**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**




**FORM
      10-K**





**ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**


**SECURITIES
      EXCHANGE ACT OF 1934**




**For
      the fiscal year ended December 31, 2005**




**Commission
      File Number: 000-11178**




**UTAH
      MEDICAL PRODUCTS, INC.**


(Exact
      name of registrant as specified in its charter)




**Utah**
            **87-0342734**(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)**7043
                S 300 W, Midvale Utah**
            **84047**(Address
                of principal executive offices)
            (Zip
                Code)Registrant’s
                telephone number, including area code:
            **Telephone
                (801) 566-1200****Facsimile
                (801) 566-2062**Securities
                registered pursuant to Section 12(b) of the Act:Title
                of each class
            Name
                of each exchange on which registered**None**
            **None**





Securities
      registered pursuant to Section 12(g) of the Act:


**Common
      Stock, $0.01Par Value**


**Preferred
      Stock Purchase Rights**


(Title
      of C lass)




Indicate
      by check mark if the registrant is a well-known seasoned issuer, as defined
      in
      Rule 405 of the Securities Act.


Yes o No **x**




Indicate
      by check mark if the registrant is not required to file reports pursuant to
      Section 13 or 15(d) of the Act.


Yes o No **x**




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




Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (Section 229.405 of this chapter) is not contained herein, and
      will not be contained, to the best of registrant’s knowledge, in definitive
      proxy or information statements incorporated by reference in Part III of this
      Form 10-K or any amendment to this Form 10-K. **x**




Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act.


Large
                accelerated filero
            Accelerated
                filer**x**
            Non-accelerated
                filero




Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Act). Yes o No **x**




State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      last sold, or the average bid and asked price of such common equity, as of
      the
      last business day of the registrant’s most recently completed second fiscal
      quarter. **As
      of June 30, 2005, the aggregate market value of the voting and nonvoting common
      equity held by nonaffiliates of the registrant was** **$77,400,000** **.**




Indicate
      the number of shares outstanding of each of the registrant’s classes of common
      stock, as of the latest practicable date. **As
      of March 10, 2006, common shares outstanding were 3,961,000.**




DOCUMENTS
      INCORPORATED BY REFERENCE. **The
      Company’s definitive proxy statement for the Annual Meeting of Shareholders is
      incorporated by reference into Part III, Item 10, 11, 12, and 13, and 14 of
      this
      Form 10-K.**












INDEX
      TO FORM 10-K




PAGEPART
                  IItem
                  1
              Business
              1Item
                  1A
              Risk
                  Factors
              11Item
                  1B
              Unresolved
                  Staff Comments
              11Item
                  2
              Properties
              11Item
                  3
              Legal
                  Proceedings
              12Item
                  4
              Submission
                  of Matters to a Vote of Security Holders
              12PART
                  IIItem
                  5
              Market
                  for Registrant’s Common Equity, Related Stockholder Matters and Issuer
                  Purchases of Equity Securities
              13Item
                  6
              Selected
                  Financial Data
              14Item
                  7
              Management’s
                  Discussion and Analysis of Financial Condition and Results of Operations
              15Item
                  7A
              Quantitative
                  and Qualitative Disclosures About Market Risk
              23Item
                  8
              Financial
                  Statements and Supplementary Data
              24Item
                  9
              Changes
                  in and Disagreements With Accountants on Accounting and Financial
                  Disclosure
              44Item
                  9A
              Controls
                  and Procedures
              44Item
                  9B
              Other
                  Information
              44PART
                  IIIItem
                  10
              Directors
                  and Executive Officers of the Registrant
              45Item
                  11
              Executive
                  Compensation
              45Item
                  12
              Security
                  Ownership of Certain Beneficial Owners and Management and Related
                  Stockholder Matters
              45Item
                  13
              Certain
                  Relationships and Related Transactions
              45Item
                  14
              Principal
                  Accounting Fees and Services
              45PART
                  IVItem
                  15
              Exhibits,
                  Financial Statement Schedules
              46Signatures
              48






















**PART
      I**








**ITEM
      1 - BUSINESS**





Dollar
      amounts throughout this report are in thousands except per-share amounts and
      where noted.





Utah
      Medical Products, Inc. (“UTMD” or “the Company”) is in the business of producing
      high quality cost-effective medical devices that are predominantly proprietary,
      disposable and for hospital use. Success depends on 1) recognizing needs of
      clinicians and patients, 2) rapidly designing or acquiring economical solutions
      that gain premarketing regulatory concurrence, 3) reliably producing products
      that meet those clinical needs, and then 4) selling through


a)
            UTMD's
                own direct channels into markets where the Company enjoys an established
                reputation and has a critical mass of sales and support resources,
                or


b)
            establishing
                relationships with other medical companies that have the resources
                to
                effectively introduce and support the Company's
                products.





UTMD's
      success in providing reliable solutions comes from its proven ability to
      integrate a number of engineering and technical disciplines in electronics,
      software, mechanical packaging, instrumentation, plastics processing and
      materials. The resulting proprietary products represent significant incremental
      improvements in patient safety, clinical outcomes and/or total cost over
      preexisting clinical tools. UTMD's experience is that, in the case of
      labor-saving devices, the improvement in cost-effectiveness of clinical
      procedures also leads to an improvement in overall healthcare including lower
      risk of complications. UTMD markets a broad range of medical devices used in
      critical care areas, especially the neonatal intensive care unit (NICU) and
      the
      labor and delivery (L&D) department in hospitals, as well as products sold
      to outpatient clinics and physician's offices.





The
      opportunity to apply solutions to recognized needs results from an excellent
      core of practicing clinicians who introduce ideas to the Company, and key
      employees who are both clinical applications savvy and development engineering
      adept.





UTMD’s
      products are sold directly to end users in the U.S. domestic market by the
      Company’s own direct sales representatives and independent manufacturers’
representatives. In addition, some of UTMD’s products are sold through specialty
      distributors, national hospital distribution companies and other medical device
      manufacturers. Internationally, products are sold through other medical device
      companies and through independent medical products distributors. UTMD has
      representation in all major developed countries through approximately 100
      international distributors.





UTMD
      was
      formed as a Utah corporation in 1978. UTMD publicly raised equity capital one
      time in 1982. In 1994, UTMD acquired all of the tangible and intangible assets
      of OB Tech, Inc, a Huntington Beach, CA company, the original owner of the
      Cordguard® concept. In 1995, Utah Medical Products Ltd., a wholly-owned
      subsidiary located in Ireland, was formed to establish an international
      manufacturing capability. In 1997, UTMD purchased Columbia Medical, Inc. (CMI),
      a Redmond, Oregon company specializing in silicone injection molding, assembly
      and marketing vacuum-assisted obstetrical delivery systems. In 1998, UTMD
      acquired the neonatal product line of Gesco International, a subsidiary of
      Bard
      Access Systems and C.R. Bard, Inc. On March 8, 2000, UTMD returned to the Nasdaq
      Stock Market after trading on the New York Stock Exchange for about 3 years.
      The
      Company was previously listed on Nasdaq for 14 years. In 2004, UTMD acquired
      Abcorp, Inc., its supplier of fetal monitoring belts. The Company's corporate
      offices are located at 7043 South 300 West, Midvale, Utah 84047 USA. The
      corporate telephone number is (801) 566-1200. Ireland operations are located
      at
      Athlone Business and Technology Park, Athlone, County Westmeath, Ireland. The
      telephone number in Ireland is 353 (90) 647-3932. CMI’s mailing address is 1830
      S.E. 1st, Redmond, Oregon 97756. The phone number in Oregon is (541) 548-7738.







1







PRODUCTS





Labor
      and Delivery/ Obstetrics :


Fetal
      Monitoring Accessories.


The
      majority of births are considered "higher risk" due to lack of prenatal care,
      or
      use of anesthesia, among other factors. In many of these births, labor may
      become complicated and does not progress normally. The obstetrician or
      perinatologist must assess progression of labor to be able to intervene with
      drug therapy, infuse a solution to augment amniotic fluid, or ultimately if
      necessary, perform an operative procedure, and then be prepared for
      complications immediately following childbirth.





To
      assist
      the physician in controlling the effectiveness of administration of oxytocin
      and
      monitoring effects of amnioinfusion, contraction intensities, uterine resting
      tones and peak contraction pressures are closely monitored through the use
      of an
      invasive intrauterine pressure catheter system. In addition, to help identify
      the possible onset of fetal hypoxia, correlation of the changes in fetal heart
      rate (FHR) relative to the frequency and duration of contractions are often
      electronically monitored. UTMD’s intrauterine pressure (IUP) catheters provide
      for clinician choices from a traditional fluid-filled system to INTRAN® PLUS,
      the most widely accepted transducer-tipped system. In addition, adjunct FHR
      electrodes, leg plates, belts and chart paper are provided by UTMD to complete
      a
      package of fetal monitoring supplies. UTMD’s IUP catheters include:





·
            IUP-075
                and UTMD’s other custom fluid-filled catheter kits utilize a saline-filled
                catheter that is placed within the uterine cavity, connected to a
                separate
                external reusable or disposable transducer. This product package,
                utilizing double lumen catheters, was the traditional mode of intrauterine
                monitoring prior to the introduction of INTRAN. An intrauterine pressure
                change is transmitted through the fluid column to the external pressure
                transducer.





·
            Introduced
                in 1987, INTRAN was the first disposable intrauterine pressure catheter
                that placed the pressure transducer at the pressure source within
                the
                uterine cavity. This design eliminated the complicated setup of
                fluid-filled systems and provided more accurate pressure waveforms.
                INTRAN
                I was discontinued in 1995 in favor of the more widely preferred
                INTRAN
                PLUS, also covered by UTMD’s original INTRAN
                patent.





·
            INTRAN
                PLUS was introduced in 1991. The INTRAN PLUS catheter combines the
                transducer tip concept of INTRAN I with a refined tip design, a zeroing
                switch that allows the clinician to reset the reference of the monitor,
                and a dedicated amnio lumen which provides access to the amniotic
                fluid
                environment which may be helpful in the diagnosis and intervention
                of
                certain fetal conditions. In 1996, a viewport enhancement which allows
                physicians to observe amniotic fluid in a closed system was added
                to
                INTRAN PLUS. In 1997, UTMD introduced several variations to allow
                user
                preferences in tip size, zero switch location and amniotic fluid
                visualization.





UTMD
      markets tocodynamometer belts, disposable electrodes, catheters and accessories
      as outlined above, but does not currently market electronic monitors, the
      capital equipment that process the electrical signals. In addition to products
      currently offered, UTMD intends to continue to investigate and introduce tools
      that enhance fetal monitoring techniques, a core area of product development
      focus.





Vacuum-Assisted
      Delivery Systems (VAD).


UTMD’s
      VAD Systems include CMI® patented soft silicone bell-shaped birthing cups and
      patented hand-held vacuum pumps which UTMD believes are the safest products
      available for use in vacuum-assisted operative deliveries. UTMD’s patented soft
      silicone cup is a bell-shaped cup design should be preferred for fetal
      well-being in low or outlet fetal stations with occiput anterior presentations,
      which represent more than 90% of the cases where VAD is indicated. Operative
      vaginal deliveries using forceps or vacuum-assisted delivery systems provide
      knowledgeable physicians with a trial vaginal operative delivery prior to a
      more
      invasive C-section intervention. Although there are risks associated with
      vaginal operative deliveries which may represent about 10-15% of all U.S.
      hospital births, the procedures are generally regarded as safer for the mother,
      and at least as safe for the fetus, as abdominal (Cesarean) delivery in
      comparable clinical situations. UTMD estimates that the VAD operative approach
      is used for about 7-9% of all U.S. births, with forceps continuing to lose
      ground as the alternative. UTMD’s patented bell-shaped soft silicone TENDER
      TOUCH® cups enjoy a low reported complication rate compared to other vacuum cup
      designs, as evidenced by the FDA Medical Device Reporting System which reports
      specific names of products used in hospitals.









2







Other
      Obstetrical Tools.


AROM-COTTM
      is a finger cover with a patented prong design to rupture maternal membranes
      with less patient pain and anxiety. MUC-X is an aspiration device used
      immediately after birth to clear neonatal respiratory passages and reduce
      exposure to potential infections. CORDGUARD® is a patented product which unifies
      the multiple steps of clamping the neonate’s cord close to the umbilicus,
      severing the cord without splattering blood, drawing a clean cord blood sample,
      and assisting in the removal of the placenta. CORDGUARD’s sharpless, closed
      system reduces the risk of exposure to potentially infected blood, and
      consequently reduces the high cost of exposure treatment under OSHA and CDC
      guidelines. In addition, CORDGUARD facilitates obtaining neonatal blood that
      is
      otherwise hard to obtain safely and cleanly. Abcorp belts and straps for fetal
      monitoring by an external tocodynamometer are provided in latex free form in
      several configurations.





Neonatal
      Intensive Care :


DISPOSA-HOODTM


The
      DISPOSA-HOOD is an infant respiratory hood that is used in the NICU to
      administer oxygen to neonates and flush CO 2 (carbon
      dioxide) while maintaining a neutral thermal environment critical to proper
      physiologic responses. The DISPOSA-HOOD, placed over the infant's head,
      incorporates a round diffusor connection specifically designed to disperse
      the
      incoming gases along the inner surfaces of the hood, rather than allowing them
      to blow directly on the infant's head. The design allows more precise
      FIO 2 (fractional inspired oxygen) control, minimizes convective heat loss from the
      head and provides optimum flows for elimination of CO 2 by
      ventilation. DISPOSA-HOOD, in contrast to an incubator, allows for excellent
      access to and visualization of the underdeveloped infant. Because it is a
      disposable product, it prevents cross-contamination.





DELTRAN®
      PLUS


UTMD’s
      DELTRAN blood pressure monitoring system has been adapted specifically for
      use
      in the NICU. The streamlined version eliminates needles used for blood sampling,
      avoids the loss of scarce neonatal blood volume and provides a closed system
      that reduces the risk of infection. The system features excellent visualization
      of clearing volume, and one-handed use.





GESCO®


In
      the
      third quarter of 1998, UTMD acquired the neonatal product line of Gesco
      International. GESCO, best known for innovative silicone catheters, gained
      an
      early distinctive reputation for its focus on the special developmental needs
      of
      tiny critically-ill babies.





A
      class
      of catheters called umbilical vessel catheters (UVC’s) are specially designed
      for administering vital medications and fluids immediately following birth
      through the infant’s umbilical vessel into the inferior vena cava. Because of
      the neonate’s small size and lack of vascular development, there is no better
      access to vital organs. The catheters are also called umbilical artery catheters
      (UAC’s) when placed in one of the umbilical arteries to measure blood pressure
      or monitor metabolic processes through blood analysis. In developing its
      UMBILI-CATHTM product line, Gesco pioneered the use of soft, biocompatible
      silicone catheters, helping to reduce the number of insertions required as
      well
      as other complications associated with invasive applications. UTMD has expanded
      the UVC product line to include catheters made from a patented thermosensitive
      polyurethane (Tecoflex®) that offers many of the flexibility and
      biocompatibility advantages of silicone after insertion, with the greater
      rigidity of polyurethane preferred by many clinicians for insertion. In
      addition, GESCO provides a convenient catheterization procedure tray of
      implements and supplies necessary to place UVC catheters, as well as perform
      other similar procedures.





The
      primary distinction of GESCO products is that they were developed with the
      special needs of the neonate in mind, not just cut-down or smaller versions
      of
      adult devices. For example, in the case of invasive catheters, the introducer,
      the soft rounded distal tip, mode of securing to the patient after insertion
      to
      avoid migration, luer locking hub with minimal dead space, number of lumens,
      catheter radiopaque striping for visualization, variations in catheter lengths
      and diameters and special packaging are all features specially designed for
      neonates. UTMD continues to modify product features to incorporate current
      neonatal nurse practitioner preferences.









3








The
      soft,
      biocompatible silicone catheter concept had important advantages in other
      applications including peripherally inserted central venous catheters (PICC
      lines), enteral feeding tubes, urinary drainage catheters, and chest drainage
      tubes. GESCO developed and marketed initial versions of all of these neonatal
      products. In order to keep pace with the trend of caring for smaller babies,
      UTMD has added smaller diameter versions of its URI-CATH® and NUTRI-CATH®
products. In 2000, UTMD gained FDA premarketing clearance of a new PICC family
      of products specifically designed to minimize trauma to the critically ill
      neonate, named PICC-NATE®. The PICC-NATE product line was designed with the
      input of experienced neonatal nurse practitioners for use as a long-term
      indwelling catheter system for single-use, therapeutic central venous infusion
      of drug solutions, blood products or other fluids and for blood sampling. The
      soft, strong silicone PICC-Nate comes in two diameter sizes, two types of
      venipuncture introducers, and two hub configurations. In early 2003, UTMD added
      a Tecoflex polyurethane version that offers many of the flexibility and
      biocompatibility advantages of silicone after insertion, with the greater
      rigidity of polyurethane preferred by many clinicians for
      insertion.





Other
      GESCO specialty products include a disposable peritoneal dialysis set that
      is a
      pre-assembled, sterile, closed system, called DIALY-NATE®; a patented silicone
      oral protection device used to prevent palatal soft tissue injury by orotracheal
      tubes, called PALA-NATE®; and a lumbar sampling kit with a tiny,
      specially-beveled needle for obtaining cerebral spinal fluid samples, called
      MYELO-NATE®.





GESCO’s
      first patented product, HEMO-NATE®, is a disposable filter designed to remove
      microaggregates from stored blood prior to transfusion into a neonate where
      any
      deficiency can have an overwhelmingly negative impact on a neonate’s chances for
      survival, given an under-developed vasculature and small total blood volume.
      In
      2001, UTMD introduced a new filter and an improved blood bag spike for
      Hemo-Nate, and a needleless version.





In
      2006,
      UTMD will continue to improve and expand its neonatal product line, seeking
      to
      reinforce a reputation as having the most developmentally-friendly NICU
      specialty products in the medical device industry. In addition to products
      already offered and being developed internally, UTMD will look to expand sales
      through international distribution arrangements, and through selective
      complementary product acquisitions.





Gynecology
      /Urology /Electrosurgery :


LETZ®
      System


The
      LETZ
      System is used to excise cervical intraepithelial neoplasia (CIN) and other
      lower genital tract lesions related to human papilloma virus (HPV) infections.
      The electrosurgery procedure with hemostasis has become the standard of care
      for
      HPV cervical infection treatment, replacing cold knife scalpel, laser and
      cryotherapy procedural approaches because it is economical, safe, effective,
      quick and easy to perform, has fewer potential side effects, and requires little
      physician training. The LETZ procedure may be performed using local anesthetic
      in a physician's office, eliminating the time and expense of hospital or
      surgical center admittance. Most importantly, in contrast to laser (tissue
      ablation) and cryotherapy (freezing of tissue), LETZ provides a fine tissue
      specimen for pathological assessment.





