Geratherm Medical AG

Earnings Release • May 23, 2006

Business Development from 1st January to 31st March 2006

• Turnover + 5%
• EAT + 53%
• FDA approval for warming systems

Dear shareholders and those interested in Geratherm Medical,

Geratherm Medical AG has made a good start to the year 2006. Developments in the first quarter largely matched our expectations. Turnover at the company increased by 5.2% during the first quarter of 2006. The growth in turnover was particularly strong in the new markets of Brazil and the Middle East. Business in Germany was somewhat lower with a drop of 7%. Sales within Europe were satisfactory and showed growth of 11%. There was a temporary drop in turnover on the US market of 24% due to the postponement of an order by our American partner. The fall in turnover on the US market will be balanced out again in the second quarter.

Earnings in the first quarter of 2006 are significantly higher than levels in the previous year. Although expenditure by our subsidiary company "apoplex medical technologies GmbH" still reduced the quality of earnings (minus € 27,000) for the whole group in the first quarter, the expenditure caused by approval procedures, which we had in the warming systems sector last year, no longer occurred with the result that the company has been able to more than double its operating results (EBIT) at € 205,000 (previous year: € 98,000) with a relatively stable core business.

The reported financial results amounted to € 31,000 (€ 42,000 in the previous year). Because of the positive stock market situation, the non-realised financial income of € 761,000 was valued much higher and this was not accounted for in the profit and loss accounts, but in the equity capital – in the so-called market assessment reserves. The results of ordinary business activities increased overall by 69% to € 236,000 (€ 140,000 in the previous year). The company periodic results (EAT) increased by 53% to € 230,000 (€ 151,000 in the previous year). The operating profits increased to 5 cents per share (3 cents in the previous year).

Equity capital amounting to € 18.1 million accounts for 93% of the balance sheet total or € 4 per share. The return on capital used amounted to 5.1% (3.6% in the previous year) in the first quarter of 2006. As at 31st March the company's liquid assets and securities amounted to € 10.3 million (€ 8.0 million in the previous year). The liquid assets amounting to € 6.0 million are invested at banks at normal commercial interest rates.

The main contributors to turnover at 44.3% (49.5% in the previous year) were once again analogue diagnostic products based on gallium. Because of the weaker sales of these products in the USA and the increase in digital products, the share in absolute terms was reduced by a total of 5.9%. The digital diagnostics sector was able to continue previous growth and it showed an increase in turnover of 9% in the first quarter.

Turnover by segments 01.01.-31.03.2006

The share of turnover in the other products sector improved significantly with an increase of 35%. This growth was achieved by a doubling of sales in the warming systems sector. Based on current requests for proposals, we assume that the warming systems sector will develop positively in the course of 2006. Our subsidiary company "apoplex medical technologies GmbH" was not able to account for any noteworthy turnover for the overall results. But we assume that this company will experience a significant upturn in business during the next few months.

Turnover by regions 01.01.-31.03.2006

81% of the turnover of € 2.2 million achieved in the first quarter of 2006 came from exports. It was possible to compensate for the fairly weak domestic demand by a significant increase in business abroad. Apart from individual postponements in placing orders, the distribution of turnover in the individual regions remained largely unchanged. Turnover by the Geratherm do Brasil subsidiary increased to € 132,000 in the first quarter of 2006 (€ 41,000 in the previous year).

Data and facts		I/06	IV/05	III/05	II/05	I/05
(kEUR)	Turnover	2,182	2,062	2,088	1,968	2,073
	EBITDA	12.8 %	6.6 %	17.3 %	15.1 %	9.2 %
	EBIT	205	46	268	205	98
	EPS (EUR)	0.05	0.07	0.15	0.08	0.03
	Cashflow	262	158	338	273	161

We have been carrying out many tests in the warming systems sector in conjunction with our American partner since the beginning of last year and have been preparing the groundwork for approval procedures. Geratherm Medical received approval for the SOS Rescue Blanket warming system product from the FDA for the US market on 24th February 2006. The tests for approval in airborne rescue systems in the USA are still being prepared.

Our research and development work connected with the "stroke monitor" has provided positive results. After the research documents had been submitted and checked, the stroke risk analysis system (SRA IV) developed by "apoplex medical technologies GmbH" was presented to visitors to the EUROPREVENT 2006 in Athens. EUROPREVENT 2006 is the first European congress on prevention, organised by the European Society of Cardiology.

We look forward to welcoming our shareholders to this year's annual meeting on 12th June 2006 at 2 p.m. in the "Hessischer Hof" hotel in Frankfurt. We will be happy to answer any questions that you may have on this occasion.

