UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-K/A


(Amendment
      No. 1)


Annual
      Report Pursuant to Section 13 or 15(d) of


the
      Securities Exchange Act of 1934





For
                the fiscal year ended December 31, 2004
            Commission
                File No.0-11178UTAH
                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
                South 300 West
              Midvale,
                UT 84047
              (Address
                of principal executive offices)Registrant's
                telephone number, including area code:(801)
                566-1200




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


None





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





Title
      of each Class


Common
      Stock, $.01 par value


Preferred
      Stock Purchase Rights





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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





Indicate
      by check mark if disclosure of delinquent filers pursuant to Item 405 of
      Regulation S-K (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 an accelerated filer (as defined in
      Rule
      12b-2 of the Act).


Yes
              X
              No




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, 2004, the aggregate market value of the voting
      and
      nonvoting common equity held by nonaffiliates of the registrant was
      $86,897,000.





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 4, 2005,  common
      shares outstanding were  4,090,061.





DOCUMENTS
      INCORPORATED BY REFERENCE





List
      herein the documents incorporated by reference: The Company's definitive proxy
      statement for the Annual Meeting of Shareholders is incorporated by reference
      into Part III, Items 10, 11, 12, and 13 of this Form 10-K.








INDEX
                    TO FORM 10-KPAGEPART
                    IItem
                    1
                Business
                1Item
                    2
                Properties
                12Item
                    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
                23Item
                    9
                Changes
                    in and Disagreements With Accountants on Accounting and Financial
                    Disclosure
                23Item
                    9A
                Controls
                    and Procedures
                24Item
                    9B
                Other
                    Information
                24PART
                    IIIItem
                    10
                Directors
                    and Executive Officers of the Registrant
                25Item
                    11
                Executive
                    Compensation
                25Item
                    12
                Security
                    Ownership of Certain Beneficial Owners and Management and Related
                    Stockholder Matters
                25Item
                    13
                Certain
                    Relationships and Related Transactions
                25Item
                    14
                Principal
                    Accounting Fees and Services
                25PART
                    IVItem
                    15
                Exhibits,
                    Financial Statement Schedules
                26Signatures
                28Index
                    to Consolidated Financial Statements
                F-1Management’s
                    Report on Internal Control Over Financial Reporting
                F-2Report
                    of Independent Registered Public Accounting Firm on Management’s
                    Assessment on Internal Control Over Financial Reporting
                F-3Report
                    of Independent Registered Public Accounting Firm on Financial
                    Statements
                F-5

















**PART
      I**








**ITEM
      1 - BUSINESS**





Utah
      Medical Products, Inc. (“UTMD” or “the Company”) is in the business of producing
      high quality cost-effective healthcare industry 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 regulatory approval, 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 proper 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 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 with approximately 100
      international distributors.





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.





UTMD
      was
      formed as a Utah corporation in 1978. UTMD publicly raised equity capital one
      time in 1982. 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 July, 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. The Company's corporate
      offices are located at 7043 South 300 West, Midvale, Utah 84047 USA. The
      corporate telephone number is (801) 566-1200. European operations are located
      at
      Athlone Business and Technology Park, Athlone, County Westmeath, Ireland. The
      telephone number in Ireland is (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 .


About
      60%
      of births are considered "higher risk" due to lack of prenatal care, among
      other
      factors. In many of these births, labor may become complicated and does not
      progress normally. The obstetrician 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 a Cesarean Section procedure, and be prepared
      for complications following childbirth.





To
      assist
      the physician in assessing fetal well-being, changes in fetal heart rate (FHR)
      in conjunction with trends in intrauterine pressure are often electronically
      monitored. UTMD’s intrauterine pressure (IUP) catheter product line provides 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, belly bands and chart paper are offered 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 zero
                switch that allows the clinician to verify the reference of the monitor,
                and a dedicated amnio lumen which provides immediate 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
                address user preferences in tip size and zero switch
                location.





UTMD
      markets disposable electrodes, catheters and accessories as outlined above,
      but
      does not currently market monitors, the electronic 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 an alternative to C-section intervention. Although
      there are risks associated with operative vaginal deliveries which represent
      about 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 8-10% 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. Because it is a disposable product, it allows for excellent
      visualization of the underdeveloped infant and 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, a subsidiary of Bard Access Systems and C.R. Bard, Inc. 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
      2005,
      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 distribution arrangements with other manufacturers, or through selective
      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. Most importantly, in contrast to laser (tissue ablation)
      and
      cryotherapy (freezing of tissue), LETZ provides a fine tissue specimen for
      pathological assessment. Therefore, LETZ is effective both as a diagnostic
      and
      therapeutic procedure. 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.





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, EPITOME has no peer. 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.





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.
      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.





5





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.





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. 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 are
      trying 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
      are generally administratively 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 many of 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.





6







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.





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 March 2005, the direct sales force
      is
      comprised of both outside territory representatives operating remotely
      geographically, 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 clinicians 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 10% of total domestic sales. In
      contrast, eight 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 resources 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 80 regional distributors and
      through about 20 OEMs (other medical device manufacturers). The international
      business is driven by the initiative and resourcefulness of these distributors.
      UTMD’s Internet website **www.utahmed.com** is a
      frequent conduit for international customer inquiries.





NEW
      PRODUCT DEVELOPMENT





New
      product development is 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.





7


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.




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. UTMD has had 7 patents
      issued in the last five years. Internal product development expenses are
      expected to be in the range of 1-2% of sales in 2005. In 2004, UTMD spent $292
      (in thousands) on internal product development activities, or 1.1% of sales.
      In
      addition, the Company invested $10 in new technology rights which have not
      resulted in a marketable product yet. In 2003 and 2002, internal new product
      development expenses were $288 (1.1% of sales) and $285 (1.0% of sales),
      respectively.





EMPLOYEES





At
      December 31, 2004, the Company had 206 employees. The average tenure of all
      of
      UTMD’s employees is over eight years. 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 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
      large 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.






8


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 2004, ongoing royalties included in cost
      of
      goods sold were $3 (in thousands). 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 2004,
      the Company received $450 in royalty income, the same as in 2003 and 2002.
      Non-operating income remains a significant portion of UTMD’s earnings. UTMD’s
      future financial performance also depends on the marketing ability of other
      companies that license UTMD’s technology.





GOVERNMENT
      REGULATION





UTMD's
      products 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.





The
      Company believes all of its present products are Class I or Class II devices
      and
      that the Company is in compliance with all applicable material performance
      standards as well as FDA cGMP (current good manufacturing practice) quality
      standards, record keeping and reporting.





In
      2003
      the FDA began withholding export certificates from UTMD, which action was part
      of an unresolved disagreement regarding the issuance of a Warning Letter by
      FDA
      to UTMD in September 2001. Export certificates are nonbinding letters assuring
      other countries that a company is in compliance with FDA regulations. The export
      certificates have now been withheld for many months while UTMD distributes
      its
      products in the U.S. without any FDA restriction, or any FDA claim that UTMD’s
      products are unsafe or ineffective. The Company strongly believes that there
      is
      no reasonable basis for this denial.





On
      August
      10, 2004, the FDA issued a press release announcing it would seek an injunction
      against UTMD until it had corrected alleged “deviations” from the Quality System
      Regulation, 21 CFR Part 820 (QSR). The FDA did not seek a preliminary
      injunction. UTMD responded with several press releases shortly following the
      FDA’s announcement, and with periodic public updates since then. The FDA press
      release and filing of the action in the U.S. District Court for the District
      of
      Utah caused significant disruption to UTMD’s business, in part because of
      inappropriate activities of UTMD competitors incorrectly telling customers
      that
      the Company has been, or was about to be, shut down. As a matter of fact,
      through the date of this report: 1) UTMD continues to manufacture and distribute
      all of its products worldwide without any regulatory restriction, 2) There
      has
      been no mandated recall or any other regulatory enforcement action that
      restricts customers from using UTMD’s products, 3) There has not been, and is
      not now, any allegation by the FDA that UTMD’s products are not safe or
      effective, 4) There is no FDA claim of defective products or products not
      conforming to specifications, and 5) The proven extremely low product liability
      risk using UTMD’s products has not changed. On November 16, 2004 UTMD announced
      that an FDA enforcement official, officially designated as the knowledgeable
      FDA
      representative, testified under oath that the FDA is not claiming in the lawsuit
      that UTMD’s devices are either unsafe or ineffective. Discovery in the lawsuit
      is ongoing at the date of this report, with a pre-trial conference scheduled
      for
      June 20, 2005. As part of its expert witness testimony in the lawsuit, the
      Company has provided independent QSR expert certification that UTMD is in
      substantial compliance with the QSR. (See also Item 3. - Legal
      Proceedings.)






9






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 initially 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 November 2004. 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 routinely checks all
      incoming material for conformance to specifications.