UTMD’s
      LETZ System includes patented disposable electrodes, the patented FINESSE®
electrosurgical generator, and other miscellaneous components. A disposable
      loop
      electrode used to excise the tissue specimen is a pencil-like tube with a thin
      tungsten wire loop attached. The loop is available in varying sizes and includes
      a Safe-T-Gauge® that can be positioned so the physician can accurately
      colposcopically monitor the amount of tissue being excised. UTMD continues
      to
      augment its specialty electrodes. For example, the Company introduced a patented
      conization electrode for deep endocervical disease called C-LETZ®, designed to
      limit the removal of healthy tissue margins that might compromise adequate
      cervical function. UTMD also will continue to provide adapters and other
      components which allow its market-leading specialty electrodes to be used with
      other manufacturers’ electrosurgical generators. The FINESSE electrosurgical
      generator is the only generator on the market that contains an integral smoke
      evacuator, required to filter smoke and vapors that contain potentially
      hazardous particulate material produced during electrosurgery.







4








FINESSE®
      Generator; Specialty Loop, Ball, and Needle Electrodes; FILTRESSE® Evacuator;
      Other Specialty Electrodes; Other Supplies and Gynecologic Tools.


UTMD
      has
      FDA clearance to market its electrosurgical system and tools for use in general
      surgery applications, including dermatology, plastic surgery and otolaryngology.
      In 2002, UTMD introduced a product line of ultra-fine tipped microdissection
      needles, called OptiMicroTM Needles. These electrosurgical needles are
      particularly useful in plastic and reconstructive surgery applications.
      FILTRESSE is a stand-alone surgical smoke filtration system that combines high
      filtration efficiency, low cost and convenient use in a surgical office setting.
      Other electrosurgery tools and accessories include disposable electrosurgical
      pens, dispersive pads, footswitches, filter packs, speculums, retractors,
      forceps, tenacula and hooks. UTMD acquired the distribution rights to a unique
      reusable four-way expander system which facilitates access to, and visualization
      of, the cervix, eliminating the need for less effective specula and lateral
      retractors.





EPITOME®


EPITOME
      is a patented electrosurgical scalpel which delivers precise performance in
      incision and excision with hemostasis while minimizing thermal side effects.
      Where rapid yet precise dissection of dense tissue is necessary, such as in
      mammaplasty or abdominoplasty, UTMD believes that EPITOME has no close
      substitute. Furthermore, an independent study concludes that the EPITOME scalpel
      provides a significant improvement over older devices in wound healing and
      patient comfort. EPITOME allows a rapid incision without countertraction,
      yielding limited morbidity, less post-surgical pain and cosmetically superior
      results. EPITOME is useful where minimization of thermal tissue injury is
      important but control of bleeding needed. A patented bendable version of EPITOME
      with a smaller active electrode was introduced in 1998. Designed to
      significantly reduce the chance of tissue burns due to inadvertent electrode
      contact and where a smaller, bent scalpel tip is needed, the bendable EPITOME
      is
      of particular value, e.g., to thoracic surgeons in harvesting the internal
      mammary artery during coronary artery bypass surgery, as well as to
      otolaryngologists for tonsillectomies or uvulapalatalplasties.





LIBERTY®
      System


LIBERTY
      is a device for the conservative treatment and effective control of urinary
      incontinence in women. UTMD believes that LIBERTY is the easiest-to-use, most
      cost effective incontinence treatment available that yields a therapeutic
      effect, not just a cover-up. LIBERTY consists of a battery operated electrical
      stimulation unit and an intravaginal electrode probe. This physiotherapy
      technique, which can be done in the privacy of the home, involves passive
      strengthening of the periurethral muscles. Pulsed, low voltage, high frequency
      current is applied primarily to the pudendal neuromuscular tissue causing the
      pelvic area muscles to contract, leading to better muscle tone. Because
      electrical stimulation has no known adverse side effects, LIBERTY provides
      women
      suffering from mild to moderate incontinence an effective, lower cost and lower
      risk alternative to more traumatic treatments such as surgery and drug therapy.





PATHFINDER
      PLUSTM


PATHFINDER
      PLUS is a proprietary endoscopic irrigation device that allows a uro/gyn surgeon
      to precisely irrigate with the same hand that controls the endoscope,
      eliminating the need for a separate assistant to irrigate without
      visualization.





ENDOCURETTETM


In
      cooperation with Mayo Clinic, UTMD developed an advanced curette for uterine
      endometrial tissue sampling in the doctor’s office. The sampling procedure is
      intended primarily to rule out precancer or cancerous change of the uterus
      in
      premenopausal women with abnormal uterine bleeding, or women with postmenopausal
      bleeding. The device is part of a class of catheters designed to be used without
      dilitation of the cervix and without general anesthetic. The inherent weakness
      of this type of device, which is related to its small size, is that it may
      not
      remove enough tissue of the endometrium for an accurate histologic assessment,
      in contrast to a more invasive D&C hospital procedure. The patented tip of
      the ENDOCURETTE was designed to obtain a more thorough tissue specimen without
      the need for dilitation, and without an increase in patient discomfort.





LUMIN®


LUMIN®
is
      a patented tool developed by UTMD for reliably and safely manipulating the
      uterus in gynecological laparoscopic procedures. LUMIN combines the strength,
      range of motion and versatility of the higher end reusable instruments with
      the
      lower cost and cleanliness of the inexpensive less functional disposable
      instruments presently on the market, while at the same time reducing the number
      of tools needed to move and secure the uterus.








5







Blood
      Pressure Monitoring:


DELTRAN®
      Disposable Pressure Transducer (DPT)


In
      pressure monitoring, a transducer is used to convert physiological (mechanical)
      pressure into an electrical signal that is displayed on electronic monitoring
      equipment. UTMD developed, patented and is now distributing its disposable
      transducer as a stand-alone product, and as a component in sterile blood
      pressure monitoring kits through direct representatives and other medical
      companies in the U.S., as well as independent distributors and other medical
      device companies internationally.





The
      Company believes that the DELTRAN DPT which it designed nearly twenty years
      ago,
      and currently manufactures, remains the standard in terms of accuracy,
      reliability and ease of use. UTMD has an automated assembly line which allows
      the Company to effectively compete with larger suppliers on the basis of
      consistent quality and low manufacturing costs. Introduced in 1998, the DELTRAN
      PLUS provides a closed system for blood sampling, without the use of needles,
      reducing the risk of an unwanted infection for both the patient and the
      practitioner.





Pressure
      Monitoring Accessories, Components and Other Molded Parts.


Components
      included in blood pressure monitoring kit configurations include flush devices,
      stopcocks, fluid administration sets, caps, pressure tubing, interface cables
      and organizers. The Company sells similar components designed for other medical
      device company applications which incorporate UTMD’s technologies and designs.
      DELTA-CALTM is a calibration device used to check proper functioning of an
      arterial pressure system. In addition, UTMD sells plastic molded parts on a
      subcontract basis to a number of medical and non-medical device companies.
      UTMD
      believes that this practice helps better utilize its investment in fixed plant
      and equipment.





MARKETING





UTMD
      competes on the basis of its value-added technologies and cost effective
      clinical solutions. UTMD believes that a number of its products are strong
      brands because they are recognized as clinically different, and consistently
      reliable in achieving their intended results. The Company’s primary marketing
      challenge is to keep its customers focused on those differences and their
      important clinical benefits. Access to the clinical decision-makers, together
      with the active involvement of clinicians in medical device purchasing
      decisions, is critical to the Company’s success. **





UTMD’s
      specialty focus, innovation and extensive experience in its specialties are
      important marketing attributes which help assure its ability to successfully
      compete and survive in a consolidating marketplace where many suppliers try
      to
      degrade product differences.





For
      U.S.
      hospitals, which represent about 60% of UTMD’s device sales, marketing efforts
      are complicated and fragmented. Although UTMD’s focus is with clinicians who
      take responsibility for obtaining optimal patient care outcomes, other people
      who are primarily administrative are often responsible for hospital purchasing
      decisions.





DISTRIBUTION





An
      important success factor in the current healthcare industry is access to
      customers. Although the U.S. hospital supplier environment has been
      consolidating as a result of group purchasing organizations (GPOs), or their
      equivalent, establishing long term contracts with large medical device suppliers
      with diverse product lines in recent years, the financial relationships and
      true
      benefits for hospitals has come under increased scrutiny, both by hospitals’
managements themselves and by the government. As a potential positive factor
      to
      UTMD’s future performance, the increased scrutiny may lead to an understanding
      consistent with UTMD’s belief that hospitals are not currently saving money
      under the GPO contracts. In addition, the longer term overall cost of care
      will
      be substantially higher, with quality of care lower, as innovative suppliers
      are
      excluded from participating in the marketplace.





The
      length of time and number of administrative steps required in evaluating new
      products for use in hospitals has grown substantially in recent years. As a
      potential negative factor to future performance, as UTMD introduces new products
      it believes are safer and more effective, it may find itself excluded from
      certain customers because of the existence of long term supply agreements for
      existing products. UTMD may also be unable to establish viable relationships
      with other medical device companies that do have access to users but lack an
      interest in the Company’s approach.







6








In
      the
      United States, UTMD sells its products through its own directly employed sales
      force and through selective independent manufacturer representatives. The direct
      representatives concentrate on applications for UTMD products where customer
      training and support are important. As of February 2006, the direct sales force
      is comprised both of “outside” representatives operating remotely in specific
      geographic areas, and “inside” representatives who operate by telephone from
      corporate offices. Direct representatives are trained to understand the medical
      procedures being performed within UTMD’s clinical focus. Through the use of its
      one-on-one contacts with physicians and other clinical practitioners directly
      involved in patient care, the direct sales force positions UTMD to gain market
      leadership with solutions to clinical problems. In addition to its direct
      representatives, UTMD utilizes third party consulting clinical specialists
      to
      augment its customer training programs.





When
      hospital customers request it, UTMD provides its products through national
      distribution companies, also known as Med/Surg distributors. Sales to Med/Surg
      distributors currently comprise less than 8% of total domestic sales. In
      contrast, ten years ago, national distributors and independent stocking
      distributors in the U.S. represented more than 65% of UTMD’s direct domestic
      Ob/Gyn business.





In
      addition to the above traditional sales approaches, UTMD encourages customers
      to
      take advantage of fast and easy direct online ordering at **www.order.utahmed.com** **.** UTMD’s
      website provides all the convenience of e-commerce demonstrated on other sites.
      UTMD’s experience to date with third party Internet-based exchanges suggests
      that they do not warrant a significant investment of UTMD resources until
      customers show more interest in their use.




Additionally,
      UTMD sells component parts to medical companies for use with their product
      lines. This OEM distribution channel effort is simply maximizing utilization
      of
      manufacturing capabilities that are otherwise needed for UTMD's primary
      business, and does not compete with or dilute UTMD’s direct distribution and
      marketing programs.





Internationally,
      the Company sells its products through about 100 regional distributors and
      OEMs
      (other medical device manufacturers). The international business is driven
      by
      the initiative and resourcefulness of those independent distributors. UTMD’s
      Internet website **www.utahmed.com** is a
      frequent conduit for international customer inquiries.





NEW
      PRODUCT DEVELOPMENT





New
      product development has been a key to UTMD’s market identity as an innovator.
      Product development takes three interrelated forms: 1) improvements,
      enhancements and extensions of current product lines in response to clinical
      needs or clinician requests, 2) invention of devices that allow significantly
      different methods of performing medical procedures, representing a quantum
      improvement in safety, efficacy and/or cost of care, and 3) acquisitions of
      products or technology from others.





Because
      of UTMD’s reputation as a successful innovator, its financial strength and its
      established clinician user base, it enjoys a substantial inflow of new product
      ideas. Internal development, joint development, product acquisitions and
      licensing arrangements are all included as viable options in the investigation
      of opportunities. Only a small percentage of ideas survive feasibility
      screening. For internal development purposes, projects are assigned to a project
      manager who assembles an interdisciplinary, cross-functional development team.
      The team’s objective is to have a clinically proven, manufacturable and FDA
      released product ready for marketing by a specific date. Approximately ten
      projects on the average, depending on the level of resources required, are
      underway at UTMD at any given time. More than 50% of assigned projects do not
      succeed in attaining a product that meets all of the Company’s criteria. In
      particular, this includes a product that is highly reliable, easy to use,
      cost-effective, safe, useful and differentiated from the competition. Once
      a
      product is developed, tooled, fully tested and cleared for marketing by the
      FDA,
      there remains a reasonable probability it cannot be successfully marketed for
      any number of reasons, not the least of which is being beaten to the market
      by a
      competitor with a better solution, or not having access to users because of
      limitations in marketing and distribution resources or exclusionary contracts
      of
      GPOs. In recent years since 2001, UTMD’s new product development initiatives
      have been foreclosed by the FDA’s unfounded attempts to shut the Company down.







7








UTMD’s
      current product development projects are in three areas of focus: 1) obstetrics/
      fetal monitoring, 2) neonatal intensive care, and 3) specialized procedures
      for
      the assessment and treatment of cervical/uterine disease. Internal product
      development expenses are expected to be in the range of 1-2% of sales in 2006.
      In 2005, UTMD spent $320 on internal product development activities, or 1.2%
      of
      sales. In 2004 and 2003, internal new product development expenses were $292
      (1.1% of sales) and $288 (1.1% of sales), respectively.





EMPLOYEES





At
      December 31, 2005, the Company had 209 employees, and an additional six contract
      employees. The contract employees represent UTMD’s desire to utilize handicapped
      persons where possible, hired through the Utah state-supported Work Activity
      Center. The average tenure of UTMD’s employees is about nine years, which
      conveys an important benefit due to the level of training required to produce
      consistent high quality medical devices. The Company's continued success will
      depend to a large extent upon its ability to retain skilled employees. No
      assurances can be given that the Company will be able to retain or attract
      such
      employees in the future, although management is committed to providing an
      attractive environment in which reliable, creative and high achieving people
      wish to work.





To
      the
      best of the Company's knowledge, none of the Company's officers or directors
      is
      bound by restrictive covenants from prior employers that limit their ability
      to
      contribute to UTMD’s programs. All professional employees sign a code of conduct
      and a confidentiality and non-compete agreement, as a condition of employment,
      and as consideration for receipt of stock option awards and participation in
      the
      management bonus program. All employees participate in performance-based bonus
      programs. None of the Company's employees is represented by labor unions or
      other collective bargaining groups.





PATENTS
      AND TECHNOLOGY LICENSES





The
      Company owns or exclusively licenses thirty-one unexpired patents, and is the
      licensee of certain other technology. There can be no assurance, however, that
      patents will be issued with respect to any pending applications, that marketable
      products will result from the patents or that issued patents can be successfully
      defended in a patent infringement situation.





The
      ability of the Company to achieve critical mass in the marketplace depends
      in
      part on the protection afforded by its patents. In cases where competitors
      introduce products that may infringe on UTMD’s technology, the Company has an
      obligation to its shareholders to defend its intangible property to the extent
      that it can afford to do so.





In
      January 2002, a jury in the U.S. Federal District Court for the District of
      Utah
      rendered a verdict in favor of UTMD that the Tyco/Kendall•LTP Softrans 4000
      Intrauterine Pressure Catheter literally infringes UTMD’s Patent No. 4,785,822
      for inventions relating to a “Disposable Intracompartmental Pressure
      Transducer.” UTMD markets the Intran® Plus which practices this patent. The
      patent infringement lawsuit had been filed in early 1997. In September 2002,
      the
      US Federal District Court issued a formal judgment awarding UTMD approximately
      $23 million in damages and accrued interest. Additional damages for infringing
      product sold by Tyco after the January verdict were to be determined by the
      Court at a later date. In addition, the Court issued a permanent injunction
      against Tyco prohibiting the manufacturing, marketing, selling and/or otherwise
      distributing of the 4000 Softrans IUPC for the duration of UTMD’s patent.
      Tyco/Kendall filed an appeal to the decision. In December 2003, the United
      States Court of Appeals for the Federal Circuit upheld in entirety the District
      Court’s judgment. In January 2004, UTMD received $31 million from Tyco/Kendall,
      including post judgment augmented damages and interest.





As
      a
      matter of policy, UTMD has acquired and will continue to acquire the use of
      technology from third parties that can be synergistically combined with UTMD
      proprietary product ideas. During 2005, ongoing royalties included in cost
      of
      goods sold were $3. Other royalties have been previously paid as a lump sum,
      or
      are incorporated into the cost of supplied components which practice certain
      patents of third parties. Also as a matter of policy, UTMD licenses its
      proprietary technology to others in circumstances where licensing does not
      directly compete with UTMD's own marketing initiatives. During 2005, the Company
      received $450 in royalty income, the same as in 2004 and 2003. UTMD’s future
      financial performance also depends on the marketing ability of other companies
      that license UTMD’s technology.







8








GOVERNMENT
      REGULATION





UTMD's
      products and manufacturing processes are subject to regulation by the U.S.
      Food
& Drug Administration (“FDA”), as well as other regulatory bodies globally.
      The FDA has authority to regulate the marketing, manufacturing, labeling,
      packaging and distribution of medical devices in the U.S. In addition,
      requirements exist under other federal laws and under state, local and foreign
      statutes that may apply to the manufacturing and marketing of the Company's
      products.





All
      manufacturers of medical devices must register with the FDA and list all medical
      devices produced by them. The listing must be updated annually. In addition,
      prior to commercial distribution of some devices for human use, a manufacturer
      must file a notice with the FDA, setting forth certain information regarding
      the
      safety and effectiveness of the device that is acceptable in content to the
      FDA.





Devices
      which are classified in Class I are subject only to the general controls
      concerning adulteration, misbranding, good manufacturing practices, record
      keeping and reporting requirements. Devices classified in Class II must, in
      addition, comply with special controls or performance standards promulgated
      by
      the FDA.





All
      of
      UTMD’s present products are Class I or Class II devices. The Company is in
      compliance with all applicable U.S. regulatory standards including CFR Part
      820,
      the FDA Quality System Regulation (QSR) promulgated in 1997, known as cGMP
      (current good manufacturing practices).





In
      1994,
      UTMD received certification of its quality system under the ISO 9001/EN 46001
      standards (“ISO” stands for “International Organization of Standardization”)
      which it maintained until December 2003. In October 2003, UTMD’s Utah facility
      was certified under the more stringent ISO 13485 standard for medical devices,
      which it currently maintains. UTMD’s Ireland facility is certified under the
      concomitant ISO 13488 standard. The U.S. FDA QSR was developed in harmony with
      the ISO standards. UTMD remains on a continuous periodic audit schedule by
      its
      independent notified body in order to stay current with international regulatory
      standards, and retain its certification. The most recent audit was conducted
      in
      February 2006. UTMD has received formal product certifications allowing the
      use
      of the CE Mark (demonstrates proof of compliance with the European Community’s
      ISO standards) for essentially all of its products.





SOURCES
      AND AVAILABILITY OF RAW MATERIALS





Most
      of
      the components which the Company purchases from various vendors are readily
      available from a number of sources. Alternate sourcing of various components
      is
      continually underway. Vendors are qualified by Corporate Quality Assurance.
      The
      Company has a vendor quality monitoring program that includes routinely checking
      incoming material for conformance to specifications, as required per written
      procedures.





