prior year's level. The tangible assets declined by 2.7% to EUR 3.2 million. The deferred taxes decreased by the use of the losses carried forward by 11.0% to 964 kEUR.

With regard to short-term assets, there was an increase in supplies by 12.8% to EUR 5.1 million. Due to the postponement of deliveries at the end of the quarter, the finished goods and products item increased by 26.9% to EUR 2.7 million.

The level of the receivables and other assets changed only slightly during the last three months by +2.4% and amounted to EUR 3.6 million as of 31 March 2014.

At the end of the quarter, the company held securities worth EUR 4.4 million (+1.6%). The cash and cash equivalents amounted to EUR 10.7 million (-3.3%)

The gross cash flow for the first three months of the current fiscal year was 479 kEUR (2013: 611 kEUR). The cash flow from operations was -233 kEUR (2013: 1,154 kEUR). The cash flow from investments amounted to -85 kEUR (2013: -383 kEUR).

Research and Development

The focal points of our research and development efforts have not changed and primarily involved the business segments Medical Warming Systems, Respiratory and Cardio/Stroke. After completing the licensing stage for our new women care products at the start of the fiscal year, we are currently focusing our activities on the marketing of these products.

Geratherm's overall strategy is to establish for the future good distinguishing characteristics with highly innovative products that are associated with complex regulatory hurdles in order to allow us to hold our own in competition with significant product advantages.

Staff

The Geratherm Group had a staff of 119 in total as of 31 March 2014 (2013: 116). 94 employees are in Germany.

Outlook

For the second quarter, we are anticipating considerable growth from operations in terms of sales and earnings. The formation of Geratherm's new wholly owned subsidiary Sensor Systems GmbH is expected to have a positive impact. The company was founded at the end of the first quarter and aims to focus on sensor and filter production for the Respiratory segment.

We are looking forward to meeting with our shareholders at this year's annual general meeting on 27 May 2014, at 1:30 PM in "Hotel Tanne" in Ilmenau.

Geschwenda, May 2014

Dr. Gert Frank Thomas Robst Chairman of the Board Head of Sales

Statement of comprehensive income for the period January 1, 2014 to March 31, 2014

	Jan.-March 2014	Jan.-March 2013	Change
	EUR	EUR
Sales revenue	3,847,058	4,373,804	-12.0%
Change in stocks of finished and unfinished goods	22,491	-397,170	-
Other own work capitalized	0	7,702	-100.0%
Other operating income	140,406	160,354	-12.4%
	4,009,955	4,144,690	-3.3%
Material costs
Costs for consumables, supplies and goods
and for specific products	-1,619,254	-1,728,855	-6.3%
Costs of purchased services	-112,972	-105,294	7.3%
	-1,732,226	-1,834,149	-5.6%
Gross profit	2,277,729	2,310,541	-1.4%
Personnel expenses
Wages and salaries	-720,133	-628,667	14.5%
Social contributions and expenditures for pensions	-165,428	-147,160	12.4%
	-885,561	-775,827	14.1%
Depreciation of intangible assets and tangible fixed assets	-154,780	-200,531	-22.8%
Other operating expenditure	-891,354	-912,089	-2.3%
Operating results	346,034	422,094	-18.0%
Income from dividends	0	0	-
Income from sale of securities	0	0	-
Depreciation of securities	0	0	-
Expenses from securities	-500	-499	0.2%
Other interest and related income	8,647	7,438	16.3%
Interests and similar expenses	-54,101	-57,491	-5.9%
Financial result	-45,954	-50,552	-9.1%
Result of normal business activity	300,080	371,542	-19.2%
Taxes on income and profit	-120,062	-124,079	-3.2%
Group net profit for the period	180,018	247,463	-27.3%
Result of non-controlling shareholders for the period	-10,437	-7,615	37.1%
Net earnings of the parent company`s shareholders in the period	190,455	255,078	-25.3%
concerned
Gross result for first quarter of year (EBITDA)	500,814	622,625	-19.6%
Earnings per share undiluted	0.04	0.05	-20.0%