EXPORTS





Revenues
      from customers outside the U.S. in 2004 were (in thousands) $6,029 (23% of
      total
      sales), as compared to $5,872 (22% of total sales) in 2003, and $5,735 (21%
      of
      total sales) in 2002. Blood pressure monitoring products represented 67% of
      international sales in both 2004 and 2003, compared to 70% in 2002.
      International Ob/Gyn and neonatal product sales were $2,019 in 2004, compared
      to
      $1,930 in 2003 and $1,743 in 2002. For financial information by geographical
      area, please see Notes 1, 4 and 9 to the Consolidated Financial
      Statements.





UTMD
      regards the international marketplace as one of the important elements 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, faster 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 at existing U.S. facilities.





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 60 days was approximately $0.3 million as of both January 1, 2005 and
      January 1, 2004.





SEASONAL
      ASPECTS





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


10






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 26 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 has is the consistent conformance of
      its
      proven safe and effective products to specifications. In the last twelve 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 VAD product was used. The VADS products 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 period of
      time, no other UTMD products were 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. Although the Company has attempted to identify
      important factors that could cause the 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.





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,
      including the current action filed by the Justice Department on behalf of the
      FDA against UTMD in the U.S. District Court for the District of Utah (see
      Government Regulation, above); and third party reimbursement of health care
      costs of customers.





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.


11






**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.








**ITEM
      3 - LEGAL PROCEEDINGS**





The
      Company may be a party from time to time in routine litigation incidental to
      its
      business. Presently, there is no such routine litigation ongoing.





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 presiding judge is Judge Bruce S. Jenkins. The government (FDA)
      is seeking a permanent injunction from alleged deviations of the Quality System
      Regulation (QSR). The FDA did not seek a preliminary injunction. The relief
      being sought is to enjoin the Company from manufacturing and shipping products
      until it conforms with the QSR in a manner that is acceptable to the FDA.




UTMD
      was
      served with the complaint on August 12, 2004. On August 10, the FDA released
      an
      announcement on its official website regarding filing the lawsuit which
      contained a personal quotation from Acting Commissioner Lester Crawford which
      UTMD believes confused and upset people who use UTMD’s devices, and thereby
      harmed UTMD’s commerce and shareholder value. In Federal Court, the FDA will
      have the burden to prove that UTMD is not in compliance with the QSR. On January
      31, 2005, attorneys for UTMD filed a Motion to amend Defendant's Answer to
      assert a counterclaim for damages for abuse of process. The Court expeditiously
      reviewed and granted Defendant's Motion for Leave to File Amended Answer to
      Assert Counterclaim. The relief being sought by UTMD includes dismissing the
      case, reimbursing UTMD for its expenses and requiring FDA to issue a public
      apology stating that UTMD has been and is in compliance with the
      QSR.




In
      addition to the GOVERNMENT REGULATION section in this document, please review
      UTMD’s MD&A section in this report for further discussion regarding its
      dispute with the FDA.








**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 began trading on the Nasdaq National Market (symbol:UTMD) in 1983.
      From December 26, 1996 until March 7, 2000, UTMD traded on the New York Stock
      Exchange (symbol: UM). Since March 8, 2000, UTMD has again traded on the Nasdaq
      National Market. The following table sets forth the high and low sales price
      information as reported by Nasdaq for the periods indicated:








2004
            
            2003High
            
            Low
            
            High
            
            Low1st
                Quarter
            
            $
            26.45
            
            $
            23.52
            
            $
            19.35
            
            $
            17.412nd
                Quarter
            
            
            27.19
            
            
            23.80
            
            
            20.87
            
            
            18.103rd
                Quarter
            
            
            27.00
            
            
            16.02
            
            
            24.99
            
            
            20.054th
                Quarter
            
            
            23.45
            
            
            17.50
            
            
            26.30
            
            
            21.00





Stockholders.


The
      approximate number of beneficial stockholders of UTMD’s common stock as of March
      4, 2005 was 3,100.








Dividends.


On
      May
      10, 2004, UTMD announced that it would begin paying a quarterly cash dividend.
      The following sets forth cash dividends declared and paid on UTMD common stock
      over the past two years:





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
            
            0.152004
                total paid
            
            $
            0.302003
                total paid
            
            
            None





Issuer
      Purchases of Equity Securities.


The
      following table details purchases by UTMD of its own securities during fourth
      quarter 2004.





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)10/01/04
                - 10/31/04
            
            
            233,200
            
            $
            17.61
            
            
            233,20011/01/04
                - 11/30/04
            
            
            6,000
            
            
            17.96
            
            
            6,00012/01/04
                - 12/31/04
            
            
            15,488
            
            
            21.92
            
            
            15,488Total
            
            
            254,688
            
            $
            17.88
            
            
            254,688





(1) In
      fourth
      quarter 2004 UTMD repurchased an aggregate of 254,688 shares of its common
      stock
      at an average cost of $17.88 per share pursuant to a continued open market
      repurchase program initially announced in August 1992. Since 1992 through 2004,
      the Company has repurchased 5,979,792 shares at an average cost of $10.70 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 8.7 million
      of its shares at an average price of $10.40 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 1.4 million option shares
      at an average price of $6.24 per share. All options were awarded at the market
      value of the stock on the date of the award.






13






The
      frequency of UTMD’s open market share repurchases depends on the availability of
      sellers and the price of the stock. Since the conclusion of its November 2002
      tender offer, the Company has repurchased shares on a total of thirty-nine
      trading days, about 8% of the total trading days available. The board of
      directors has not established an expiration date or a maximum dollar or share
      limit for UTMD’s continuing and long term pattern of open market share
      repurchases.





The
      purpose of UTMD’s ongoing 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 by 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**


(in
      thousands, except per share data)





The
      following selected consolidated financial data of UTMD and its subsidiaries
      for
      the five years ended December 31, 2004, 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 312004
            
            2003
            
            2002
            
            2001
            
            2000Net
                Sales
            
            $
            26,485
            
            $
            27,137
            
            $
            27,361
            
            $
            26,954
            
            $
            27,193Net
                Income
            
            
            10,220
            
            
            20,761
            
            
            7,165
            
            
            5,934
            
            
            5,373Earnings
                Per Common Share (Diluted)
            
            
            2.19
            
            
            4.25
            
            
            1.36
            
            
            1.14
            
            
            .90Total
                Assets
            
            
            41,262
            
            
            49,694
            
            
            23,387
            
            
            23,572
            
            
            25,423Working
                Capital
            
            
            20,194
            
            
            21,405
            
            
            5,437
            
            
            5,400
            
            
            5,418Long-term
                Debt
            
            
            0
            
            
            0
            
            
            4,956
            
            
            2,501
            
            
            10,000Cash
                Dividends Per Common Share
            
            
            0.30
            
            
            None
            
            
            None
            
            
            None
            
            
            None








Quarterly
                Data for 2004First
                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
            
            
            .32Quarterly
                Data for 2003First
                Quarter
            
            
            Second
                Quarter
            
            
            Third
                Quarter
            
            
            Fourth
                QuarterNet
                Sales
            
            $
            6,877
            
            $
            6,840
            
            $
            6,761
            
            $
            6,659Gross
                Profit
            
            
            3,977
            
            
            4,033
            
            
            3,979
            
            
            3,902Net
                Income
            
            
            1,788
            
            
            1,837
            
            
            1,861
            
            
            15,274Earnings
                Per Common Share (Diluted)
            
            
            .37
            
            
            .38
            
            
            .38
            
            
            3.10





14





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





Productivity
      of Assets and Working Capital.


a) Assets .
      Year-end 2004 total assets were $41,262, compared to $49,694 in 2003. Year-end
      assets in both years were substantially higher than in prior years due to the
      Tyco patent infringement damages, reflected in cash and investments in year-end
      2004 and receivables in year-end 2003. The change in total assets was not
      related to sales activity. It reflected the difference in the Tyco damages
      due
      UTMD at the end of 2003 and the cash and investment balances resulting from
      the
      damages at the end of 2004 after income taxes on the income resulting from
      the
      infringement damages had been paid. The same statement applies to the net change
      in current assets. In 2005, total asset turns will depend primarily on UTMD’s
      use of its cash and investment balances.





Although
      other current asset categories netted out to remain about the same, 2004 ending
      inventory balances were about $400 lower and receivables were about $400 higher.
      As a result, average inventory turns increased to 3.7 in 2004 from 3.3 in 2003
      despite a decline in sales activity. Management expects to sustain 3.7 inventory
      turns in 2005. Because year-ending 2004 accounts receivable (A/R) balances
      increased 12%, calculated average days in A/R aging was 51 on December 31,
      2004
      based on 4Q 2004 shipment activity. Although this is well within management’s
      objective of 55 days, it is less favorable than at the end of 2003. A/R over
      90
      days from invoice date were about 5% of total A/R at year-end 2004, compared
      to
      4% at year-end 2003. The Company believes these older A/R are collectible or
      within its reserve balances for uncollectible accounts.





