Geratherm Medical AG

Quarterly Report • Aug 24, 2011

GERATHERM AT A GLANCE

Group financial ratio	Jan.-June 2011	Jan.-June 2010	Change
Sales revenues	8,530 kEUR	7,997 kEUR	+6.7 %
Export share	7,443 kEUR	6,946 kEUR	+7.2 %
Export ratio	87 %	87 %	-
Gross profit (EBITDA)*	1,261 kEUR	1,556 kEUR	-19.0 %
EBITDA-Margin	14.8 %	19.5 %	-24.1 %
Amortization or depreciation	-331 kEUR	-300 kEUR	+10.2 %
Operating results (EBIT)	930 kEUR	1,256 kEUR	-26.0 %
EBIT margin	10.9 %	15.7 %	-30.6 %
Financial results	628 kEUR	559 kEUR	+12.4 %
Result of ordinary activities	1,558 kEUR	1,815 kEUR	-14.2 %
Net earnings of the parent company`s shareholders in the period concerned	1,334 kEUR	1,535 kEUR	-13.1 %
Long-term assets	5,688 kEUR	6,046 kEUR	-5.9 %
Short-term assets	19,340 kEUR	19,605 kEUR	-1.4 %
Total assets	25,028 kEUR	25,651 kEUR	-2.4 %
Equity capital	19,223 kEUR	20,179 kEUR	-4.7 %
Return on equity	13.9 %	15.2 %	-8.7 %
Equity ratio	76.8 %	78.7 %	-2.4 %
Cash, cash equivalents and securities	11,193 kEUR	11,870 kEUR	-5.7 %
Earnings per share according to IFRS (EPS)** Earnings per share according to	0.27 EUR 0.27 EUR	0.31 EUR 0.31 EUR	-12.9 % -12.9 %
DVFA** Number of employees at end of the period	135	128	+5.5 %
Total shares issued	4,949,999	4,949,999	-
** based on total shares issued	4,949,999	4,949,999	-

*EBITDA=profits from ordinary business activities adjusted by financial results and write-offs.

Business Performance from January 1 to June 30, 2011

• Sales revenues EUR 8.5 million +6.7 %
• Gross result for first half of year (EBITDA) EUR 1.261 million -19.0 %
• Operating result (EBIT) 930 kEUR -26.0 %
• Earnings after taxes (EAT) EUR 1.334 million -13.1 %
• Earnings per share 27 EUR cents (2010: 31 EUR cents)

Dear Shareholders and Parties Interested in Geratherm Medical,

The strong momentum previously registered in sales and revenues during the first quarter did not continue during the second quarter of 2011. The second quarter concluded with a 7.2% decline in sales compared to the same period last year. There were various temporary causes for the sales decline, such as late deliveries of orders, which were beyond our control, a slow demand for digital clinical thermometers and a pending product change in the Healthcare Diagnostic segment.

The operating result was strained due to high marketing and product development costs and consulting fees in the second quarter. The total operating revenue decreased by 3.2 % during the second quarter. All in all, goods amounting to 339 kEUR were manufactured for inventory and were valuated only at manufacturing costs. As a result of these factors, the company was only able to post a below-average operating result in the amount of 333 kEUR (2010: 707 kEUR).

The company reported a considerably higher financial results in the amount of 627 kEUR (2010: 99 kEUR) during the second quarter. The result from ordinary business activities amounted to 960 kEUR (2010: 806 kEUR) including the financial earnings during the second quarter. For the second quarter, an after-tax result of 858 kEUR (2010: 625 kEUR) or 17 EUR cent per share (2010: 13 EUR cent) was realized less taxes and net result for minority interests.

		II/11	I/11	IV/10	III/10	II/10
Facts and figures	Turnover	3,749	4,781	4,515	4,466	4,039
(in kEUR)	EBITDA	13.3%	16.0%	13.7%	17.3%	21.1%
	EBIT	333	597	467	627	707
	EPS (EUR)	0.17	0.10	0.16	0.09	0.13
	Cash flow	458	717	617	734	868

Sales Development

The sales development during the first six months of 2011 was below our budgeted estimates, posting a 6.7% increase and is influenced primarily by different factors in the second quarter. The export share amounted to 87 %, exhibiting an above-average growth of 7.2 %. The German market posted only a slight growth of 3.4 %.

