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~~

⌧ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For ~~quarter ended:~~the quarterly period ended June 30, ~~2018~~2019

□ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to ________

Commission File No. 001-12575

UTAH MEDICAL PRODUCTS ~~INC.~~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~~

7043 South 300 West

Midvale, Utah 84047

~~Address of principal executive offices~~

(Address of principal executive offices) (Zip Code)

~~Registrant's telephone number:~~	(801) 566‑1200
(Registrant’s telephone number, including area code)

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

Title of each class:	Trading Symbol:	Name of each exchange on which registered:
Common stock, $0.01 par value	UTMD	NASDAQ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by ~~Sections~~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;~~, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒⌧ No ☐□

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

~~Large accelerated filer~~ ☐

~~Accelerated filer~~ ☒

~~Non-accelerated filer~~ ☐

~~Smaller reporting company~~ ☐

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

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ☒ ⌧ No ☐□

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

Large accelerated filer □	Accelerated filer ⌧
Non-accelerated filer □	Smaller reporting company □
	Emerging growth company □

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. □

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

Indicate the number of shares outstanding of each of the ~~issuer's~~issuer’s classes of common stock as of August 7, ~~2018: 3,733,000.~~

2019: 3,719,600.

UTAH MEDICAL PRODUCTS, INC.

INDEX TO FORM 10‑Q

PART I - FINANCIAL INFORMATION			PAGE

	Item 1.	Financial Statements

		Consolidated Condensed Balance Sheets as of June 30, ~~2018~~2019 and December 31, ~~2017~~2018	1

		Consolidated Condensed Statements of Income for the three and six months ended June 30, ~~2018~~2019 and June 30, ~~2017~~2018	2

		Consolidated Condensed Statements of Cash Flows for six months ended June 30, ~~2018~~2019 and June 30, ~~2017~~2018	3

		Consolidated Statement of Stockholders’ Equity Three and six months ended June 30, 2019 and June 30, 2018	4

		Notes to Consolidated Condensed Financial Statements	45

	Item 2.	~~Management's~~Management’s Discussion and Analysis of Financial Condition and Results of Operations	68

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	1418

	Item 4.	Controls and Procedures	1419

PART II – OTHER INFORMATION

	Item 1.	Legal Proceedings	1520

	Item 1A.	Risk Factors	1520

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	1621

	Item 6.	Exhibits	1722

SIGNATURES				1822

Item 1. Financial Statements
UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS AS OF
JUNE 30, 2019 AND DECEMBER 31, 2018
(in thousands)
	(unaudited)			(audited)
ASSETS	JUNE 30, 2019			DECEMBER 31, 2018
Current assets:
Cash & investments	$	32,880		$	51,112
Accounts & other receivables, net		5,235			3,956
Inventories		7,712			5,412
Other current assets		398			423
Total current assets		46,225			60,903
Property and equipment, net		10,134			10,359
Operating lease - right of use assets, net		433			0
Goodwill		13,679			13,703
Other intangible assets		53,870			32,979
Other intangible assets - accumulated amortization		(20,980	)		(18,176	)
Other intangible assets, net		32,890			14,803
Total assets	$	103,361		$	99,768

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	854		$	975
Accrued expenses		2,967			4,285
Total current liabilities		3,821			5,260
Deferred tax liability - Femcare IIA		2,339			2,540
Other long term liabilities		2,441			2,441
Operating lease liability		395			0
Deferred income taxes		453			535
Total liabilities		9,449			10,776

Stockholders' equity:
Preferred stock - $.01 par value; authorized - 5,000 shares; no shares issued or outstanding		-			-
Common stock - $.01 par value; authorized - 50,000 shares; issued - June 30, 2019, 3,719 shares and December 31, 2018, 3,720 shares		37			37
Accumulated other comprehensive income (loss)		(10,806	)		(11,290	)
Additional paid-in capital		0			122
Retained earnings		104,681			100,123
Total stockholders' equity		93,912			88,992

Total liabilities and stockholders' equity	$	103,361		$	99,768

PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS AS OF
JUNE 30, 2018 AND DECEMBER 31, 2017
(in thousands)

(unaudited) (audited)
ASSETS

JUNE 30,
2018

DECEMBER 31,
2017

Current assets:
Cash $ 45,873 $ 39,875
Investments, available-for-sale 0 80
Accounts & other receivables, net 4,532 3,623
Inventories 5,228 5,244
Other current assets 363 366
Total current assets 55,996 49,188
Property and equipment, net 10,769 11,621
Goodwill 13,925 14,092
Other intangible assets 34,018 34,805
Other intangible assets - accumulated amortization (17,664 ) (16,961 )
Other intangible assets, net 16,354 17,844
Total assets $ 97,044 $ 92,745

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 979 $ 934
Accrued expenses 4,269 4,346
Total current liabilities 5,248 5,280
Deferred tax liability - intangible assets 2,827 3,102
Other long term liabilities 5,168 5,785
Deferred income taxes 439 456
Total liabilities 13,682 14,623