EXPORTS





Revenues
      from customers outside the U.S. in 2005 were $6,391 (23% of total sales),
      compared to $6,029 (23% of total sales) in 2004 and $5,872 (22% of total sales)
      in 2003. Blood pressure monitoring products represented 66% of international
      sales in 2005, compared to 67% in both 2004 and 2003. International Ob/Gyn
      and
      neonatal product sales were $2,191 in 2005, compared to $2,019 in 2004 and
      $1,930 in 2003. For financial information by geographical area, please see
      Notes
      1, 4 and 9 to the Consolidated Financial Statements.





UTMD
      regards the international marketplace as an important element of its growth
      strategy. UTMD is keenly aware that not only are international markets different
      from the U.S. market, but also that each country has its own set of driving
      influences that affects the dynamics of the nature of care given and medical
      devices used. In 1996 UTMD completed construction of a manufacturing facility
      in
      Athlone, County Westmeath, Ireland. The facility offers a number of advantages:
      1) from a marketing point of view, better response to European Union customers,
      including a better understanding of customized needs, less costly distribution
      and duty-free access to over 350 million patients; 2) from a regulatory point
      of
      view, faster new product introductions; and 3) from a manufacturing point of
      view, reduced dependence on one manufacturing site and increased capacity for
      existing U.S. facilities.







9








BACKLOG





As
      a
      supplier of primarily disposable hospital products, the nature of UTMD’s
      business necessitates being very responsive to customer orders and delivering
      products quickly. Virtually all direct shipments to end users are accomplished
      within one week of receipt of customer purchase order. Backlog shippable in
      less
      than 90 days was $653 as of January 1, 2005 and $910 as of January 1, 2006.





SEASONAL
      ASPECTS





The
      Company's business is generally not affected by seasonal factors.





PRODUCT
      LIABILITY RISK MANAGEMENT





The
      risk
      of product liability lawsuits is a negative factor in UTMD’s business because
      UTMD’s products are frequently used in inherently life threatening situations to
      help physicians achieve a more positive outcome than what might otherwise be
      the
      case. In any lawsuit against a company where an individual plaintiff suffers
      a
      permanent physical injury, a possibility of a large award for damages exists
      whether or not a causal relationship exists. However, no such damages have
      been
      awarded against UTMD in its 27 year history.





UTMD
      is
      self-insured for product liability risk and reserves funds against its current
      performance on an ongoing basis to provide for its defense should any lawsuits
      be filed. The best defense the Company believes that it has is the consistent
      conformance to specifications of its proven safe and effective products. In
      the
      last thirteen years, UTMD has been named as a defendant, along with each
      attending physician and hospital, in four product liability lawsuits. All four
      were related to operative vaginal deliveries where a UTMD VAD birthing cup
      or
      hand pump was used by the surgeon. The VADS products in all four cases did
      conform to specifications. UTMD was ultimately dismissed as a defendant in
      the
      lawsuits, and legal costs were not material to performance. During the same
      thirteen year period of time, in which more than 16 million UTMD finished
      devices were used, no other UTMD product was the subject of a product liability
      lawsuit. There are currently no product liability lawsuits in which UTMD is
      a
      defendant.





FORWARD
      LOOKING INFORMATION





This
      report contains certain forward-looking statements and information relating
      to
      the Company that are based on the beliefs of management as well as assumptions
      made by management based on information currently available. When used in this
      document, the words “anticipate,” “believe,” “project,” “estimate,” “expect,”
“intend” and similar expressions, as they relate to the Company or its
      management, are intended to identify forward-looking statements. Such statements
      reflect the current view of the Company respecting future events and are subject
      to certain risks, uncertainties and assumptions, including the risks and
      uncertainties stated throughout the document and in Item 1A. Although the
      Company has attempted to identify important factors that could cause actual
      results to differ materially, there may be other factors that cause the forward
      statement not to come true as anticipated, believed, projected, expected, or
      intended. Should one or more of these risks or uncertainties materialize, or
      should underlying assumptions prove incorrect, actual results may differ
      materially from those described herein as anticipated, believed, projected,
      estimated, expected or intended.










10








**ITEM
      1A - RISK FACTORS**





General
      risk factors that may impact the Company’s revenues include: the market
      acceptance of competitive products; administrative practices of group purchasing
      organizations; obsolescence caused by new technologies; the possible
      introduction by competitors of new products that claim to have many of the
      advantages of UTMD’s products at lower prices; the timing and market acceptance
      of UTMD’s own new product introductions; UTMD’s ability to efficiently and
      responsively manufacture its products, including the possible effects of lack
      of
      performance of suppliers; success in gaining access to important global
      distribution channels; budgetary constraints; the timing of regulatory approvals
      for newly introduced products; regulatory intervention in current operations;
      and third party reimbursement of health care costs of customers.





Negative
      factors that may adversely impact future performance include managed care
      reforms or hospital group buying agreements that may limit physicians’ ability
      to choose certain products or procedures, new products introduced by other
      companies that displace UTMD’s products, new product regulatory approval delays,
      changes in the Company’s relationships with distribution partners, and loss of
      key personnel.





The
      length of time and number of administrative steps required in adopting new
      products for use in hospitals has grown substantially in recent years. As a
      potential negative factor to future performance, as UTMD introduces new products
      it believes are safer and more effective, it may find itself excluded from
      certain customers because of the existence of long term supply agreements for
      existing products. UTMD may also be unable to establish viable relationships
      with other medical device companies that do have access to users but lack an
      interest in the Company’s approach.





Risk
      factors, in addition to the risks outlined in the previous paragraph and
      elsewhere in this report that may impact the Company’s assets and liabilities,
      as well as cash flows, include: risks inherent to companies manufacturing
      products used in healthcare, including claims resulting from the improper use
      of
      devices and other product liability claims; defense of the Company’s
      intellectual property; productive use of assets in generating revenues;
      management of working capital, including inventory levels required to meet
      delivery commitments at a minimum cost; and timely collection of accounts
      receivable.





Additional
      risk factors that may affect non-operating income include: the continuing
      viability of the Company’s technology license agreements; actual cash and
      investment balances; asset dispositions; and acquisition activities that may
      require external funding.








**ITEM
      1B - UNRESOLVED STAFF COMMENTS**





None








**ITEM
      2 - PROPERTIES**





Office
      and Manufacturing Facilities.


The
      Company's current operations are located in an 100,000 square foot facility
      in
      Midvale, Utah, a suburb of Salt Lake City, a 20,000 square foot facility in
      Redmond, Oregon, and a 77,000 square foot facility in Athlone, County Westmeath,
      Ireland. UTMD owns its property and facilities in Utah and Ireland, with the
      exception of a long-term lease on one section of its Midvale parking lot. The
      Oregon facility is leased.





UTMD
      is a
      vertically-integrated manufacturing company. Capabilities include silicone
      and
      plastics-forming operations including injection molding, insert and
      over-molding, thermoforming and extrusion; sensor production; manual and
      automated assembly of mechanical, electrical and electronic components; parts
      printing; various testing modalities; advanced packaging in clean room
      conditions; and a machine shop for mold-making and fabrication of assembly
      tools
      and fixtures. Capabilities also include an R&D laboratory for both
      electronic and chemical processes, software development resources,
      communications and computer systems networked real time internationally, and
      administrative offices.











11







**ITEM
      3 - LEGAL PROCEEDINGS**





The
      Company may be a party from time to time in litigation incidental to its
      business. Presently, there is no litigation for which the Company believes
      the
      outcome may be material to its financial results.





On
      August
      9, 2004, the United States of America filed a lawsuit in The United States
      District Court, Central District of Utah v. UTMD, Kevin L. Cornwell, Chairman
      & CEO, and Ben D. Shirley, Vice President, Product Development & Quality
      Assurance. The government (FDA) sought a permanent injunction from alleged
      deviations of the Quality System Regulation (QSR). The relief sought was to
      enjoin the Company from manufacturing and shipping products until it conforms
      with the QSR in a manner that is acceptable to the FDA. The trial occurred
      September 26, 2005 to October 4, 2005, with Judge Bruce R. Jenkins
      presiding.





On
      October 21, 2005, the Court issued an order finding UTMD has been and currently
      is in compliance with the QSR, dismissing all FDA allegations. The judge said
      in
      his order, among other things,


“It
      makes
      no sense for the Court to order Utah Medical to do something they are already
      doing.”





The
      government decided that it would not appeal the decision.




In
      February 2005, after formal discovery in the lawsuit brought by the FDA
      confirmed UTMD’s suspicions, UTMD asserted a counterclaim against the FDA for
      abuse of process. On June 30, 2005, in response to the government’s motion to
      dismiss, the Court dismissed UTMD’s counterclaim without prejudice, indicating
      that the counterclaim was not timely. As a result, on July 15, 2005, UTMD filed
      an administrative claim under the Federal Tort Claims Act with the U.S.
      Department of Health and Human Services, requesting restitution of litigation
      costs and lost profits as damages. This was done as a matter of procedure to
      satisfy the Court. On February 10, 2006, the government denied the
      administrative claim. UTMD now has until August 9, 2006 to file a request for
      reconsideration, or a lawsuit.







**ITEM
      4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**





No
      matter
      was submitted to a vote of security holders through the solicitation of proxies
      or otherwise during the fourth quarter of the fiscal year covered by this
      report.










12






**PART
      II**





**ITEM
      5 - MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
      ISSUER PURCHASES OF EQUITY SECURITIES**





Market
      Information.


UTMD's
      common stock trades on the Nasdaq National Market (symbol:UTMD). The following
      table sets forth the high and low sales price information as reported by Nasdaq
      for the periods indicated:





2005
            
            2004High
            
            Low
            
            High
            
            Low1st
                Quarter
            
            $
            22.80
            
            $
            20.06
            
            $
            26.45
            
            $
            23.522nd
                Quarter
            
            
            23.50
            
            
            20.20
            
            
            27.19
            
            
            23.803rd
                Quarter
            
            
            24.88
            
            
            22.80
            
            
            27.00
            
            
            16.024th
                Quarter
            
            
            32.80
            
            
            24.50
            
            
            23.45
            
            
            17.50





Stockholders.


The
      approximate number of beneficial stockholders of UTMD’s common stock as of March
      10, 2006 was 2,800.





Dividends.


On
      May
      10, 2004, UTMD announced that it would resume paying a quarterly cash dividend.
      The following sets forth cash dividends declared since May 10,
      2004:





Record
                Date
            Payable
                Date
            Per
                Share AmountJune
                16, 2004
            July
                5, 2004
            $  
                0.15September
                16, 2004
            October
                5, 2004
            0.15December
                16, 2004
            January
                5, 2005
            0.15March
                16, 2005
            April
                5, 2005
            0.15June
                17, 2005
            July
                5, 2005
            $   0.155September
                16, 2005
            October
                5, 2005
            0.155December
                16, 2005
            January
                5, 2006
            0.17March
                16, 2006
            April
                5, 2006
            0.182004
                total paid
            
            $  
                0.302005
                total paid
            
            $  
                0.61








Issuer
      Purchases of Equity Securities.


The
      following table details purchases by UTMD of its own securities during fourth
      quarter 2005.





Period
            Total
                Number of
              Shares
              Purchased
                (1)
            Average
              Price
                Paid
              per
                Share
            Total
                Number of
              Shares
                Purchased as
              Part
                of Publicly
              Announced
                Plans or
              Programs
                (1)
            Maximum
                Number (or
              Approximate
                Dollar Value)
              of
                Shares that May be
              Purchased
                Under the Plans
              or
                Programs (1)10/01/05
                - 10/31/05
            19,711
            $
                28.21
            19,71111/01/05
                - 11/30/05
            23,832
            28.82
            23,83212/01/05
                - 12/31/05
            29,957
            28.65
            29,957Total
            73,500
            $
                28.58
            73,500










13








(1) In
      fourth
      quarter 2005 UTMD repurchased an aggregate of 73,500 shares of its common stock
      at an average cost of $28.58 per share pursuant to a continued open market
      repurchase program instituted in August 1992. Since 1992 through 2005, the
      Company has repurchased 6,352,391 shares at an average cost of $11.43 per share
      including broker commissions and fees in open market transactions. In addition,
      the Company conducted tender offer transactions in which it purchased an
      additional 2,775,742 shares at an average cost of $9.76 per share including
      fees
      and administrative costs. In total, UTMD has repurchased over 9.1 million of
      its
      shares at an average price of $10.92 per share since 1992. To complete the
      picture relating to current shares outstanding, since 1992 the Company’s
      employees and directors have exercised and purchased 1.6 million option shares
      at an average price of $6.96 per share. All options were awarded at the market
      value of the stock on the date of the award.





The
      frequency of UTMD’s open market share repurchases depends on the availability of
      sellers and the price of the stock. The board of directors has not established
      an expiration date or a maximum dollar or share limit for UTMD’s continuing long
      term program of open market share repurchases.





The
      purpose of UTMD’s share repurchases is to maximize the value of the Company for
      its continuing shareholders, and maximize its return on shareholder equity
      by
      employing excess cash generated from effectively managing its business. UTMD
      does not intend to repurchase shares that would result in terminating its Nasdaq
      National Market listing.








**ITEM
      6 - SELECTED FINANCIAL DATA**


Dollar
      amounts are in thousands, except per share data.





The
      following selected consolidated financial data of UTMD and its subsidiaries
      for
      the five years ended December 31, 2005, are derived from the audited financial
      statements and notes of UTMD and its subsidiaries, certain of which are included
      in this report. The selected consolidated financial data should be read in
      conjunction with UTMD’s Consolidated Financial Statements and the Notes included
      elsewhere in this report.





Year
      Ended December 31





2005
            
            2004
            
            2003
            
            2002
            
            2001Net
                Sales
            
            $
            27,692
            
            $
            26,485
            
            $
            27,137
            
            $
            27,361
            
            $
            26,954Net
                Income
            
            
            7,547
            
            
            10,220
            
            
            20,761
            
            
            7,165
            
            
            5,934Earnings
                Per Common Share (Diluted)
            
            
            1.80
            
            
            2.19
            
            
            4.25
            
            
            1.36
            
            
            1.14Total
                Assets
            
            
            41,642
            
            
            41,262
            
            
            49,694
            
            
            23,387
            
            
            23,572Working
                Capital
            
            
            22,683
            
            
            20,194
            
            
            21,405
            
            
            5,437
            
            
            5,400Long-term
                Debt
            
            
            5,336
            
            
            -
            
            
            -
            
            
            4,956
            
            
            2,501Cash
                Dividends Per Common Share
            
            
            0.61
            
            
            0.30
            
            
            None
            
            
            None
            
            
            None





Quarterly
      Data for 2005




First
                Quarter
            
            Second
                Quarter
            
            Third
                Quarter
            
            Fourth
                QuarterNet
                Sales
            
            $
            6,652
            
            $
            7,028
            
            $
            7,001
            
            $
            7,011Gross
                Profit
            
            
            3,734
            
            
            4,022
            
            
            4,014
            
            
            3,983Net
                Income
            
            
            1,969
            
            
            1,887
            
            
            1,789
            
            
            1,903Earnings
                Per Common Share (Diluted)
            
            
            .46
            
            
            .45
            
            
            .44
            
            
            .46








14







Quarterly
      Data for 2004




First
                Quarter
            
            Second
                Quarter
            
            Third
                Quarter
            
            Fourth
                QuarterNet
                Sales
            
            $
            6,616
            
            $
            6,827
            
            $
            6,670
            
            $
            6,372Gross
                Profit
            
            
            3,850
            
            
            3,934
            
            
            3,779
            
            
            3,503Net
                Income
            
            
            5,175
            
            
            1,841
            
            
            1,807
            
            
            1,397Earnings
                Per Common Share (Diluted)
            
            
            1.07
            
            
            .38
            
            
            .39
            
            
            .32






**ITEM
      7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF
      OPERATIONS**







The
      following comments should be read in conjunction with accompanying financial
      statements.





Productivity
      of Assets and Working Capital.


a) Assets .
      Year-end 2005 total assets were $41,642, compared to $41,262 in 2004. Cash
      (and
      investments of cash) balances were $17,453 and $16,928, 42% and 41% of total
      assets, at year-end 2005 and 2004, respectively. Year-end cash balances
      increased, even though UTMD paid $2,445 in dividends, $8,604 in share
      repurchases and $2,933 in litigation costs in 2005, because of continuing
      excellent cash generated from operations (before litigation costs) of $9,384
      and
      a $5,336 loan taken out by UTMD’s Ireland subsidiary. Excluding cash and
      investment balances, average total asset turns in 2005 were 1.14, consistent
      with years prior to 2003. Year-end assets since 2003 were substantially higher
      than in prior years due to Tyco patent infringement damages awarded to UTMD.
      In
      2006, total assets excluding cash balances will continue to be less than annual
      sales. Improvement in total asset turns will depend on reduction of excess
      cash
      and investment balances.





Property,
      plant and equipment (PP&E) assets are comprised of Utah, Oregon and Ireland
      manufacturing molds, production tooling and equipment, test equipment, computer/
      communications equipment and software, and the Utah and Ireland facilities.
      UTMD
      leases the Oregon facility as part of the 1997 CMI acquisition, and a portion
      of
      its Midvale, Utah parking lot. In 2005, net PP&E declined $898 because
      depreciation of $626 exceeded new purchases of $345, while Ireland assets
      decreased $605 in dollar-value as a result of a weaker U.S. dollar (USD). The
      lower consolidated PP&E balances combined with higher sales resulted in
      substantially higher PP&E turns. The current book value of consolidated
      PP&E is 35% of acquisition cost. Management believes that PP&E is in
      good working order and capable of supporting increased sales activity. In 2006,
      depreciation of fixed assets is expected to again exceed new PP&E purchases
      required to sustain current operations. Combining this with expected higher
      2006
      sales suggests that PP&E asset turns will again improve in 2006, unless
      offset by a strengthening of the Euro relative to the USD, inflating the dollar
      value of Ireland PP&E.





Average
      inventory turns in 2005 increased to 3.9 from 3.7 in 2004, despite a $446
      increase in ending inventories, primarily as a result of the 5% increase in
      2005
      sales activity. Management has set this level of 3.9 turns for its objective
      in
      2006. Net (after allowance for doubtful accounts) year-end accounts receivable
      (A/R) balances decreased $90 at the same time that 2005 sales activity
      increased, yielding lower average days in A/R on December 31, 2005 of 45 days,
      based on 4Q 2005 shipment activity. This was well within management’s continuing
      objective of 55 days. A/R over 90 days from invoice date of about 5% of total
      A/R at year-end were about the same as at the end of the prior year. The Company
      believes the older A/R are collectible or within its reserve balances for
      uncollectible accounts.