Statement of financial position as at the end of the period by March 31, 2014

Assets	31. March 2014 EUR	31. December 2013 EUR	Change
A. Long-term assets
I. Intangible assets
1. Development costs	157,828	160,215	-1.5%
2. Other intangible assets	468,838	456,845	2.6%
3. Goodwill	75,750	75,750	-
	702,416	692,810	1.4%
II. Tangible assets
1. Land and buildings 2. Plant and machinery	1,136,256 1,896,328	1,152,585 1,994,532	-1.4% -4.9%
3. Other plants, operating and office equipment	163,429	169,047	-3.3%
4. Assets under construction	46,283	16,663	>100.0%
	3,242,296	3,332,827	-2.7%
III. Other assets	50,003	50,003	-
IV. Deferred taxes	964,367	1,083,646	-11.0%
	4,959,082	5,159,286	-3.9%
B. Current assets
I. Inventories
1. Raw, auxiliary and operating materials	1,362,157	1,260,058	8.1%
2. Unfinished products	1,102,077	1,185,681	-7.1%
3. Finished products and goods	2,652,198	2,089,779	26.9%
	5,116,432	4,535,518	12.8%
II. Receivables and other assets 1. Trade accounts receivable	3,010,310	2,866,920	5.0%
2. Tax claims	379,795	380,903	-0.3%
3. Other assets	239,354	296,250	-19.2%
	3,629,459	3,544,073	2.4%
III. Securities	4,415,019	4,346,104	1.6%
IV. Means of payment	10,744,329	11,112,484	-3.3%
	23,905,239	23,538,179	1.6%
	28,864,321	28,697,465	0.6%
Equity and Liabilities
A. Equity
I. Subscribed capital	4,949,999	4,949,999	-
II. Capital reserves	10,711,677	10,711,677	-
III. Other reserves	5,300,448	5,043,049	5.1%
Attributable to parent company shareholders	20,962,124	20,704,725	1.2%
Non-controlling shareholders	-636,665	-624,334	2.0%
	20,325,459	20,080,391	1.2%
B. Non-current liabilities
1. Liabilities to banks	2,695,322	2,934,852	-8.2%
2. Accrued investment subsidies 3. Other long-term liabilities	669,767 596,079	697,787 596,079	-4.0% -
	3,961,168	4,228,718	-6.3%
C. Current liabilities
1. Amounts owed to credit institutions	2,332,535	2,143,250	8.8%
2. Advances received	72,497	48,104	50.7%
3. Trade accounts payable	1,313,574	1,358,482	-3.3%
4. Tax liabilities	69,933	84,127	-16.9%
5. Other current liabilities	789,155	754,393	4.6%
	4,577,694	4,388,356	4.3%
	28,864,321	28,697,465	0.6%

Statement of cash flow for the period January 1, 2014 to March 31, 2014

	January – March 2014 kEUR	January – March 2013 kEUR
Group net profit for the period	180	247
Other non-cash expenses	-4	16
Dividend income	0	0
Interest income	-9	-7
Interest paid	54	57
Decrease in deferred taxes	119	112
Expenditure from income taxes	1	12
Depreciation of fixed assets	155	201
Income from the sale of securities	0	0
Losses from securities trading	0	0
Depreciation of securities	0	0
Amortization of allowances and subsidies	-28	-27
Loss on disposal of fixed assets	11	0
Gross cash flow	479	611
Decrease/increase in inventories	-581	738
Increase in trade receivables and other assets	-151	-142
Increase in current and other liabilities	0	20
Cash from dividends	0	0
Inflow from interest	9	7
Outflow from interest	-54	-57
Inflow/Outflow of taxes	65	-23
Cash flow from operations	-233	1,154
Outflow for investment in fixed assets	-85	-250
Inflow from funds for investments	0	0
Payments from financial investments	0	0
Cash for financial investment	0	-133
Cash flow from investments	-85	-383
Cash inflow from non-controlling shareholders	0	0
Distribution of profits to non-controlling shareholders	0	0
Dividend distribution	0	0
Proceeds from the repayment of loans	288	0
Outflows for the repayment of loans	-338	-215
Decrease/increase in fixed liabilities	0	0
Cash flow from financing activities	-50	-215
Change in cash and cash equivalents	-368	556
Cash and cash equivalents at the start of the reporting period	11,112	8,810
Cash and cash equivalents at the end of the reporting period	10,744	9,366