Stockholders' equity:
Preferred stock - $.01 par value; authorized - 5,000shares; no shares issued or outstanding - -
Common stock - $.01 par value; authorized - 50,000 shares; issued - June 30, 2018, 3,732 shares and December 31, 2017, 3,721 shares 37 37
Accumulated other comprehensive income (loss) (9,876 ) (8,341 )
Additional paid-in capital 1,197 809
Retained earnings 92,004 85,617
Total stockholders' equity 83,362 78,122

Total liabilities and stockholders' equity $ 97,044 $ 92,745

see notes to consolidated condensed financial statements

UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND JUNE 30, 2018
(in thousands, except per share amounts - unaudited)

	Three Months Ended						Six Months Ended
	2019			2018			2019		2018
Sales, net	$	11,846		$	10,965		$	22,579	$	21,852

Cost of goods sold		4,346			3,981			8,306		7,946
Gross profit		7,500			6,984			14,273		13,906

Operating expense
Selling, general and administrative		2,906			1,811			5,463		3,649
Research & development		113			117			228		230
Total operating expenses		3,019			1,928			5,691		3,879
Operating income		4,481			5,056			8,582		10,027

Other income (expense)		84			500			120		538
Income before provision for income taxes		4,565			5,556			8,702		10,565

Provision for income taxes		1,040			1,248			2,038		2,165
Net income	$	3,525		$	4,308		$	6,664	$	8,400

Earnings per common share (basic)	$	0.95		$	1.15		$	1.79	$	2.25

Earnings per common share (diluted)	$	0.94		$	1.15		$	1.78	$	2.24

Shares outstanding - basic		3,721			3,731			3,721		3,728

Shares outstanding - diluted		3,735			3,754			3,737		3,751

Other comprehensive income (loss):
Foreign currency translation net of taxes of $0 in all periods	$	(464	)	$	(2,836	)	$	484	$	(1,535	)
Total comprehensive income	$	3,061		$	1,472		$	7,148	$	6,865

UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND JUNE 30, 2017
(in thousands, except per share amounts - unaudited)

Three Months Ended Six Months Ended
June 30, June 30,
2018 2017 2018 2017
Sales, net $ 10,965 $ 10,829 $ 21,852 $ 21,088

Cost of goods sold 3,981 3,936 7,946 7,660
Gross profit 6,984 6,893 13,906 13,428

Operating expense
Selling, general and administrative 1,811 1,740 3,649 3,432
Research & development 117 119 230 238
Total operating expenses 1,928 1,859 3,879 3,670
Operating income 5,056 5,034 10,027 9,758

Other income (expense) 500 23 538 49
Income before provision for income taxes 5,556 5,057 10,565 9,807

Provision for income taxes 1,248 1,187 2,165 2,402
Net income $ 4,308 $ 3,870 $ 8,400 $ 7,405

Earnings per common share (basic) $ 1.15 $ 1.04 $ 2.25 $ 1.99

Earnings per common share (diluted) $ 1.15 $ 1.04 $ 2.24 $ 1.98

Shares outstanding - basic 3,731 3,716 3,728 3,715

Shares outstanding - diluted 3,754 3,732 3,751 3,732

Other comprehensive income (loss):
Foreign currency translation net of taxes of $0 in all periods $ (2,836 ) $ 1,680 $ (1,535 ) $ 2,336
Total comprehensive income $ 1,472 $ 5,550 $ 6,865 $ 9,741

see notes to consolidated condensed financial statements

UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2019 AND JUNE 30, 2018
(in thousands - unaudited)

	Six Months Ended June 30,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	6,664		$	8,400
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		355			395
Amortization		2,902			1,128
Gain on Investments		0			(32	)
Provision for (recovery of) losses on accounts receivable		(2	)		1
Amortization of Right of Use Assets		19			0
(Gain) loss on disposal of assets		0			(418	)
Deferred income taxes		(278	)		(225	)
Stock-based compensation expense		56			42
Tax benefit attributable to exercise of stock options		15			39
Changes in operating assets and liabilities:
Accounts receivable and other receivables		(1,256	)		(992	)
Inventories		(2,322	)		(45	)
Prepaid expenses and other current assets		24			(3	)
Accounts payable		(123	)		51
Accrued expenses		(1,011	)		(594	)
Total adjustments		(1,621	)		(653	)
Net cash provided by operating activities		5,043			7,747

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for:
Property and equipment		(130	)		(201	)
Intangible assets		(21,000	)		-
Proceeds from sale of investments		-			74
Proceeds from sale of property and equipment		-			862
Net cash provided by (used in) investing activities		(21,130	)		735

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - options		171			347
Common stock purchased and retired		(398	)		-
Payment of dividends		(2,055	)		(2,011	)
Net cash provided by (used in) financing activities		(2,282	)		(1,664	)

Effect of exchange rate changes on cash		137			(820	)
Net increase (decrease) in cash and cash equivalents		(18,232	)		5,998
Cash at beginning of period		51,112			39,875
Cash at end of period	$	32,880		$	45,873