Working
      capital at year-end 2004 was $20,194 compared to $21,405 at year-end 2003.
      Both
      amounts far exceed UTMD’s working capital needs for normal operations. UTMD’s
      current ratio increased to 5.7 from 2.7, due mainly to the decrease in income
      taxes due resulting from the patent infringement damages. 2005 working capital
      balances and current ratio will depend primarily upon the timing and extent
      of
      use of cash and investment balances. The non-cash and investment components
      of
      working capital are expected to remain within management targets.





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, involved in the 1997 CMI acquisition, and a portion
      of the Midvale parking lot. In 2004, PP&E depreciation of $739 exceeded new
      PP&E asset purchases of $411. Net PP&E assets, however, increased $53
      compared to the end of 2003 because of a $252 increase in dollar-valued Ireland
      PP&E assets. In 2004, the U.S. dollar (USD) declined in value relative to
      the euro by about 8%. Slightly higher consolidated PP&E (in U.S. dollar
      terms) and lower sales resulted in a slightly lower PP&E turn. In 2005,
      depreciation of fixed assets is expected to exceed new fixed asset purchases
      required to sustain current operations, which will improve PP&E asset turns
      unless the U.S. dollar continues to weaken, further inflating the dollar value
      of Ireland PP&E.




The
      current book value of consolidated PP&E is 37% of acquisition cost.
      Management believes that PP&E is in good working order and capable of
      supporting increased sales activity.




Intangible
      assets are comprised of goodwill resulting from acquisitions and the costs
      of
      obtaining patents and other technology rights. Goodwill of $7,191 is the result
      of three acquisitions in 1997, 1998 and 2004 which were made in cash at
      conservative valuations. Goodwill increased $946 in 2004 as a result of the
      acquisition of Abcorp Medical, UTMD’s supplier of fetal monitoring belts. The
      increase in 2004 goodwill was offset by $70 amortization of other intangible
      assets. As of the end of 2004, goodwill on the balance sheet has been reduced
      by
      24% from the goodwill resulting at time of acquisition. The reduction is a
      result of UTMD using previous GAAP through 2001 for the purchase method of
      acquisition accounting. Under current GAAP, the goodwill will not be expensed
      unless and until the value of the acquired entity becomes impaired. The
      acquisitions reflected in goodwill continue to be viable parts of UTMD’s overall
      business activities, representing 26% of total sales in 2004.






15






b) Liabilities .
      Excluding accrued and deferred income taxes, UTMD’s total liabilities at the end
      of 2004 and 2003, which were $3,952 and $3,227, respectively, were both less
      than 10% of total assets reduced by the total accrued tax liability. At the
      end
      of 2004, UTMD’s total debt ratio decreased to 12% from 26% at the end of 2003.
      The decline was due to accrued taxes on the patent infringement damages
      receivable item on the balance sheet at the end of 2003 which were paid in
      2004.





Results
      of Operations.


a) 
      Revenues .
      Global
      consolidated sales decreased 2% in 2004 compared to 2003. Foreign
      (international) sales increased 3% while U.S. (domestic) sales declined 4%.
      Revenues were negatively affected by an August 10 FDA press release that
      announced that the FDA filed a lawsuit against UTMD. International revenues
      continued to be negatively affected by the FDA’s refusal, continuing since 2003,
      to provide Certificates to Foreign Governments (CFGs).





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 product offerings. As a percentage of total domestic sales, direct
      sales were 93% of domestic sales in both 2004 and 2003, and 94% in 2002. The
      remaining sales were OEM sales, e.g. 7% of domestic sales in 2004 were domestic
      OEM sales. Domestic direct sales represented 72% of global consolidated sales
      in
      2004 compared to 73% in 2003 and 74% in 2002.





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 appeared to be the most affected. Hospital NICU sales
      were less affected than L&D because practitioners still have major
      discretion in determining what products are purchased. In order to help gain
      further attention of concerned hospital administrators, UTMD instituted a
      special “loyalty discount” in late August. Ignoring the effect of the special
      U.S. hospital customer loyalty discount (the Discount) in effect from August
      20
      through November 30, 2004, UTMD’s sales were down 1% from 2003. The amount of
      the Discount was $374.




International
      sales in 2004 were 23% of global consolidated sales compared to 22% and 21%
      in
      years 2003 and 2002, respectively. Of the 2004 international sales,
      60%  were
      made
      in Europe, compared to 58% in both 2003 and 2002. Ireland operations (UTMD
      Ltd.)
      shipped 59% of international sales (in USD terms) in 2004 compared to 63% in
      2003 and 59% in 2002. UTMD Ltd. 2004 shipments, including intercompany to
      Midvale, were down 15% in euro terms, and down 5% in USD terms, compared to
      2003.





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 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 applications; and 4) blood pressure
      monitoring/ accessories/ other, comprised of specialized components and 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.








16






Revenues
      by product category:


1.
      Worldwide obstetrics product sales were $10,918 in 2004 compared to $11,435
      in
      2003 and $11,977 in 2002. Without the Discount, 2004 obstetrics sales were
      $11,120. Of the $517 decline in total obstetrics sales, $154 was from lower
      sales of vacuum-assisted delivery systems (VADS), an 11% decline, and $1,136
      from lower Intran Plus (IUPC) sales, a 12% decline. Abcorp sales of $842 helped
      offset the declines. After August 10, the lower IUPC and VADS sales resulted
      primarily from concerns of hospital administrators related to the press release
      from the FDA. 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. International obstetrics sales increased to $774 in 2004
      from
      $665 in 2003.





2.
      Consolidated global gynecology/ electrosurgery/ urology product sales were
      $5,142 in 2004 compared to $5,324 in 2003 and $5,271 in 2002. Without the
      Discount, 2004 sales were $5,212. International sales in this category decreased
      9%. International sales were negatively affected by not being able to supply
      requested FDA CFGs to international distributors.





3.
      Consolidated global neonatal product sales were $4,134 in 2004 compared to
      $4,142 in 2003 and $3,852 in 2002. Without the Discount, 2004 sales were $4,217.
      International neonatal product sales increased 39%.




4.
      Worldwide blood pressure monitoring and accessories (BPM) sales were $6,292
      in
      2004 compared to $6,236 in 2003 and $6,261 in 2002. Without the Discount, 2004
      sales were $6,310. International sales in this category, which includes plastic
      molded components increased 2%.





Looking
      forward to 2005, UTMD’s
      improvement in sales depends primarily on the timing of a favorable resolution
      of the lawsuit with the FDA, receipt of CFGs and restoration of its good
      reputation for supplying high quality devices. If the FDA lawsuit is resolved
      by
      the middle of the year, management believes that it can achieve a 2-3% increase
      in 2005 sales relative to 2004.





b) Gross
      Profit .
      UTMD’s
      average 2004 gross profit margin (GPM), the surplus after costs of
      manufacturing, inspecting, packaging, sterilizing and shipping products (COGS)
      are subtracted from net revenues, was 56.9% compared to a Company record 58.6%
      in 2003 and 57.6% in 2002. As a percentage of sales, the negative effect of
      the
      Discount was more pronounced on gross profits than on sales. In 2004, UTMD
      experienced higher materials costs, particularly for plastics, along with
      increased labor costs, lower absorption of fixed overhead costs because of
      lower
      sales, and an unfavorable shift from higher margin products to lower margin
      products. The unfavorable cost trends were partially offset by lower
      depreciation expense on fixed assets and recoveries of previous years’
      misappropriated funds. With regard to the latter, UTMD recognized a favorable
      contribution to gross profit of $181 and $241 for 4Q 2004 and 2004,
      respectively, as the result of recovery of misappropriated funds that had
      reduced gross profit performance in prior years. The Audit Committee of UTMD
      was
      fully involved in the investigation and resolution of this matter.





With
      respect to gross profits in UTMD’s sales channels, 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.





UTMD
      targets an average GPM greater than or equal to 55%, which it believes is
      necessary to successfully support the significant operating expenses required
      in
      a highly complex and competitive medical device marketplace. Management expects
      to achieve this GPM target again in 2005. Expected favorable influences include
      growth in sales volume without a similar increase in manufacturing overhead
      expenses, a larger percentage of total sales from higher margin products and
      a
      continued emphasis on reengineering products and processes to reduce costs.
      Expected unfavorable influences are continued increases in material costs,
      competitive pressure on pricing and higher wage rates.