The sales of Geratherm products in Europe enjoyed an above-average increase of 13.6 %. On the US market we experienced a considerable decrease in sales of 56.9 % during the first six months, since the stock levels at customers were still being decreased as a result of the high amount of inventories due to the swine flu. Orders for the third quarter have already been received such that we will attain last year's level. The sales of Geratherm products in South America increased considerably by 48.9 % compared to the prior year. The Other countries segment, which includes the Middle East as sales region, posted a decrease of 23.9 % due to the rioting that took place in the Arab world during the first six months of 2011.

Sales by regions Jan. 1 - Jun. 30, 2011

Sales by segments Jan. 1 - Jun. 30, 2011

Geratherm Medical's mainstay of sales during the first six months of 2011 with a share of 88.4 % includes products of the Healthcare Diagnostic segment, which are marketed internationally in hospitals, clinics and pharmacies. Important products of this segment are gallium-filled clinical thermometers (50.0 %) and blood pressure monitors (19.8 %). The sales of the Healthcare Diagnostic segment increased by 3.4 % in the first six months of the fiscal year. Gallium-filled thermometers provided positive contributions to growth with a 9.2 % increase and blood pressure monitors with a 13.5 % increase. Even the Medical Warming Systems and Respiratory segments posted a considerable sales growth of 23.6 % and 74.1 % respectively during the first six months. The sales posted in the Cardio/Stroke segment was for the most part on the same level reported last year.

Earnings Situation

Geratherm Medical's earnings situation from business operations experienced a below-average development compared to the reference period in 2010. This is essentially due to the increase in other costs like marketing, consulting and transport costs, which were temporarily aboveaverage. During the first six months of 2011, the gross profit recorded an above-average 10.4% development compared to growth in sales. The gross margin increased to 65.4 %, up from 63.2 %. The material and personnel costs experienced an above-average increase of 10.1 % and 13.0 % respectively. The gross profit (EBITDA) decreased to EUR 1.261 million (-19.0 %) during the first six months. Amortization and depreciation increased altogether by 10.2 % due to increased investment activities.

The operating result (EBIT) decreased to 930 kEUR for the first six months of the current fiscal year (2010: EUR 1.256 million). The decrease in the quality of earnings can be attributed to the increase in other operating expenses, which rose by almost 600 kEUR compared to 2010.

The other expenses were strained due to the high marketing expenses of the subsidiary Geratherm do Brasil in the amount of 135 kEUR. The EBIT contribution from Brazil was 169 kEUR lower compared to the same period last year.

At the same time, the external consulting fees increased by 104 kEUR compared to 2010. The consulting fees were essentially attorney costs for patent protection lawsuits in Italy.

Geratherm managed to post a net financial result of 628 kEUR during the first six months of 2011. The net financial result was 12.4 % higher than during the reference period of 2010.

The result from ordinary business activities amounted to EUR 1.558 million (-14.2 %) during the first six months of the current fiscal year. Income taxes weigh on the result with 356 kEUR, whereas 78 kEUR of that was effective tax burden. The non-cash decrease of the deferred tax assets accounted for the remaining tax burden with 278 kEUR due to the use of losses carried forward.

The consolidated net profit amounted to EUR 1.202 million (-17.8 %). Geratherm Medical posted a net result of EUR 1.334 million less the net result for minority interests in the amount of -132 kEUR during the first six months of 2011. The profit statement was 13.1 % below the result attained during the same period last year. The result per share is 27 EUR cents (2010: 31 EUR cents).

Net Assets and Financial Situation

Geratherm Medical enjoys a favorable asset situation. The balance sheet total was a total EUR 25.0 million (2010: EUR 27.0 million) at the end of the first six months of 2011 and is essentially formed by equity capital. The company's equity capital amounted to EUR 19.2 million (2010: EUR 20.5 million) as at Jun. 30, 2011. The equity-to-assets ratio represents 76.8 % of the balance sheet total. The return on equity was 13.9 % for the first six months of the current fiscal year. As of Jun. 30, 2011 the company had cash, cash equivalents and securities in the amount of EUR 11.2 million (2010: EUR 11.9 million). Thus, the company has a solid financial position.