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes	$	2,937		$	3,016
Cash paid during the period for interest		0			0

UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND JUNE 30, 2017
(in thousands - unaudited)

Six Months Ended
June 30,

2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,400 $ 7,405
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation 395 330
Amortization 1,128 1,031
Gain on Investments (32 ) 0
Provision for (recovery of) losses on accounts receivable 1 (1 )
(Gain) loss on disposal of assets (418 ) -
Deferred income taxes (225 ) (182 )
Stock-based compensation expense 42 69
Tax benefit attributable to exercise of stock options 39 21
Changes in operating assets and liabilities:
Accounts receivable (992 ) (1,157 )
Accrued interest and other receivables 0 (5 )
Inventories (45 ) (100 )
Prepaid expenses and other current assets (3 ) 60
Accounts payable 51 68
Accrued expenses (594 ) 203
Total adjustments (653 ) 337
Net cash provided by operating activities 7,747 7,742

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for:
Property and equipment (201 ) (114 )
Intangible assets - -
Purchases of investments - -
Proceeds from sale of investments 74
Proceeds from sale of property and equipment 862 -
Net cash provided by (used in) investing activities 735 (114 )

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - options 347 168
Payment of dividends (2,011 ) (984 )
Net cash provided by (used in) financing activities (1,664 ) (816 )

Effect of exchange rate changes on cash (820 ) 629
Net increase (decrease) in cash and cash equivalents 5,998 7,441
Cash at beginning of period 39,875 26,296
Cash at end of period $ 45,873 $ 33,737

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes $ 3,016 $ 2,676
Cash paid during the period for interest 0 0

see notes to consolidated condensed financial statements

UTAH MEDICAL PRODUCTS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Three Months and Six Months Ended June 30, 2019 and 2018
(In thousands - unaudited)

										Accumulated
							Additional			Other						Total
	Common Stock						Paid-in			Comprehensive			Retained			Stockholders'
	Shares			Amount			Capital			Income			Earnings			Equity
Balance at December 31, 2018		3,720		$	37		$	121		$	(11,290	)	$	100,123		$	88,991
Shares issued upon exercise of employee stock options for cash		3			-			97			-			-			97
Stock option compensation expense		-			-			28			-			-			28
Common stock purchased and retired		-			-			-			-			-			-
Foreign currency translation adjustment		-			-			-			948			-			948
Common stock dividends		-			-			-			-			(1,028	)		(1,028	)
Net income		-			-			-			-			3,139			3,139
Balance at March 31, 2019		3,723		$	37		$	246		$	(10,343	)	$	102,234		$	92,175
Shares issued upon exercise of employee stock options for cash		1			0			74			-			-			74
Stock option compensation expense		-			-			28			-			-			28
Common stock purchased and retired		(5	)		(0	)		(348	)		-			(50	)		(398	)
Foreign currency translation adjustment		-			-			-			(464	)		-			(464	)
Common stock dividends		-			-			-			-			(1,028	)		(1,028	)
Net income		-			-			-			-			3,525			3,525
Balance at June 30, 2019		3,719		$	37		$	(0	)	$	(10,807	)	$	104,682		$	93,912

Balance at December 31, 2017		3,721		$	37		$	809		$	(8,341	)	$	85,617		$	78,122
Shares issued upon exercise of employee stock options for cash		9			0			372			-			-			372
Shares received and retired upon exercise of stock options		(2	)		(0	)		(225	)		-			-			(225	)
Stock option compensation expense		-			-			30			-			-			30
Common stock purchased and retired		-			-			-			-			-			-
Foreign currency translation adjustment		-			-			-			1,301			-			1,301
Common stock dividends		-			-			-			-			(1,006	)		(1,006	)
Net income		-			-			-			-			4,092			4,092
Balance at March 31, 2018		3,728		$	37		$	986		$	(7,040	)	$	88,703		$	82,687
Shares issued upon exercise of employee stock options for cash		4			0			200			-			-			200
Shares received and retired upon exercise of stock options		-			-			-			-			-			-
Stock option compensation expense		-			-			11			-			-			11
Foreign currency translation adjustment		-			-			-			(2,836	)		-			(2,836	)
Common stock dividends		-			-			-			-			(1,008	)		(1,008	)
Net income		-			-			-			-			4,308			4,308
Balance at June 30, 2018		3,732		$	37		$	1,197		$	(9,876	)	$	92,004		$	83,362

see notes to consolidated condensed financial statements

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, ~~2017.~~2018. 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. Currency amounts are in thousands except per-share amounts and where noted.

(2) Recent Accounting Standards.