17






c) Operating
      Profit .
      Operating profit, or income from operations, is the surplus after operating
      expenses are subtracted from gross profits. Operating expenses include sales
      and
      marketing (S&M) expenses, research and development (R&D) expenses and
      general and administrative (G&A) expenses. Litigation expenses are included
      as part of G&A expenses. Operating expenses in 2004 were lower by $1,571
      than in 2003. This was due to litigation expenses and bonuses in 2003 related
      to
      the conclusion of the Tyco litigation of $2,208 which were not present in 2004,
      offset by FDA litigation expenses in 2004 not present in 2003. 2004 operating
      profit increased $745 to $9,259 from $8,514 in 2003. 2002 operating profits
      were
      $10,542. UTMD’s operating profit margin (operating profits divided by total
      sales) was 35.0% in 2004, compared to 31.4% in 2003 and 38.5% in 2002. Operating
      expenses as a percentage of sales were 21.9% in 2004, compared to 27.2% in
      2003
      and 19.1% in 2002. The higher expenses as a percentage of sales in 2004 and
      2003
      compared to 2002 were due primarily to litigation. Looking forward to 2005,
      UTMD
      expects to control operating expenses excluding litigation expenses below 19%
      of
      sales. Based on the date set by the Federal Court for the pretrial conference,
      UTMD has accrued in 2004 an estimate for litigation expenses for resolution
      of
      the FDA lawsuit. However, UTMD cannot estimate with certainty the length of
      time
      required to resolve the lawsuit. A delay would be a double negative by
      continuing to retard sales activity while at the same time increasing
      time-related litigation costs as an addition to 2005 operating expenses.





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. Year 2004 S&M expenses decreased to $2,253 from $2,364 in 2003 and
      $2,472 in 2002, as UTMD continued to focus on the productivity of its direct
      sales force. As a percent of total sales, S&M operating expenses were 8.5%
      in 2004, 8.7% in 2003 and 9.0% in 2002. Looking forward, UTMD plans higher
      S&M expenses during 2005 due to Group Purchasing Organization fees,
      increased advertising expenses and new marketing initiatives, but intends to
      manage S&M expenses to remain less than 9% of total sales.





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. Internal
      R&D expenses were $292 in 2004, $288 in 2003 and $285 in 2002. ** As
      a
      percent of sales, 2004 and 2003 R&D expenses were 1.1% compared to 1.0% in
      2002. In addition to new products still being developed, a number of existing
      products were enhanced or updated in 2004. In 2005, UTMD will opportunistically
      employ R&D resources to invest where management anticipates it can get a
      significant return with future new product sales. 2005 R&D expenses are
      again likely to be in the range of 1% of sales *.*





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 the preceding 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. G&A expenses were $3,262 in 2004,
      $4,726 in 2003 and $2,464 in 2002. As a percent of sales, G&A expenses were
      12.3% in 2004, 17.4% in 2003 and 9.0% in 2002. All three years included
      litigation expenses relating to the patent infringement lawsuit with
      Tyco/Kendall•LTP or lawsuits with the FDA. In addition, all three years include
      increasing G&A expenses to comply with required governance activities
      mandated by The Sarbanes Oxley Act of 2002. It is management’s objective to hold
      G&A expenses to about 9% of sales in 2005, exclusive of litigation
      expenses.






18






d) Non-operating
      Income, Non-operating Expense and EBT .
      Non-operating income, or other income, includes the Tyco patent infringement
      damages, 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.
      Non-operating income was $6,858 in 2004, $25,338 in 2003 and $454 in 2002.
      Tyco
      patent infringement damages comprised $6,060 of non-operating income in 2004,
      and $24,884 in 2003. The increase in other 2004 non-operating income resulted
      from investment income on much higher average cash and investment balances,
      higher rental income and no interest expense. 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 2004, UTMD had no interest expense because it did not
      utilize its bank line-of-credit. In 2003 and 2002, respectively, interest
      expense was $47 and $36. UTMD expects non-operating income in 2005 to be between
      $500 and $800. No patent infringement damages are expected in 2005 since the
      patent infringement case against Tyco has been concluded, and there is presently
      no open patent litigation. Although UTMD has claimed damages as part of its
      counterclaim against the FDA, no FDA damages were included in the above 2005
      estimate for non-operating income. The actual amount of 2005 non-operating
      income received will depend on many factors including: the timing of utilization
      of cash balances for share repurchases, dividends or acquisitions; the market
      performance of UTMD’s liquid investments; the need for capital to support
      litigation; and cash flow from normal operating performance; in addition to
      the
      outcome of UTMD’s counterclaim against the FDA.





Earnings
      before income taxes (EBT) result from adding UTMD’s non-operating income to its
      operating profits. EBT were $16,117 in 2004, $33,852 in 2003 and $10,996 in
      2002. The Tyco patent infringement damages contributed to EBT in 2004 and 2003.
      Given the 2005 projections previously noted, management is targeting 2005 EBT
      of
      about $11,000, minus costs related to the FDA lawsuit which cannot be estimated
      now.





e) Net
      Income, EPS and ROE .
      Net
      income is EBT minus income taxes. Net income in 2004 decreased to $10,220 from
      $20,761 in 2003. 2002 net income was $7,165. The Tyco patent infringement
      damages contributed to Net Income, EPS and ROE in 2004 and 2003. The effective
      income tax rate in 2004 was 36.6% compared to 38.7% in 2003 and 34.8% in 2002.
      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 consolidated income tax rate will be lower in 2005 compared
      to 2004, but this is difficult to predict. **





UTMD’s
      net income expressed as a percentage of sales ranks in the top performance
      tier
      of all U.S. publicly-traded companies at 38.6%, 76.5% and 26.2% for years 2004,
      2003 and 2002, respectively. This profitability performance factor is the
      primary driver for UTMD’s return 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 2004 EPS were $2.19, compared to $4.25 in 2003
      and $1.36 in 2002. The end of 2004 weighted average number of diluted common
      shares (the number used to calculate diluted EPS) were 4,675 (in thousands)
      compared to 4,885 shares in 2003 and 5,263 shares in 2002. Dilution for “in the
      money” unexercised options for the year 2004 was 276 (in thousands) shares
      compared to 359 in 2003 and 350 in 2002. The total number of options outstanding
      at year-end was about the same in 2004 as 2003, following a 23% decline in
      the
      prior year. Dilution decreased in 2004 from 2003 because the average number
      of
      options outstanding decreased substantially, partially offset by a higher
      average share price in the stock market. Actual outstanding common shares as
      of
      December 31, 2004 were 4,105,000.





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 2004 was
      23%
      (28% before dividends), compared to 79% in 2003 and 42% in 2002. This ratio
      determines how fast the Company can afford to grow without adding external
      financing that would dilute shareholder interests. For example, a 20% ROE will
      financially support 20% growth in revenues without issuing more stock. The
      lower
      ROE in 2004, 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 no long-term
      debt which reduced financial leverage compared to prior years. Looking forward,
      2005 ROE is projected to be lower than 2004 if cash and investment balances
      are
      maintained at current levels, shareholder dividends are continued and no
      non-operating income from litigation damages is received. In UTMD’s opinion,
      achieving growth in revenues and EPS without diluting shareholder interests
      maximizes shareholder value. UTMD’s ROE has averaged 34% per year over the last
      18 years.




19






Liquidity
      and Capital Resources.


Cash
      Flows .
      Cash
      (and investment) balances were $16,928 at the end of 2004, compared to $1,484
      at
      the end of 2003.




Net
      cash
      provided by operating activities, including adjustments for depreciation and
      other non-cash operating expenses, along with changes in working capital,
      totaled $27,459 in 2004 compared to $8,335 in 2003 and $8,656 in 2002. 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 2004 includes continued excellent net income performance, aided
      by
      a $446 tax benefit attributable to exercise of employee options, compared to
      the
      same tax benefit in 2003 of $1,108 and $354 in 2002.





The
      Company’s use of cash for investing activities was primarily as a result of
      purchases of short-term investments, in an effort to make prudent use of excess
      cash. UTMD expended $22,103 in 2004 on such purchases, compared to $737 in
      2003
      and none in 2002. In 2004, UTMD received $8,202 from selling short-term
      investments. 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 detail of the Abcorp assets
      purchased.





In
      2004,
      UTMD received $1,111 and issued 117,482 shares of stock upon the exercise of
      employee and director stock options. Employees and directors exercised a total
      of 122,908 option shares in 2004, with 5,426 shares immediately being retired
      as
      a result of the individuals trading the shares in payment of the exercise price
      of the options. UTMD paid $6 to meet tax withholding requirements on options
      exercised. UTMD repurchased 555,765 shares of stock in the open market at a
      cost
      of $10,692 during 2004. Option exercises in 2004 were at an average price of
      $10.05 per share. Share repurchases in the open market were at an average cost
      of $19.24 per share, including commissions and fees. In 2003, the Company
      received $882 from issuing 197,432 shares of stock on the exercise of employee
      and director stock options, including 101,420 shares retired upon an employee
      trading those shares in payment of the stock option exercise price and related
      tax withholding requirements.





During
      2004, UTMD did not utilize its bank line of credit. In 2003, UTMD made
      repayments of $4,956 on its note payable, which eliminated the line of credit
      balance remaining at the end of 2002, while receiving $0 in proceeds from the
      line of credit. In 2002, UTMD made loan repayments of $2,501 and received $4,956
      in proceeds from the line of credit to finance the November 2002 tender offer
      for UTMD share repurchases.





