UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





**FORM
      10-Q**





Quarterly
      Report Under Section 13 or 15(d) of


The
      Securities Exchange Act of 1934











For
                quarter ended: June 30, 2006
            Commission
                File No.0-11178








UTAH
      MEDICAL PRODUCTS, INC.


(Exact
      name of Registrant as specified in its charter)








UTAH
            87-0342734(State
                or other jurisdiction of incorporation or organization)
            (I.R.S.
                Employer Identification No.)








7043
      South 300 West


Midvale,
      Utah 84047


Address
      of principal executive offices








Registrant's
      telephone number: (801)
      566-1200








Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Sections 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 o





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





Large
                accelerated filero
            Accelerated
                filer x
            Non-accelerated
                filero





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





Indicate
      the number of shares outstanding of each of the issuer’s classes of common stock
      as of August 7, 2006: 3,926,000.
















UTAH
      MEDICAL PRODUCTS, INC.


INDEX
      TO FORM 10-Q











PART
                I - FINANCIAL INFORMATION
            PAGEItem
                1.
            Financial
                StatementsConsolidated
                Condensed Balance Sheets as of June 30, 2006 and December 31, 2005
            1Consolidated
                Condensed Statements of Income for the three and six months ended
                June 30,
                2006 and June 30, 2005
            2Consolidated
                Condensed Statements of Cash Flows for the six months ended June
                30, 2006
                and June 30, 2005
            3Notes
                to Consolidated Condensed Financial Statements
            4Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of Operations
            7Item
                3.
            Quantitative
                and Qualitative Disclosures about Market Risk
            12Item
                4.
            Controls
                and Procedures
            12PART
                II - OTHER INFORMATIONItem
                1A.
            Risk
                Factors
            13Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            13Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            14Item
                6.
            Exhibits
            14SIGNATURES
            14




























PART
        I -
        FINANCIAL INFORMATION
 **Item
        1. Financial Statements**
 
 UTAH
        MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
 CONSOLIDATED
        CONDENSED BALANCE SHEETS AS OF
 JUNE
        30, 2006 AND DECEMBER 31, 2005
 (in
        thousands)
 
 (unaudited)
              
              (audited)ASSETS
              
              JUNE
                  30,
                2006
              
              DECEMBER
                  31,
                2005Current
                  assets:Cash
              
              $
              690
              
              $
              703Investments,
                  available-for-sale
              
              
              17,732
              
              
              16,750Accounts
                  & other receivables - net
              
              
              3,879
              
              
              4,418Inventories
              
              
              3,323
              
              
              3,305Other
                  current assets
              
              
              660
              
              
              682Total
                  current assets
              
              
              26,284
              
              
              25,858Property
                  and equipment - net
              
              
              8,360
              
              
              8,160Goodwill
              
              
              7,191
              
              
              7,191Other
                  intangible assets
              
              
              2,718
              
              
              2,718Other
                  intangible assets - accumulated amortization
              
              
              (2,439
              )
              
              (2,285
              )Other
                  intangible assets - net
              
              
              279
              
              
              433TOTAL
              
              $
              42,114
              
              $
              41,642LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  liabilities:Accounts
                  payable
              
              $
              726
              
              $
              757Accrued
                  expenses
              
              
              1,998
              
              
              2,418Total
                  current liabilities
              
              
              2,724
              
              
              3,175Note
                  payable
              
              
              5,313
              
              
              5,336Deferred
                  income taxes
              
              
              187
              
              
              274Total
                  liabilities
              
              
              8,224
              
              
              8,785Stockholders'
                  equity:Preferred
                  stock - $.01 par value; authorized - 5,000 shares; no shares issued
                  or
                  outstandingCommon
                  stock - $.01 par value; authorized - 50,000 shares; issued - June
                  30,
                  2006, 3,930 shares December 31, 2005, 3,856 shares
              
              
              39
              
              
              39Accumulated
                  other comprehensive income
              
              
              (693
              )
              
              (495
              )Retained
                  earnings
              
              
              34,543
              
              
              33,314Total
                  stockholders' equity
              
              
              33,890
              
              
              32,857TOTAL
              
              $
              42,114
              
              $
              41,642
 
 
 *see
        notes to consolidated condensed financial statements*


1




UTAH
        MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
 CONSOLIDATED
        CONDENSED STATEMENTS OF INCOME FOR THE
 THREE
        AND SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2005
 (in
        thousands - unaudited)
 
 THREE
                  MONTHS ENDED
              
              SIX
                  MONTHS ENDEDJUNE
                  30,
              
              JUNE
                  30,2006
              
              2005
              
              2006
              
              2005NET
                  SALES
              
              $
              7,293
              
              $
              7,028
              
              $
              14,396
              
              $
              13,680COST
                  OF SALES
              
              
              3,216
              
              
              3,006
              
              
              6,312
              
              
              5,924Gross
                  Margin
              
              
              4,077
              
              
              4,022
              
              
              8,084
              
              
              7,756OPERATING
                  EXPENSES:Selling,
                  general and administrative
              