In ~~May 2014,~~February 2016, new accounting guidance (ASU 2014-09) was issued that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance is based on the principle that an entity should recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to fulfill a contract. UTMD adopted this new standard on January 1, 2018, using a modified retrospective approach. In accordance with ASU 2014-09, UTMD's revenue recognition is based on standard terms & conditions of sale for like customers in addition to contracts and the performance obligations identified in them. With very insignificant and limited exceptions, the Company's performance obligation is met when it ships a physical product to a customer. The basis on which UTMD recognizes revenue was updated on January 1, 2018, but it did not result in a change to the process and timing of revenue recognition, because the previous revenue recognition method complies with ASU 2014-09. Therefore, the adoption of ASU 2014-09 did not have an impact on UTMD's financial statements. In accordance with this adoption disaggregated revenue is presented in Note 7.

~~In February 2016, new accounting guidance~~2016-02, Leases (Topic 842)) was issued which requires recording most leases on the balance sheet. The new lease standard requires disclosure of key information about lease arrangements and aligns many of the underlying principles of this new model with those in the new revenue recognition standard noted above. This guidance ~~becomes~~is effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. The new guidance became effective for UTMD ~~has yet~~on January 1, 2019. UTMD applied the requirements using the modified retrospective method and so will not restate comparative financial statements. Implementation of the standard resulted in addition of right of use assets and lease liabilities of $452 to ~~assess~~ the ~~impact that this standard~~consolidated balance sheet and will require additional disclosures but will have no effect on the income statement. UTMD’s only leases are for a portion of the parking lot at the Midvale facility and an automobile in Ireland.

The Company has determined that other recently issued accounting standards will either have no material impact on its consolidated financial ~~statements when it is adopted. The only significant lease the Company anticipates it~~position, results of operations or cash flows, or will ~~have at that time is for the parking lot at~~not apply to its ~~Utah facility.~~operations.

(3) Inventories at June 30, ~~2018~~2019 and December 31, ~~2017~~2018 consisted of the following:

	June 30,		December 31,		June 30,		December 31,
	2018		2017		2019		2018
Finished goods	$	1,307	$	1,313	$	3,145	$	1,615
Work‑in‑process		1,342		1,270		1,217		1,103
Raw materials		2,579		2,661		3,350		2,694
Total	$	5,228	$	5,244	$	7,712	$	5,412

(4)Stock-Based Compensation. At June 30, ~~2018,~~2019, the Company has stock-based employee compensation plans which authorize the grant of stock options to eligible employees and directors. The Company accounts for stock compensation under FASB Accounting Standards Codification ~~("ASC"~~(“ASC”) 718, Compensation - Stock Compensation. 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 quarters ended June 30, ~~2018~~2019 and ~~2017,~~2018, the Company recognized ~~$11~~$28 and ~~$33,~~$11, respectively, in stock based compensation cost. In the six months ended June 30, ~~2018~~2019 and ~~2017,~~2018, the Company recognized ~~$42~~$56 and ~~$69,~~$42, respectively, in stock based compensation cost.

(5) Warranty Reserve. The ~~Company's~~Company’s published warranty is: ~~"UTMD~~“UTMD warrants its products to conform in all material respects to all published product specifications in effect on the date of shipment, and to be free from defects in material and workmanship for a period of thirty (30) days for supplies, or twenty-four (24) months for equipment, from date of shipment. During the warranty period UTMD shall, at its option, replace any products shown to UTMD's reasonable satisfaction to be defective at no expense to the Purchaser or refund the purchase price."”

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 actual experience. Based on its analysis of historical warranty claims and its estimate that existing warranty obligations were immaterial, no warranty reserve was made at December 31, ~~2017~~2018 or June 30, ~~2018.~~2019.

(6) ~~Fair Value Measurements. The Company follows ASC 820,~~ ~~Fair Value Measurement~~ ~~to determine fair value of its financial assets. The following table provides financial assets carried at fair value measured as of June 30, 2018:~~

Fair Value Measurements Using
Description
Total Fair Value
at 6/30/2018

Quoted Prices
in Active Markets
for Identical Assets
(Level 1)

Significant Other
Observable Inputs
(Level 2)

Significant
Unobservable Inputs
(Level 3 )

Equities $ 0 $ 0 $ 0 $ 0

~~(7)~~ Global 2Q 2019 revenues (USD) by product category:

	Domestic		Outside US		Total		Domestic		Outside US		Total
Obstetrics	$	891	$	204	$	1,095	$	1,038	$	194	$	1,232
Gynecology/Electrosurgery/Urology		2,378		3,695		6,073		3,229		3,534		6,763
Neonatal		1,031		704		1,735		1,149		287		1,436
Blood Pressure Monitoring and Accessories		1,181		881		2,062		1,580		835		2,415
Total	$	5,481	$	5,484	$	10,965	$	6,996	$	4,850	$	11,846

Global 1H 2019 revenues (USD) by product category:

	Domestic		Outside US		Total
Obstetrics	$	2,064	$	507	$	2,571
Gynecology/Electrosurgery/Urology		5,307		7,038		12,345
Neonatal		2,320		627		2,947
Blood Pressure Monitoring and Accessories		3,100		1,616		4,716
Total	$	12,791	$	9,788	$	22,579

(7) Leases

UTMD has operating leases for a portion of its parking lot at its Midvale facility and an automobile at its Ireland facility. The remaining lease term on the parking lot is 12 years and on the automobile is 30 months. There are no options to extend or terminate the leases. UTMD has no other leases yet to commence. As neither lease contains implicit rates, UTMD’s incremental borrowing rate, based on information available at adoption date, was used to determine the present value of the leases.