Management
      believes that future income from operations and effective management of working
      capital will provide the liquidity needed to finance growth plans. Planned
      2005
      capital expenditures are expected to be approximately $600 to keep facilities,
      equipment and tooling in good working order. In addition to capital
      expenditures, UTMD plans to use cash in 2005 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.
      Management believes that the Company has sufficient cash to finance costs of
      the
      FDA litigation without effecting other normal operations. 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.




20






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 help spur revenue growth
      and better utilize UTMD = s
      infrastructure; and/or 3) to buy back UTMD shares in the open marketplace.





Contractual
      Obligations and Contingent Liabilities and Commitments


The
      following is a summary of UTMD’s significant contractual obligations and
      commitments as of December 31, 2004 (in thousands):





**Contractual
                Obligations and****Commitments**
            
            **Total**
            
            **Less
                than 1****year**
            
            **1-3****years**
            
            **3-5****years**
            
            **More
                than 5****years**Long-term
                debt obligations
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -Operating
                lease obligations
            
            
            1,095
            
            
            108
            
            
            142
            
            
            111
            
            
            734Purchase
                obligations (1)
            
            
            1,788
            
            
            1,788
            
            
            -
            
            
            -
            
            
            -Total
            
            $
            2,883
            
            $
            1,896
            
            $
            142
            
            $
            111
            
            $
            734





(1)
      The
      majority of UTMD’s purchase obligations constitute raw materials for use in its
      manufacturing operations. UTMD has the right to make changes in, among other
      things, purchase quantities, delivery schedules and order
      acceptance.





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.













21
 
 Management's
          Outlook.
 In
          summary, in 2005 UTMD plans to
 1)
          clear
          up its unresolved QSR status with the U.S. FDA that has hindered international
          sales, slowed new product development, stymied business development, clouded
          UTMD’s previously excellent reputation for quality products and consumed an
          inordinate amount of human and financial capital since 2001;
 2)
          continue outstanding operating performance;
 3)
          actively look for new acquisitions to facilitate sales growth; and
 4)
          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 will determine if UTMD is violating any provisions of the
      QSR. The FDA has the burden to prove its allegations. UTMD and its highly
      reputable independent experts maintain that UTMD has been and is in substantial
      compliance with all applicable government regulations.





Because
      the FDA is not claiming that the Company’s devices are unsafe or ineffective, or
      do not meet predetermined specifications, UTMD and its lawyers believe that
      an
      injunction to cease manufacturing and shipping products is not a realistic
      possibility, even if the Court agrees with FDA allegations. If the Court agrees
      with any of the FDA allegations, the Company’s responsibility would be to
      implement procedures that satisfy the Court’s determination. Because of this and
      because UTMD does not understand the factual basis for FDA’s allegations, the
      Company has not spent resources analyzing the potential financial impact of
      the
      relief being sought by the FDA. Management further believes that the primary
      negative financial impact was suffered by UTMD when the FDA chose to release
      a
      public announcement on August 10, 2004 regarding the lawsuit which UTMD believes
      contains defamatory statements.





There
      is
      not and never has been an imminent public health risk relating to use of UTMD’s
      products. The FDA has a variety of remedies to address device risks without
      any
      resort to the courts. None of those remedies has ever been applied to any UTMD
      device, because none has been justified. The FDA Denver District Office shut
      off
      communication with UTMD after 2001 while it performed inspection after
      inspection in an attempt to build a case. The case that was finally filed
      involves alleged QSR violations that the agency has been unable to substantiate,
      despite an effort coordinated by the CDRH including four comprehensive
      inspections, some involving “national expert” FDA inspectors. An independent
      expert, a nearly thirty year FDA compliance veteran and former District Director
      retained by UTMD, has alleged misconduct within FDA, which will be adjudicated
      by the Court as part of the present lawsuit.




There
      continue to be no FDA restrictions on UTMD’s production and distribution of its
      products, the clinical acceptance and differentiation of which have been clearly
      demonstrated by continued customer demand through 2004.





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 to become big as a primary motivation. We just want
      to
      do an excellent job in meeting our customers’ needs and provide our shareholders
      with excellent returns.





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 picture which includes complications and unnecessary
      utilization.





In
      the
      U.S., UTMD will continue (FDA willing) 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.





Looking
      back five years to the end of 1999, UTMD’s EPS have more than doubled, and its
      year-ending share price has more than tripled. In comparison, the NASDAQ
      Composite, S&P 500 Index and DJIA were down 46%, down 17% and down 6%,
      respectively, over that same five year time span.





In 2004, 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 2005 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.





22






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
      June 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 third quarter
      2005 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.








**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 .7335, .7958 and .9551 per U.S. Dollar as
      of
      December 31, 2004, 2003 and 2002, respectively. Please see Note 1, starting
      on
      page F-12. UTMD manages its foreign currency risk without separate hedging
      transactions by converting currencies as transactions occur.








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





See
      index
      to financial statements and financial statement schedule at page
      F-1.








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





None.












23
 
   **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(f). UTMD’s Board of Directors, operating through its audit
          committee, provides oversight to its financial reporting process.


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, 2004,
      its
      disclosure controls and procedures are 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, 2004. 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, 2004, and there were no significant
      deficiencies or material weaknesses.








**ITEM
      9B - OTHER INFORMATION**





None.









24


**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 2005 annual meeting
      of
      stockholders under the caption “Independent Public Accountants” is incorporated
      herein by reference.




















25





**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
        Index
        to
        Consolidated Financial Statements at page F-1.)


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
            Summary
                of Officer and Director Compensation
            
            See
                Original Filing13
            21
            Subsidiaries
                of Utah Medical Products, Inc.
            
            Incorporated
                by Reference (7)14
            23
            Consent
                of Jones Simkins, P.C., Company’s independent auditors for the years ended
                December 31, 2004 and December 31, 2003
            
            This
                Filing






26





Exhibit
                #
            SEC
              Reference
                #
            Title
                of Document
            
            Location15
            23
            Consent
                of Tanner LC, Company's independent
              auditors
                for the year ended December 31, 2002
            
            This Filing16
            31
            Certification
                of CEO pursuant to Rule 13a-14(a) as adopted pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 2002
            
            This
                Filing17
            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
                Filing18
            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
                Filing19
            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 annual report on form 10-K filed with the
                Commission for the year ended December 31,
                1999.
















27


**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 19th day of July, 2005.





UTAH
      MEDICAL PRODUCTS, INC.








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






















28








































**UTAH
      MEDICAL PRODUCTS, INC.**





**CONSOLIDATED
      FINANCIAL STATEMENTS**





**December
      31, 2004, 2003 and 2002**


















































UTAH
      MEDICAL PRODUCTS, INC.


Index
      to Consolidated Financial Statements


December
      31, 2004, 2003 and 2002





PageManagement’s
                Report on Internal Control Over Financial Reporting
            F-2Report
                of Jones Simkins, P.C. on Management’s Assessment on Internal Control Over
                Financial Reporting
            F-3Report
                of Jones Simkins, P.C. on Financial Statements
            F-5Report
                of Tanner LC on Financial Statements
            F-6Consolidated
                balance sheet
            F-7Consolidated
                statement of income and comprehensive income
            F-8Consolidated
                statement of cash flows
            F-9Consolidated
                statement of stockholders’ equity
            F-11Notes
                to consolidated financial statements
            F-12











F-1


**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, 2004. 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, 2004.
  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, 2004, and their report is shown on
        the
        next pages.
  
 By:
              /s/ Kevin L. CornwellKevin
                  L. CornwellChief
                  Executive OfficerBy:
              /s/ Greg A. LeClaireGreg
                  A. LeClaireChief
                  Financial Officer






F-2







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, 2004, 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.





F-3






In
      our
      opinion, management's assessment that Utah Medical Products, Inc. maintained
      effective internal control over financial reporting as of December 31, 2004,
      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, 2004
      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, 2004 consolidated financial
      statements of Utah Medical Products, Inc. and our report dated January 17,
      2005
      expressed an unqualified opinion.





/s/ Jones Simkins, P.C.JONES
                SIMKINS, P.C.Logan,
                UtahJanuary
                17, 2005















F-4






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, 2004 and 2003 and the related consolidated statements
      of
      income and comprehensive income, stockholders’ equity, and cash flows for the
      years then ended. 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, 2004 and 2003 and the results of its operations and its
      cash
      flows for the years then ended 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, 2004, 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, 2005 expressed an unqualified opinion.








/s/
                Jones Simkins, P.C.JONES
                SIMKINS, P.C.Logan
                UtahJanuary
                17, 2005








F-5







**INDEPENDENT
      AUDITORS' REPORT**













**To
      the Board of Directors and Stockholders**


**of
      Utah Medical Products, Inc.**








We
      have
      audited the consolidated statements of income and other comprehensive income,
      stockholders’ equity, and cash flows of **Utah
      Medical Products, Inc.** for the
      year ended December 31, 2002. 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
      audit.