Statement of changes in equity for the period by March 31, 2014

				Other reserves
	Subscribed capital	Capital reserves	Market valuation reserve	Currency conversion reserves	Accumulat ed earnings	To be assigned to the shareholders of the parent company	Non-con trolling interests	Equity capital
	EUR	EUR	EUR	EUR	EUR	EUR	EUR	EUR
As of January 1, 2013	4,949,999	10,711,677	144,916	17,968	3,209,505	19,034,065	-412,790	18,621,275
Dividend payment to shareholders	0	0	0	0	0	0	0	0
Transaction with associates and shareholders	0	0	0	0	0	0	0	0
Group period result	0	0	0	0	255,078	255,078	-7,615	247,463
Unrealized profits and losses from valuation of securities	0	0	262,418	0	0	262,418	0	262,418
Currency translation in group	0	0	0	8,271	0	8,271	7,946	16,217
Total consolidated income	0	0	262,418	8,271	255,078	525,767	331	526,098
As of March 31, 2013	4,949,999	10,711,677	407,334	26,239	3,464,583	19,559,832	-412,459	19,147,373
As of January 1, 2014	4,949,999	10,711,677	1,477,897	11,865	3,553,287	20,704,725	-624,334	20,080,391
Dividend payment to shareholders	0	0	0	0	0	0	0	0
Transaction with associates and shareholders	0	0	0	0	0	0	0	0
Group period result	0	0	0	0	190,455	190,455	-10,437	180,018
Unrealized profits and losses from valuation of securities	0	0	68,917	0	0	68,917	0	68,917
Currency translation in group	0	0	0	-1,973	0	-1,973	-1,894	-3,867
Total consolidated income	0	0	68,917	-1,973	190,455	257,399	-12,331	245,068
As of March 31, 2014	4,949,999	10,711,677	1,546,814	9,892	3,743,742	20,962,124	-636,665	20,325,459

Consolidated Statement of Comprehensive Income (IFRS) for the period from January 1, 2014 to March 31, 2014

	01.01.-31.03.2014 EUR	01.01.-31.03.2013 EUR
Net earnings of the parent company`s shareholders in the period concerned	180,018	247,463
Income and expenses directly included in equity capital Which are reclassified under specific conditions to profit or loss:
Profit and losses from the revaluation of securities	68,917	262,418
Difference resulting from currency translation	-3,867	16,217
Income and expenses directly included in equity capital	65,050	278,635
Total consolidated income	245,068	526,098
Of which for non-controlling shareholders	-12,331	331
Of which for parent company shareholders	257,399	525,767

Segment Report for the period from January 1, 2014 to March 31, 2014

According to product segments 2014	Healthcare Diagnostic Jan.- March kEUR	Respiratory Jan.- March kEUR	Med. Warming Systems Jan.- March kEUR	Cardio/ Stroke Jan.- March kEUR	Consolidation Jan.- March kEUR	Reconciliation Jan.- March kEUR	Total Jan.- March kEUR
Segment revenues	3,121	433	166	140	-13	0	3,847
Operating results	297	28	1	12	13	-5	346
of which:
Amortization of intangible assets and depreciation of tangible assets	136	2	3	1	-8	21	155
Segment assets	10,896	872	924	222	0	14,986	27,900
Segment liabilities	7,424	225	331	559	0	0	8,539

According to product segments	Healthcare Diagnostic	Respiratory	Med. Warming Systems	Cardio/ Stroke	Consolidation	Reconciliation	Total
	Jan.- March	Jan.- March	Jan.- March	Jan.- March	Jan.- March	Jan.- March	Jan.- March
2013	kEUR	kEUR	kEUR	kEUR	kEUR	kEUR	kEUR
Segment revenues	3,765	456	245	85	-189	12	4,374
Operating results	582	68	9	-28	-173	-36	422
of which:
Amortization of intangible assets and depreciation of tangible assets	191	2	6	1	-21	22	201
Segment assets	11,265	771	902	156	0	13,493	26,587
Segment liabilities	7,535	278	162	583	0	0	8,558