The components of lease cost were as follows:	Three Months Ended June 30, 2019
Operating Lease Cost (in thousands)		$	16
Right of Use Assets obtained in exchange for new operating lease Obligations		$	0

Other Information	Three Months Ended June 30, 2019
Weighted Average Remaining Lease Term - Operating Leases	12 years
Weighted Average Discount Rate – Operating Leases			5.4	%

Operating lease liabilities/ payments (in thousands)
Operating lease payments, 2019	$	30
Operating lease payments, 2020	$	60
Operating lease payments, 2021	$	60
Operating lease payments, 2022	$	45
Operating lease payments, 2023	$	45
Thereafter	$	344

Reconciliation of operating lease liabilities/ payments to operating lease liabilities	(in thousands)
Total operating lease liabilities/ payments	$	584
Operating lease liabilities – current (included in Accrued Expenses)		38
Operating lease liabilities – long term		395
Present value adjustment	$	151

Maturities of lease liabilities were as follows:	(in thousands)
Year ending December 31,
2019	$	37
2020	$	38
2021	$	40
2022	$	27
2023	$	29
Thereafter	$	280

(8) Distribution Agreement Purchase. UTMD completed the purchase of exclusive U.S. distribution rights for the FILSHIE Clip System from CooperSurgical, Inc. (CSI) on February 1, 2019, after which CSI will no longer sell the FILSHIE Clip System and UTMD will distribute the FILSHIE Clip System directly to clinical facilities in the U.S. The $21,000 purchase price represents an identifiable intangible asset which will be straight-line amortized and recognized as part of G&A expenses over the 4.75 year remaining life of the prior CSI distribution agreement with Femcare. As part of the agreement, UTMD also purchased the remaining CSI inventory for approximately $2,100.

(9) Earnings Per Share. Basic earnings per share is calculated by dividing net income attributable to the common stockholders of the company by the weighted average number of common shares outstanding during the period. Diluted earnings per share is calculated by assuming the exercise of stock options at the closing price of stock at the end of 2^nd quarter 2019.

The following table reconciles the numerator and the denominator used to calculate basic and diluted earnings per share:

(in thousands)	Three months ended				Six months ended
	June 30,				June 30,
	2019		2018		2019		2018
Numerator
Net income		3,525		4,308		6,664		8,400

Denominator
Weighted average shares, basic		3,721		3,731		3,721		3,728
Dilutive effect of stock options		14		23		16		23
Diluted shares		3,735		3,754		3,737		3,751

Earnings per share, basic		.95		1.15		1.79		2.25
Earnings per share, diluted		.94		1.15		1.78		2.24

(10) Subsequent Events. UTMD has evaluated subsequent events through the date the financial statements were issued, and concluded there were no other events or transactions during this period that required recognition or disclosure in its financial ~~statements.~~statements.

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

General

Utah Medical Products, Inc. (UTMD) manufactures and markets a well-established range of specialty medical devices. The ~~Company's~~Company’s Form 10-K Annual Report for the year ended December 31, ~~2017~~2018 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 or six month period in comparison with a previous three or six month period may not be indicative of comparative results for the year as a whole. Currency amounts in the report are in thousands, except per share amounts or where otherwise noted. Currencies in this report are denoted as $ or USD = U.S. Dollars; A$ or AUD = Australia Dollars; £ or GBP = UK Pound Sterling; C$ or CAD = Canadian Dollars; and € or EUR = Euros.

Analysis of Results of Operations

a)Overview

In the second calendar quarter (2Q) and first half (1H) of ~~2018,~~2019, UTMD achieved results which reflect that the Company remains on target to achieve beginning of year goals for ~~2018.~~2019.

Income statement results in 2Q and 1H ~~2018~~2019 compared to the same periods of ~~2017~~2018 were as follows:

	2Q 2018		2Q 2017		change				1H 2018		1H 2017	change			2Q 2019		2Q 2018		change				1H 2019		1H 2018	change
Net Sales	$	10,965	$	10,829		+1.3	%	$	21,852	$	21,088		+3.6	%	$	11,846	$	10,965		+8.0	%	$	22,578	$	21,852		+3.3	%
Gross Profit		6,984		6,893		+1.3	%		13,906		13,428		+3.6	%		7,500		6,984		+7.4	%		14,273		13,906		+2.6	%
Operating Income		5,056		5,034		+0.4	%		10,027		9,758		+2.7	%		4,481		5,056		(11.4	%)		8,582		10,027		(14.4	%)
Income Before Tax		5,556		5,057		+9.9	%		10,565		9,807		+7.7	%		4,565		5,556		(17.8	%)		8,702		10,565		(17.6	%)
Net Income		4,308		3,870		+11.3	%		8,400		7,405		+13.4	%		3,525		4,308		(18.2	%)		6,664		8,400		(20.7	%)
Earnings per Diluted Share		1.148		1.037		+10.7	%		2.239		1.985		+12.8	%		0.944		1.148		(17.8	%)		1.783		2.239		(20.4	%)