We
      conducted our audit in accordance with auditing standards generally accepted
      in
      the United States of America. 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 audit provides a reasonable basis
      for our opinion.





In
      our
      opinion, the consolidated financial statements referred to above present fairly,
      in all material respects, the results of operations and cash flows of **Utah
      Medical Products, Inc.** for the
      year ended December 31, 2002 in conformity with accounting principles generally
      accepted in the United States of America.








/s/
                Tanner LCSalt
                Lake City, UtahJanuary
                21, 2003









F-6






UTAH
        MEDICAL PRODUCTS, INC.
 CONSOLIDATED
        BALANCE SHEET
 December
        31, 2004 and 2003
 (In
        thousands)
 
 ASSETS
              
              2004
              
              2003Current
                  assets:Cash
              
              $
              1,818
              
              $
              762Investments,
                  available-for-sale (note 3)
              
              
              15,110
              
              
              722Accounts
                  receivable, net (note 2)
              
              
              3,730
              
              
              3,326Inventories
                  (note 2)
              
              
              2,859
              
              
              3,268Prepaid
                  expenses and other current assets
              
              
              263
              
              
              219Litigation
                  receivable (note 13)
              
              
              -
              
              
              24,884Deferred
                  income taxes (note 7)
              
              
              750
              
              
              721Total
                  current assets
              
              
              24,530
              
              
              33,902Property
                  and equipment, net (note 4)
              
              
              9,058
              
              
              9,005Goodwill
              
              
              7,191
              
              
              6,245Other
                  intangible assets - net (note 2)
              
              
              483
              
              
              542Total
                  assets
              
              $
              41,262
              
              $
              49,694LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilities:Accounts
                  payable
              
              $
              698
              
              $
              368Accrued
                  expenses (note 2)
              
              
              3,638
              
              
              12,129Total
                  current liabilities
              
              
              4,336
              
              
              12,497Deferred
                  income taxes (note 7)
              
              
              769
              
              
              665Total
                  liabilities
              
              
              5,105
              
              
              13,162Commitments
                  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 4,105
                    shares in
                    2004 and4,544 shares in 2003
              
              
              41
              
              
              45Accumulated
                  other comprehensive income
              
              
              226
              
              
              (260
              )Retained
                  earnings
              
              
              35,890
              
              
              36,747Total
                  stockholders' equity
              
              
              36,157
              
              
              36,532Total
                  liabilities and stockholders' equity
              
              $
              41,262
              
              $
              49,694See
                  accompanying notes to financial
                  statements.






F-7




UTAH
        MEDICAL PRODUCTS, INC.
 CONSOLIDATED
        STATEMENT OF INCOME
 AND
        COMPREHENSIVE INCOME
 Years
        ended December 31, 2004, 2003 and 2002
 (In
        thousands, except per share amounts)
 
 
 2004
              
              2003
              
              2002Sales,
                  net (notes 9 and 10)
              
              $
              26,485
              
              $
              27,137
              
              $
              27,361Cost
                  of goods sold (notes 9 and 10)
              
              
              11,419
              
              
              11,245
              
              
              11,598Gross
                  margin
              
              
              15,066
              
              
              15,892
              
              
              15,763Operating
                  expenses:Sales
                  and marketing
              
              
              2,253
              
              
              2,364
              
              
              2,472Research
                  and development
              
              
              292
              
              
              288
              
              
              285General
                  and administrative
              
              
              3,262
              
              
              4,726
              
              
              2,464Operating
                  income
              
              
              9,259
              
              
              8,514
              
              
              10,542Other
                  income (expense):Dividend
                  and interest income
              
              
              238
              
              
              5
              
              
              6Royalty
                  income
              
              
              450
              
              
              450
              
              
              450Interest
                  expense
              
              
              -
              
              
              (47
              )
              
              (36
              )Other,
                  net
              
              
              6,170
              
              
              24,930
              
              
              34Income
                  before provision for income taxes
              
              
              16,117
              
              
              33,852
              
              
              10,996Provison
                  for income taxes (note 7)
              
              
              5,897
              
              
              13,091
              
              
              3,831Net
                  income
              
              $
              10,220
              
              $
              20,761
              
              $
              7,165Earnings
                  per common share (basic) (notes 1 and 2):
              
              $
              2.32
              
              $
              4.59
              
              $
              1.46Earnings
                  per common share (diluted) (notes 1 and 2):
              
              $
              2.19
              
              $
              4.25
              
              $
              1.36Other
                  comprehensive income:Foreign
                  currency translation net of taxes of$107,
                  $288 and $244
              
              $
              222
              
              $
              548
              
              $
              457Unrealized
                  gain on investments net of taxes of$61,
                  $12 and $0
              
              
              157
              
              
              19
              
              
              -Total
                  comprehensive income
              
              $
              10,599
              
              $
              21,328
              
              $
              7,622See
                  accompanying notes to financial
                  statements.
    F-8




UTAH
        MEDICAL PRODUCTS, INC.
 CONSOLIDATED
        STATEMENT OF CASH FLOW
 Years
        Ended December 31, 2004, 2003 and 2002
 (In
        thousands)
 
 2004
              
              2003
              
              2002Cash
                  flows from operating activities:Net
                  income
              
              $
              10,220
              
              $
              20,761
              
              $
              7,165Adjustments
                    to reconcile net income to netcash provided by operating
                    activities:Depreciation
                  and amortization
              
              
              809
              
              
              984
              
              
              1,172Gain
                  on investments
              
              
              (52
              )
              
              (11
              )
              
              -Provision
                  for (recovery of) losses on accounts receivable
              
              
              3
              
              
              (93
              )
              
              18Loss
                  on disposal of assets
              
              
              5
              
              
              4
              
              
              -Deferred
                  income taxes
              
              
              75
              
              
              (47
              )
              
              108Tax
                  benefit attributable to exercise of stock options
              
              
              446
              
              
              1,108
              
              
              354(Increase)
                  decrease in:Accounts
                  receivable
              
              
              (226
              )
              
              36
              
              
              577Accrued
                  interest and other receivables
              
              
              (191
              )
              
              257
              
              
              (316
              )Inventories
              
              
              437
              
              
              174
              
              
              (168
              )Prepaid
                  expenses and other current assets
              
              
              (43
              )
              
              (32
              )
              
              (31
              )Litigation
                  receivable
              
              
              24,884
              
              
              (24,884
              )
              
              -Increase
                  (decrease) in:Accounts
                  payable
              
              
              312
              
              
              (291
              )
              
              154Accrued
                  expenses
              
              
              (9,220
              )
              
              10,369
              
              
              (377
              )Net
                  cash provided by operating activities
              
              
              27,459
              
              
              8,335
              
              
              8,656Cash
                  flows from investing activities:Capital
                  expenditures for:Property
                  and equipment
              
              
              (411
              )
              
              (272
              )
              
              (517
              )Intangible
                  assets
              
              
              (10
              )
              
              (122
              )
              
              -Purchases
                  of investments
              
              
              (22,103
              )
              
              (737
              )
              
              -Proceeds
                  from the sale of investments
              
              
              8,202
              
              
              98
              
              
              -Net
                  cash paid in acquisition
              
              
              (1,012
              )
              
              -
              
              
              -Net
                  cash used in investing activities
              
              
              (15,334
              )
              
              (1,033
              )
              
              (517
              )Cash
                  flows from financing activities:Proceeds
                  from issuance of common stock - options
              
              
              1,111
              
              
              882
              
              
              1,113Common
                  stock purchased and retired
              
              
              (10,692
              )
              
              (2,240
              )
              
              (11,787
              )Common
                  stock purchased and retired - options
              
              
              (6
              )
              
              (555
              )
              
              (31
              )Proceeds
                  from note payable
              
              
              -
              
              
              -
              
              
              4,956Repayments
                  of note payable
              
              
              -
              
              
              (4,956
              )
              
              (2,501
              )Dividends
                  paid
              
              
              (1,331
              )
              
              -
              
              
              -Net
                  cash used in financing activities
              
              
              (10,918
              )
              
              (6,869
              )
              
              (8,250
              )Effect
                  of exchange rate changes on cash
              
              
              (151
              )
              
              44
              
              
              26Net
                  increase (decrease) in cash and cash equivalents
              
              
              1,056
              
              
              477
              
              
              (85
              )Cash
                  at beginning of year
              
              
              762
              
              
              285
              
              
              370Cash
                  at end of year
              
              $
              1,818
              
              $
              762
              
              $
              285See
                  accompanying notes to financial
                  statements.