              
              1,267
              
              
              1,472
              
              
              2,574
              
              
              2,590Research
                  & development
              
              
              215
              
              
              79
              
              
              283
              
              
              143Total
              
              
              1,482
              
              
              1,551
              
              
              2,857
              
              
              2,733Income
                  from Operations
              
              
              2,595
              
              
              2,471
              
              
              5,227
              
              
              5,023OTHER
                  INCOME, NET
              
              
              571
              
              
              213
              
              
              985
              
              
              467Income
                  Before Income Tax Expense
              
              
              3,166
              
              
              2,684
              
              
              6,212
              
              
              5,490INCOME
                  TAX EXPENSE
              
              
              1,107
              
              
              797
              
              
              2,118
              
              
              1,634Net
                  Income
              
              $
              2,059
              
              $
              1,887
              
              $
              4,094
              
              $
              3,856BASIC
                  EARNINGS PER SHARE
              
              $
              0.52
              
              $
              0.47
              
              $
              1.04
              
              $
              0.95DILUTED
                  EARNINGS PER SHARE
              
              $
              0.51
              
              $
              0.45
              
              $
              1.01
              
              $
              0.90SHARES
                  OUTSTANDING - BASIC
              
              
              3,946
              
              
              4,010
              
              
              3,949
              
              
              4,053SHARES
                  OUTSTANDING - DILUTED
              
              
              4,043
              
              
              4,229
              
              
              4,056
              
              
              4,277
 
 
 
 *see
        notes to consolidated condensed financial statements*













2




UTAH
        MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
 CONSOLIDATED
        CONDENSED STATEMENTS OF CASH FLOWS
 FOR
        THE SIX MONTHS ENDED JUNE 30, 2006 AND JUNE 30, 2005
 (in
        thousands - unaudited)
 
 JUNE
                  30,2006
              
              2005CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income
              
              $
              4,094
              
              $
              3,856Adjustments
                  to reconcile net income to net cash provided by operating
                  activities:Depreciation
                  and amortization
              
              
              444
              
              
              349Gain
                  on investments
              
              
              (885
              )
              
              (70
              )Provision
                  for (recovery of) losses on accounts receivable
              
              
              4
              
              
              4Deferred
                  income taxes
              
              
              (15
              )
              
              24Stock-based
                  compensation expense
              
              
              76
              
              
              -Tax
                  benefit attributable to exercise of stock options
              
              
              2,155
              
              
              171Changes
                  in operating assets and liabilities:Accounts
                  receivable - trade
              
              
              (110
              )
              
              (469
              )Accrued
                  interest and other receivables
              
              
              676
              
              
              130Inventories
              
              
              (231
              )
              
              111Prepaid
                  expenses and other current assets
              
              
              (69
              )
              
              (47
              )Accounts
                  payable
              
              
              217
              
              
              145Accrued
                  expenses
              
              
              (436
              )
              
              (1,727
              )Total
                  adjustments
              
              
              1,826
              
              
              (1,380
              )Net
                  cash provided by operating activities
              
              
              5,920
              
              
              2,476CASH
                  FLOWS FROM INVESTING ACTIVITIES:Capital
                  expenditures for:Property
                  and equipment
              
              
              (210
              )
              
              (230
              )Purchases
                  of investments
              
              
              (3,900
              )
              
              (3,300
              )Proceeds
                  from the sale of investments
              
              
              3,590
              
              
              5,760Net
                  cash provided by (used in) investing activities
              
              
              (520
              )
              
              2,230CASH
                  FLOWS FROM FINANCING ACTIVITIES:Proceeds
                  from issuance of common stock - options
              
              
              444
              
              
              541Common
                  stock purchased and retired
              
              
              (1,590
              )
              
              (5,171
              )Common
                  stock purchased and retired - options
              
              
              (2,488
              )
              
              (47
              )Repayments
                  of note payable
              
              
              (403
              )
              
              -Payment
                  of dividends
              
              
              (1,368
              )
              
              (1,230
              )Net
                  cash used in financing activities
              
              
              (5,405
              )
              
              (5,908
              )Effect
                  of exchange rate changes on cash
              
              
              (8
              )
              
              9NET
                  INCREASE (DECREASE) IN CASH
              
              
              (13
              )
              
              (1,193
              )CASH
                  AT BEGINNING OF PERIOD
              
              
              703
              
              
              1,818CASH
                  AT END OF PERIOD
              
              $
              690
              
              $
              626SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:Cash
                  paid during the period for income taxes
              
              $
              136
              
              $
              1,765Cash
                  paid during the period for interest
              
              
              125
              
              
              -
 
 
 *see
        notes to consolidated condensed financial statements*


3







UTAH
      MEDICAL PRODUCTS, INC.


NOTES
      TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS


(unaudited)





(1) The
      unaudited financial statements have been prepared in accordance with the
      instructions to form 10-Q and do not include all of the information and note
      disclosures required by accounting principles generally accepted in the United
      States. These statements should be read in conjunction with the financial
      statements and notes included in the Utah Medical Products, Inc. ("UTMD" or
      "the
      Company") annual report on form 10-K for the year ended December 31, 2005.
      In
      the opinion of management, the accompanying financial statements include all
      adjustments (consisting only of normal recurring adjustments) necessary to
      summarize fairly the Company's financial position and results of operations.
      Dollar amounts are in thousands except per-share amounts and where
      noted.