With regard to long-term assets, development costs in the amount of 120 kEUR were written off. The value of tangible assets remained with EUR 3.2 million on the same level as last year.

Inventories increased by 3.9 % to EUR 5.0 million. The accounts receivable and other assets decreased by 22.3 % to EUR 3.2 million. As of Jun. 30, 2011, the company held securities worth EUR 7.2 million.

The gross cash flow for the first six months was EUR 1.175 million (2010: EUR 1.370 million). The cash flow from operations increased considerably to EUR 1.404 million (2010: -473 kEUR). The cash flow from investment activities was -871 kEUR (2010: EUR -1.086 million). The cash and cash equivalents at the end of the period under review amounted to EUR 3.986 million (2010: EUR 5.859 million).

Research and Development

Our research and development activities mainly focus on the still new business segments such as Warming Systems, Respiratory and Cardio/Stroke. In the Respiratory segment, the development on the booth for testing pulmonary function has been concluded. In the Cardio/Stroke segment, the results of a large scale study on stroke prevention with more than 600 patients were presented at the XXth European Stroke Conference in Hamburg on May 26, 2011. The SRAclinic product, which was developed by the subsidiary apoplex, received extremely positive results of the study, which was performed by the University Hospital of Heidelberg.

Staff

The Geratherm Group had a staff of 135 persons in total as of June 30, 2011 (2010: 128). 93.3 % of the employees are in Germany.

Outlook

In spite of the comparably weak operational performance during the second quarter, we expect the positive development to continue. Orders that were not delivered during the second quarter were delivered one month later. Our line of new products in the Healthcare segment is currently undergoing registration in the individual countries of our customers. The response has been positive such that we anticipate a revival of this business segment. Moreover, we expect a continuation of the dynamic development of sales in the Respiratory and Medical Warming Systems segments. After publishing the positive results of the stroke prevention study, we anticipate for the last six months of the year a considerable increase in the number of connected stroke prevention centers that will use the apoplex technology for the first time in their daily work routine.

The general meeting of shareholders took place on June 6, 2011 for the first time in Hamburg. All items on the agenda were discussed and adopted by our shareholders at the annual general meeting. 63.92 % of the voting capital was represented.

Geschwenda, August 2011

Dr. Gert Frank Thomas Robst

Chair of the Board Head of Marketing/Sales

Statement of comprehensive income for the period 1 January to 30 June 2011

	April-June 2011 EUR	April-June 2010 EUR	Change	Jan.- June 2011 EUR	Jan.- June 2010 EUR	Change
Sales revenue	3,748,982	4,038,529	-7.2 %	8,529,941	7,996,862	6.7 %
Change in inventories of semi-finished and finish products	338,813	149,067	>100.0 %	452,735	95,252	>100.0 %
Other capitalized own work	0	0		0	0
Other operating income	140,682	181,930	-22.7 %	247,617	277,174	-10.7 %
	4,228,477	4,369,526	-3.2 %	9,230,293	8,369,288	10.3 %
Cost of Materials
Cost of raw materials, consumables
and goods for resale	-1,479,555	-1,582,662	-6.5 %	-3,476,443	-3,164,375	9.9 %
Costs of purchased services	-89,508	-74,122	20.8 %	-176,706	-154,108	14.7 %
	-1,569,063	-1,656,784	-5.3 %	-3,653,149	-3,318,483	10.1 %
Gross profit or loss	2,659,414	2,712,742	-2.0 %	5,577,144	5,050,805	10.4 %
Personnel expenses
Wages and salaries	-851,853	-781,036	9.1 %	-1,718,582	-1,532,611	12.1 %
Social security, pension and other benefits	-184,009	-160,235	14.8 %	-365,498	-310,953	17.5 %
	-1,035,862	-941,271	10.0 %	-2,084,080	-1,843,564	13.0 %
Amortization of intangible assets and depreciation of tangible assets	-164,480	-145,729	12.9 %	-330,782	-300,085	10.2 %
Other operating expenses	-1,126,174	-918,460	22.6 %	-2,232,267	-1,650,732	35.2 %
Operating result	332,898	707,282	-52.9 %	930,015	1,256,424	-26.0 %
Dividend income	94,696	75,709	25.1 %	105,548	78,362	34.7 %
Income from securities trading	908,021	114,810	>100.0 %	908,021	733,558	23.8 %
Losses from securities	-338,805	-57,589	>100.0 %	-338,805	-57,589	>100.0 %
Securities-related expenses	-24,022	-14,596	64.6 %	-30,278	-163,301	-81.5 %
Other interest and similar income	13,334	8,778	51.9 %	24,167	14,531	66.3 %
Interests and similar expenses	-26,458	-27,953	-5.3 %	-40,477	-46,743	-13.4 %
Financial result	626,766	99,159	>100.0 %	628,176	558,818	12.4 %
Result of ordinary activities	959,664	806,441	19.0 %	1,558,191	1,815,242	-14.2 %
Income taxes	-144,820	-205,660	-29.6 %	-356,125	-353,034	0.9 %
Group net profit for the period	814,844	600,781	35.6 %	1,202,066	1,462,208	-17.8 %
Minority interests result	-42,964	-23,856	80.1 %	-131,954	-72,988	80.8%
Earnings for the period of Geratherm shareholders	857,808	624,637	37.3 %	1,334,020	1,535,196	-13.1 %
EBITDA	497,378	853,011	-41.7 %	1,260,797	1,556,509	-19.0 %
Result per share undiluted	0.17	0.13	30.8 %	0.27	0.31	-12.9 %