Financial results in 2Q 2019 continued to be hampered on the top line by a stronger USD, on the operating income line by the new intangible asset amortization expense from UTMD’s February 2019 Filshie Clip System (Filshie device) U.S. exclusive distribution rights acquisition, and on the bottom line by a higher consolidated income tax provision rate than in 2018. Net income was also lower because UTMD had realized $450 in non-operating income from one-time sales of unneeded assets in 2Q 2018 which did not repeat in 2Q 2019.

Because ~~32%~~29% of 1H ~~2018~~2019 consolidated sales ~~and 53% of 1H 2018 consolidated operating expenses are~~were in foreign currencies, the volatility of foreign currency exchange (FX) rates for sales and expenses outside the U.S. (OUS) continued to have an impact on period-to-period relative financial results. FX rates for income statement purposes are transaction-weighted averages. The average rates from the applicable foreign currency to USD during 2Q ~~2018~~2019 and 1H ~~2018~~2019 compared to the same periods in ~~2017~~2018 follow:

	2Q 18	2Q 17	Change			1H 18	1H 17	Change			2Q 19	2Q 18	Change			1H 19	1H 18	Change
GBP	1.359	1.279		+6.3	%	1.375	1.259		+ 9.2	%	1.285	1.359		(5.4	%)	1.295	1.375		(5.9	%)
EUR	1.192	1.108		+7.5	%	1.209	1.085		+11.4	%	1.125	1.192		(5.6	%)	1.129	1.209		(6.6	%)
AUD	0.756	0.750		+0.8	%	0.771	0.755		+ 2.1	%	0.701	0.756		(7.3	%)	0.707	0.771		(8.4	%)
CAD	0.775	0.743		+4.2	%	0.783	0.749		+ 4.5	%	0.748	0.775		(3.5	%)	0.750	0.783		(4.1	%)

~~UTMD's~~UTMD’s revenues invoiced in the above foreign currencies represented ~~31.3%~~28.6% of total consolidated USD sales in 2Q 2019 and 29.2% in 1H 2019. The weighted average negative impact on all foreign currency sales from the change in FX rates was 5.6% in 2Q 2019 and 6.1% in 1H 2019, reducing reported USD sales in 2Q 2019 by $194 relative to the same FX rates in 2Q 2018 and ~~32.2%~~by $431 in 1H 2019 relative to the same FX rates in 1H 2018.

~~The weighted average positive impact on GBP, EUR, AUD and CAD~~ In constant currency revenues in 2Q 2018 compared to 2Q 2017 was 5.4%, increasing reported USD sales by $177. The weighted average positive impact on GBP, EUR, AUD and CAD currency sales in 1H 2018 compared to 1H 2017 was 7.9%, increasing reported USD sales by $518. Withterms, i.e. using the same FX rates as in ~~2017 (constant currency terms),~~the applicable periods in 2018, total consolidated 2Q ~~2018~~2019 sales were ~~down 0.4%~~up $1,075 (+9.8%), and 1H ~~2018~~2019 total consolidated constant currency sales were up ~~1.2%~~$1,158 (5.3%).

~~UTMD's consolidated Gross Profit Margin (GPM), Gross Profit (GP) divided by sales, was consistent with the prior year's periods. Consolidated Operating Expenses (OE) were $69 higher~~Other significant revenue changes in 2Q ~~2018~~and 1H 2019 compared to ~~2Q 2017, and $210 higher~~the same periods in 1H 2018 ~~compared~~had to ~~1H 2017. Eighty-three percent of the increase in 2Q 2018 OE was due to~~do with the change in ~~FX rates. Seventy-eight percent~~distribution of Filshie devices in the U.S., which is described later in this report; a substantial increase in 1H ~~2018 OE was~~2019 U.S. OEM sales; a solid increase in direct sales to U.S. domestic medical facilities; and a pause in U.S. neonatal device exports due to ~~the change~~regulatory re-registrations by third party distributors in FX rates. The combination of 3.6% higher revenues, the same GPM but higher OE resulted in a 2.7% increase in 1H 2018 Operating Income (OI). The 13.4% higher UTMD Net Income (NI) in 1H 2018 was primarily a result of the higher OI plus 1) non-operating income from the sale of a no longer needed storage facility in Utah,China, Brazil and ~~2) a lower U.S. income tax provision rate.~~Mexico.

Earnings Per Diluted Share (EPS) in 1H 2018 were up only 12.8% compared to the 13.4% higher NI, because of employee option exercises and a higher dilution calculation resulting from a higher share market price.