F-9






UTAH
        MEDICAL PRODUCTS, INC.
 CONSOLIDATED
        STATEMENT OF CASH FLOW
 Years
        Ended December 31, 2004, 2003 and 2002
 (In
        thousands)
 *Continued*
 
 SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:2004
              
              2003
              
              2002Cash
                  paid during the year for:Income
                  taxes
              
              $
              14,294
              
              $
              2,628
              
              $
              3,568Interest
              
              $
              -
              
              $
              47
              
              $
              25During
                  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.
   F-10






UTAH
        MEDICAL PRODUCTS, INC.
 CONSOLIDATED
        STATEMENT OF STOCKHOLDERS' EQUITY
 Years
        Ended December 31, 2004, 2003 and 2002
 (In
        thousands)
 
 AccumulatedAdditional
              
              Other
              
              
              
              TotalCommon
                  Stock
              
              Paid-in
              
              Comprehensive
              
              Retained
              
              Stockholders'Shares
              
              Amount
              
              Capital
              
              Income
              
              Earnings
              
              EquityBalance
                  at January 1, 2002
              
              
              5,029
              
              $
              50
              
              $
              -
              
              $
              (1,816
              )
              $
              19,973
              
              $
              18,207Shares
                  issued upon exercise of employee
                stock
                  options for cash
              
              
              137
              
              
              1
              
              
              1,112
              
              
              -
              
              
              -
              
              
              1,113Shares
                  received and retired upon exercise
                of
                  stock options
              
              
              (2
              )
              
              -
              
              
              (31
              )
              
              -
              
              
              -
              
              
              (31
              )Tax
                  benefit attributable to appreciation
                of
                  stock options
              
              
              -
              
              
              -
              
              
              354
              
              
              -
              
              
              -
              
              
              354Common
                  stock purchased and retired
              
              
              (721
              )
              
              (7
              )
              
              (1,435
              )
              
              -
              
              
              (10,345
              )
              
              (11,787
              )Foreign
                  currency translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              701
              
              
              -
              
              
              701Net
                  income
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              7,165
              
              
              7,165Balance
                  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
              
              $
              36,157See
                  accompanying notes to financial
                  statements.
   F-11







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 primarily of hospitals, medical product
      distributors, physician practices and others directly related to healthcare
      providers. 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, 2004.





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.





F-12





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 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.





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, all of which meet the criteria of SAB 104:




1)
            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.








F-13






Note
      1
      - Summary of Significant Accounting Policies (continued)





2)
            The
                Company manufactures products for other companies (OEM customers)
                according to fixed longer term supply contracts which are not cancelable
                or changeable. Occasionally, an OEM customer will request the Company
                to
                bill completed products according to the contract, but hold shipment
                for
                some business purpose of the customer (e.g. awaiting some mating
                component
                from another supplier).





3)
            The
                Company manufactures products for foreign companies according to
                fixed
                contracts which are not cancelable or changeable. Occasionally, a
                foreign
                customer under a prepay obligation will request the Company to bill
                completed products according to the contract, but hold shipment until
                payment will be made.





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.





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 is currently
      involved in litigation with the FDA which it does not consider an expected
      consequence of its operations, or in the ordinary course of its business. The
      Company maintains a reserve for legal costs consistent with its previous
      experience and anticipated costs. The reserve for legal costs at December 31,
      2004 and 2003 was (in thousands) $1,260 and $1,050, 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:





2004
            
            2003
            
            2002Weighted
                average number of shares outstanding - basic
            
            
            4,399
            
            
            4,526
            
            
            4,913Dilutive
                effect of stock options
            
            
            276
            
            
            359
            
            
            350Weighted
                average number of shares outstanding, assuming dilution
            
            
            4,675
            
            
            4,885
            
            
            5,263











F-14






Note
      1
      - Summary of Significant Accounting Policies (continued)





Stock-Based
      Compensation





At
      December 31, 2004, 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
      July 1, 2005, 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 14, below.





Had
      compensation cost for the Company’s stock option plans been determined based on
      the fair value at the grant date for awards starting in 1995 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 (in thousands, except
      per share amounts):





Years
                ended December 31,2004
            
            2003
            
            2002Net
                income as reported
            
            $
            10,220
            
            $
            20,761
            
            $
            7,165Deduct:Total
                stock-based employee compensation expense determined under fair value
                based method for all awards, net of related tax effects
            
            
            (388
            )
            
            (178
            )
            
            (175
            )Net
                income pro forma
            
            $
            9,832
            
            $
            20,583
            
            $
            6,990Earnings
                per share:Basic
                - as reported
            
            $
            2.32
            
            $
            4.59
            
            $
            1.46Basic
                - pro forma
            
            $
            2.24
            
            $
            4.55
            
            $
            1.42Diluted
                - as reported
            
            $
            2.19
            
            $
            4.25
            
            $
            1.36Diluted
                - pro forma
            
            $
            2.10
            
            $
            4.21
            
            $
            1.33





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.








F-15






Note
      2
      - Detail of Certain Balance Sheet Accounts




December
                31,2004
            
            2003Account
                receivable (in thousands):Receivables
            
            $
            3,636
            
            $
            3,373Accrued
                interest and other
            
            
            171
            
            
            27Less
                allowance for doubtful accounts
            
            
            (77
            )
            
            (74
            )$
            3,730
            
            $
            3,326Inventories
                (in thousands):Finished
                products
            
            $
            932
            
            $
            1,495Work-in-process
            
            
            640
            
            
            631Raw
                materials
            
            
            1,287
            
            
            1,142$
            2,859
            
            $
            3,268Other
                intangible assets (in thousands):Patents
            
            
            2,025
            
            
            2,015License
                rights
            
            
            293
            
            
            293Trademarks
            
            
            224
            
            
            224Non-compete
                agreements
            
            
            175
            
            
            1752,717
            
            
            2,707Accumulated
                amortization
            
            
            (2,234
            )
            
            (2,165
            )$
            483
            
            $
            542Accrued
                expenses (in thousands):Income
                taxes payable
            
            $
            384
            
            $
            9,270Payroll
                and payroll taxes
            
            
            963
            
            
            1,479Reserve
                for litigation costs
            
            
            1,260
            
            
            1,050Dividends
                payable
            
            
            616
            
            
            -Other
            
            
            415
            
            
            330$
            3,638
            
            $
            12,129








Note
      3
      - Investments





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





December
                31,2004
            
            2003Investments,
                at cost
            
            $
            14,822
            
            $
            691Equity
                Securities:-Unrealized
                holding gains
            
            
            295
            
            
            31-Unrealized
                holding (losses)
            
            
            (7
            )
            
            0Investments,
                at fair value
            
            $
            15,110
            
            $
            722








F-16





Note
      3
      - Investments (continued)





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 (in thousands):





December
                31,2004
            
            2003Balance,
                beginning of year
            
            $
            19
            
            $
            -Gross
                unrealized holding gains, net of (losses), in equity
                securities
            
            
            257
            
            
            31Deferred
                income taxes on unrealized holding gain
            
            
            (100
            )
            
            (12)Balance,
                end of year
            
            $
            176
            
            $
            19





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


December
                31,2004
            
            2003Maturity
                less than 1 year
            
            $
            9,081
            
            $
            -Maturity
                greater than 10 years
            
            
            1,475
            
            
            -





During
      2004 and 2003 UTMD had proceeds from sales of available-for-sale securities
      of
      $8,202 and $98, respectively and associated realized gains of $52 and $11,
      respectively. UTMD uses the specific identification method to calculate its
      realized gains. UTMD did not have sales of available-for-sale securities in
      2002.





Note
      4
      - Property and Equipment





Property
                and equipment consists of the following (in thousands):2004
            
            2003Land
            
            $
            1,089
            
            $
            1,052Buildings
                and improvements
            
            
            9,283
            
            
            8,738Furniture,
                equipment and tooling
            
            
            13,763
            
            
            13,966Construction-in-progress
            
            
            41
            
            
            11124,176
            
            
            23,867Accumulated
                depreciation and amortization
            
            
            (15,118
            )
            
            (14,862
            )$
            9,058
            
            $
            9,005





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 (in thousands):





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





F-17








Note
      4
      - Property and Equipment (continued)





December
                31, 2003Utah
            
            Oregon
            
            Ireland
            
            TotalLand
            
            $
            621
            
            $
            -
            
            $
            431
            
            $
            1,052Building
                and improvements
            
            
            4,082
            
            
            32
            
            
            4,624
            
            
            8,738Furniture,
                equipment and tooling
            
            
            11,901
            
            
            1,245
            
            
            820
            
            
            13,966Construction-in-progress
            
            
            111
            
            
            -
            
            
            -
            
            
            111Total
            
            
            16,715
            
            
            1,277
            
            
            5,875
            
            
            23,867Accumulated
                depreciation and amortization
            
            
            (12,221
            )
            
            (1,267
            )
            
            (1,374
            )
            
            (14,862
            )Property
                and equipment, net
            
            $
            4,494
            
            $
            10
            
            $
            4,501
            
            $
            9,005








Note
      5
      - Note Payable





The
      Company has an unsecured bank line-of-credit agreement which allows the Company
      to borrow up to a fixed maximum amount (in thousands) of $5,000 at an interest
      rate equal to either the bank's LIBOR rate plus 1.25%, the bank’s prime rate
      less 1.00%, or a daily rate based on LIBOR plus 1.35%. The
      line-of-credit-balance matures on May 31, 2006 and had an outstanding balance
      of
      $0 at both December 31, 2004 and 2003. The principal financial loan covenants
      are a restriction on the total amount available for borrowing to 1.25 times
      the
      last twelve months’ EBITDA, which as of December 31, 2004 and 2003 was equal to
      (in thousands) $21,158 and $43,506, respectively, and a requirement to maintain
      a net worth in excess of $10 million, which at the end of 2004 and 2003 was
      (in
      thousands) $36,157 and $36,532, respectively.