Statement of financial position as at the end of the period by June 30, 2011

Assets	30 June 2011 EUR	31 December 2010 EUR	Change
A. Long-term assets
I. Intangible assets
1. Development costs	547,434	667,824	-18.0 %
2. Software	34,106	39,095	-12.8 %
3. Goodwill	75,750	75,750	0.0%
	657,290	782,669	-16.0%
II. Tangible assets
1. Land, land rights and buildings	1,088,022	1,125,303	-3.3 %
2. Technical equipment and machinery	1,478,940	1,249,095	18.4 %
3. Other equipment, factory and office equipment	243,227	256,563	-5.2 %
4. Construction in process	407,049	571,162	-28.7 %
	3,217,238	3,202,123	0.5 %
III. Deferred taxes	1,813,309	2,091,495	-13.3 %
	5,687,837	6,076,287	-6.4 %
B. Short-term assets
I. Inventories
1. Raw materials and supplies	1,701,255	1,573,475	8.1 %
2. Unfinished goods	739,492	676,235	9.4 %
3. Finished goods and merchandise	2,547,364	2,549,516	-0.1 %
	4,988,111	4,799,226	3.9 %
II. Receivables and other assets
1. Trade receivables	2,557,178	3,200,158	-20.1 %
2. Tax receivables	127,473	329,605	-61.3 %
3. Other assets	474,518	534,529	-11.2 %
	3,159,169	4,064,292	-22.3 %
III. Securities	7,206,142	6,502,161	10.8 %
IV. Cash and cash equivalents	3,986,452	5,519,458	-27.8 %
	19,339,874	20,885,137	-7.4 %
	25,027,711	26,961,424	-7.2 %
Equity and Liabilities
A. Equity capital
I. Subscribed capital	4,949,999	4,949,999	0.0 %
II. Capital reserves	10,577,354	10,577,354	0.0 %
III. Other reserves	3,917,331	5,089,579	-23.0 %
Minority interests assigned to the shareholders of the parent company	19,444,684	20,616,932	-5.7 %
Non-controlling interests	-221,454	-100,176	>100.0 %
	19,223,230	20,516,756	-6.3 %
B. Long-term debts
1. Liabilities to banks	1,300,000	1,500,000	-13.3 %
2. Accrued investment subsidies	694,195	729,079	-4.8 %
3. Other long-term liabilities	572,079	522,079	9.6 %
	2,566,274	2,751,158	-6.7 %
C. Short-term debts
1. Liabilities to banks	1,170,916	1,127,748	3.8 %
2. Payments on accounts	234,128	240,535	-2.7 %
3. Trade payables	949,712	1,126,602	-15.7 %
4. Tax liabilities	165,172	446,272	-63.0 %
5. Other short-term liabilities	718,279	752,353	-4.5 %
	3,238,207	3,693,510	-12.3 %
	25,027,711	26,961,424	-7.2 %