Geschwenda, May 2006

Dr. Gert Frank Thomas Robst

Chairman of the Board Director of Sales & Marketing

GERATHERM AT A GLANCE

Group financial ratio	Jan.-March 2006	Jan.-March 2005	Change
Sales	2,182 kEUR	2,073 kEUR	5.2%
Export share	1,758 kEUR	1,617 kEUR	8.7%
Export ratio	81 %	78 %	3.8%
EBITDA	280 kEUR	190 kEUR	47.7%
EBITDA - Margin	12.8 %	9.2 %	39.1%
Depreciation	-75 kEUR	-92 kEUR	-18.5%
EBIT	205 kEUR	98 kEUR	>100.0%
Result of ordinary operation	236 kEUR	140 kEUR	68.9%
Group period result (EAT)	230 kEUR	151 kEUR	53.0%
Long term assets	5,230 kEUR	6,709 kEUR	-22.0%
Short term assets	14,299 kEUR	12,550 kEUR	13.9%
Total Assets	19,529 kEUR	19,259 kEUR	1.4%
Shareholders equity	18,104 kEUR	17,009 kEUR	6.4%
Return on equity	5.1 %	3.6 %	43.1%
Equity ratio	92.7 %	88.3 %	5.0%
Liquid funds and securities	10,278 kEUR	8,024 kEUR	28.1%
Earnings per share according to IFRS*	0.05 EUR	0.03 EUR	66.7%
Earnings per Share according to DVFA*	0.05 EUR	0.03 EUR	66.7%
Number of employees at end of the period	69	70	-1.4%
Total amount of issued share	4,500,000	4,500,000
* there of out standing	4,500,000	4,500,000

Consolidated profit and loss statement of 1 January 2006 to 31 March 2006

	Jan.-March 2006	Jan.-March 2005	Change
	EUR	EUR
Sales	2,181,526	2,072,950	5.2%
Increase/decrease of finished goods and work in progress	16,317	-42,989	>100.0%
Other capitalized company work	27,770	0	100.0%
Other operating income	37,626	91,794	-59.0%
	2,263,239	2,121,755	6.7%
Materials
Raw materials, supplies and
purchased goods	-997,588	-972,476	2.6%
Expenses for services	-45,083	-36,069	25.0%
	-1,042,671	-1,008,545	3.4%
Gross profit	1,220,568	1,113,210	9.6%
Personnel costs
Wages and salaries	-421,230	-436,918	-3.6%
Social security and pension costs	-95,637	-93,591	2.2%
	-516,867	-530,509	-2.6%
Depreciation on tangible and intangible assets	-74,845	-91,815	-18.5%
Other operating expenses	-423,747	-393,218	7.8%
Operating result	205,109	97,668	>100.0%
Income from accured dividend	3,605	0	100.0%
Other interest and similar income	34,732	34,136	1.7%
Income from securities trading	28,500	18,042	58.0%
Interest and other expenses	-478	-9,869	-95.2%
Loss from securities trading	-35,069	0	100.0%
Financial result	31,290	42,309	-26.0%
Result of ordinary operation	236,399	139,977	68.9%
Income Taxes	-17,235	-10,784	59.8%
Result of ordinary operation	219,164	129,193	69.6%
Minority interests	-11,073	-21,307	-48.0%
Group period result	230,237	150,500	53.0%
EBITDA	279,954	189,483	47.7%
Result per share basic	0.05	0.03	66.7%