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 (in
      thousands) $107, $105 and $104 for the years ended December 31, 2004,
      2003
      and 2002, respectively.





Future
      minimum lease payments under its lease obligations as of December 31, 2004
      were
      as follows (in thousands):





Years
                ending December 31:
            
            Amount2005
            
            $
            1072006
            
            
            662007
            
            
            372008
            
            
            372009
            
            
            37Thereafter
            
            
            808Total
                future minimum lease payments
            
            $
            1,092





F-18





Note
      6
      - Commitments and Contingencies (continued)





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 eventual
      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 2004 (in thousands):





Beginning
                Balance, January 1, 2004
            
            $
            30Changes
                in Warranty Reserve during 2004:Aggregate
                reductions for warranty repairs
            
            
            (7
            )Aggregate
                changes for warranties issued during reporting period
            
            
            13Aggregate
                changes in reserve related to preexisting warranties
            
            
            24Ending
                Balance, December 31, 2004
            
            $
            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. With respect to the FDA’s August 2004 lawsuit against UTMD,
      seeking to enjoin the Company from manufacturing and shipping products until
      it
      conforms with the QSR in a manner acceptable to the FDA, the Company has applied
      its accounting policy to accrue legal costs that can be reasonably estimated.
      Accordingly UTMD created a litigation cost reserve included in current
      liabilities that reflects its estimate of an additional approximately $1,000
      (in
      thousands) in litigation costs that will be incurred through June 2005, at
      which
      time the Company expects the lawsuit to be resolved. The Company has always
      strongly maintained that it is in substantial compliance with all government
      regulations. If the U.S. Court disagrees with the Company or if the adjudication
      of the matter extends beyond June 2005, the Company is unable to estimate its
      possible costs and there may be a materially adverse effect on the Company’s
      financial condition or results of operations. Alternatively, if the U.S. Court
      agrees with it and dismisses the FDA claims, the Company may have the
      opportunity to seek restitution of its litigation costs and damages.





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.











F-19




Note
        7
        - Income Taxes
 
 Deferred
        tax assets (liabilities) consist of the following temporary differences (in
        thousands):
 
 December
                  31,2004
              
              2003Current
              
              Long-term
              
              Current
              
              Long-termInventory
                  write-downs and differences due to UNICAP
              
              $
              73
              
              $
              -
              
              $
              169
              
              $
              -Allowance
                  for doubtful accounts
              
              
              30
              
              
              -
              
              
              29
              
              
              -Accrued
                  liabilities and reserves
              
              
              641
              
              
              23
              
              
              523
              
              
              12Other
              
              
              6
              
              
              (42
              )
              
              -
              
              
              22Depreciation
                  and amortization
              
              
              -
              
              
              161
              
              
              -
              
              
              164Earnings
                  from subsidiary
              
              
              -
              
              
              (911
              )
              
              -
              
              
              (863
              )Deferred
                  income taxes, net
              
              $
              750
              
              $
              (769
              )
              $
              721
              
              $
              (665
              )
 
 The
        components of income tax expense are as follows (in thousands):
 
 Years
                  ended December 31,2004
              
              2003
              
              2002Current
              
              $
              5,822
              
              $
              13,138
              
              $
              3,715Deferred
              
              
              75
              
              
              (47
              )
              
              116Total
              
              $
              5,897
              
              $
              13,091
              
              $
              3,831
 
 Income
        tax expense differed from amounts computed by applying the statutory federal
        rate to pretax income as follows (in thousands):
 
 Years
                  ended December 31,2004
              
              2003
              
              2002Federal
                  income tax expense at the statutory rate
              
              $
              5,480
              
              $
              11,510
              
              $
              3,738State
                  income taxes
              
              
              806
              
              
              1,693
              
              
              482ETI,
                  foreign sales corporation and tax credits
              
              
              (164
              )
              
              (68
              )
              
              (182
              )Other
              
              
              (225
              )
              
              (44
              )
              
              (207
              )Total
              
              $
              5,897
              
              $
              13,091
              
              $
              3,831
 
 
 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 1,014,226 shares of common stock, of which 755,526 are outstanding
        as of December 31, 2004. 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:




F-20




Note
        8
        - Options (continued)
  Shares
                
                Price
                    Range
                  Per
                    Share**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**2002**Granted
                74,100
                
                $14.60
                      -
                $15.01Expired
                    or canceled
                31,574
                
                6.50
                      -
                15.01Exercised
                137,089
                
                6.50
                      -
                14.25Total
                    outstanding at December 31
                988,315
                
                6.50
                      -
                15.01Total
                    exercisable at December 31
                870,414
                
                6.50
                      -
                14.25


For
        the
        years ended December 31, 2004, 2003 and 2002, the Company reduced
        current
        income taxes payable and increased additional paid-in capital by (in thousands)
        $446, $1,109 and $354, 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 31,2004
              
              2003
              
              2002Expected
                  dividend yield
              
              
              0.7%
              
              
              -
              
              
              -Expected
                  stock price volatility
              
              
              39.0%
              
              
              40.5%
              
              
              41.7%Risk-free
                  interest rate (weighted average)
              
              
              3.7%
              
              
              3.5%
              
              
              4.3%Expected
                  life of options
              
              
              6.2
                  years
              
              
              5.9
                  years
              
              
              5.2
                  years
 
 The
        per-share weighted average fair value of options granted during 2004, 2003
        and
        2002 is $10.07, $8.89 and $6.52, respectively.
 
  F-21
  Note
        8
        - Options (continued)
 Stock-Based
        Compensation (continued)
 
 The
        following table summarizes information about stock options outstanding at
        December 31, 2004:
  Options
                  Outstanding
              
              Options
                  ExercisableWeightedAverageRemaining
              
              Weighted
              
              
              
              WeightedRange
                  of
              
              
              
              Contractual
              
              Average
              
              
              
              AverageExercise
              
              Number
              
              Life
              
              Exercise
              
              Number
              
              ExercisePrices
              
              Outstanding
              
              (Years)
              
              Price
              
              Exercisable
              
              Price$ 
                   6.50   -    7.25
              
              
              276,052
              
              
              3.71
              
              $
              6.83
              
              
              276,052
              
              $
              6.839.125
                    -  15.01
              
              
              280,068
              
              
              2.97
              
              
              12.81
              
              
              260,510
              
              
              12.7217.71   -  25.59
              
              
              199,406
              
              
              9.03
              
              
              22.72
              
              
              18,165
              
              
              20.32$
                    6.50   -  25.59
              
              
              755,526
              
              
              4.84
              
              $
              13.24
              
              
              554,727
              
              $
              10.04
  Note
          9
          - Geographic Sales Information
 
 The
        Company had sales in the following geographic areas (in thousands):
 
 United
                  States
              
              Europe
              
              Other2004
              
              $
              20,452
              
              $
              3,639
              
              $
              2,3942003
              
              
              21,266
              
              
              3,376
              
              
              2,4952002
              
              
              21,626
              
              
              3,337
              
              
              2,398
 
 Note
        10 - Revenues by Product Category
 
 The
        Company had revenues in the following product categories (in
        thousands):
 
 Product
                  Category
              
              2004
              
              2003
              
              2002Obstetrics
              
              $
              10,917
              
              $
              11,435
              
              $
              11,977Gynecology/Electrosurgery/Urology
              
              
              5,142
              
              
              5,324
              
              
              5,271Neonatal
              
              
              4,134
              
              
              4,142
              
              
              3,852Blood
                  Pressure Monitoring and accessories
              
              
              6,292
              
              
              6,236
              
              
              6,261
  
 Note
        11 - 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.
   F-22
   Note
          12 - 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 (in
          thousands) $92, $95 and $94 for the years ended December 31, 2004, 2003
          and
          2002, respectively.
 
 Note
          13 - 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, 2004, does
          not
          differ materially from the aggregate carrying value of its financial instruments
          recorded in the accompanying consolidated balance sheet.
 
 Note
          14 - 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
          June 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 third quarter
          2005 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.
       F-23