(2) Inventories
      at June 30, 2006 and December 31, 2005 (in thousands) consisted of the
      following:





June
                30,
            
            December
                31,2006
            
            2005Finished
                goods
            
            $
            1,005
            
            $
            1,058Work-in-process
            
            
            860
            
            
            657Raw
                materials
            
            
            1,458
            
            
            1,590Total
            
            $
            3,323
            
            $
            3,305





(3) Stock-Based
      Compensation. At June 30, 2006 the Company had stock-based employee compensation
      plans, which authorized the grant of stock options to eligible employees and
      directors. Effective January 1, 2006, the Company adopted Statement of Financial
      Accounting Standards (SFAS) 123R, *Share-Based
      Payment* ,
      using
      the modified prospective method. This statement requires the Company to
      recognize compensation cost based on the grant date fair value of options
      granted to employees and directors. In the second quarter and six months ended
      June 30, 2006, the Company recognized $33 and $76, respectively, in compensation
      cost related to adoption of the statement. Prior to December 31, 2005, the
      Company accounted for its stock-based employee compensation plans under the
      recognition and measurement principles of APB Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      and
      related Interpretations, and had adopted the disclosure-only provisions of
      SFAS
      No. 123, *Accounting
      for Stock-Based Compensation* .
      Accordingly, no compensation cost was recognized in the financial statements
      prior to 2006, as all options granted under those plans had exercise prices
      equal to or greater than the market value of the underlying common stock on
      the
      date of grant.





A
      comparison of reported net income for the three and six months ended June 30,
      2006 and 2005, and pro-forma net income for the three and six months ended
      June
      30, 2006, including effects of expensing stock options, follows.





Three
                months ended
            
            Six
                months endedJune
                30,
            
            June
                30,2006
            
            2005
            
            2006
            
            2005Net
                income, as reported
            
            $
            2,059
            
            $
            1,887
            
            $
            4,094
            
            $
            3,856Earnings
                per share, as reportedBasic
            
            
            0.52
            
            
            0.47
            
            
            1.04
            
            
            0.95Diluted
            
            
            0.51
            
            
            0.45
            
            
            1.01
            
            
            0.90Stock
                option expense included in calculation of net income
            
            
            33
            
            
            -
            
            
            76
            
            
            -**Pro-forma
                effects**Stock
                option expense not included in net income, net of related tax
                effects
            
            
            
            
            
            515
            
            
            
            
            
            612Net
                income on a pro-forma basis
            
            
            
            
            
            1,372
            
            
            
            
            
            3,244Earnings
                per share, on a pro-forma basisBasic
            
            
            
            
            
            0.34
            
            
            
            
            
            0.80Diluted
            
            
            
            
            
            0.32
            
            
            
            
            
            0.76








4








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


Options
      to purchase 124,800 shares became fully exercisable on December 1, 2005 as
      a
      result of the vesting acceleration. Exercise prices of the options that were
      accelerated are $24.02 and $25.59 per share. These options previously were
      to
      become fully vested on October 1, 2007 and January 1, 2008. The Company took
      this action to avoid an accounting charge (as compensation expense) for these
      options starting in the quarter ending March 31, 2006, as required by SFAS
      123R.





(4) Comprehensive
      Income. Comprehensive income for the three and six months ending June 30, 2006
      was $1,910 and $3,922, net of taxes, respectively. The components used to adjust
      net income in order to obtain comprehensive income were foreign currency
      translation adjustments of ($24) and ($47), and unrealized holding losses of
      ($124) and ($125), respectively.





(5) Warranty
      Reserve. The Company accrues provisions for estimated costs that are likely
      to
      be incurred for product warranties and uncollectible accounts. The amount of
      the
      provision is adjusted, as required, to reflect historical experience. The
      following table summarizes changes to UTMD’s warranty reserve during 2Q
      2006:





Beginning
                Balance, April 1, 2006
            
            $
            60Changes
                in Warranty Reserve during 2Q 2006:Aggregate
                reductions for warranty repairs
            
            
            -Aggregate
                changes for warranties issued during reporting period
            
            
            -Aggregate
                changes in reserve related to preexisting warranties
            
            
            -Ending
                Balance, June 30, 2006
            
            $
            60








(6) Investments.
      Investments, classified as available-for-sale consist of the
      following:





June
                30, 2006
            
            June
                30, 2005Investments,
                at cost
            
            $
            17,759
            
            $
            12,590Equity
                Securities:Unrealized
                holding gains
            
            
            -
            
            
            150Unrealized
                holding (losses)
            
            
            (27
            )
            
            (64
            )Investments,
                at fair value
            
            $
            17,732
            
            $
            12,676





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





2Q
                2006
            
            2Q
                2005Balance,
                beginning of period
            
            $
            108
            
            $
            32Reversal
                of unrealized gain from securities included in beginning balance,
                realized
                in the period
            
            
            (163
            )
            
            -Unrealized
                holding gains (losses), in equity securities
            
            
            (42
            )
            
            34Deferred
                income taxes on unrealized holding gain (loss)
            
            
            80
            
            
            (13
            )Balance,
                end of period
            
            $
            (17
            )
            $
            53





Available-for-sale
                debt securities
            
            June
                30, 2006
            
            June
                30, 2005Maturity
                less than 1 year
            
            $
            -
            
            $
            2,041Maturity
                greater than 10 years
            
            
            -
            
            
            1,450











5








(7) 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, and information currently available to,
      management. When used in this document, the words “anticipate,” “believe,”
“should,” “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 noted
      throughout this 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; changes in clinical practices; UTMD’s
      ability to efficiently and responsively manufacture its products, including
      the
      possible effects of lack of performance of suppliers; access to important global
      distribution channels; budgetary constraints; the timing of regulatory approvals
      for newly introduced products; regulatory intervention in current operations;
      and third party reimbursement of health care costs of patients.