Consolidated balance sheet 31 March 2006

A. Long term assets
I. Intangible assets
1. Development costs	377,789 369,128	2.3%
2. Other intangible assets	20,012 22,769	-12.1%
3. Goodwill	75,750 75,750	0.0%
	473,551 467,647	1.3%
II. Tabgible assets
1. Property and plants 1,479,953	1,498,886	-1.3%
2. Technical facilities and machinery	236,682 258,098	-8.3%
3. Other equipment, factory and office equipment	84,599 77,453	9.2%
4. Payments in advance	9,186 6,110	50.3%
1,810,420	1,840,547	-1.6%
III. Deferred taxes 2,946,200	2,963,435	-0.6%
5,230,171	5,271,629	-0.8%
B. Short term assets
I. Inventories
1. Raw materials	632,853 550,347	15.0%
2. Unfinished goods	624,341 591,459	5.6%
3. Finished goods	963,672 1,154,414	-16.5%
2,220,866	2,296,220	-3.3%
II. Receivables and other assets
1. Trade receivables 1,646,051	1,686,104	-2.4%
2. Tax receivables	124,806 80,287	55.4%
3. Other assets	29,567 35,839	-17.5%
1,800,424	1,802,230	-0.1%
III. Securities 4,189,200	3,218,121	30.2%
IV. Cash and cash equivalents 6,088,624	5,965,441	2.1%
14,299,114	13,282,012	7.7%
19,529,285	18,553,641	5.3%
Liabilities
A. Equity
I. Subscribed capital 4,500,000	4,500,000	0.0%
II. capital reserves 7,570,000	7,570,000	0.0%
III. Other reserves 5,981,840	4,989,766	19.9%
IV. Minority interest	52,444 62,522	-16.1%
18,104,284	17,122,288	5.7%
B. Special reserve for investments	662,775 682,709	-2.9%
C. Short Term liabilities
1. Received payments	66,543 2,454	>100.0%
2. Trade accounts payable	128,404 198,921	-35.4%
3. Tax liabilities	32,905 18,301	79.8%
4. Other Liabilities	534,374 528,968	1.0%
	762,226 748,644	1.8%

Group cash flow statement of 01 January 2006 to 31 March 2006

	Jan.-March 2006 kEUR	Jan.- March 2005 kEUR
Group period result	230	151
Earnings Minority interests	-11	-22
Other costs affecting income/expenses	2	0
Dividend income	-4	0
Interest income	-34	-34
Interest costs	0	10
Decrease of deferred taxes	17	11
Depreciation on tangible assets	75	92
Income from securities trading	-28	-18
Loss from securities trading	35	0
Amortisation of subsidies and grant	-20	-29
Brutto-Cashflow	262	161
Decrease / increase of inventories	75	-328
Decrease / increase of trade receivables	2	-472
Increase of short term liabilities	14	205
Incoming payments from dividends	4	0
Incoming payments from interest	34	34
Outgoing payments from interest	0	-10
Cashflow from operating activity	391	-410
Payments for capital investments to fixed assets	-51	-13
Incoming payment from financial assets	944	153
Outgoing payments from financial assets	-1,160	-327
Cashflow from investing activities	-267	-187
Cash inflow from minority interest	0	0
Dividend payments	0	0
Increase / decrease short term liabilities to bank	0	-28
Cashflow from financial activities	0	-28
Change in cash and cash equivalents	124	-625
Cash and cash equivalents at beginning of the reporting period	5,965	6,382
Cash and cash equivalents at the end of the reporting period	6,089	5,757

Group equity change calculation by 31.March 2006

			Other reserves
	Subscribed capital	Capital reserve	Market evaluation reserve	Currency conversion reserv	Result achieved in the group	Minority interests	Equity
	EUR	EUR	EUR	EUR	EUR	EUR	EUR
1. January 2005	4,500,000	7,528,332	96,774	1,004	4,615,507	31,104	16,772,721
Not realized profit/ losses from evaluation of securities			85,371		21,481		106,852
Currency conversion in the Group				335		322	657
Group period result					150,500	-21,307	129,193
31. March 2005	4,500,000	7,528,332	182,145	1,339	4,787,488	10,119	17,009,423
1. January 2006	4,500,000	7,570,000	150,816	4,542	4,834,408	62,522	17,122,288
Not realized profit/ losses from evaluation of securities			760,801				760,801
Currency conversion in the Group				1,036		995	2,031
Group period result					230,237	-11,073	219,164
31. March 2006	4,500,000	7,570,000	911,617	5,578	5,064,645	52,444	18,104,284

Segment reporting of 1 January 2006 to 31 March 2006

By Region	Germany		Europe		USA		Others		Total
	Jan.- March 2006	Jan.- March 2005	Jan.- March 2006	Jan.- March 2005	Jan.- March 2006	Jan.- March 2005	Jan.- March 2006	Jan.- March 2005	Jan.- March 2006	Jan.- March 2005
	TEUR	TEUR	TEUR	TEUR	TEUR	TEUR	TEUR	TEUR	TEUR	TEUR
Sales	424	455	1,124	1,014	281	369	353	235	2,182	2,073
Gross Profit	265	282	611	521	153	189	192	121	1,221	1,113
Operating results	45	25	102	46	26	17	32	10	205	98
Including:
Depreciation of tangible and fixed assets	16	23	38	43	9	16	12	10	75	92
Amortisation of grants and subsidies and bonus	4	7	10	14	3	5	3	3	20	29
Asset cost for the period	50	13	0	0	0	0	1	0	51	13
Book values assets	2,277	3,739	0	0	0	0	7	1	2,284	3,740