Statement of cash flow for the period January 01, 2011 to June 30, 2011

	January - June 2011 kEUR	January - June 2010 kEUR
Group net profit for the period	1,202	1,462
Other costs affecting income/expenses	-21	62
Dividend income	-105	-78
Interest earnings	-24	-15
Interest expenses	40	47
Decrease in deferred taxes	278	224
Income tax expenditure	78	73
Depreciation of fixed assets	331	300
Income from securities trading	-908	-734
Losses from securities trading	0	0
Losses from valuation of securities	339	58
Amortisation of public grants and subsidies	-35	-29
Loss from disposal of fixed assets	0	0
Gross cash flow	1,175	1,370
Increase in loan liabilities	-189	-1,391
Decrease/ increase in trade receivables and other assets	847	-732
Decrease/ increase in current liabilities and other liabilities	-269	244
Monies received from dividends	105	78
Monies received from interest	24	15
Cash outflow from interest	-40	-47
Cash outflow for income taxes	-249	-10
Cash flow from operations	1,404	-473
Cash outflow for investments in fixed assets	-221	-588
Monies received based on financial assets	1,515	1,278
Cash outflow based on financial assets	-2,165	-1,776
Cash flow from Investments	-871	-1,086
Cash inflow from capital increase	0	3,600
Cash outflow for equity capital procurement costs	0	-198
Taxes regarding equity capital procurement costs	0	55
Cash inflow from minority interests	39	27
Dividend payout to minority interests	-18	0
Dividend payments	-1,980	-1,980
Decrease/ increase in loan liabilities	-157	171
Inflow from long-term liabilities	50	40
Cash flow from financing activities	-2,066	1,715
Change in cash and cash equivalents	-1,533	156
Cash and cash equivalents at the start of the reporting period	5,519	5,703
Cash and cash equivalents at the end of the reporting period	3,986	5,859

Statement of changes in equity for the period by June 30, 2011

			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, 2010	4,500,000	7,570,000	2,274,419	24,918	3,298,059	17,667,396	3,030	17,670,426
Increase in Share Capital	449,999	3,149,993	0	0	0	3,599,992	0	3,599,992
Transaction costs	0	-198,316	0	0	0	-198,316	0	-198,316
Taxes regarding transaction costs	0	55,677	0	0	0	55,677	0	55,677
Increase in share capital of the subsidiary Geratherm Respiratory GmbH	0	0	0	0	0	0	26,750	26,750
Dividend paid to shareholders	0	0	0	0	-1,979,999	-1,979,999	0	-1,979,999
Transactions with shareholders and member partners	449,999	3,007,354	0	0	-1,979,999	1,477,354	26,750	1,504,104
Group period result	0	0	0	0	1,535,196	1,535,196	-72,988	1,462,208
Unrealised profits and losses from valuation of securities	0	0	-519,333	0	0	-519,333	0	-519,333
Currency translation in group	0	0	0	31,617	0	31,617	30,379	61,996
Total consolidated income	0	0	-519,333	31,617	1,535,196	1,047,480	-42,609	1,004,871
As of June 30, 2010	4,949,999	10,577,354	1,755,086	56,535	2,853,256	20,192,230	-12,829	20,179,401
As of January 1, 2011	4,949,999	10,577,354	1,004,598	55,346	4,029,635	20,616,932	-100,176	20,516,756
Increase in share capital of the subsidiary apoplexy medical technologies GmbH	0	0	0	0	0	0	39,000	39,000
Dividend paid to shareholders	0	0	0	0	-1,979,999	-1,979,999	-17,902	-1,997,901
Transactions with shareholders and member partners	0	0	0	0	-1,979,999	-1,979,999	21,098	-1,958,901
Group period result	0	0	0	0	1,334,020	1,334,020	-131,954	1,202,066
Unrealised profits and losses from valuation of securities	0	0	-515,421	0	0	-515,421	0	-515,421
Currency translation in group	0	0	0	-10,848	0	-10,848	-10,422	-21,270
Total consolidated income	0	0	-515,421	-10,848	1,334,020	807,751	-142,376	665,375
As of June 30, 2011	4,949,999	10,577,354	489,177	44,498	3,383,656	19,444,684	-221,454	19,223,230