EPS for the most recent twelve months (TTM) were $2.53 per U.S. GAAP. This includes the 4Q 2017 recognition of a $6,288 one-time U.S. and Utah repatriation tax (REPAT) on foreign subsidiary cash and cumulative earnings (E&P) resulting from the "Tax Cuts and Jobs Act" enacted in December 2017. Excluding the REPAT tax, TTM EPS were $4.15.

UTMD profit margins in 2Q 2019 and 1H 2019 compared to 2Q 2018 and 1H 2018 ~~compared~~follow:

	2Q 2019 (Apr – Jun)			2Q 2018 (Apr – Jun)			1H 2019 (Jan – Jun)			1H 2018 (Jan – Jun)
Gross Profit Margin (gross profits/ sales):		63.3	%		63.7	%		63.2	%		63.6	%
Operating Income Margin (operating profits/ sales):		37.8	%		46.1	%		38.0	%		45.9	%
Net Income Margin (profit after taxes/ sales):		29.8	%		39.3	%		29.5	%		38.4	%

UTMD’s 2019 Gross Profit Margin (GPM) has not benefited yet from the early 2019 acquisition of distribution rights of its Filshie devices in the U.S. from CooperSurgical Inc (CSI) because of the substantial remaining CSI inventory which was repurchased by UTMD at CSI’s cost. Although UTMD has picked up the distributor margin on higher U.S. Filshie device sales, which has allowed UTMD’s total consolidated GPM to not be diluted, it has not realized any GP contribution from Femcare sales of Filshie devices to the U.S. yet. Another way to explain this is that 71% of the 2018 GP generated by Femcare sales of Filshie devices to the U.S. (to third party distributor CSI) was recorded in 1H 2018, whereas in 1H 2019 Femcare’s GP contribution from sales of Filshie devices to the U.S. (to intercompany distributor UTMD) has been zero. Profit in inventory from intercompany sales is eliminated when consolidating financial results (i.e. not recognized until the devices are sold to a third party). UTMD estimates the remaining CSI repurchased inventory will likely last well into 4Q 2019. The slightly lower consolidated GPM was due primarily to a disproportionate increase in U.S. OEM sales which are at a lower average GPM.

On the other hand, UTMD’s Operating Income Margin (OIM) was substantially reduced by a 1H $1,842 expense from straight-line amortization of the $21,000 purchase price that UTMD paid CSI to acquire the remaining 4.75 years’ exclusive U.S. Filshie device distribution rights. The purchase price of CSI’s remaining exclusive distribution rights was recognized as an identifiable intangible asset (IIA). Because the IIA amortization began on February 1 and expensed on a straight-line basis over 4.75 years, the expected improved GPM from the acquisition will ramp up after the CSI inventory has been consumed and as UTMD is able to grow Filshie device sales in the U.S. IIA amortization expense in total, including that remaining from the 2011 Femcare Group acquisition, which comprises a significant portion of General & Administrative (G&A) operating expenses, was 13.7% of 2Q ~~2017~~2019 consolidated sales and 12.7% of 1H 2019 consolidated sales. In other words, UTMD’s OIM excluding Femcare-related IIA amortization expense was 51% in both 2Q and 1H ~~2017 follow:~~2019.

2Q 2018
(Apr-Jun)

2Q 2017
(Apr-Jun)

1H 2018
(Jan-Jun)

1H 2017
(Jan-Jun)

Gross Profit Margin (gross profit/ sales): 63.7 % 63.7 % 63.6 % 63.7 %
Operating Income Margin (operating income/ sales): 46.1 % 46.5 % 45.9 % 46.3 %
EBT Margin (profit before income taxes/ sales): 50.7 % 46.7 % 48.3 % 46.5 %
Net Income Margin (profit after taxes/ sales): 39.3 % 35.7 % 38.4 % 35.1 %

~~In summary, comparing~~On top of the ~~profit margins~~period-to-period differences in ~~2018 time periods with 2017 periods, GPM~~OI, additional differences in Income Before Tax (EBT) were ~~about~~due mainly to the ~~same, OIM were squeezed by higher FX rates on foreign OE, the EBTM benefited~~$450 non-operating income (NOI) from ~~the gain from one-time~~ sale of unneeded assets in 2Q 2018 that did not repeat in 2Q 2019. Net NOI was $85 in 2Q 2019 compared to $501 in 2Q 2018, and $120 in 1H 2019 compared to $538 in 1H 2018.

UTMD’s Net Income Margin (NIM) in 2Q and 1H 2019 was incrementally lower than in the ~~NIM benefited from~~same periods of 2018 not only because of the EBT differences, but also due to combined entity income tax provision rates that were 22.8% in 2Q 2019 compared to 22.5% of EBT in 2Q 2018, and 23.4% in 1H 2019 compared to 20.5% in 1H 2018. The reasons for the higher ~~EBTM combined with lower~~estimated provision rate were a different mix of subsidiary EBT (with varying tax rates) and a higher U.S. income tax ~~rates.~~provision rate as a result of the GILTI tax slipped into the U.S. Tax Cuts and Jobs Act (TCJA), enacted in December 2017, which was not in the estimated provision of UTMD in 1H 2018.