Working
      capital at year-end 2005 was $22,683 compared to $20,194 at year-end 2004.
      Both
      of these amounts substantially exceed working capital needs for normal
      operations. UTMD’s current ratio increased to 8.1 from 5.7, due to a substantial
      decrease in UTMD’s litigation reserve (part of accrued expenses) reflecting the
      dismissal and conclusion of the FDA lawsuit filed in August 2004, as well as
      a
      substantial decrease in income tax payable resulting from the one-time tax
      holiday from the American Jobs Creation Act of 2004. Since the large majority
      of
      the working capital balance is excess cash (and cash investments), the current
      ratio going forward in 2006 will depend primarily upon the timing and extent
      of
      use of existing cash and investment balances. The other current asset and
      current liability components of working capital are expected to remain
      consistent with 2005 and within management targets, given an increase in 2006
      sales.







15








Intangible
      assets, which are comprised of goodwill resulting from acquisitions and the
      costs of obtaining patents and other technology rights, were $7,624 at the
      end
      of 2005 compared to $7,674 sat the end of 2004. The goodwill balance of $7,191,
      reduced 24% from time of acquisition, is the result of three acquisitions in
      1997, 1998 and 2004 which were made in cash at conservative valuations. The
      reduction was goodwill amortization as a result of UTMD using previous GAAP
      through 2001 for the purchase method of acquisition accounting. Under current
      GAAP, goodwill will not be expensed unless and until the market value of the
      acquired entity becomes impaired. The three acquisitions continue to be viable
      parts of UTMD’s overall business activities, representing 33% of total sales in
      2005. UTMD does not expect the goodwill value of the acquisitions to become
      impaired in 2006. Other intangible assets decreased $50 in 2005 as a result
      of
      amortization. Total net intangible assets at the end of 2005 represented 18%
      of
      total assets.





Liabilities .
      Although UTMD’s current liabilities decreased from the end of 2004 to the end of
      2005 by $1,161, total liabilities increased $3,680, yielding a 2005-ending
      total
      debt ratio of 21%, up from 12% at the end of 2004. Current liabilities declined
      primarily because the ending litigation reserve (accrued liabilities) was $1,135
      lower. However, the long term note payable initiated in Ireland in December,
      which had a balance of $5,336 at the end of 2005, more than offset the
      reductions in other liabilities. The purpose of the note payable was to finance
      the repatriation of profits achieved in Ireland since 1996, under The American
      Jobs Creation Act of 2004. UTMD Ltd. plans to repay this note from profits
      generated over the next five years. Deferred income taxes declined in 2005
      due
      mainly to reversing previously accrued deferred income taxes for undistributed
      earnings from UTMD’s foreign subsidiary.





Results
      of Operations.


a) Revenues .
      Global
      consolidated sales increased 5% in 2005 compared to 2004. Foreign
      (international) sales increased 6%. U.S. (domestic) sales increased 4%. Sales
      increased despite customers being negatively affected by the August 10, 2004
      FDA
      press release that announced that the FDA had filed a lawsuit against UTMD
      alleging lack of compliance with the Quality System Regulation (QSR). In October
      2005, a Federal Court ruled that UTMD has been and is complying with the QSR,
      and dismissed the FDA allegations in entirety. The FDA did not appeal.
      International revenues also continued to be negatively affected in 2005 because
      of the FDA’s refusal from early 2003 until late November 2005 to provide
      Certificates to Foreign Governments (CFGs), certifying UTMD’s compliance with
      the QSR for the benefit of countries outside the U.S. which depend on the FDA’s
      regulatory lead.





UTMD
      divides its domestic sales into two primary distribution channels: “direct
      sales” which are sales to end user customers by UTMD’s direct sales force,
      independent commissioned sales reps, specialty distributors and national
      hospital distribution companies, and “OEM sales” which are component sales to
      other companies where products are packaged and resold as part of another
      company’s finished product offerings. As a percentage of total domestic sales,
      direct sales were 94% of domestic sales in 2005, and 93% in both 2004 and 2003.
      The remaining sales were OEM sales, e.g. 6% of domestic sales in 2005 were
      domestic OEM sales. Domestic direct sales represented 72% of global consolidated
      sales in both 2005 and 2004, compared to 73% in 2003.





Domestic
      direct sales which appeared least affected by the FDA announcement were sales
      where clinicians make the purchase decision. Consequently, the least affected
      sales were sales to physician offices and clinics. Hospital labor and delivery
      (L&D) department sales where administrators determine what products are
      purchased appeared to be the most affected. Hospital NICU sales were less
      affected than L&D because clinical practitioners still have major discretion
      in determining what products are purchased. In order to help offset hospital
      administrators’ concern over the August 10, 2004 FDA press release, UTMD
      employed a special “loyalty discount” which lasted for about three months in
      late 2004 . The amount of the discount which affected only 2004 sales was $374.




International
      sales in 2005 were 23% of global consolidated sales compared to 23% and 22%
      in
      years 2004 and 2003, respectively. Of the 2005 international sales,
      55%  were
      for
      customers in Europe, compared to 60% in 2004 and 58% in 2003. Ireland operations
      (UTMD Ltd.) shipped 57% of international sales (in USD terms) in 2005, compared
      to 59% in 2004 and 63% in 2003. UTMD Ltd. 2005 shipments, including intercompany
      sales to Midvale, were up 5% in euro terms and up 4% in USD terms compared
      to
      2004.







16








UTMD
      groups sales into four product-line categories: 1) obstetrics, comprised of
      labor and delivery management tools for monitoring fetal and maternal
      well-being, for reducing risk in performing difficult delivery procedures and
      for improving clinician and patient safety; 2) gynecology/ electrosurgery/
      urology, comprised of tools for gynecological procedures associated primarily
      with cervical/ uterine disease including LETZ, endometrial sampling, diagnostic
      laparoscopy, and other MIS procedures; specialty excision and incision tools;
      conservative urinary incontinence therapy devices; and urology tools; 3)
      neonatal care, comprised of devices that provide developmentally-friendly care
      to the most critically ill babies including providing vascular access,
      administering vital fluids, maintaining a neutral thermal environment, providing
      protection and assisting in specialized qpplications; and 4) blood pressure
      monitoring/ accessories/ other, comprised of specialized components as well
      as
      molded parts sold on an OEM basis to other companies. In these four categories,
      UTMD’s primary revenue contributors often enjoy a dominant market share and
      typically have differentiated product features protected by patents.





Global
      revenues by product category:


2005
            
            %
            
            2004
            
            %
            
            2003
            
            %Obstetrics
            
            $
            9,774
            
            
            36
            
            $
            10,918
            
            
            41
            
            $
            11,435
            
            
            42Gynecology/
                Electrosurgery/ Urology
            
            
            5,397
            
            
            19
            
            
            5,142
            
            
            19
            
            
            5,324
            
            
            20Neonatal
            
            
            6,475
            
            
            23
            
            
            4,134
            
            
            16
            
            
            4,142
            
            
            15Blood
                Pressure Monitoring and Accessories*
            
            
            6,046
            
            
            22
            
            
            6,292
            
            
            24
            
            
            6,236
            
            
            23Total:
            
            $
            27,692
            
            
            100
            
            $
            26,485
            
            
            100
            
            $
            27,137
            
            
            100*includes
                molded components sold to OEM
                customers.





International
      revenues by product category:


2005
            
            %
            
            2004
            
            %
            
            2003
            
            %Obstetrics
            
            $
            593
            
            
            9
            
            $
            774
            
            
            13
            
            $
            665
            
            
            11Gynecology/
                Electrosurgery/ Urology
            
            
            1,199
            
            
            19
            
            
            966
            
            
            16
            
            
            1,064
            
            
            18Neonatal
            
            
            400
            
            
            6
            
            
            278
            
            
            5
            
            
            200
            
            
            4Blood
                Pressure Monitoring and Accessories*
            
            
            4,200
            
            
            66
            
            
            4,010
            
            
            66
            
            
            3,942
            
            
            67Total:
            
            $
            6,392
            
            
            100
            
            $
            6,028
            
            
            100
            
            $
            5,871
            
            
            100*includes
                molded components sold to OEM
                customers.





As
      a
      brief explanation of revenues in the above tables:


1.
      Of the
      $1,144 decline in total obstetrics sales in 2005, $76 was from lower sales
      of
      vacuum-assisted delivery systems (VADS), a 6% decline, and $902 from lower
      Intran Plus (IUPC) sales, an 11% decline. The lower IUPC and VADS sales resulted
      primarily from concerns of hospital administrators related to the FDA press
      release of August 10, 2004. Other contributing factors included a trend in
      obstetrics practice that favors abdominal operative deliveries over vaginal
      operative deliveries because of medical malpractice litigation risk, and
      increased competition including effects of product bundling agreements. Cheaper
      priced, less clinically-effective products represent significant competition
      where hospital administrators are constrained by GPO contracts or may not take
      the total cost of care into consideration, including increased risk of
      complications and utilization rates.





2.
      Gynecology/ electrosurgery/ urology product sales which had been negatively
      affected by the 2003 FDA refusal to provide CFGs for foreign customers, and
      the
      2004 FDA press release which caused concern among domestic customers, rebounded
      in 2005.





3.
      Consolidated global neonatal product sales increased 57% in 2005. The closing
      and move to Mexico of the San Antonio manufacturing operations of UTMD’s
      competitor, NeoCare, a subsidiary of Arrow International, was a positive factor
      for UTMD’s 2005 neonatal product sales.




4.
      International blood pressure monitoring and accessories (BPM) sales increased
      5%, but domestic BPM sales decreased 19%. Domestic BPM sales were negatively
      affected by the August 2004 FDA press release.









17








Looking
      forward to 2006, UTMD’s improvement in sales depends on UTMD’s continued
      recapture of lost sales due to the unnecessary concern caused by the August
      10,
      2004 FDA press release, continued expansion in clinical acceptance of newer
      specialty products, release of new products after FDA concurrence with
      premarketing submissions and continued development of UTMD’s international
      distribution channels. Management targets a 5% revenue increase again in 2006,
      relative to the prior year.





b) Gross
      Profit .
      UTMD’s
      average 2005 gross profit margin (GPM), the surplus after costs of
      manufacturing, inspecting, packaging, sterilizing and shipping products (CGS)
      are subtracted from net revenues, was 56.9%, the same as in 2004. The GPM in
      2003 was a Company record 58.6%. In 2005, UTMD experienced higher materials
      costs, particularly for plastics, along with increased labor costs, including
      particularly costs of medical care coverage for employees. The Company continues
      to maintain facilities and other manufacturing overheads far in excess of its
      needs. As a result, it projects that the dilution of fixed overhead costs that
      will occur with increased sales in 2006 will offset the continuing increase
      in
      incremental direct material and labor costs, together with some competitive
      pressure on prices, yielding a GPM in 2006 comparable to 2005.





OEM
      sales
      are sales of UTMD components that are marketed by other companies as part of
      their product offerings. UTMD utilizes OEM sales as a means to help maximize
      utilization of its capabilities established to satisfy its direct sales
      business. As a general rule, prices for OEM sales expressed as a multiple of
      direct variable manufacturing expenses are lower than for direct sales because,
      in the OEM and international channels, UTMD’s business partners incur
      significant expenses of sales and marketing. Because of UTMD’s small size and
      period-to-period fluctuations in OEM business activity, allocations of fixed
      manufacturing overheads cannot be meaningfully allocated between direct and
      OEM
      sales. Therefore, UTMD does not report GPM by sales channels.





c)  Operating
      Profit .
      Operating profit, or income from operations, is the surplus after operating
      expenses are subtracted from gross profits. In 2004 and 2003, operating profit
      includes other operating income resulting from UTMD’s patent infringement
      victory over Tyco, net of associated expenses. That added income resulted in
      a
      net contribution to income from operating income (expense) in those two years,
      an unusual result. Operating expenses include sales and marketing (S&M)
      expenses, research and development (R&D) expenses and general and
      administrative (G&A) expenses. Combined operating expenses were $6,516 in
      2005, compared to $5,807 in 2004 and $6,486 in 2003. Litigation expenses are
      included as part of G&A expenses. Substantial litigation expenses associated
      with the dispute with the FDA are included 2003, 2004 and 2005 G&A expenses.
      In order to help clarify operating expenses, we provide the table
      below:





2005
            
            2004
            
            2003R&D
                expenses
            
            $
            320
            
            $
            292
            
            $
            289S&M
                expenses
            
            
            2,214
            
            
            2,253
            
            
            2,364G&A
                - FDA litigation expenses
            
            
            1,527
            
            
            850
            
            
            1,316G&A
                - all other expenses
            
            
            2,454
            
            
            2,412
            
            
            2,517G&A
                expenses - total
            
            
            3,981
            
            
            3,262
            
            
            3,833Total
                operating expenses
            
            $
            6,516
            
            $
            5,807
            
            $
            6,486





UTMD’s
      operating profit margin (operating profits divided by total sales) was 33.4%
      in
      2005, compared to 57.8% in 2004 and 123.1% in 2003, which does not correlate
      to
      sales since there were substantial expenses and/or other income in all three
      periods unrelated to sales. Excluding the other operating income related to
      patent infringement damages and FDA litigation expenses, operating profits
      would
      have been $10,764, $10,109 and $10,722, and operating profit margins would
      have
      been 38.9%, 38.2% and 39.5% in 2005, 2004 and 2003, respectively, which
      management believes is a better measure of operating profits relative to sales
      activity. Looking forward to 2006, UTMD expects to control operating expenses,
      excluding consideration for any remaining required FDA litigation expenses,
      at a
      level below 19% of sales, yielding a 2006 operating profit margin about 38%.





i)
      S&M expenses: S&M expenses are the costs of communicating UTMD’s
      differences and product advantages, providing training and other customer
      service in support of the use of UTMD’s solutions, processing orders and funding
      GPO fees. Because UTMD sells internationally through third party distributors,
      its S&M expenses are predominantly employed for U.S. business activity where
      it sells directly to clinical users. The largest component of S&M expenses
      is the cost of directly employing representatives that provide coverage across
      the U.S. As a percent of total sales, S&M operating expenses were 8.0% in
      2005, 8.5% in 2004 and 8.7% in 2003. In 2006, UTMD intends to substantially
      expand its direct sales force, but intends to manage S&M expenses to less
      than 9% of total sales.







18








ii)
      R&D expenses: R&D expenses include the costs of investigating clinical
      needs, developing innovative concepts, testing concepts for viability,
      validating methods of manufacture, completing regulatory documentation and
      other
      activities required for design control, responding to customer requests for
      product enhancements, and assisting manufacturing engineering on an ongoing
      basis in developing new processes or improving existing processes. As a percent
      of sales, 2005 R&D expenses were 1.2% compared to 1.1% in both 2004 and
      2003. In addition to new products still being developed, a number of existing
      products were enhanced or updated in 2005. In 2006, UTMD plans to increase
      R&D spending modestly as a percentage of sales in order to reinvigorate its
      product development pipeline. **





iii)
      G&A expenses: G&A expenses include the “front office” functional costs
      of executive management, finance and accounting, corporate information systems,
      human resources, shareholder relations, risk management, protection of
      intellectual property, and legal costs. In addition to employing the personnel
      required to coordinate or manage those functions, G&A expenses include
      outside director costs, outside legal counsel and litigation experts,
      independent accounting audit fees, 401(k) administration, NASDAQ exchange fees,
      write-offs of uncollectible receivables, business insurance costs and corporate
      contributions to charitable organizations. Aggregate G&A expenses as a
      percent of sales were 14.4% in 2005, 12.3% in 2004 and 14.1% in 2003. G&A
      expenses excluding the FDA litigation expenses were 8.9%, 9.1% and 9.3% of
      sales
      in 2005, 2004 and 2003, respectively, which management believes is a better
      indicator of G&A expenses related to sales. Excluding any remaining required
      FDA litigation expenses, UTMD plans to hold G&A expenses at a level about 9%
      of 2006 sales.





iv)
      Other
      operating income: Other operating income in both 2004 and 2003 resulted from
      UTMD’s patent infringement victory over Tyco. In January 2004, the Company
      received a payment of $30,944 in damages and interest resulting from a 2002
      District Federal Court judgment, and a post judgment settlement. The Company
      recognized operating income from that payment of $6,060 in first quarter 2004
      and $23,992 in fourth quarter 2003. Expenses related to the judgment of $892
      reduced the net other operating income recognized in 2003.





d) Non-operating
      Income, Non-operating Expense and EBT .
      Non-operating income, or other income, includes royalties from licensing UTMD’s
      technology to other companies, rent from leasing underutilized property to
      others, income earned from investing the Company’s excess cash and gains or
      losses from the sale of assets, offset by non-operating expenses which include
      interest expenses and bank fees. In prior SEC Form 10-Ks, UTMD reported the
      Tyco
      patent infringement damages as part of non-operating income, instead as part
      of
      operating income (expense). After the change in allocating Tyco patent
      infringement damages to operating expenses, non-operating income was $977 in
      2005, $798 in 2004 and $454 in 2003. In 2005 and 2004, the increases in
      investment income resulted from higher average cash and investment balances
      during the applicable years. Royalties received were $450 in all three years.
      Future royalties may vary depending on the success of other companies in selling
      products licensed by UTMD, and the remaining life of the applicable patents.
      In
      2005, UTMD paid $10 for interest expense after it borrowed €4.5 million ($5,336)
      in December to facilitate the repatriation of profits generated by its Ireland
      operations since 1996. In 2004 and 2003, interest expense was $0 and $47,
      respectively. UTMD expects interest expense of about $230 in 2006, as a result
      of the Ireland note payable. However, management still expects 2006
      non-operating income (after subtracting the interest expense) to be about the
      same as in 2005 because of projected higher investment balances and higher
      interest rates in the U.S. The actual amount of 2006 non-operating income may
      be
      lower if UTMD utilizes its excess cash for an acquisition, continued litigation
      with the FDA seeking to recover damages or substantial share repurchases.
      Non-operating income may be higher if investment balances are higher because
      the
      FDA or a Federal Court honors UTMD’s claims for damages.




Earnings
        before income taxes (EBT) result from adding UTMD’s non-operating income to its
        operating profits. EBT margin is EBT divided by sales. UTMD’s EBT margin was
        36.9%, 60.9% and 124.7% in 2005, 2004 and 2003, respectively. Excluding the
        Tyco
        and FDA items in the table above, UTMD’s EBT margin would have been 42%, 41% and
        41% of sales in 2005, 2004 and 2003, respectively, which management believes
        is
        a better indicator of past EBT related to sales. Given the 2006 projections
        previously noted, management is targeting 2006 EBT of about $11,800, or an
        EBT
        margin of 41% of sales.