Consolidated Statement of Earnings (IFRS) for the period from January 1, 2011 to June 30, 2011

	01/01-30/06/2011	01/01-30/06/2010
	EUR	EUR
Net earnings of the parent company`s shareholders in the period concerned	1,334,020	1,535,196
Result of the minority interests	-131,954	-72,988
Group net profit for the period	1,202,066	1,462,208
Profit and losses from the revaluation of securities	-515,421	-519,333
Difference resulting from currency translation	-21,270	61,996
Income and expenses directly included in equity capital	-536,691	-457,337
Total consolidated income	665,375	1,004,871
of which assignable to minority interests	-142,376	-42,609
of which assignable to shareholders of parent company	807,751	1,047,480

Segment Report for the period from January 1, 2011 to June 30, 2011

According to product segments	Healthcare Diagnostics Jan.-June	Med. Warming Systems Jan.-June	Cardio/ Stroke Jan.-June	Respiratory Jan.-June	Consolidation Jan.-June	Reconcilia tionn Jan.-June	Total Jan.-June
2011	kEUR	kEUR	kEUR	kEUR	kEUR	kEUR	kEUR
Segment sales	8,234	331	112	536	-683	0	8,530
Operating results	1,212	-3	-104	-23	156	-308	930
of which:
Amortisation of intangible assets and depreciation of tangible assets	331	19	2	5	-61	35	331
Segment assets	10,432	834	246	651	0	11,052	23,215
Segment debts	4,719	139	605	341	0	0	5,804

According to product segments	Healthcare Diagnostics	Med. Warming Systems	Cardio/ Stroke	Respiratory	Consolidation	Reconcilia tionn	Total
	Jan.-June	Jan.-June	Jan.-June	Jan.-June	Jan.-June	Jan.-June	Jan.-June
2010	kEUR	kEUR	kEUR	kEUR	kEUR	kEUR	kEUR
Segment sales	7,678	281	110	305	-390	13	7,997
Operating results	1,510	4	-92	-33	-78	-55	1,256
of which:
Amortisation of intangible
assets and depreciation of	104	18	2	5	123	48	300
tangible assets
Segment assets	9,894	628	326	592	0	11,810	23,250
Segment debts	4,611	78	639	143	0	0	5,471

According to regions	Germany Jan.-June	Europe Jan.-June	USA Jan.-June	South America Jan.-June	Others Jan.-June	Total Jan.-June
2011	kEUR	kEUR	kEUR	kEUR	kEUR	kEUR
Sales revenue	1,327	4,547	359	2,351	630	9,214
Elimination of intercompany Sales	-240	0	0	-444	0	-684
Sales revenue to third parties	1,087	4,547	359	1,907	630	8,530
Gross profit or loss	744	3,111	246	1,045	431	5,577
Operating results	148	620	49	27	86	930
of which:
Amortisation/depreciation of intangible assets and tangible assets	52	216	17	16	30	331
Amortisation of public grants and subsidies	6	24	2	0	3	35
Acquisition costs of fixed assets for the period	213	0	0	8	0	221
Segment assets	21,580	0	0	1,635	0	23,215

According to regions	Germany Jan.-June	Europe Jan.-June	USA Jan.-June	South America Jan.-June	Others Jan.-June	Total Jan.-June
2010	kEUR	kEUR	kEUR	kEUR	kEUR	kEUR
Sales revenue	1,267	4,003	834	1,640	828	8,572
Elimination of intercompany Sales	-216	0	0	-359	0	-575
Sales revenue to third parties	1,051	4,003	834	1,281	828	7,997
Gross profit or loss	665	2,532	527	803	524	5,051
Operating results	162	617	128	222	127	1,256
of which:
Amortisation/depreciation of intangible assets and tangible assets	45	171	36	13	35	300
Amortisation of public grants and subsidies	5	17	4	0	3	29
Acquisition costs of fixed assets for the period	287	0	0	13	0	300
Segment assets	21,543	0	0	1,707	0	23,250

Notes on Interim Consolidated Financial Statements for the Period from January 1, 2011 to June 30, 2011