Risk
      factors, in addition to the risks outlined in the previous paragraph 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.






















6







**Item
      2.**  **Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations**





General


UTMD
      manufactures and markets a well-established range of specialty medical devices.
      The Company’s Form 10-K Annual Report for the year ended December 31, 2005
      provides a detailed description of products, technologies, markets, regulatory
      issues, business initiatives, resources and business risks, among other details,
      and should be read in conjunction with this report. Because of the relatively
      short span of time, results for any given three month period in comparison
      with
      a previous three month period may not be indicative of comparative results
      for
      the year as a whole. Dollar amounts in the report are in thousands, except
      per-share amounts or where otherwise noted.





Analysis
      of Results of Operations


a)
            Overview


In
      second
      quarter (2Q) 2006, UTMD’s consolidated global sales increased 4% compared to 2Q
      2005. 2Q 2006 earnings per share (EPS) were $.51, an increase of 14% compared
      to
      $.45 EPS in 2Q 2005. UTMD achieved the following profitability as a ratio of
      sales in 2Q 2006 and 2Q 2005:





2Q
                06
            
            2Q
                05Gross
                Profit Margin:
            55.9%
            
            57.2%Operating
                Profit Margin:
            35.6%
            
            35.2%Net
                (Income) Margin:
            28.2%
            
            26.9%





For
      first
      half (1H) 2006, UTMD’s total sales increased 5% relative to 1H 2005. 1H 2006 EPS
      were $1.01, an increase of 12% compared to $.90 EPS in 1H 2005. UTMD achieved
      the following profitability as a ratio of sales in 1H 2006 and 1H
      2005:





1H
                06
            
            1H
                05Gross
                Profit Margin:
            56.2%
            
            56.7%Operating
                Profit Margin:
            36.3%
            
            36.7%Net
                (Income) Margin:
            28.4%
            
            28.2%





b)
            Revenues


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. For example,
      the Company provides engineering services, and/or design and production of
      manufacturing tooling, which 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.


Total
      sales, which increased 4% in 2Q 2006 compared to 2Q 2005, were comprised of
      international sales up 21% and domestic sales down 2%. Domestic sales were
      comprised of domestic OEM sales (sales of components to other companies for
      use
      in their products) up 25% and domestic direct sales (sales of finished devices
      to users or distributors) down 3%. Domestic OEM sales and international sales
      have an uneven quarter-to-quarter sales pattern because customers tend to
      purchase several months’ supply of products at a time to minimize costs.


Total
      1H
      2006 sales increased 5% compared to 1H 2005. International sales increased
      14%
      and domestic sales increased 2%. International sales were 26% of total sales
      in
      1H 2006, up from 24% in 1H 2005. 1H 2006 trade shipments from UTMD’s Ireland
      facility were down 6% in US Dollar terms, and 2% in EURO terms compared to
      1H
      2005.


The
      following table provides the actual sales dollar amounts by general product
      category for total sales and the subset of international sales:












7






Global
      revenues by product category:


2Q
                2006
            
            2Q
                2005
            
            1H
                2006
            
            1H
                2005Obstetrics
            
            $
            2,359
            
            $
            2,392
            
            $
            4,769
            
            $
            4,804Gynecology/
                Electrosurgery/ Urology
            
            
            1,565
            
            
            1,324
            
            
            2,994
            
            
            2,631Neonatal
            
            
            1,715
            
            
            1,647
            
            
            3,484
            
            
            2,958Blood
                Pressure Monitoring and Accessories*
            
            
            1,654
            
            
            1,665
            
            
            3,149
            
            
            3,287Total:
            
            $
            7,293
            
            $
            7,028
            
            $
            14,396
            
            $
            13,680*includes
                molded components sold to OEM
                customers.





International
      revenues by product category:


2Q
                2006
            
            2Q
                2005
            
            1H
                2006
            
            1H
                2005Obstetrics
            
            $
            259
            
            $
            120
            
            $
            464
            
            $
            281Gynecology/
                Electrosurgery/ Urology
            
            
            552
            
            
            268
            
            
            951
            
            
            543Neonatal
            
            
            120
            
            
            80
            
            
            289
            
            
            140Blood
                Pressure Monitoring and Accessories*
            
            
            1,130
            
            
            1,236
            
            
            2,095
            
            
            2,363Total:
            
            $
            2,061
            
            $
            1,704
            
            $
            3,799
            
            $
            3,327*includes
                molded components sold to OEM
                customers.





c)
            Gross
                Profit


UTMD’s
      average gross profit margin (GPM), gross profits as a percentage of sales,
      was
      55.9% and 56.2% in 2Q and 1H 2006, respectively, compared to 57.2% and 56.7%
      in
      2Q and 1H 2005, respectively. UTMD’s prices for its products remained generally
      consistent with the prior year, but in 1H 2006 the sales mix favored lower
      margin products as a result of substantially higher international and domestic
      OEM sales compared to 1H 2005. The Company is also experiencing inflationary
      pressures in its manufacturing costs associated both with labor and with raw
      materials. The costs of manufacturing labor, particularly in Ireland, have
      been
      recently accelerating. Within the last twelve months, UTMD has made a number
      of
      cost of living pay adjustments for its employees. The cost of UTMD’s health plan
      benefits continue to increase at a much faster rate than sales. Since nearly
      all
      of UTMD’s products are made of petroleum-based compounds, the worldwide
      substantial increase in cost of oil has a significant impact on raw materials
      costs. In addition, the higher cost of oil has direct impact on transportation
      costs, both those included in manufacturing overhead for shipping and receiving
      products and raw materials, and those in operating expenses associated with
      sales and marketing traveling expenses. Because UTMD owns and has maintained
      facilities and other manufacturing overheads in excess of its needs, some
      dilution of overhead costs as a result of higher sales is helping to offset
      the
      increases in incremental direct material and labor costs. Management projects
      that it can achieve a GPM for the year of 2006 about the same as 1H 2006, which
      would be about a half percentage point lower as a percentage of sales than
      the
      GPM achieved in 2005.