19







e) Net
      Income, EPS and ROE .
      Net
      income is EBT minus income taxes, often called the “bottom line”. Net income was
      $7,547, $10,220 and $20,761 in 2005, 2004 and 2003, respectively. The effective
      income tax rate was 26.1%, 36.6% and 38.7% respectively. The significantly
      lower
      income tax provision in 2005 was a result of The American Jobs Creation Act
      of
      2004 (the Act) enacted in October 2004 which allows a temporary tax deduction
      on
      repatriated foreign earnings, which must be accomplished in 2005. UTMD
      previously included a deferred tax liability in reported results, anticipating
      that profits generated by its Ireland facility would eventually be repatriated,
      triggering additional U.S. income taxes. Also, UTMD recorded a favorable
      deferred tax liability adjustment after the conclusion of a formal IRS audit
      in
      3Q 2005. These were non-recurring tax benefits limited to the year 2005. Other
      year to year fluctuations in the tax rate have resulted from: 1) differences
      in
      distribution of state income taxes; 2) variations in profits of the Ireland
      subsidiary which is taxed at a 10% rate on exported manufactured products;
      3)
      extraterritorial income exclusions; 4) higher marginal tax rates for EBT above
      $10 million; and 5) other factors such as R&D tax credits. Management
      expects that UTMD’s 2006 consolidated income tax rate will be around 34%, but
      this is difficult to predict. **





UTMD’s
      net income expressed as a percentage of sales was 27.3%, 38.6% and 76.5% for
      years 2005, 2004 and 2003, respectively. Excluding the Tyco and FDA items
      identified in the table in operating expenses, UTMD’s bottom line was $7,714,
      $7,166 and $7,335, or 28%, 27% and 27% of sales, in 2005, 2004 and 2003,
      respectively. UTMD’s profitability has consistently ranked in the top
      performance tier of all U.S. publicly-traded companies, and has been a primary
      driver for UTMD’s past excellent returns on shareholders’ equity (ROE).





Earnings
      per share (EPS) is net income divided by the number of shares of stock
      outstanding (diluted to take into consideration stock option awards which are
      “in the money,” i.e., have exercise prices below the current period’s weighted
      average market value). Diluted EPS were $1.80, $2.19 and $4.25 in 2005, 2004
      and
      2003, respectively. Excluding the Tyco and FDA items, EPS would have been $1.82,
      $1.53 and $1.50 in 2005, 2004 and 2003, respectively. UTMD’s EPS has grown at a
      compounded rate of 17% per year since 1997.





The
      end
      of 2005 weighted average number of diluted common shares (the number used to
      calculate diluted EPS) were 4,192 (in thousands) compared to 4,675 shares in
      2004 and 4,885 shares in 2003. Dilution for “in the money” unexercised options
      for the year 2005 was 230 (in thousands) shares compared to 276 in 2004 and
      359
      in 2003. The total number of options outstanding at year-end 2005 declined
      27%
      from year-end 2004, following no decline in the prior year. Dilution decreased
      in 2005 from 2004 because the average number of options outstanding decreased
      substantially, even though a higher average share price in the stock market
      increased the dilution effect of each option. Actual outstanding common shares
      as of December 31, 2005 were 3,856,000.





Return
      on
      shareholders’ equity (ROE) is the portion of net income retained by UTMD (after
      payment of dividends) to internally finance its growth, divided by the average
      accumulated shareholders’ equity during the applicable time period. ROE includes
      balance sheet measures as well as income statement measures. ROE in 2005 was
      15%
      (22% before dividends). ROE was negatively affected by FDA litigation costs,
      but
      enhanced by share repurchases which were helped because of a lower share price
      than probably would have existed without the FDA lawsuit. ROE in 2004 and 2003,
      which was aided by Tyco patent infringement damages, was 24% (28% before
      dividends) and 79%, respectively. UTMD’s ROE (before dividends) has averaged 33%
      per year over the last 20 years. This ratio determines how fast the Company
      can
      afford to grow without adding external financing that would dilute shareholder
      interests. For example, a 30% ROE will financially support 30% annual growth
      in
      revenues without issuing more stock.





The
      lower
      ROE in 2005, despite a continued excellent net profit margin, was due to payment
      of dividends to shareholders which reduced retained profits, much higher average
      cash and investment balances which reduced total asset turns, and a low debt
      ratio. Looking forward, unless UTMD utilizes its cash to make an acquisition
      or
      repurchase shares, 2006 ROE will be lower than 2005 even though net profits
      are
      projected to increase, because average shareholders’ equity will increase faster
      on a percentage basis than net profits.







20








Liquidity
      and Capital Resources.


Cash
      Flows .


Net
      cash
      provided by operating activities, including adjustments for depreciation and
      other non-cash operating expenses, along with changes in working capital and
      the
      tax benefit attributable to exercise of employee incentive stock options,
      totaled $6,451 in 2005 compared to $27,459 in 2004 and $8,335 in 2003. The
      major
      changes in operating assets and liabilities in both 2004 and 2003 were related
      to the accrual and receipt of about $31 million from Tyco International for
      patent infringement, and taxes on that income. Cash provided by operating
      activities in 2005 includes continued excellent net income performance, aided
      by
      a $936 tax benefit attributable to exercise of employee options, compared to
      $446 in 2004 and $1,108 in 2003.





The
      Company’s use of cash for investing activities was primarily as a result of
      purchases of liquid investments, in an effort to maximize returns on excess
      cash
      balances while maintaining liquidity. UTMD expended $10,600 in 2005 on such
      purchases, compared to $22,103 in 2004 and $737 in 2003. In 2005, UTMD received
      $9,045 from selling short-term investments, compared to $8,202 in 2004 and
      $98
      in 2003. No acquisitions were made in 2005 or 2003. UTMD invested $1,012 in
      second quarter 2004 to acquire Abcorp, Inc., its vendor for fetal monitoring
      belts. Please see the table under Supplemental Disclosure of Cash Flow
      Information for more detail of the Abcorp assets purchased.





In
      2005,
      UTMD received $858 and issued 123,478 shares of stock upon the exercise of
      employee and director stock options. Employees and directors exercised a total
      of 207,133 option shares in 2005, with 83,655 shares immediately being retired
      as a result of the individuals trading the shares in payment of the exercise
      price of the options and related tax withholding. UTMD paid $833 in 2005 to
      meet
      tax withholding requirements on options exercised. UTMD repurchased 372,599
      shares of stock in the open market at a cost of $8,604 during 2005. Option
      exercises in 2005 were at an average price of $11.69 per share. Share
      repurchases in the open market were at an average cost of $23.09 per share,
      including commissions and fees. In 2004, the Company received $1,111 from
      issuing 117,482 shares of stock on the exercise of employee and director stock
      options, including 5,426 shares retired upon employees trading those shares
      in
      payment of the stock option exercise price.





In
      December 2005, UTMD’s foreign subsidiary borrowed €4.5 million ($5,336) to
      finance repatriation (from Ireland to the U.S.) of profits achieved since 1996
      under The American Jobs Creation Act of 2004. UTMD did not borrow during 2004.
      In 2004, UTMD made repayments of $4,956 on its note payable, which eliminated
      the line of credit balance remaining at the end of 2003, while receiving $0
      in
      proceeds from the line of credit. The previous loan was undertaken to finance
      repurchase of shares. Although UTMD has not borrowed under its revolving line
      of
      credit since it paid off the balance in 2004, the line of credit is used to
      guarantee the current Ireland loan in order to achieve the most favorable credit
      terms.





Management
      believes that future income from operations and effective management of working
      capital will provide the liquidity needed to finance internal growth plans.
      Planned 2006 capital expenditures are expected to be approximately $500 to
      keep
      facilities, equipment and tooling in good working order. In addition, UTMD
      may
      use cash in 2006 for selective infusions of technological, marketing or product
      manufacturing rights to broaden the Company's product offerings; for continued
      share repurchases if the price of the stock remains undervalued; and if
      available for a reasonable price, acquisitions that may strategically fit UTMD’s
      business and are accretive to performance. The revolving line of credit will
      continue to be available for liquidity when the timing of acquisitions or
      repurchases of stock require a large amount of cash in a short period of time
      not otherwise available from existing cash and investment balances.





In
      summary, management plans to utilize cash not needed to support normal
      operations in one or a combination of the following: 1) to make investments
      in
      new technology; 2) to acquire a product line that will augment revenue growth
      and better utilize UTMD’s infrastructure; and/or 3) to repurchase UTMD shares in
      the open marketplace.










21







Contractual
      Obligations and Contingent Liabilities and Commitments


The
      following is a summary of UTMD’s significant contractual obligations and
      commitments as of December 31, 2005:





**Contractual
                Obligations**
              **and****Commitments**
            
            **Total**
            
            **2006**
            
            **2007-**
              **2008**
            
            **2009-**
              **2010**
            
            **2011
                and**
              **thereafter**Long-term
                debt obligations
            
            $
            6,333
            
            $
            633
            
            $
            1,266
            
            $
            1,266
            
            $
            3,168Operating
                lease obligations
            
            
            985
            
            
            66
            
            
            74
            
            
            74
            
            
            771Purchase
                obligations
            
            
            1,752
            
            
            1,752
            
            
            -
            
            
            -
            
            
            -Total
            
            $
            9,070
            
            $
            2,451
            
            $
            1,340
            
            $
            1,340
            
            $
            3,939





Additional
      information regarding the Company’s contractual obligations and commitments may
      be found in Notes 5 and 6 of the Company’s Notes to Consolidated Financial
      Statements.





Critical
      Accounting Policies and Estimates


The
      preparation of these financial statements requires management to make estimates
      and assumptions that affect the reported amounts of assets and liabilities
      as
      well as the reported amounts of revenues and expenses during the reporting
      period.





Management
      bases its estimates and judgments on historical experience, current economic
      and
      industry conditions and on various other factors that are believed to be
      reasonable under the circumstances. This forms the basis for making judgments
      about the carrying values of assets and liabilities that are not readily
      available from other sources. Management has identified the following as the
      Company’s most critical accounting policies which require significant judgment
      and estimates. Although management believes its estimates are reasonable, actual
      results may differ from these estimates under different assumptions or
      conditions.


·
            Allowance
                for doubtful accounts: The majority of the Company’s receivables are with
                hospitals and medical device distributors. Although the Company has
                historically not had significant write-offs of bad-debt, the possibility
                exists, particularly with foreign customers where collection efforts
                can
                be difficult or in the event of widespread U.S. hospital bankruptcies.


·
            Inventory
                valuation reserves: The Company strives to maintain a good balance
                of
                inventory to (1) meets its customer’s needs while (2) not tying-up an
                unnecessary amount of the Company’s resources increasing the possibility
                of, among other things, obsolescence. The Company believes its method
                of
                reviewing actual and projected demand for its existing inventory
                allows it
                to arrive at a fair inventory valuation reserve. While the Company
                has
                historically not had significant inventory write-offs, the possibility
                exists that one or more of its products may become unexpectedly obsolete
                for which a reserve has not previously been created.The
                Company’s historical write-offs have not been materially different from
                its estimates.





Management's
      Outlook.


In
      summary, in 2006 UTMD plans to


1)
      increase efforts to regain business lost as a result of the FDA’s August 10,
      2004 press release;


2)
      reinvigorate internal new product development;


3)
      continue outstanding operating performance;


4)
      look
      for new acquisitions to augment sales growth; and


5)
      utilize current cash balances in shareholders’ best long-term interest.





Item
      3 of
      this report describes the legal proceedings regarding UTMD’s dispute with the
      FDA. The U.S. Court determined that UTMD has been and is in compliance with
      the provisions of the Quality System Regulation. The Company remains proud
      of
      its long term record of compliance with all government regulations.





The
      reliability and performance of UTMD’s products is high and represents
      significant clinical benefits while providing minimum total cost of care.
      Physicians do care about the well-being of their patients, but their time is
      limited to evaluate choices, and they have hospital administrators to deal
      with
      who often look at the initial price of a product without understanding the
      total
      cost of care which includes risk of unwanted complications and unnecessary
      utilization.









22








In
      the
      U.S., UTMD will continue to leverage its reputation as an innovator which will
      responsively take on challenges to work with physicians who use its products
      in
      specialty hospital areas, or outside the hospital in their office practices.
      Internationally, where UTMD must depend on the knowledge, focus, relationships
      and energy of independent distributors, management will continue to closely
      monitor performance and recruit needed business partners.





UTMD
      will
      continue to focus on differentiating itself, especially from commodity-oriented
      competitors. UTMD is small, but its employees are experienced and diligent
      in
      their work. Our passion is in providing innovative clinical solutions that
      will
      help reduce health risks for women and their babies. The Company has a defined
      focus and does not seek revenue growth as its primary motivation. We
      fundamentally seek to do an excellent job in meeting our customers’ and their
      patients’ needs, and provide our shareholders with excellent returns.





Looking
      back five years from the end of 2005 to the end of 2000, UTMD’s EPS have more
      than doubled, and its year-ending share price has more than quadrupled (up
      326%). In comparison, the NASDAQ Composite, S&P 500 Index and DJIA indices
      were all down: 11%, 5% and down 1%, respectively, over that same five year
      time
      span.





In
      2005,
      UTMD again demonstrated a high positive cash flow, managing working capital
      effectively and keeping new capital expenditures below its rate of depreciation
      of existing assets. UTMD’s balance sheet is strong enough to finance an
      acquisition in 2006 without issuing stock. In considering acquisitions, UTMD
      looks to acquire successful companies that will enhance its specialist focus.
      When UTMD acquires a company, it probably will be for cash and with the idea
      that it will be able to retain key resources that helped make the acquired
      entity successful.





Accounting
      Policy Changes.


In
      December 2004, the FASB issued SFAS 123 (revised 2004), “Accounting for Stock
      Based Compensation.” This statement supersedes APB Opinion No. 25, “Accounting
      for Stock Issued to Employees.” This revised statement establishes standards for
      the accounting of transactions in which an entity exchanges its equity
      instruments for goods and services, including the grant of stock options to
      employees and directors. The Statement is effective for periods beginning after
      December 15, 2005, and will require the Company to recognize compensation cost
      based on the grant date fair value of the equity instruments it awards. The
      Company currently accounts for those instruments under the recognition and
      measurement principles of APB Opinion 25, including the disclosure-only
      provisions of the original SFAS 123. Accordingly, no compensation cost from
      issuing equity instruments has been recognized in the Company’s financial
      statements. The Company estimates that the required adoption of SFAS 123 (R)
      in
      first quarter 2006 will have a negative impact on its consolidated financial
      statements. Please see note 1, starting on page F-12 for an estimate of the
      impact this Statement would have had on the Company’s net income for the periods
      covered by this report. The Company estimates that adoption of this Statement
      will result in about $130 additional compensation expense during the year 2006
      related to options outstanding on the date of this report. The Company intends
      to continue granting stock options or other equity instruments, although at
      a
      lower level than in the past, which will increase the amount of stock based
      compensation in 2006 and beyond. The Board of Director’s action on May 6, 2005
      to accelerate the vesting of under water options reduced the financial statement
      impact of this accounting policy change.








**ITEM
      7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**





The
      Company had manufacturing operations, including related assets, in Ireland
      denominated in the EURO, and sold products under agreements denominated in
      various Western European currencies. The EURO and other currencies have been
      and
      are subject to exchange rate fluctuations that are beyond the control of UTMD.
      The exchange rate for the EURO was .8433, .7335 and .7958 per U.S. Dollar as
      of
      December 31, 2005, 2004 and 2003, respectively. Please see Note 1 in Item,
      8,
      below under “Translation of Foreign Currencies” for more information. UTMD
      manages its foreign currency risk without separate hedging transactions by
      converting currencies as transactions occur.









23






**ITEM
      8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**


Dollar
      amounts are in thousands except per-share amounts and where noted.








**TABLE
      OF CONTENTS**




Management’s
                  Report on Internal Control Over Financial Reporting
              25Report
                  of Independent Registered Public Accounting Firm on Management’s
                  Assessment on Internal Control Over Financial Reporting
              26Report
                  of Independent Registered Public Accounting Firm on Financial Statements
              27Consolidated
                  Balance Sheet
              28Consolidated
                  Statement of Income and Comprehensive Income
              29Consolidated
                  Statement of Cash Flow
              30Consolidated
                  Statement of Stockholders’ Equity
              32Notes
                  to Consolidated Financial Statements
              33

















24






**MANAGEMENT’S
      REPORT ON INTERNAL CONTROL**


**OVER
      FINANCIAL REPORTING**







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




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


·
            provide
                reasonable assurance that transactions are recorded as necessary
                to permit
                preparation of financial statements in accordance with GAAP, and
                that
                receipts and expenditures of the Company are being made only in accordance
                with authorizations of management and directors of the Company; and


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




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




As
      required by Section 404 of the Sarbanes-Oxley Act of 2002, management
      assessed the effectiveness of the Company's internal control over financial
      reporting as of December 31, 2005. In making this assessment, management
      used the criteria set forth by the Committee of Sponsoring Organizations of
      the
      Treadway Commission (COSO) in *Internal
      Control-Integrated Framework* .




Based
      on
      our assessment and those criteria, management believes that the Company
      maintained effective internal control over financial reporting as of
      December 31, 2005.




The
      Company's independent registered public accounting firm, Jones Simkins, P.C.,
      has audited management's assessment of the Company's internal control over
      financial reporting as of December 31, 2005, and their report is shown on the
      next page.







By: / s/
      Kevin L.
      Cornwell


Kevin
      L.
      Cornwell


Chief
      Executive Officer








By: /s/
      Greg A.
      LeClaire


Greg
      A.
      LeClaire


Chief
      Financial Officer









25







REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM





We
      have
      audited management's assessment, included in the accompanying report titled *Management’s
      Report On Internal Control Over Financial Reporting* ,
      that
      Utah Medical Products, Inc. maintained effective internal control over financial
      reporting as of December 31, 2005, based on criteria established in *Internal
      Control-Integrated Framework* issued
      by the *Committee
      of Sponsoring Organizations of the Treadway Commission (COSO)* .
      Utah
      Medical Products, Inc.’s management is responsible for maintaining effective
      internal control over financial reporting and for its assessment of the
      effectiveness of internal control over financial reporting. Our responsibility
      is to express an opinion on management's assessment and an opinion on the
      effectiveness of the company's internal control over financial reporting based
      on our audit.





We
      conducted our audit in accordance with the standards of the Public Company
      Accounting Oversight Board (United States). Those standards require that we
      plan
      and perform the audit to obtain reasonable assurance about whether effective
      internal control over financial reporting was maintained in all material
      respects. Our audit included obtaining an understanding of internal control
      over
      financial reporting, evaluating management's assessment, testing and evaluating
      the design and operating effectiveness of internal control, and performing
      such
      other procedures as we considered necessary in the circumstances. We believe
      that our audit provides a reasonable basis for our opinion.





A
      company's internal control over financial reporting is a process designed to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles. A company's internal control
      over
      financial reporting includes those policies and procedures that (1) pertain
      to
      the maintenance of records that, in reasonable detail, accurately and fairly
      reflect the transactions and dispositions of the assets of the company; (2)
      provide reasonable assurance that transactions are recorded as necessary to
      permit preparation of financial statements in accordance with generally accepted
      accounting principles, and that receipts and expenditures of the company are
      being made only in accordance with authorizations of management and directors
      of
      the company; and (3) provide reasonable assurance regarding prevention or timely
      detection of unauthorized acquisition, use, or disposition of the company's
      assets that could have a material effect on the financial
      statements.