Accounting and Valuation Methods

The unaudited interim consolidated financial statements of Geratherm Medical AG as at June 30, 2011 were prepared 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 2010 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 recoverability of deferred taxation allocated to the losses carried forward and the capitalized development costs 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

No changes occurred in the composition of the consolidated group during the first six months of 2011. The following share quotas apply in detail:

Company	Percentage of shares held in 2011	Percentage of shares held in 2010
GME Rechte und Beteiligungen GmbH, Geschwenda, Germany	100.00 %	100.00 %
apoplex medical technologies GmbH, Pirmasens, Germany	61.00 %	61.00 %
Geratherm Respiratory GmbH, Bad Kissingen, Germany	61.27 %	61.27 %
Geratherm Medical do Brasil Ltda., Sao Paulo, Brazil	51.00 %	51.00 %

The share capital of apoplex medical technologies GmbH was increased by EUR 100,000 to EUR 500,000 in accordance with the resolution of the shareholders' meeting from May 9, 2011. Of which Geratherm Medical AG assumed a capital share of EUR 61,000 in accordance with its percentage of shares. The new share capital of apoplex was paid in full. Entry in the Commercial Register was carried out on 6/16/2011.

Long-term Assets

The slight decrease in long-term assets as at 6/30/2011 is due mainly to the write-offs for the capitalized development costs and the decrease in deferred tax assets as a result of the use of losses carried forward. In the area of tangible assets, 210 kEUR were invested to increase production capacities for gallium-filled thermometers.

Short-term Assets

The short-term assets decreased by 22.3% to EUR 3.159 million in the area of accounts receivable and other assets. The company's level of securities changed as a result of purchase by EUR 2.165 million (2010: EUR 1.776 million) and the sale of securities by EUR 1.515 million (2010: EUR 1.278 million). The sale of securities resulted in a gain in the amount of 908 kEUR (2010: 734 kEUR). The change in the securities at the prices valid on the reporting date, June 30, 2011, was mainly reported in the market assessment reserve without having any effect on the income statement and amounted to 489 kEUR (2010: EUR 1.755 million). The value adjustment of Epigenomics AG in the amount of 339 kEUR was posted with effect on the bottom line in accordance with IAS 39.67.

As of June 30, 2011 the change in the available cash and cash equivalents is EUR -1.533 million (2010: 156 kEUR). The cash flow before any change in the commitment of funds in the amount of EUR 1.175 million (2010: EUR 1.370 million) is set against changes in the operating funds in the amount of 229 kEUR (2010: EUR -1.843 million). The cash flow from investments amounting to -871 kEUR (2010: EUR -1.086 million) resulted from the purchase of fixed assets and intangible assets and the purchase and sale of financial assets. The cash flow from financing activities encompassed essentially the outflow of funds from the dividend payments and amounted to EUR -2.066 million as of the reporting date (2010: EUR 1.715 million).

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 June 30, 2011 (2010: EUR 4,949,999) and is divided into 4,949,999 (2010: 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.

The shareholders of Geratherm Medical AG have agreed during the annual general meeting of the company on June 6, 2011 in Hamburg to distribute a tax-free dividend of 0.40 EUR per individual share from the tax deposit account (according to Art. 27 of KStG (Corporation Tax Law)) on the capital stock in the amount of EUR 4,949,999. The dividend was distributed in the amount of EUR 1,979,999.60 on 6/7/2011.

These interim consolidated financial statements as at June 30, 2011 were not audited or reviewed by the company's auditors.

Financial Statement Affidavit

To the best of our knowledge, and in accordance with the applicable accounting principles for interim financial reporting, the interim consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the Group interim management report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group for the remaining months of the financial year.

Geschwenda, in August of 2011

Dr. Gert Frank Thomas Robst

Chair of the Board Head of Marketing/Sales

Financial calender 2011/2012

Quarterly Reports 3rd Quarter 2011 November 23, 2011

Publication Annual Report 2011 April 24, 2012

Quarterly Reports 1st Quarter 2012 Mai 24, 2012

Half-yearly Report 2012 August 23, 2012

Quarterly Reports 3rd Quarter 2012 November 22, 2012

Geratherm Medical AG

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