OEM
      sales
      are sales of UTMD components that are marketed by other companies as part of
      their product offerings. UTMD utilizes OEM sales as a means to help maximize
      utilization of its assets and 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, nonvariable
      manufacturing overhead expenses cannot be meaningfully allocated between direct
      and OEM sales. Therefore, UTMD does not report GPM by sales
      channels.





d)
            Operating
                Profit


Operating
      Profit, or income from operations, is the profit remaining after subtracting
      operating expenses from gross profits. Operating expenses include sales and
      marketing (S&M), research and development (R&D) and general and
      administrative (G&A) expenses. Operating expenses in 2Q 2006 were $69 lower
      than 2Q 2005, but $124 higher in 1H 2006 than 1H 2005. Please see the table
      below. Costs decreased in 2Q 2006 mainly because litigation expenses included
      in
      G&A were $279 lower than in 2Q 2005. The lower litigation expenses were
      offset by $33 higher G&A expenses for estimated option expense per SFAS
      123R, and by a $130 write-off of intellectual property included in R&D
      expense, neither of which occurred in 2Q 2005. For 1H 2006 compared to 1H 2005,
      decreased litigation expenses were about equal to the new option expense,
      leaving the $130 intellectual property write-off approximately equal to the
      overall operating expense increase. Operating expenses were 20.3% of sales
      in 2Q
      2006 compared to 22.1% in 2Q 2005, and 19.9% of sales in 1H 2006 compared to
      20.0% in 1H 2005. For the year of 2006, management expects to hold operating
      expenses to less than 20% of sales. This compares to an actual operating expense
      ratio of 23.5% of sales in 2005. Operating profit margins were 35.6% of sales
      in
      2Q 2006 compared to 35.2% in 2Q 2005, and 36.3% in 1H 2006 compared to 36.7%
      in
      1H 2005.






8






Because
      UTMD sells internationally through third party distributors, its S&M
      expenses are predominantly for U.S. business activity. S&M expenses in 2Q
      2006 were 8.5% of sales compared to 8.3% of sales in 2Q 2005. S&M expenses
      in 1H 2006 were 8.4% of sales compared to 7.9% of sales in 1H 2005. The higher
      expenses, which are expected to continue for the rest of 2006, were due to
      an
      expanded direct domestic sales force. For the year, UTMD intends to manage
      S&M expenses to a ratio consistent with 1H 2006.


R&D
      expenses in 2Q 2006 were 2.9% of sales compared to 1.1% of sales in 2Q 2005,
      and
      2.0% of 1H 2006 sales compared to 1.0% of sales in 1H 2005. 2Q 2006 R&D
      expenses included a $130 write-off of intellectual property which the Company
      believes will not come to fruition in terms of a marketable product. Excluding
      the $130 write-off, UTMD expects R&D expenses during 2006 as a whole to be
      slightly higher than in 2005.


G&A
      expenses in 2Q 2006 were 8.9% of sales compared to 12.7% of 2Q 2005 sales.
      G&A expenses in 1H 2006 were 9.5% of sales compared to 11.0% of 1H 2005
      sales. As noted above, 2Q 2005 litigation expenses were $279 higher than in
      2Q
      2006 due to the FDA lawsuit. In addition to litigation costs, G&A expenses
      include the cost of outside auditors and corporate governance activities
      relating to the implementation of SEC rules resulting from the Sarbanes-Oxley
      Act of 2002. Starting in 2006, G&A expenses also include the estimated
      stock-based compensation expense related to adoption of SFAS 123R. Barring
      expenses resulting from currently unknown new litigation, G&A expenses for
      the year should be consistent with the 1H 2006 as a percentage of
      sales.




2Q
                2006
            
            2Q
                2005
            
            1H
                2006
            
            1H
                2005S&M
                Expense
            
            $
            616
            
            $
            580
            
            $
            1,206
            
            $
            1,082R&D
                Expense
            
            
            215
            
            
            79
            
            
            283
            
            
            143G&A
                Expense
            
            
            651
            
            
            891
            
            
            1,368
            
            
            1,508Total
                Operating Expenses:
            