According to areas of activity	Analogue Diagnostic Products		Digital Diagnostic Products		Others		Total
	Jan.-Mar. 2006	Jan.-Mar. 2005	Jan.-Mar. 2006	Jan.-Mar. 2005	Jan.-Mar. 2006	Jan.-Mar. 2005	Jan.-Mar. 2006	Jan.-Mar. 2005
	TEUR	TEUR	TEUR	TEUR	TEUR	TEUR	TEUR	TEUR
Sales	966	1,026	830	762	386	285	2,182	2,073
Gross Profit	661	633	316	239	244	241	1,221	1,113
Operating result	178	143	58	77	-31	-122	205	98
Financial result							31	43
Taxes							-17	-11
Minority share in result							11	21
Group period result							230	151
including:
Depreciation of tangible and fixed assets	27	49	14	22	34	21	75	92
Amortisation of grants and subsidies and bonus	9	14	8	11	4	4	21	29
Asset cost for the period	3	0	1	1	47	12	51	13
Book values assets	853	852	298	175	1,133	2,713	2,284	3,740
Deferred taxes					2,946	2,969	2,946	2,969
Short term assets	1,973	2,016	1,200	1,516	11,126	9,018	14,299	12,550
Total assets	2,826	2,868	1,498	1,692	15,205	14,699	19,529	19,259
Short term liabilities	86	73	74	54	602	1,447	762	1,574
Special reserve for received investments					663	675	663	675

Explanatory notes on the group's interim financial statement for the period 1st January – 31st March 2006

Accounting and Assessment Methods

The group interim financial statement for Geratherm Medical AG has been prepared in accordance with the International Financial Reporting Standards (IFRS) valid at the balance sheet date and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC), such as it is compulsory to apply them within the European Union.

All the accounting, assessment and consolidation principles have been adhered to, as is described in the attached annual group accounts for 2005.

Consolidated Group

No changes were made to the consolidated group during the first quarter of 2006.

Explanatory Notes on the Assets, Financial and Earnings Situation

Long-term Assets

As per 31st March 2006 development costs for intangible assets provided by ourselves and amounting to € 28,000 (€ 0 in the previous year) were entered on the assets side; these cover the development of the new SRA IV stroke risk analyser for preventing strokes.

Other additions to the long-term assets amounting to € 23,000 (€ 13,000 in the previous year) largely involve replacement investments in production machinery and other business equipment.

Short-term Assets

There are more significant changes to the short-term assets, mainly in the securities item. Additions as a result of purchasing amounted to € 1,160,000 (€ 327,000 in the previous year) as at 31st March 2006. Decreases in assets took place as a result of sales amounting to € 944,000 (€ 153,000 in the previous year). This generated a profit of € 28,000 (€ 18,000 in the previous year) and a loss amounting to € 35,000 (€ 0 in the previous year). Holdings assessed to be worth € 4,189,000 (€ 2,266,000 in the previous year) in line with the market prices on the reporting date on 31st March 2006 must be viewed in the light of the purchasing costs amounting to € 3,277,000 (€ 2,084,000 in the previous year). This has created profits of € 912,000 (€ 182,000 in the previous year), which have not been converted into cash. These are shown in the market assessment reserves item in the equity capital section.

Equity Capital

The subscribed capital at Geratherm Medical AG amounted to a total of € 4,500,000 as at 31st March 2006 and is divided up into 4,500,000 individual share certificates made out to the owners. The subscribed capital has been fully paid. The company did not own any of its own shares as at 31st March 2006.

The market assessment reserve item, listed under equity capital for the first time in 2005, increased by € 761,000 in the first quarter of 2006 (€ 85,000 in the previous year) to € 912,000 (€ 182,000 in the previous year). As a result of the binding commitment dated 31st December 2005 to make adjustments required by the change to IAS 39 in the previous year's figures by using IAS 39.107 starting from 1st January 2004, we have adjusted the comparison period for the 1st quarter of 2005. The adjustment involves a reclassification amounting to € 58,000 from the market assessment reserve item to accumulated profits.

The board and the supervisory board will suggest at the main shareholders' meeting on 12th June 2006 that a tax-free dividend of 32 cents per share should again be paid out using the existing capital reserves.

Dates for further reporting

12/06/2006	Main Shareholders` Meeting
23/08/2006	Interim report 2nd Quarter of 2006
23/11/2006	Interim report 3rd Quarter of 2006