According to regions	Europe Jan.-March	South America Jan.-March	Germany Jan.-March	Middle East Jan.-March	USA Jan.-March	Others Jan.-March	Total Jan.-March
2014	kEUR	kEUR	kEUR	kEUR	kEUR	kEUR	kEUR
Sales revenue	1,915	601	593	314	2242	213	3,860
Elimination of intercompany Sales	0	-1	-12	0	0	1 0	-13
Sales revenue to third parties	1,915	600	581	314	224	213	3,847
Gross profit or loss	1,127	366	342	185	132	126	2,278
Operating results	192	20	58	32	22	22	346
of which:
Amortization/depreciation of intangible assets and tangible assets	89	4	27	15	10	10	155
Amortization of public grants and subsidies	17	0	5	3	2	1	28
Acquisition costs of fixed assets for the period	0	5	80	0	0	0	85
Segment assets	0	2,365	25,535	0	0	0	27,900

According to regions	Europe	South America	Germany	Middle East	USA	Others	Total
2013	Jan.-March kEUR	Jan.-March kEUR	Jan.-March kEUR	Jan.-March kEUR	Jan.-March kEUR	Jan.-March kEUR	Jan.-March kEUR
Sales revenue	1,957	1,107	693	232	375	199	4,563
Elimination of intercompany Sales	0	-78	-111	0	0	0	-189
Sales revenue to third parties	1,957	1,029	582	232	375	199	4,374
Gross profit or loss	1,041	527	314	124	200	105	2,311
Operating results	208	66	62	25	40	21	422
of which:
Amortization/depreciation of intangible assets and tangible assets	113	7	34	13	22	12	201
Amortization of public grants and subsidies	16	0	5	2	3	1	27
Acquisition costs of fixed assets for the period	0	8	242	0	0	0	250
Segment assets	0	2,420	24,167	0	0	0	26,587

Notes on the Interim Consolidated Financial Statements for the Period from 1 January 2014 to 31 March 2014

Accounting and Valuation Methods

The interim consolidated financial statements of Geratherm Medical AG were prepared for the first three months of the 2014 fiscal year in accordance with the rules of the International Financial Reporting Standards (IFRS) valid on the date of the financial statements and in consideration of the guidance provided by the International Financial Reporting Interpretations Committee (IFRIC), as is mandatory in the European Union.

The accounting, evaluation and consolidation principles were maintained, as shown in the Notes to Consolidated Financial Statements for the 2013 Fiscal Year.

The valuation of assets and liabilities is based in part on estimates and/or assumptions about future developments. For instance, the statements on economic useful life for long-term assets are based on estimates and assumptions. In addition, the assessment of the intrinsic value of deferred taxation allocated to the losses carried forward and the impairment tests of the cash-generating units and the assets is based on the corporate planning, which of course involves uncertainties such that the actual values may deviate from the made assumptions and estimates in individual cases. Estimates and the underlying assumptions are regularly checked and evaluated with regard to possible impact on accounting.

Consolidated Group

The following changes occurred in the consolidation group as of 31 March 2014:

	Share quota	Share quota
Company	31.03.2014	31.03.2013
GME Rechte und Beteiligungen GmbH, Geschwenda / Germany	100.00%	100.00%
Sensor Systems GmbH, Steinbach Hallenberg / Germany	100.00%	-
apoplex medical technologies GmbH, Pirmasens / Germany	59.11%	59.11%
Geratherm Respiratory GmbH, Bad Kissingen / Germany	61.27%	61.27%
Geratherm Medical do Brasil Ltda., Sao Paulo / Brazil	51.00%	51.00%

Sensor Systems GmbH, which was founded in March of 2014, was entered in the Commercial Registry on 14 March 2014. Sensor Systems GmbH is a wholly owned subsidiary of Geratherm Medical AG and started its activities on 1 April 2014.

Equity Capital

The development of the equity capital is shown in the consolidated statement of change to the shareholders' equity.

The subscribed capital of Geratherm Medical AG amounts all in all to EUR 4,949,999 as at 31.03.2014 (2011: EUR 4,949,999) and is divided into 4,949,999 (2011: 4,949,999) share certificates issued to the bearers. The subscribed capital has been paid in full. As of the reporting date there were no shares held by the company.

COMPANY CALENDAR 2014

Annual General Meeting in Ilmenau, "Hotel Tanne"	27 May
6-Month Report 2014	21 August
9-Month Report 2014	20 November

Geratherm Medical AG

Fahrenheitstraße 1 98716 Geschwenda Telefon: +49 36205 980 Fax: +49 36205/98 115 E-Mail: info@geratherm.com Internet:www. geratherm.com