            $
            1,482
            
            $
            1,551
            
            $
            2,857
            
            $
            2,733





e)
            Non-operating
                income


Non-operating
      income in 2Q 2006 was $571 compared to $213 in 2Q 2005, and $985 in 1H 2006
      compared to $467 in 1H 2005. UTMD received interest, dividends and capital
      gains
      of $514 in 2Q 2006 and $885 in 1H 2006, compared to $85 in 2Q 2005 and $233
      in
      1H 2005, from investing its cash balances. In 2Q and 1H 2006, UTMD paid $63
      and
      $125, respectively, for interest expense because its Ireland subsidiary borrowed
      €4.5 million ($5,336) in December 2005 to allow the repatriation of profits
      generated by its Ireland operations between 1996 and 2005. The loan will have
      to
      be repaid by the Ireland subsidiary from its profits generated in the future,
      which should take about four years. UTMD had no interest expense during 1H
      2005.
      Royalty income, which UTMD receives from licensing its technology to other
      companies, was approximately the same for the same periods in both years.
      Management expects non-operating income for 2006 as a whole (after subtracting
      interest expense for the Ireland loan) to be about $500 higher than in 2005.
      This projection is based on the Company continuing to receive substantial
      investment income that would not occur if a large amount of current cash
      balances were used for a special purpose such as an acquisition, substantial
      share repurchases or new litigation.





f)
            Earnings
                Before Income Taxes


2Q
      2006
      earnings before income taxes (EBT) were $3,166 compared to $2,684 in 2Q 2005.
      1H
      2006 EBT were $6,212 compared to $5,490 in 1H 2005. 2Q and 1H 2006 EBT margin
      was 43.4% and 43.2% of sales, respectively, compared to 38.2% and 40.1% in
      2Q
      and 1H 2005, respectively. The higher margins were due primarily to higher
      non-operating income and lower litigation expenses compared to the previous
      year.





g)
            Net
                Income and Earnings per Share


UTMD’s
      net income increased to $2,059 in 2Q 2006 compared to $1,887 in 2Q 2005, and
      to
      $4,094 in 1H 2006 compared to $3,856 in 1H 2005. Net profit margins (NPM),
      which
      are net income (after tax) expressed as a percentage of sales, were 28.2% in
      2Q
      2006 compared to 26.9% in 2Q 2005, and 28.4% in 1H 2006 compared to 28.2% in
      1H
      2005. The 2006 income tax provision, which is the percentage of EBT estimated
      to
      be owed in federal and state income taxes, has been and will continue to be
      substantially higher than in the previous year because of the one-time tax
      benefit that UTMD received in 2005 from The American Jobs Creation Act of 2004
      (the Act) which allowed a temporary tax deduction on prior accumulated foreign
      earnings. In 2Q and 1H 2006, the income tax provision was 35.0% and 34.1% of
      EBT, respectively, compared to 29.7% and 29.8% in 2Q and 1H 2005, respectively.
      Tax provisions on 2005 earnings were reduced following guidance provided by
      FASB
      Staff Position No. FAS 109-2. Tax benefits from the Act were limited to the
      year
      2005. As a result, UTMD estimates that its consolidated income tax provision
      for
      the year 2006 may be eight percentage points higher than in the previous year,
      which was 26.1%.





9







UTMD’s
      net income divided by weighted average outstanding shares for the applicable
      reporting period, diluted for unexercised employee and director options,
      provides earnings per share (EPS):




2Q
                2006
            
            2Q
                2005
            
            1H
                2006
            
            1H
                2005Earnings
                Per Share (EPS)
            
            $
            .509
            
            $
            .446
            
            $
            1.010
            
            $
            .902Shares
                (000), Diluted
            
            
            4,043
            
            
            4,229
            
            
            4,056
            
            
            4,277





Diluted
      2Q 2006 Earnings per Share (EPS) increased 14% compared to 2Q 2005. Diluted
      1H
      2006 EPS increased 12% compared to 1H 2005. The changes in diluted shares
      resulted from share repurchases and from exercises of options. UTMD repurchased
      39,533 shares in 2Q 2006 and 51,632 shares in 1H 2006. Exercises of employee
      options in 2Q 2006 added 2,695 shares and 124,886 shares in 1H 2006 (net of
      961
      and 145,399 shares swapped or traded in 2Q and 1H, respectively, by individuals
      in payment of the exercise price of the options and related tax withholding).
      Market increases and decreases in UTMD’s stock price impact EPS as a result of
      the dilution calculation for unexercised options (with exercise prices below
      the
      average stock market value during each period). The dilution calculation added
      96,000 and 106,000 shares to actual weighted average shares outstanding in
      2Q
      and 1H 2006 respectively, compared to 219,000 and 224,000 in 2Q and 1H 2005.
      The
      decrease in dilution is primarily due to fewer unexercised options outstanding.
      Actual outstanding common shares as of the end of 2Q 2006 were 3,929,600
      compared to 3,928,400 at the end of 2Q 2005.





h)
            Return
                on Equity


Return
      on
      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
      shareholder equity for the applicable time period. Annualized ROE (after payment
      of dividends) for 1H 2006 was 16% compared to 15% for 1H 2005. The higher ROE
      in
      1H 2006 was due to higher net profits. Share repurchases have a beneficial
      impact on ROE as long as the Company sustains net profit performance, because
      shareholder equity is reduced by the cost of the shares repurchased. Although
      UTMD expects higher net profits in 2006, ROE for the year may be about the
      same
      as in 2005 as a result of increased dividends to shareholders coupled with
      higher average shareholders’ equity. The ROE in 2006 will be sufficient to
      internally-finance UTMD’s revenue growth.