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





In
      our
      opinion, management's assessment that Utah Medical Products, Inc. maintained
      effective internal control over financial reporting as of December 31, 2005,
      is
      fairly stated, in all material respects, based on criteria established in *Internal
      Control-Integrated Framework* issued
      by the *Committee
      of Sponsoring Organizations of the Treadway Commission*  *(COSO)* .
      Also in
      our opinion, Utah Medical Products, Inc. maintained, in all material respects,
      effective internal control over financial reporting as of December 31, 2005
      based on criteria established in *Internal
      Control-Integrated Framework* issued
      by the *Committee
      of Sponsoring Organizations of the Treadway Commission*  *(COSO)* .





We
      have
      also audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the December 31, 2005 consolidated balance
      sheets and the related consolidated statements of income and comprehensive
      income, stockholders’ equity and cash flows of Utah Medical Products, Inc., and
      our report dated January 17, 2006 expressed an unqualified opinion.




/s/
      Jones Simkins, P.C.





JONES
      SIMKINS, P.C.


Logan,
      Utah


January
      17, 2006









26







REPORT
      OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM









To
      the
      Board of Directors and Stockholders of Utah Medical Products, Inc.





We
      have
      audited the accompanying consolidated balance sheets of Utah Medical Products,
      Inc. as of December 31, 2005 and 2004 and the related consolidated statements
      of
      income and comprehensive income, stockholders’ equity, and cash flows for the
      years ended December 31, 2005, 2004 and 2003. These consolidated financial
      statements are the responsibility of the Company’s management. Our
      responsibility is to express an opinion on these consolidated financial
      statements based on our audits.





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





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the financial position of Utah Medical Products,
      Inc.
      as of December 31, 2005 and 2004 and the results of its operations and its
      cash
      flows for the years ended December 31, 2005, 2004 and 2003 in conformity with
      accounting principles generally accepted in the United States of
      America.





We
      also
      have audited, in accordance with the standards of the Public Company Accounting
      Oversight Board (United States), the effectiveness of Utah Medical Products,
      Inc. internal control over financial reporting as of December 31, 2005, based
      on
      criteria established in *Internal
      Control-Integrated Framework* issued
      by
      the *Committee of Sponsoring Organizations of the Treadway Commission
      (COSO)* and our
      report dated January 17, 2006 expressed an unqualified opinion on management’s
      assessment of internal control over financial reporting and an unqualified
      opinion on the effectiveness of internal control over financial
      reporting.








/s/
      Jones Simkins, P.C.


JONES
      SIMKINS, P.C.


Logan,
      Utah


January
      17, 2006









27








UTAH
      MEDICAL PRODUCTS, INC.


CONSOLIDATED
      BALANCE SHEET


December
      31, 2005 and 2004


(In
      thousands)





ASSETS
            
            2005
            
            2004Current
                assets:Cash
            
            $
            703
            
            $
            1,818Investments,
                available-for-sale (note 3)
            
            
            16,750
            
            
            15,110Accounts
                and other receivables, net (note 2)
            
            
            4,418
            
            
            3,730Inventories
                (note 2)
            
            
            3,305
            
            
            2,859Prepaid
                expenses and other current assets
            
            
            280
            
            
            263Deferred
                income taxes (note 7)
            
            
            402
            
            
            750Total
                current assets
            
            
            25,858
            
            
            24,530Property
                and equipment, net (note 4)
            
            
            8,160
            
            
            9,058Goodwill
            
            
            7,191
            
            
            7,191Other
                intangible assets - net (note 2)
            
            
            433
            
            
            483Total
                assets
            
            $
            41,642
            
            $
            41,262LIABILITIES
                AND STOCKHOLDERS' EQUITYCurrent
                liabilities:Accounts
                payable
            
            $
            757
            
            $
            698Accrued
                expenses (note 2)
            
            
            2,418
            
            
            3,638Total
                current liabilities
            
            
            3,175
            
            
            4,336Note
                payable (note 5)
            
            
            5,336
            
            
            -Deferred
                income taxes (note 7)
            
            
            274
            
            
            769Total
                liabilities
            
            
            8,785
            
            
            5,105Commitments
                and contingencies (notes 6 and 10)
            
            
            -
            
            
            -Stockholders'
                equity:Preferred
                stock, $.01 par value; 5,000 shares authorized, no shares issued
                and
                outstanding
            
            
            -
            
            
            -Common
                stock, $.01 par value; 50,000 shares authorized, issued 3,856 shares
                in
                2005 and 4,105 shares in 2004
            
            
            39
            
            
            41Accumulated
                other comprehensive income
            
            
            (495
            )
            
            226Retained
                earnings
            
            
            33,314
            
            
            35,890Total
                stockholders' equity
            
            
            32,857
            
            
            36,157Total
                liabilities and stockholders' equity
            
            $
            41,642
            
            $
            41,262




See
      accompanying notes to financial statements.









28








UTAH
      MEDICAL PRODUCTS, INC.


CONSOLIDATED
      STATEMENT OF INCOME


AND
      COMPREHENSIVE INCOME


Years
      ended December 31, 2005, 2004 and 2003


(In
      thousands, except per share amounts)





2005
            
            2004
            
            2003Sales,
                net (notes 9 and 10)
            
            $
            27,692
            
            $
            26,485
            
            $
            27,137Cost
                of goods sold (notes 9 and 10)
            
            
            11,939
            
            
            11,419
            
            
            11,245Gross
                margin
            
            
            15,753
            
            
            15,066
            
            
            15,892Operating
                income (expense):Sales
                and marketing expense
            
            
            (2,214
            )
            
            (2,253
            )
            
            (2,364
            )Research
                and development expense
            
            
            (320
            )
            
            (292
            )
            
            (288
            )General
                and administrative expense
            
            
            (3,981
            )
            
            (3,262
            )
            
            (3,834
            )Other
                operating income (note 11)
            
            
            -
            
            
            6,060
            
            
            23,992Operating
                income
            
            
            9,237
            
            
            15,320
            
            
            33,398Other
                income (expense):Dividend
                and interest income
            
            
            398
            
            
            238
            
            
            5Royalty
                income
            
            
            450
            
            
            450
            
            
            450Interest
                expense
            
            
            (10
            )
            
            -
            
            
            (47
            )Other,
                net
            
            
            139
            
            
            110
            
            
            46Income
                before provision for income taxes
            
            
            10,214
            
            
            16,117
            
            
            33,852Provison
                for income taxes (note 7)
            
            
            2,667
            
            
            5,897
            
            
            13,091Net
                income
            
            $
            7,547
            
            $
            10,220
            
            $
            20,761Earnings
                per common share (basic) (notes 1 and 2):
            
            $
            1.91
            
            $
            2.32
            
            $
            4.59Earnings
                per common share (diluted) (notes 1 and 2):
            
            $
            1.80
            
            $
            2.19
            
            $
            4.25Other
                comprehensive income:Foreign
                currency translation net of taxes of $(153), $107 and $288
            
            $
            (502
            )
            $
            222
            
            
            548Unrealized
                gain (loss) on investments net of taxes of $(42), $100 and
                $12
            
            
            (65
            )
            
            157
            
            
            19Total
                comprehensive income
            
            $
            6,980
            
            $
            10,599
            
            $
            21,328





See
      accompanying notes to financial statements.









29








UTAH
      MEDICAL PRODUCTS, INC.


CONSOLIDATED
      STATEMENT OF CASH FLOW


Years
      Ended December 31, 2005, 2004 and 2003


(In
      thousands)





2005
            
            2004
            
            2003Cash
                flows from operating activities:Net
                income
            
            $
            7,547
            
            $
            10,220
            
            $
            20,761Adjustments
                to reconcile net income to net cash provided by operating
                activities:Depreciation
                and amortization
            
            
            676
            
            
            809
            
            
            984Gain
                on investments
            
            
            (70
            )
            
            (52
            )
            
            (11
            )Provision
                for (recovery of) losses on accounts receivable
            
            
            (4
            )
            
            3
            
            
            (93
            )(Gain)
                Loss on disposal of assets
            
            
            (5
            )
            
            5
            
            
            4Deferred
                income taxes
            
            
            (129
            )
            
            75
            
            
            (47
            )Tax
                benefit attributable to exercise of stock options
            
            
            936
            
            
            446
            
            
            1,108(Increase)
                decrease in:Accounts
                receivable
            
            
            (51
            )
            
            (226
            )
            
            36Accrued
                interest and other receivables
            
            
            (770
            )
            
            (191
            )
            
            257Inventories
            
            
            (573
            )
            
            437
            
            
            174Prepaid
                expenses and other current assets
            
            
            (13
            )
            
            (43
            )
            
            (32
            )Litigation
                receivable
            
            
            -
            
            
            24,884
            
            
            (24,884
            )Increase
                (decrease) in:Accounts
                payable
            
            
            81
            
            
            312
            
            
            (291
            )Accrued
                expenses
            
            
            (1,175
            )
            
            (9,220
            )
            
            10,369Net
                cash provided by operating activities
            
            
            6,451
            
            
            27,459
            
            
            8,335Cash
                flows from investing activities:Capital
                expenditures for:Property
                and equipment
            
            
            (345
            )
            
            (411
            )
            
            (272
            )Intangible
                assets
            
            
            -
            
            
            (10
            )
            
            (122
            )Purchases
                of investments
            
            
            (10,600
            )
            
            (22,103
            )
            
            (737
            )Proceeds
                from the sale of:Investments
            
            
            9,045
            
            
            8,202
            
            
            98Property
                and equipment
            
            
            5
            
            
            -
            
            
            -Net
                cash paid in acquisition
            
            
            -
            
            
            (1,012
            )
            
            -Net
                cash used in investing activities
            
            
            (1,895
            )
            
            (15,334
            )
            
            (1,033
            )Cash
                flows from financing activities:Proceeds
                from issuance of common stock - options
            
            
            858
            
            
            1,111
            
            
            882Common
                stock purchased and retired
            
            
            (8,604
            )
            
            (10,692
            )
            
            (2,240
            )Common
                stock purchased and retired - options
            
            
            (833
            )
            
            (6
            )
            
            (555
            )Proceeds
                from note payable
            
            
            5,336
            
            
            -
            
            
            -Repayments
                of note payable
            
            
            -
            
            
            -
            
            
            (4,956
            )Dividends
                paid
            
            
            (2,445
            )
            
            (1,331
            )
            
            -Net
                cash used in financing activities
            
            
            (5,687
            )
            
            (10,918
            )
            
            (6,869
            )Effect
                of exchange rate changes on cash
            
            
            16
            
            
            (151
            )
            
            44Net
                increase (decrease) in cash and cash equivalents
            
            
            (1,116
            )
            
            1,056
            
            
            477Cash
                at beginning of year
            
            
            1,818
            
            
            762
            
            
            285Cash
                at end of year
            
            $
            703
            
            $
            1,818
            
            $
            762





See
      accompanying notes to financial statements.









30








UTAH
      MEDICAL PRODUCTS, INC.


CONSOLIDATED
      STATEMENT OF CASH FLOW


Years
      Ended December 31, 2005, 2004 and 2003


(In
      thousands)


*Continued*


SUPPLEMENTAL
                DISCLOSURE OF CASH FLOW INFORMATION:2005
            
            2004
            
            2003Cash
                paid during the year for:Income
                taxes
            
            $
            2,915
            
            $
            14,294
            
            $
            2,628Interest
            
            
            10
            
            
            -
            
            
            47During
                2004, the Company purchased all of the oustanding stock of Abcorp
                Medical,
                Inc. The Company paid cash and recorded net assets from the acquisition
                as
                follows:Cash
            
            
            
            
            $
            11Accounts
                receivable
            
            
            
            
            
            127Inventory
            
            
            
            
            
            25Prepaid
                insurance
            
            
            
            
            
            19Equipment,
                net
            
            
            
            
            
            16Accounts
                payable
            
            
            
            
            
            (96
            )Accrued
                expenses
            
            
            
            
            
            (25
            )Goodwill
            
            
            
            
            
            946Total
                cash paid
            
            
            
            
            
            1,023Less
                cash received
            
            
            
            
            
            (11
            )Net
                cash investment
            
            
            
            
            $
            1,012





See
      accompanying notes to financial statements.













31








UTAH
      MEDICAL PRODUCTS, INC.


CONSOLIDATED
      STATEMENT OF STOCKHOLDERS' EQUITY


Years
      Ended December 31, 2005, 2004 and 2003


(In
      thousands)





AccumulatedAdditional
            
            Other
            
            
            
            TotalCommon
                Stock
            
            Paid-in
            
            Comprehensive
            
            Retained
            
            Stockholders'Shares
            
            Amount
            
            Capital
            
            Income
            
            Earnings
            
            EquityBalance
                at December 31, 2002
            
            
            4,443
            
            $
            44
            
            $
            -
            
            $
            (1,115
            )
            $
            16,793
            
            $
            15,722Shares
                issued upon exercise of employee stock options for cash
            
            
            299
            
            
            3
            
            
            2,465
            
            
            -
            
            
            -
            
            
            2,468Shares
                received and retired upon exercise of stock options
            
            
            (101
            )
            
            (1
            )
            
            (2,141
            )
            
            -
            
            
            -
            
            
            (2,142
            )Tax
                benefit attributable to appreciation of stock options
            
            
            -
            
            
            -
            
            
            1,108
            
            
            -
            
            
            -
            
            
            1,108Common
                stock purchased and retired
            
            
            (97
            )
            
            (1
            )
            
            (1,432
            )
            
            -
            
            
            (807
            )
            
            (2,240
            )Foreign
                currency translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            836
            
            
            -
            
            
            836Unrealized
                holding gain from investments, available-for-sale, net of
                taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            19
            
            
            -
            
            
            19Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            20,761
            
            
            20,761Balance
                at December 31, 2003
            
            
            4,544
            
            $
            45
            
            $
            -
            
            $
            (260
            )
            $
            36,747
            
            $
            36,532Shares
                issued upon exercise of employee stock options for cash
            
            
            123
            
            
            1
            
            
            1,234
            
            
            -
            
            
            -
            
            
            1,235Shares
                received and retired upon exercise of stock options
            
            
            (5
            )
            
            (0
            )
            
            (124
            )
            
            -
            
            
            -
            
            
            (124
            )Tax
                benefit attributable to appreciation of stock options
            
            
            -
            
            
            -
            
            
            446
            
            
            -
            
            
            -
            
            
            446Common
                stock purchased and retired
            
            
            (557
            )
            
            (5
            )
            
            (1,556
            )
            
            -
            
            
            (9,130
            )
            
            (10,691
            )Foreign
                currency translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            329
            
            
            -
            
            
            329Unrealized
                holding gain from investments, available-for-sale, net of
                taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            157
            
            
            -
            
            
            157Common
                stock dividends
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,947
            )
            
            (1,947
            )Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            10,220
            
            
            10,220Balance
                at December 31, 2004
            
            
            4,105
            
            $
            41
            
            $
            -
            
            $
            226
            
            $
            35,890
            
            $
            36,157Shares
                issued upon exercise of employee stock options for cash
            
            
            207
            
            
            2
            
            
            2.420
            
            
            -
            
            
            -
            
            
            2.422Shares
                received and retired upon exercise of stock options
            
            
            (84
            )
            
            (1
            )
            
            (2,395
            )
            
            -
            
            
            -
            
            
            (2,396
            )Tax
                benefit attributable to appreciation of stock options
            
            
            -
            
            
            -
            
            
            936
            
            
            -
            
            
            -
            
            
            936Common
                stock purchased and retired
            
            
            (373
            )
            
            (4
            )
            
            (960
            )
            
            -
            
            
            (7,640
            )
            
            (8,604
            )Foreign
                currency translation adjustment
            
            
            -
            
            
            -
            
            
            -
            
            
            (654
            )
            
            -
            
            
            (654
            )Unrealized
                holding gain from investments, available-for-sale, net of
                taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            (67
            )
            
            -
            
            
            (67
            )Common
                stock dividends
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (2,484
            )
            
            (2,484
            )Net
                income
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            7,547
            
            
            7,547Balance
                at December 31, 2005
            
            
            3,856
            
            $
            39
            
            $
            -
            
            $
            (495
            )
            $
            33,314
            
            $
            32,857





See
      accompanying notes to financial statements.




32
 UTAH
            MEDICAL PRODUCTS, INC.
 Notes
            to
            Consolidated Financial Statements





Dollar
      amounts are in thousands except per-share amounts and where noted.





Note
      1
      - Summary of Significant Accounting Policies





Organization





Utah
      Medical Products, Inc. and its wholly owned subsidiaries, principally Utah
      Medical Products Ltd., which operates a manufacturing facility in Ireland,
      and
      Columbia Medical, Inc., (the Company) are in the business of producing
      specialized devices for the healthcare industry. The Company’s broad range of
      products includes those used in critical care areas and the labor and delivery
      departments of hospitals, as well as outpatient clinics and physicians’ offices.
      Products are sold in both domestic U.S. and international markets.





Use
      of
      Estimates in the Preparation of Financial Statements





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Although actual results could differ from those
      estimates, management believes it has considered and disclosed all relevant
      information in making its estimates that materially affect reported performance
      and current values.





Principles
      of Consolidation





The
      consolidated financial statements include those of the Company and its
      subsidiaries. All intercompany accounts and transactions have been eliminated
      in
      consolidation.





Cash
      and Cash Equivalents





For
      purposes of the consolidated statement of cash flows, the Company considers
      cash
      on deposit and short-term investments with original maturities of three months
      or less to be cash and cash equivalents.





Investments





The
      Company classifies its investments as “available for sale.” Securities
      classified as “available for sale” are carried in the financial statements at
      fair value. Realized gains and losses, determined using the specific
      identification method, are included in operations; unrealized holding gains
      and
      losses are reported as a separate component of accumulated other comprehensive
      income. Declines in fair value below cost that are other than temporary are
      included in operations.





Concentration
      of Credit Risk





The
      primary concentration of credit risk consists of trade receivables. In the
      normal course of business, the Company provides credit terms to its customers.
      Accordingly, the Company performs ongoing credit evaluations of its customers
      and maintains allowances for possible losses which, when realized, have been
      within the range of management's expectations as reflected by its reserves.





The
      Company's customer base consists of hospitals, medical product distributors,
      physician practices and others directly related to healthcare providers, as
      well
      as other manufacturing companies. Although the Company is affected by the
      well-being of the global healthcare industry, management does not believe
      significant trade receivable credit risk exists at December 31,
      2005.





The
      Company maintains its cash in bank deposit accounts, which at times, may exceed
      federally insured limits in addition to Fidelity Investments accounts. The
      Company has not experienced any losses in such accounts and believes it is
      not
      exposed to a significant credit risk on cash and cash equivalent
      balances.





Accounts
      Receivable





Accounts
      receivable are amounts due on product sales and are unsecured. Accounts
      receivable are carried at their estimated collectible amounts. Credit is
      generally extended on a short-term basis; thus accounts receivable do not bear
      interest although a finance charge may be applied to such receivables that
      are
      past the due date. Accounts receivable are periodically evaluated for
      collectiblity based on past credit history with clients. Provisions for losses
      on accounts receivable are determined on the basis of loss experience, known
      and
      inherent risk in the account balance and current economic conditions (see Note
      2).