Liquidity
      and Capital Resources


i)
            Cash
                flows


Cash
      flows from operating activities, including adjustments for depreciation and
      other non-cash operating expenses, along with changes in working capital and
      the
      tax benefit attributable to exercise and subsequent sale of employee and
      director stock options, totaled $5,920 in 1H 2006 compared to $2,476 in 1H
      2005.
      A $1,984 larger tax benefit from exercise of employee and outside director
      stock
      options in 1H 2006 compared to 1H 2005 was the most significant difference
      in
      the two periods, followed by a $1,291 smaller decrease in accrued expenses,
      which resulted primarily from a $821 1H 2005 decrease in litigation payable
      as
      accrued expenses associated with the FDA litigation were paid.


Cash
      flows from investing activities primarily results from purchases and sales
      of
      short-term investments, in an effort to achieve a prudent return for excess
      cash
      balances. Capital expenditures for property and equipment were $210 in 1H 2006
      compared to 230 in 1H 2005. This rate of investing in new property and equipment
      is required to keep facilities, equipment and tooling in good working
      condition.


In
      1H
      2006, UTMD received $444 and issued 124,886 shares of stock upon the exercise
      of
      employee and director stock options. Option exercises in 1H 2006 were at an
      average price of $9.90 per share. Employees and directors exercised a total
      of
      270,285 option shares in 1H 2006, with 145,399 shares immediately being retired
      as a result of the individuals trading the shares in payment of the exercise
      price of the options and related tax withholding. UTMD used $2,488 in cash
      during 1H 2006 to meet tax withholding requirements on options exercised. For
      comparison, the Company received $541 from issuing 61,697 shares of stock on
      the
      exercise of employee stock options in 1H 2005, net of 8,264 shares retired
      upon
      employees trading those shares in payment of the stock option exercise price.
      UTMD repurchased 51,632 shares of its stock in the open market at a cost of
      $1,590 during 1H 2006, an average cost of $30.80 per share including commissions
      and fees. For comparison, UTMD repurchased 238,737 shares of stock in the open
      market at a cost of $5,171 during 1H 2005.






10








UTMD
      Ltd.
      (Ireland subsidiary) made payments of $403 on its note payable during 1H 2006.
      UTMD Ltd. did not have any bank debt in 2005. UTMD (U.S.) did not utilize its
      bank line of credit with US Bank during 1H 2005, but used it in 2006 to provide
      a loan guarantee on the Ireland debt. UTMD paid $1,368 in cash dividends in
      1H
      2006 compared to $1,230 in 1H 2005.


Management
      believes that future income from operations and effective management of working
      capital will provide the liquidity needed to finance growth plans. Planned
      capital expenditures during the remainder of 2006 are expected to be
      approximately $350 to keep facilities, equipment and tooling in good working
      order. In addition to capital expenditures, UTMD plans to use cash in 2006
      for
      selective infusions of technological, marketing or product manufacturing rights
      to broaden the Company's product offerings; for continued share repurchases
      if
      the price of the stock remains undervalued; and if available for a reasonable
      price, acquisitions that may strategically fit UTMD’s business and are accretive
      to performance. The US Bank 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 UTMD’s existing cash and investment balances.





j)
            Assets
                and Liabilities


June
      30,
      2006 total assets were $472 higher than at December 31, 2005. Current assets
      increased $426. The increases resulted from a $969 increase in cash and
      investments despite significant uses of cash as noted above including payment
      of
      $1,368 in dividends and $1,590 to repurchase shares. Receivables declined $539
      primarily due to a $530 decrease in income taxes receivable. One important
      subset of receivables, trade accounts receivable, net of allowance for doubtful
      accounts, increased $136, yielding approximately 45 days in customer receivables
      using 2Q 2006 shipments as the denominator. Other receivables declined $145.
      Inventories as well as other current assets remained about the same in US dollar
      terms.


Working
      capital was $23,560 at June 30, 2006, an $877 increase from 2005 year-end.
      Working capital exceeds UTMD’s normal operating needs. $426 of the increase in
      working capital was due to an increase in current assets. Current liabilities
      declined $451 primarily because of lower accrued liabilities after payment
      of
      litigation expenses and 2005 annual management bonuses. As a result of the
      working capital changes, UTMD’s current ratio increased to 9.6 on June 30, 2006
      from 8.1 on December 31, 2005 and 7.7 on June 30, 2005.


Net
      property and equipment increased $200 in 1H 2006 despite an increase in
      accumulated depreciation of $290 because of capital spending of $210 and an
      increase in the dollar-denominated value of Ireland P&E. The U.S. dollar
      increased about 7% relative to the EURO during 1H 2006. Goodwill resulting
      from
      prior acquisitions remained the same. Net intangible assets, excluding goodwill,
      decreased $154 as a result of amortization of patents and other intellectual
      property, including the $130 write-off of intellectual property. At June 30,
      2006, net intangible assets including goodwill were 17.7% of total assets
      compared to 18.3% at year-end 2005.


UTMD’s
      long term liabilities are comprised almost entirely of the Ireland loan ($5,313
      on June 30, 2006) and deferred income taxes ($187 on June 30, 2006). As of
      December 31, 2005, those long term liabilities were $5,336 and $274,
      respectively. As of June 30, 2006, UTMD’s total debt ratio (total liabilities/
      total assets) decreased to 20% from 21% on December 31, 2005. On June 30, 2005,
      UTMD’s total debt ratio, prior to the Ireland loan required to repatriate
      foreign profits in 2005, was 9%.





k)
            Management's
                Outlook.


As
      expressed at the beginning of the year, management’s operating plan for 2006 is
      to


1)
            increase
                sales and marketing efforts after finally resolving a four-year long
                dispute with the FDA in late 2005;


2)
            reinvigorate
                internal new product development;


3)
            continue
                outstanding operating performance;


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


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


We
      believe that the actual financial performance in 1H 2006 indicated excellent
      initial success in achieving the 2006 plan, although the knowledge of progress
      in items 2) and 4) remains internal. UTMD does not announce its new product
      development initiatives until after it achieves applicable FDA premarketing
      regulatory concurrences. No 510(k) submissions were made to the FDA in 1H 2006.







11








In
      the
      first half of 2006, the Company realized accelerating increases in labor and
      raw
      materials costs, which will provide a profit margin challenge going forward
      because prices for UTMD’s finished products are relatively inelastic due to
      established long term fixed U.S. hospital pricing agreements and a very
      competitive marketplace worldwide for medical devices.





l)
            Accounting
                Policy Changes.


None.





**Item
      3.**  **Quantitative
      and Qualitative Disclosures about Market Risk**





UTMD
      has
      manufacturing operations, including related assets, in Ireland denominated
      in
      the EURO, and sells products under agreements denominated in various Western
      European currencies. The EURO and other currencies are subject to exchange
      rate
      fluctuations that are beyond the control of UTMD. The exchange rate was 0.7870
      EURO per USD as of June 30, 2006, and 0.8282 EURO per USD as of June 30, 2005.
      UTMD manages its foreign currency risk without separate hedging transactions
      by
      converting currencies to USD as transactions occur.








**Item
      4. Controls and Procedures**





The
      company’s management, under the supervision and with the participation of the
      Chief Executive Officer and the Principal Financial Officer, evaluated the
      effectiveness of the company’s disclosure controls and procedures (as defined in
      Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of
      June
      30, 2006. Based on this evaluation, the Chief Executive Officer and Principal
      Financial Officer concluded that, as of June 30, 2006, the company’s disclosure
      controls and procedures were effective.


There
      were no changes in the company’s internal controls over financial reporting that
      occurred during the quarter ended June 30, 2006, that have materially affected,
      or are reasonably likely to materially affect, the company’s internal controls
      over financial reporting.















































12







PART
      II -
      OTHER INFORMATION





**Item
                1A.**
            **Risk
                Factors**





In
      addition to the other information set forth in this report, investors should
      carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in
      UTMD’s Annual Report on Form 10-K for the year ended December 31, 2005, which
      could materially affect its business, financial condition or future results.
      The
      risks described in the Annual Report on Form 10-K are not the only risks facing
      the Company. Additional risks and uncertainties not currently known to UTMD
      or
      currently deemed to be immaterial also may materially adversely affect the
      Company’s business, financial condition and/or operating results.





**Item
                2.**
            **Unregistered
                Sales of Equity Securities and Use of
                Proceeds**





The
      following table details purchases by UTMD of its own securities during 2Q
      2006.





**ISSUER
      PURCHASES OF EQUITY SECURITIES**





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)4/01/06
                - 4/30/06
            
            18,933
            
            $ 
                   31.43
            
            18,9335/01/06
                - 5/31/06
            
            4,672
            
            31.40
            
            4,6726/01/06
                - 6/30/06
            
            15,928
            
            29.98
            
            15,928Total
            
            39,533
            
            $    
                30.84
            
            39,533





(1) In
      2Q
      2006 UTMD repurchased the above shares pursuant to a continued open market
      repurchase program initially announced in August 1992. Since 1992 through 2Q
      2006, the Company has repurchased 6.4 million shares at an average cost of
      $11.59 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 2.8 million shares at an average cost of $9.76
      per share including fees and administrative costs. In total, UTMD has
      repurchased 9.1 million of its shares at an average price of $11.04 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
      1.9 million option shares at an average price of $7.38 per share. All options
      were awarded at the market value of the stock on the date of the
      award.





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




























13






**Item
                4.**
            **Submission
                of Matters to a Vote of Security
                Holders**





On
      May
      12, 2006 at the annual meeting, shareholders of the Company approved the
      following matters submitted to them for consideration:


Elected
      Kevin L. Cornwell and Paul O. Richins as directors of the
      Company;


Kevin
                L. Cornwell:
            For
            2,924,392Paul
                O. Richins:
            For
            2,905,858








**Item
                6.**
            **Exhibits**





Exhibit
                #
            SEC
              Reference
                #
            Title
                of Document1
            31
            Certification
                of CEO pursuant to Rule 13a-14(a) as adopted pursuant to Section
                302 of
                the Sarbanes-Oxley Act of 20022
            31
            Certification
                of Principal Financial Officer pursuant to Rule 13a-14(a) as adopted
                pursuant to Section 302 of the Sarbanes-Oxley Act of
                20023
            32
            Certification
                of CEO pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of
                the Sarbanes-Oxley Act of 20024
            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








SIGNATURES





Pursuant
      to the requirements of the Securities Exchanges Act of 1934, the registrant
      has
      duly caused this report to be signed on its behalf by the undersigned thereunto
      duly authorized.








UTAH
                MEDICAL PRODUCTS, INC.REGISTRANTDate:8/8/06
            By:
            /s/
                Kevin L.
                CornwellKevin
                L. CornwellCEODate: 8/8/06
            By:
            /s/ Paul O.
                RichinsPaul
                O. RichinsPrincipal
                Financial Officer




















14