33
 UTAH
            MEDICAL PRODUCTS, INC.
 Notes
            to
            Consolidated Financial Statements








Note
      1
      - Summary of Significant Accounting Policies (continued)





Inventories





Finished
      products, work-in-process, raw materials and supplies inventories are stated
      at
      the lower of cost (computed on a first-in, first-out method) or market (see
      Note
      2).





Property
      and Equipment





Property
      and equipment are stated at cost. Depreciation and amortization are computed
      using the straight-line and units-of-production methods over estimated useful
      lives as follows:


Building
                and improvements
            30-40
                yearsFurniture,
                equipment and tooling
            3-10
                years





Long-Lived
      Assets





The
      Company evaluates its long-lived assets in accordance with Statement of
      Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment of
      Long-Lived Assets.” Long-lived assets held and used by the Company are reviewed
      for impairment whenever events or changes in circumstances indicate that their
      net book value may not be recoverable. When such factors and circumstances
      exist, the Company compares the projected undiscounted future cash flows
      associated with the related asset or group of assets over their estimated useful
      lives against their respective carrying amounts. Impairment, if any, is based
      on
      the excess of the carrying amount over the fair value of those assets and is
      recorded in the period in which the determination was made.







Intangible
      Assets





Costs
      associated with the acquisition of patents, trademarks, license rights and
      non-compete agreements are capitalized and are being amortized using the
      straight-line method over periods ranging from 5 to 17 years. UTMD’s goodwill is
      tested for impairment annually, in the fourth quarter of each year, using a
      fair
      value measurement test, in accordance with SFAS 142. UTMD would also perform
      an
      impairment test, between annual tests, if circumstances changed that would
      more
      than likely reduce the fair value of goodwill below its net book value. If
      UTMD
      determined that its goodwill were impaired, a second step would be completed
      to
      measure the amount of the impairment loss. UTMD does not expect its goodwill
      to
      become impaired in the foreseeable future (see Note 2).





Loans
      to Related Parties





The
      Company has not made loans to related entities including employees, directors,
      shareholders, suppliers or customers, nor does it guarantee the debt of related
      entities.





Revenue
      Recognition





The
      Company believes that revenue should be recognized at the time of shipment
      as
      title generally passes to the customer at the time of shipment. Revenue
      recognized by UTMD is based upon documented arrangements and fixed contracts
      in
      which the selling price is fixed prior to completion of an order. Revenue from
      product and service sales is generally recognized at the time the product is
      shipped or service completed and invoiced, and collectibility is reasonably
      assured. There are circumstances under which revenue may be recognized when
      product is not shipped, which meet the criteria of SAB 104: the Company provides
      engineering services, for example, design and production of manufacturing
      tooling that may be used in subsequent UTMD manufacturing of custom components
      for other companies. This revenue is recognized when UTMD’s service has been
      completed according to a fixed contractual agreement.


Income
        Taxes
 
 The
        Company accounts for income taxes under SFAS No. 109, “Accounting for Income
        Taxes,” whereby deferred taxes are computed under the asset and liability
        method.


34
 UTAH
            MEDICAL PRODUCTS, INC.
 Notes
            to
            Consolidated Financial Statements







Note
      1
      - Summary of Significant Accounting Policies (continued)





Legal
      Costs





The
      Company has been involved in lawsuits which are an expected consequence of
      its
      operations and in the ordinary course of business. The Company maintains a
      reserve for legal costs which are probable and estimated based on its previous
      experience. The reserve for legal costs at December 31, 2005 and 2004 was $125
      and $1,260, respectively (see Note 2).





Earnings
      per Share





The
      computation of basic earnings per common share is based on the weighted average
      number of shares outstanding during each year.





The
      computation of earnings per common share assuming dilution is based on the
      weighted average number of shares outstanding during the year plus the weighted
      average common stock equivalents which would arise from the exercise of stock
      options outstanding using the treasury stock method and the average market
      price
      per share during the year.





The
      shares (in thousands) used in the computation of the Company’s basic and diluted
      earnings per share are reconciled as follows:




2005
            
            2004
            
            2003Weighted
                average number of shares outstanding - basic
            
            
            3,962
            
            
            4,399
            
            
            4,526Dilutive
                effect of stock options
            
            
            230
            
            
            276
            
            
            359Weighted
                average number of shares outstanding, assuming dilution
            
            
            4,192
            
            
            4,675
            
            
            4,885





Stock-Based
      Compensation





At
      December 31, 2005, the Company has stock-based employee compensation plans,
      which are described more fully in Note 8. The Company accounts for those plans
      under the recognition and measurement principles of APB Opinion 25, “Accounting
      for Stock Issued to Employees, *”* and
      related Interpretations, and has adopted the disclosure-only provisions of
      SFAS
      123, “Accounting for Stock-Based Compensation.” Accordingly, no compensation
      cost has been recognized in the financial statements, as all options granted
      under those plans had an exercise price equal to or greater than the market
      value of the underlying common stock on the date of grant.





Starting
      January 1, 2006, in accordance with SFAS 123 (revised 2004), the Company will
      be
      required to begin recognizing compensation cost related to its stock option
      plans. Please see note 15, below.





Had
      compensation cost for the Company’s stock option plans been determined based on
      the fair value at the grant date consistent with the provisions of SFAS 123,
      the
      Company’s net earnings and earnings per share would have been reduced to the pro
      forma amounts indicated below:





Years
                ended December 31,2005
            
            2004
            
            2003Net
                income as reported
            
            $
            7,547
            
            $
            10,220
            
            $
            20,761Deduct:Total
                stock-based employee compensation expense determined under fair value
                based method for all awards, net of related tax effects
            
            
            (869
            )
            
            (388
            )
            
            (178
            )Net
                income pro forma
            
            $
            6,678
            
            $
            9,832
            
            $
            20,583Earnings
                per share:Basic
                - as reported
            
            $
            1.91
            
            $
            2.32
            
            $
            4.59Basic
                - pro forma
            
            $
            1.69
            
            $
            2.24
            
            $
            4.55Diluted
                - as reported
            
            $
            1.80
            
            $
            2.19
            
            $
            4.25Diluted
                - pro forma
            
            $
            1.59
            
            $
            2.10
            
            $
            4.21




35
 UTAH
            MEDICAL PRODUCTS, INC.
 Notes
            to
            Consolidated Financial Statements






Note
      1
      - Summary of Significant Accounting Policies (continued)





On
      May 6,
      2005 the Compensation and Option Committee of the Board accelerated the vesting
      of certain unvested stock options awarded to employees, officers and directors
      under the Company’s stock option plans, which had exercise prices that were
      under water as of market close May 5, 2005.





Options
      to purchase 124,800 shares become fully exercisable on December 1, 2005 as
      a
      result of the vesting acceleration. Exercise prices of the options accelerated
      are $24.02 and $25.59 per share. These options previously became fully vested
      on
      October 1, 2007 and January 1, 2008.





The
      Company took this action to avoid an accounting charge (as compensation expense)
      for these options starting in the quarter ending March 31, 2006, as required
      by
      FAS 123(R). The increase in proforma compensation expense in 2005, as shown
      above, is a result of the vesting acceleration.





Translation
      of Foreign Currencies





Assets
      and liabilities of the Company’s foreign subsidiary are translated into U.S.
      dollars at the applicable exchange rates at year-end. Net gains or losses
      resulting from the translation of the Company’s assets and liabilities are
      reflected as a separate component of stockholders’ equity. A negative
      translation impact on stockholders’ equity reflects a current relative U.S.
      Dollar value higher than at the point in time that assets were actually acquired
      in a foreign currency. A positive translation impact would result from a U.S.
      dollar weaker in value than at the point in time foreign assets were
      acquired.





Income
      and expense items are translated at the weighted average rate of exchange (based
      on when transactions actually occurred) during the year.








Note
      2
      - Detail of Certain Balance Sheet Accounts





December
                31,2005
            
            2004Accounts
                and other receivables:Accounts
                receivable
            
            $
            3,542
            
            $
            3,636Income
                tax receivable
            
            
            783
            
            
            -Accrued
                interest and other
            
            
            166
            
            
            171Less
                allowance for doubtful accounts
            
            
            (73
            )
            
            (77
            )$
            4,418
            
            $
            3,730




Inventories:Finished
                products
            
            $
            1,058
            
            $
            932Work-in-process
            
            
            657
            
            
            640Raw
                materials
            
            
            1,590
            
            
            1,287$
            3,305
            
            $
            2,859Other
                intangible assets:Patents
            
            
            2,025
            
            
            2,025License
                rights
            
            
            293
            
            
            293Trademarks
            
            
            224
            
            
            224Non-compete
                agreements
            
            
            175
            
            
            1752,717
            
            
            2,717Accumulated
                amortization
            
            
            (2,284
            )
            
            (2,234
            )$
            433
            
            $
            483


Accrued
                  expenses:Income
                  taxes payable
              
              $
              45
              
              $
              384Payroll
                  and payroll taxes
              
              
              949
              
              
              963Reserve
                  for litigation costs
              
              
              125
              
              
              1,260Dividends
                  payable
              
              
              658
              
              
              616Other
              
              
              641
              
              
              415$
              2,418
              
              $
              3,638





36
 UTAH
            MEDICAL PRODUCTS, INC.
 Notes
            to
            Consolidated Financial Statements







Note
      3
      - Investments





The
      Company’s investments, classified as available-for-sale consist of the
      following:





December
                31,2005
            
            2004Investments,
                at cost
            
            $
            16,571
            
            $
            14,822Equity
                Securities:-Unrealized
                holding gains
            
            
            298
            
            
            295-Unrealized
                holding (losses)
            
            
            (119
            )
            
            (7
            )Investments,
                at fair value
            
            $
            16,750
            
            $
            15,110








Changes
      in the unrealized holding gain on investment securities available-for-sale
      and
      reported as a separate component of accumulated other comprehensive income
      are
      as follows:





December
                31,2005
            
            2004Balance,
                beginning of year
            
            $
            176
            
            $
            19Gross
                unrealized holding gains, net of (losses), in equity
                securities
            
            
            (110
            )
            
            257Deferred
                income taxes on unrealized holding gain
            
            
            43
            
            
            (100
            )Balance,
                end of year
            
            $
            109
            
            $
            176





UTMD
      held
      available-for-sale investments in municipal debt securities with the following
      maturities and amounts:





December
                31,2005
            
            2004Maturity
                less than 1 year
            
            $
            -
            
            $
            9,081Maturity
                greater than 10 years
            
            
            -
            
            
            1,475





During
      2005, 2004 and 2003, UTMD had proceeds from sales of available-for-sale
      securities of $9,045, $8,202 and $98 respectively, and associated realized
      gains
      of $70, $52 and $11, respectively. UTMD uses the specific identification method
      to calculate its realized gains.








37
 UTAH
            MEDICAL PRODUCTS, INC.
 Notes
            to
            Consolidated Financial Statements




Note
      4
      - Property and Equipment





Property
      and equipment consists of the following:


December
                31,2005
            
            2004Land
            
            $
            1,028
            
            $
            1,089Buildings
                and improvements
            
            
            8,631
            
            
            9,283Furniture,
                equipment and tooling
            
            
            13,781
            
            
            13,763Construction-in-progress
            
            
            179
            
            
            4123,619
            
            
            24,176Accumulated
                depreciation and amortization
            
            
            (15,459
            )
            
            (15,118
            )$
            8,160
            
            $
            9,058





Included
      in the Company’s consolidated balance sheet are the assets of its manufacturing
      facilities in Utah, Oregon and Ireland. Property and equipment, by location,
      are
      as follows:





December
                31, 2005Utah
            
            Oregon
            
            Ireland
            
            TotalLand
            
            $
            621
            
            $
            -
            
            $
            407
            
            $
            1,028Building
                and improvements
            
            
            4,236
            
            
            32
            
            
            4,363
            
            
            8,631Furniture,
                equipment and tooling
            
            
            11,750
            
            
            1,251
            
            
            781
            
            
            13,782Construction-in-progress
            
            
            179
            
            
            -
            
            
            -
            
            
            179Total
            
            
            16,786
            
            
            1,283
            
            
            5,551
            
            
            23,619Accumulated
                depreciation and amortization
            
            
            (12,672
            )
            
            (1,274
            )
            
            (1,513
            )
            
            (15,459
            )Property
                and equipment, net
            
            $
            4,114
            
            $
            9
            
            $
            4,038
            
            $
            8,160




December
                31, 2004Utah
            
            Oregon
            
            Ireland
            
            TotalLand
            
            $
            621
            
            $
            -
            
            $
            468
            
            $
            1,089Building
                and improvements
            
            
            4,234
            
            
            32
            
            
            5,017
            
            
            9,283Furniture,
                equipment and tooling
            
            
            11,627
            
            
            1,245
            
            
            891
            
            
            13,763Construction-in-progress
            
            
            41
            
            
            -
            
            
            -
            
            
            41Total
            
            
            16,523
            
            
            1,277
            
            
            6,376
            
            
            24,176Accumulated
                depreciation and amortization
            
            
            (12,224
            )
            
            (1,271
            )
            
            (1,623
            )
            
            (15,118
            )Property
                and equipment, net
            
            $
            4,299
            
            $
            6
            
            $
            4,753
            
            $
            9,058




Note
      5
      - Note Payable





In
      December 2005 the Company borrowed €4.5 million ($5,336) from the Bank of
      Ireland to finance repatriation of profits achieved since 1996 under The
      American Jobs Creation Act of 2004. The loan term is 10-years at an interest
      rate of 0.70% plus the bank’s money market rate, which is a total of the bank’s
      cost of funds and cost of liquidity.





The
      Company has an unsecured bank line-of-credit agreement with U.S. Bank which
      allows the Company to borrow up to a fixed maximum amount of $8,000 at an
      interest rate equal to the bank's one-month LIBOR rate plus 1.25%. The
      line-of-credit-balance matures on May 31, 2006 and had an outstanding balance
      of
      $0 at both December 31, 2005 and 2004. The principal financial loan covenants
      are a restriction on the total amount available for borrowing to 1.25 times
      the
      last twelve months’ EBITDA, and a requirement to maintain a net worth in excess
      of $18.5 million, which at the end of 2005 and 2004 was $32,857 and $36,157,
      respectively. U.S. Bank also guarantees the Bank of Ireland loan through a
      letter of credit arrangement at an interest rate of 1.25%.




38
 UTAH
            MEDICAL PRODUCTS, INC.
 Notes
            to
            Consolidated Financial Statements








Note
      6
      - Commitments and Contingencies





Operating
      Leases





The
      Company has a lease agreement for land adjoining its Utah facility for a term
      of
      forty years commencing on September 1, 1991. On September 1, 2001 and subsequent
      to each fifth lease year, the basic rental was and will be adjusted for
      published changes in a price index. The Company also leases its CMI building
      in
      Oregon under a two-year non-cancelable operating lease. Rent expense charged
      to
      operations under these operating lease agreements was approximately $107, $107
      and $105 for the years ended December 31, 2005, 2004 and 2003,
      respectively.





Future
      minimum lease payments under its lease obligations as of December 31, 2005
      were
      as follows:





Years
                ending December 31:
            
            Amount2006
            
            $
            662007
            
            
            372008
            
            
            372009
            
            
            372010
            
            
            37Thereafter
            
            
            771Total
                future minimum lease payments
            
            $
            985





Purchase
      Obligations





The
      Company has obligations to purchase raw materials for use in its manufacturing
      operations. The Company has the right to make changes in, among other things,
      purchase quantities, delivery schedules and order acceptance.





Product
      Liability





The
      Company is self-insured for product liability risk. “Product liability” is an
      insurance industry term for the cost of legal defense and possible damages
      awarded as a result of use of a company’s product during a procedure that
      results in an injury of a patient. The Company maintains a reserve for product
      liability litigation and damages consistent with its previous long-term
      experience. Actual product liability litigation costs and damages during the
      last three reporting years have been immaterial, which is consistent with the
      Company’s overall history.





The
      Company absorbs the costs of clinical training and trouble-shooting in its
      on-going operating expenses.





Warranty
      Reserve





UTMD
      maintains a warranty reserve to provide for estimated costs which are likely
      to
      occur. The amount of this reserve is adjusted, as required, to reflect its
      historical experience. The following table summarizes changes to UTMD’s warranty
      reserve during 2005:





Beginning
                balance, January 1, 2005
            
            $
            60Changes
                in warranty reserve during 2005:Aggregate
                reductions for warranty repairs
            
            
            (3
            )Aggregate
                changes for warranties issued during reporting period
            
            
            21Aggregate
                changes in reserve related to preexisting warranties
            
            
            (18
            )Ending
                balance, December 31, 2005
            
            $
            60








Litigation





The
      Company has been involved in lawsuits which are an expected consequence of
      its
      operations and in the ordinary course of business. There are no such lawsuits
      currently pending. The Company applies its accounting policy to accrue legal
      costs that can be reasonably estimated. The significant decrease in the
      litigation reserve during 2005, from $1,260 to $125 reflects the conclusion
      of
      the FDA lawsuit.








39
 UTAH
            MEDICAL PRODUCTS, INC.
 Notes
            to
            Consolidated Financial Statements







Note
      6
      - Commitments and Contingencies (continued)





Irish
      Development Agency





In
      order
      to satisfy requirements of the Irish Development Agency in assisting the
      start-up of its Ireland subsidiary, the Company agreed to invest certain amounts
      and maintain a certain capital structure in its Ireland subsidiary. The effect
      of these financial relationships and commitments are reflected in the
      consolidated financial statements and do not represent any significant credit
      risk that would affect future liquidity.





Note
      7
      - Income Taxes





Deferred
      tax assets (liabilities) consist of the following temporary
      differences:







December
                31,2005
            
            2004Current
            
            Long-term
            
            Current
            
            Long-termInventory
                write-downs and differences due to UNICAP
            
            $
            84
            
            $
            -
            
            $
            73
            
            $
            -Allowance
                for doubtful accounts
            
            
            28
            
            
            -
            
            
            30
            
            
            -Accrued
                liabilities and reserves
            
            
            290
            
            
            (63
            )
            
            641
            
            
            23Other
            
            
            -
            
            
            (53
            )
            
            6
            
            
            70Depreciation
                and amortization
            
            
            -
            
            
            (89
            )
            
            -
            
            
            161Unrealized
                investment gains
            
            
            -
            
            
            (70
            )
            
            -
            
            
            (112
            )Earnings
                from subsidiary
            
            
            -
            
            
            -
            
            
            -
            
            
            (911
            )Deferred
                income taxes, net
            
            $
            402
            
            $
            (274
            )
            $
            750
            
            $
            (769
            )








The
      components of income tax expense are as follows:





Years
                ended December 31,2005
            
            2004
            
            2003Current
            
            $
            2,519
            
            $
            5,822
            
            $
            13,138Deferred
            
            
            148
            
            
            75
            
            
            (47
            )Total
            
            $
            2,667
            
            $
            5,897
            
            $
            13,091








Income
      tax expense differed from amounts computed by applying the statutory federal
      rate to pretax income as follows:





Years
                ended December 31,2005
            
            2004
            
            2003Federal
                income tax expense at the statutory rate
            
            $
            3,473
            
            $
            5,480
            
            $
            11,510State
                income taxes
            
            
            337
            
            
            806
            
            
            1,693ETI,
                foreign sales corporation and tax credits
            
            
            (172
            )
            
            (164
            )
            
            (68
            )Reversal
                of deferred tax for foreign subsidiary earnings, net of repatriation
                tax
            
            
            (434
            )
            
            -
            
            
            -Other
            
            
            (537
            )
            
            (225
            )
            
            (44
            )Total
            
            $
            2,667
            
            $
            5,897
            
            $
            13,091








40
 UTAH
            MEDICAL PRODUCTS, INC.
 Notes
            to
            Consolidated Financial Statements







Note
      8
      - Options





The
      Company has stock option plans which authorize the grant of stock options to
      eligible employees, directors and other individuals to purchase up to an
      aggregate of 895,208 shares of common stock, of which 548,621 are outstanding
      as
      of December 31, 2005. All options granted under the plans are granted at current
      market value at date of grant, and may be exercised between six months and
      ten
      years following the date of grant. The plans are intended to advance the
      interest of the Company by attracting and ensuring retention of competent
      directors, employees and executive personnel, and to provide incentives to
      those
      individuals to devote their utmost efforts to the advancement of the Company.
      Changes in stock options were as follows:








Shares
            
            Price
                RangePer Share**2005**Granted
            
            
            27,900
            
            $
            21.68
            -
            $
            21.68Expired
                or canceled
            
            
            27,672
            
            
            9.13
            -
            
            25.59Exercised
            
            
            207,133
            
            
            6.50
            -
            
            25.59Total
                outstanding at December 31
            
            
            548,621
            
            
            6.50
            -
            
            25.59Total
                exercisable at December 31
            
            
            491,070
            
            
            6.50
            -
            
            25.59**2004**Granted
            
            
            164,100
            
            $
            18.00
            -
            $
            25.59Expired
                or canceled
            
            
            44,767
            
            
            6.75
            -
            
            25.59Exercised
            
            
            122,908
            
            
            6.50
            -
            
            17.71Total
                outstanding at December 31
            
            
            755,526
            
            
            6.50
            -
            
            25.59Total
                exercisable at December 31
            
            
            554,727
            
            
            6.50
            -
            
            24.02**2003**Granted
            
            
            82,200
            
            $
            17.71
            -
            $
            24.02Expired
                or canceled
            
            
            12,562
            
            
            6.75
            -
            
            17.71Exercised
            
            
            298,852
            
            
            6.50
            -
            
            15.01Total
                outstanding at December 31
            
            
            759,101
            
            
            6.50
            -
            
            24.02Total
                exercisable at December 31
            
            
            625,859
            
            
            6.50
            -
            
            14.60





For
      the
      years ended December 31, 2005, 2004 and 2003, the Company reduced current
      income taxes payable and increased additional paid-in capital by $936, $446
      and
      $1,108, respectively, for the income tax benefit attributable to sale by
      optionees of common stock received upon the exercise of stock
      options.





Stock-Based
      Compensation





The
      Company has adopted the disclosure-only provisions of SFAS No. 123, “Accounting
      for Stock-Based Compensation,” as described in Note 1.





The
      fair
      value of each option grant is estimated on the date of grant using the
      Black-Scholes option pricing model with the following weighted average
      assumptions:





Years
                ended December 31,2005
            
            2004
            
            2003Expected
                dividend yield
            
            
            2.9
            %
            
            0.7
            %
            
            -Expected
                stock price volatility
            
            
            39.7
            %
            
            39.0
            %
            
            40.5
            %Risk-free
                interest rate (weighted average)
            
            
            4.1
            %
            
            3.7
            %
            
            3.5
            %Expected
                life of options
            
            
            5.1
                years
            
            
            6.2
                years
            
            
            5.9
                years





The
      per-share weighted average fair value of options granted during 2005, 2004
      and
      2003 is $6.88, $10.07 and $8.89, respectively.







41
 UTAH
            MEDICAL PRODUCTS, INC.
 Notes
            to
            Consolidated Financial Statements





Note
      8
      - Options (continued)


Stock-Based
      Compensation (continued)




The
      following table summarizes information about stock options outstanding at
      December 31, 2005:




Options
                Outstanding
            
            Options
                ExercisableWeightedAverageRemaining
            
            Weighted
            
            
            
            WeightedRange
                of
            
            
            
            Contractual
            
            Average
            
            
            
            AverageExercise
            
            Number
            
            Life
            
            Exercise
            
            Number
            
            ExercisePrices
            
            Outstanding
            
            (Years)
            
            Price
            
            Exercisable
            
            Price$   6.50    -    7.25
            
            
            209,686
            
            
            2.63
            
            $
            6.87
            
            
            209,686
            
            $
            6.879.125  -  15.01
            
            
            145,799
            
            
            2.62
            
            
            12.00
            
            
            140,767
            
            
            11.8917.71    -  25.59
            
            
            193,136
            
            
            8.18
            
            
            22.93
            
            
            140,617
            
            
            24.19$6.50
                   -  25.59
            
            
            548,621
            
            
            4.58
            
            $
            13.89
            
            
            491,070
            
            $
            13.27








Note
      9
      - Geographic Sales Information





The
      Company had sales in the following geographic areas:





United
                States
            
            Europe
            
            Other2005
            
            $
            21,301
            
            $
            3,501
            
            $
            2,8902004
            
            
            20,452
            
            
            3,639
            
            
            2,3942003
            
            
            21,266
            
            
            3,376
            
            
            2,495








Note
      10 - Revenues by Product Category





The
      Company had revenues in the following product categories:





Product
                Category
            
            2005
            
            2004
            
            2003Obstetrics
            
            $
            9,774
            
            $
            10,918
            
            $
            11,435Gynecology/Electrosurgery/Urology
            
            
            5,397
            
            
            5,142
            
            
            5,324Neonatal
            
            
            6,475
            
            
            4,134
            
            
            4,142Blood
                Pressure Monitoring and Accessories
            
            
            6,046
            
            
            6,292
            
            
            6,236








Note
      11 - Other Operating Income





In
      January 2004, the Company received a payment of $30,944 in damages and interest
      resulting from a 2002 District Federal Court judgment and ensuing post judgment
      settlement relating to Tyco/Kendall•LTP ’s patent infringement. The Company
      recognized other operating income from that payment of $6,060 in first quarter
      2004 and $23,992 in fourth quarter 2003. Related expenses of $892 reduced the
      amount recognized in 2003 from $24,884.








Note
      12 - Product Sale and Purchase Commitments





The
      Company has license agreements for the rights to develop and market certain
      products or technologies owned by unrelated parties. The confidential terms
      of
      such agreements are unique and varied, depending on many factors relating to
      the
      value and stage of development of the technology licensed. Royalties on future
      product sales are a normal component of such agreements and are included in
      the
      Company’s cost of goods sold on an ongoing basis.





The
      Company has in the past received and continues to receive royalties as a result
      of license agreements with unrelated companies that allow exclusive or
      nonexclusive rights to the Company’s technology.





42
 UTAH
            MEDICAL PRODUCTS, INC.
 Notes
            to
            Consolidated Financial Statements







Note
      13 - Employee Benefit Plan





The
      Company has a contributory 401(k) savings plan for employees, who are at least
      21 years of age, work 30 hours or more each week, and have a minimum of one
      year
      of service with the Company. The Company’s contribution is determined annually
      by the board of directors. Company contributions were approximately $92, $92
      and
      $95 for the years ended December 31, 2005, 2004 and 2003,
      respectively.





Note
      14 - Fair Value Financial Instruments





None
      of
      the Company’s financial instruments, which are current assets and liabilities
      that could be readily traded, are held for trading purposes, except investments.
      Detail on investments is provided in note 3, above. The Company estimates that
      the fair value of all financial instruments at December 31, 2005, does not
      differ materially from the aggregate carrying value of its financial instruments
      recorded in the accompanying consolidated balance sheet.





Note
      15 - Recent Accounting Pronouncements





In
      December 2004, the FASB issued SFAS 123 (revised 2004), “Accounting for
      Stock-Based Compensation.” This statement supersedes APB Opinion No. 25,
“Accounting for Stock Issued to Employees.” This revised statement establishes
      standards for the accounting of transactions in which an entity exchanges its
      equity instruments for goods and services, including the grant of stock options
      to employees and directors. The statement is effective for periods beginning
      after December 15, 2005, and will require the Company to recognize compensation
      cost based on the grant date fair value of the equity instruments it awards.
      The
      Company currently accounts for those instruments under the recognition and
      measurement principles of APB Opinion 25, including the disclosure-only
      provisions of the original SFAS 123. Accordingly, no compensation cost from
      issuing equity instruments has been recognized in the Company’s financial
      statements. The Company estimates that the required adoption of SFAS 123 (R)
      in
      first quarter 2006 will have a negative impact on its consolidated financial
      statements. Please see note 1 for an estimate of the impact this statement
      would
      have had on the Company’s net income for the periods covered by this report. The
      Company estimates that adoption of this Statement will result in about $130
      additional compensation expense during the year 2006 related to options
      outstanding on the date of this report. The Company intends to continue granting
      stock options or other equity instruments, although at a lower level than in
      the
      past, which will increase the amount of stock-based compensation in 2006 and
      beyond. The Board of Director’s action on May 6, 2005 to accelerate the vesting
      of underwater options reduced the financial statement impact of this accounting
      policy change.








43






**ITEM
      9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE**





None.








**ITEM
      9A - CONTROLS AND PROCEDURES**





Evaluation
      of Disclosure Controls and Procedures.


UTMD
      Management is responsible for establishing and maintaining adequate internal
      control over financial reporting, as defined in the Securities Exchange Act
      of
      1934 Rule 13a-15(e). UTMD’s Board of Directors, operating through its audit
      committee, provides oversight to its financial reporting process.





During
      2005, UTMD evaluated the effectiveness of the design and operation of its
      disclosure controls and procedures. Based on that evaluation, UTMD’s Chief
      Executive Officer and Chief Financial Officer concluded that, as of December
      31,
      2005, its disclosure controls and procedures were effective.





Management’s
      Report on Internal Control Over Financial Reporting.


Pursuant
      to Section 404 of the Sarbanes-Oxley Act of 2002, the Company has included,
      as part of this Form 10-K, a report of management's assessment of the
      effectiveness of its internal controls as of December 31, 2005. Jones
      Simkins, P.C., the independent registered public accounting firm of the Company,
      has audited management's assessment of, and the effectiveness of, the Company's
      internal control over financial reporting. Management's report, and the report
      of Jones Simkins, P.C. appear on pages F-2 and F-3 of this
      Form 10-K under the captions "Management's Report on Internal Control Over
      Financial Reporting" and "Report of Independent Registered Public Accounting
      Firm on Internal Control Over Financial Reporting" and are incorporated herein
      by reference.





Changes
      in Internal Control Over Financial Reporting.


There
      have been no changes in UTMD’s internal control over financial reporting that
      materially affected, or were reasonably likely to materially affect, the
      Company’s internal control over financial reporting during the fourth quarter of
      the fiscal year ended December 31, 2005, and there were no significant
      deficiencies or material weaknesses.








**ITEM
      9B - OTHER INFORMATION**





None.






44






**PART
      III**





**ITEM
      10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT** .





The
      information from the definitive proxy statement of the registrant under the
      caption, “PROPOSAL NO. 1. ELECTION OF DIRECTORS: General,” “Directors and
      Nominees,” “Executive Officers,” and “Compliance with Exchange Act
      Requirements,” is incorporated herein by reference, *expressly
      excluding* the
      material set forth under the subcaptions “Report of the Compensation and Option
      Committee” and “Stock Performance Chart.”





UTMD
      adopted a Code of Ethics for its executive officers, including the Chief
      Executive Officer and outside directors, in October 2003. The Code of Ethics,
      along with UTMD’s Code of Conduct, which covers all exempt employees (including
      all officers and outside directors) and certain non-exempt employees, is posted
      on UTMD’s web site at www.utahmed.com .
      UTMD
      intends to post on its website any waivers of or amendments to its Code of
      Ethics.








**ITEM
      11 - EXECUTIVE COMPENSATION**





The
      information from the definitive proxy statement of the registrant under the
      caption, “PROPOSAL NO. 1. ELECTION OF DIRECTORS: Executive Compensation,”
“Compensation and Option Committee Interlocks and Insider Participation,”
“Employment Agreements, Termination of Employment, and Change in Control,” and
“Director’s Compensation” is incorporated herein by reference, *expressly
      excluding* the
      material set forth under the subcaptions “Report of the Compensation and Option
      Committee” and “Stock Performance Chart.”








**ITEM
      12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
      STOCKHOLDER MATTERS**





The
      information from the definitive proxy statement of the registrant under the
      caption, “PROPOSAL NO. 1. ELECTION OF DIRECTORS: Security Ownership of
      Management and Certain Persons” is incorporated herein by
      reference.








**ITEM
      13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS**





None.








**ITEM
      14 - PRINCIPAL ACCOUNTING FEES AND SERVICES**





The
      information from the definitive proxy statement for the 2006 annual meeting
      of
      stockholders under the caption “Independent Public Accountants” is incorporated
      herein by reference.



























45






**PART
      IV**





**ITEM
      15 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES**





(a)
      The
      following documents are filed as part of this report or incorporated herein
      by
      reference.





1.
            Financial
                Statements.


(See
      Table of Contents to Item 8, above.)





2.
            Supplemental
                Schedule.


Financial
      Statement Schedules are omitted because they are inapplicable or the required
      information is otherwise included in the accompanying Financial Statements
      and
      the notes thereto.





3.
            Exhibits.


Exhibit
                #
            SEC
              Reference#
            Title
                of Document
            Location1
            3
            Articles
                of Restatement of the Articles of Incorporation
            See
                Original Filing2
            3
            Articles
                of Correction to the Restated Articles of Incorporation
            See
                Original Filing3
            3
            Bylaws
            Incorporated
                by Reference(1)4
            4
            Rights
                Agreement dated as of July 30, 2004, between Utah Medical Products,
                Inc.,
                and Registrar and Transfer Company
            Incorporated
                by Reference(2)5
            4
            Designation
                of Rights, Privileges, and Preferences of Series “A” Preferred
                Stock
            Incorporated
                by Reference(1)6
            10
            Employment
                Agreement dated December 21, 1992 with Kevin L. Cornwell*
            Incorporated
                by Reference(3)7
            10
            Amendment,
                effective May 15, 1998, to Employment Agreement dated December 21,
                1992
                with Kevin L. Cornwell*
            Incorporated
                by Reference(3)8
            10
            Utah
                Medical Products, Inc., 2003 Employees’ and Directors’ Incentive
                Plan*
            Incorporated
                by Reference(4)9
            10
            Loan
                Agreement, dated 3 July, 2002 between Utah Medical Products, Inc
                and U.S.
                Bank National Association
            Incorporated
                by Reference(5)10
            10
            Revolving
                Promissory Note, dated July 3, 2002 by Utah Medical Products, Inc.
                to U.S.
                Bank National Association
            Incorporated
                by Reference(5)11
            10
            Second
                Amendment to Loan Agreement, dated 30 August 2004 between Utah Medical
                Products, Inc. and U.S. Bank National Association
            Incorporated
                by Reference(6)12
            10
            Third
                Amendment to Loan Agreement, dated December 6, 2005 between Utah
                Medical
                Products, Inc. and U.S. Bank National Association
            Incorporated
                by Reference (7)13
            10
            Amended
                and Restated Revolving Promissory Note, dated December 6, 2005 by
                Utah
                Medical Products, Inc. to U.S. Bank National Association
            Incorporated
                by Reference (7)14
            10
            Loan
                Agreement, signed 6-December-2005 between Utah Medical Products Limited
                and Bank of Ireland
            Incorporated
                by Reference (7)15
            10
            Summary
                of Officer and Director Compensation
            This
                Filing












46








Exhibit
                #
            SEC
              Reference
                #
            Title
                of Document
            Location16
            21
            Subsidiaries
                of Utah Medical Products, Inc.
            Incorporated
                by Reference(8)17
            23
            Consent
                of Jones Simkins, P.C., Company’s independent auditors for the years ended
                December 31, 2005, December 31, 2004 and December 31, 2003
            This
                Filing18
            31
            Certification
                of CEO pursuant to Rule 13a-14(a) as adopted pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002
            This
                Filing19
            31
            Certification
                of Principal Financial Officer pursuant to Rule 13a-14(a) as adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
            This
                Filing20
            32
            Certification
                of CEO pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of
                the Sarbanes-Oxley Act of 2002
            This
                Filing21
            32
            Certification
                of Principal Financial Officer pursuant to 18 U.S.C. §1350, as Adopted
                Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
            This
                Filing




*
      Management contract of compensatory plan or arrangement required to be filed
      pursuant to Item 14(c).





(1)
            Incorporated
                by reference from the Company’s registration statement on form S-8 filed
                with the Commission effective February 10,
                1995.





(2)
            Incorporated
                by reference from the Company’s report on form 8-K filed with the
                Commission on October 1, 2004.





(3)
            Incorporated
                by reference from the Company’s annual report on form 10-K filed with the
                Commission for the year ended December 31,
                2003.





(4)
            Incorporated
                by reference from the Company’s annual report on form 10-K filed with the
                Commission for the year ended December 31,
                2002.





(5)
            Incorporated
                by reference from the Company’s quarterly report on form 10-Q filed with
                the Commission for the quarter ended June 30,
                2002.





(6)
            Incorporated
                by reference from the Company’s quarterly report on form 10-Q filed with
                the Commission for the quarter ended September 30,
                2004.





(7)
            Incorporated
                by reference from the Company’s report on form 8-K filed with the
                Commission on December 12, 2005.





(8)
            Incorporated
                by reference from the Company’s annual report on form 10-K filed with the
                Commission for the year ended December 31,
                1999.















47






**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned this 15th day of March, 2006.





UTAH
      MEDICAL PRODUCTS, INC.








By:
            /s/ Kevin L.
                CornwellKevin
                L. CornwellChief
                Executive OfficerBy:
            /s/ Greg A.
                LeClaireGreg
                A. LeClaireChief
                Financial Officer








Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed below by the following persons on behalf of the registrant and in the
      capacities indicated on this 15th day of March, 2006.








By:
            /s/ Stephen W.
                BennettStephen
                W. Bennett, DirectorBy:
            /s/ Kevin L.
                CornwellKevin
                L. Cornwell, DirectorBy:
            /s/ Ernst G.
                HoyerErnst
                G. Hoyer, DirectorBy:
            /s/ Barbara A.
                PayneBarbara
                A. Payne, DirectorBy:
            /s/ Paul O.
                RichinsPaul
                O. Richins, Director






























48