~~UTMD's Balance Sheet continued to strengthen. June 30, 2018 ending Cash and Investments were up $5.9 million and Stockholders' Equity was up $5.2 million from December 31, 2017.~~UTMD’s FX rates for ~~Balance Sheet~~balance sheet purposes are the applicable rates at the end of each reporting period. The FX rates from the applicable foreign currency to USD for assets and liabilities at the end of June ~~2018~~2019 and the end of ~~December 2017~~June 2018 follow:

	June 30, 2018		December 31, 2017		change			June 30, 2019		June 30, 2018		Change
GBP		1.320		1.352		(2.4	%)		1.271		1.320		( 3.7	%)
EUR		1.168		1.202		(2.9	%)		1.138		1.168		( 2.5	%)
AUD		0.740		0.781		(5.3	%)		0.701		0.740		( 5.2	%)
CAD		0.761		0.799		(4.7	%)		0.765		0.761		+0.5	%

UTMD’s June 30, 2019 Balance Sheet, in the absence of debt, remained strong. Ending Cash and Investments were $32.9 million on June 30, 2019 compared to $51.1 million on December 31, 2018, after investing $23.1 million acquiring CSI’s Filshie device distribution rights and remaining inventory, paying $2.1 million in cash dividends to stockholders and repurchasing $0.4 million in UTMD stock during 1H 2019. Stockholders’ Equity was up $4.9 million in the six month period from December 31, 2018 after netting the combined $2.5 million in dividends and stock repurchases which reduced Stockholders’ Equity.

b)~~Revenues~~9

b) Revenues

Beginning on January 1, 2018, the Company adopted ASU 2014-09, the new revenue recognition accounting standard. Management completed an extensive assessment and implementation of the standard, including ~~UTMD's~~UTMD’s various contracts with customers and associated performance obligations and the ~~Company's~~Company’s conclusions regarding its revenue recognition practices and procedures. Other items like commissions and rights of return were also evaluated by the Company. Management is confident that the Company has properly evaluated the ~~standard's~~standard’s requirements and has arrived at appropriate conclusions in recognizing revenue in accordance with the new standard. Those practices and procedures the Company will use to recognize revenue under the new standard are not significantly different than the methods used previously since UTMD has traditionally recognized revenue upon shipping a physical product to a customer, which is also when the Company has met its performance obligations under contracts it has with its customers that represent over 99% of its revenue. While the ~~Company's~~Company’s revenue not associated with shipping a physical product is immaterial, management believes the ~~Company's~~Company’s practices in recognizing that revenue is also in accordance with ASU 2014-09.

Terms of sale are established in advance of ~~UTMD's~~UTMD’s acceptance of customer orders. In the U.S., Ireland, UK and Australia prior to 2017, UTMD generally accepted orders directly from and shipped directly to end user clinical facilities, as well as third party medical/surgical distributors, under ~~UTMD's~~UTMD’s Standard Terms and Conditions (T&C) of Sale. The same was true in 2017 with the addition of direct shipments to end user facilities in Canada and France. About 14% of ~~UTMD's~~UTMD’s domestic end user sales, excluding ~~Femcare's~~Femcare’s Filshie Clip System sales to its exclusive U.S. distributor, CooperSurgical Inc. (CSI), go through third party med/surg distributors which contract separately with clinical facilities to provide purchasing, storage and scheduled delivery functions for the applicable facility. ~~UTMD's~~UTMD’s T&C of Sale to end user facilities are substantially the same in the U.S., Canada, Ireland, UK, France and Australia.

UTMD may have separate discounted pricing agreements with a specific clinical facility or group of affiliated facilities based on volume of purchases. Pricing agreements which are documented arrangements with clinical facilities, or groups of affiliated facilities, if applicable, are established in advance of orders accepted or shipments made. For existing customers, past actual shipment volumes typically determine the fixed price by part number for the next agreement period of one year. For new customers, the ~~customer's~~customer’s best estimate of volume is usually accepted by UTMD for determining the ensuing fixed prices for the agreement period. Prices are not adjusted after an order is accepted. For the sake of clarity, the separate pricing agreements with clinical facilities based on volume of purchases disclosure is not inconsistent with ~~UTMD's~~UTMD’s disclosure that the selling price is fixed prior to the acceptance of a specific customer order.

Total consolidated 2Q ~~2018 consolidated~~2019 UTMD sales were ~~$136 (1.3%~~$881 (+8.0%) higher than in 2Q ~~2017, and in~~2018. Constant currency sales were $1,075 (+9.8%) higher. Total consolidated 1H ~~2018~~2019 UTMD sales were ~~$764 (3.6%~~$727 (+3.3%) higher than in 1H ~~2017. Comparing~~2018. Constant currency sales in 1H 2019 were $1,158 (+5.3%) higher than in 1H 2018.

In 2Q ~~2018~~2019 compared to 2Q ~~2017, total~~2018, U.S. domestic sales were 4%28% higher and ~~USD sales~~ outside the U.S. ~~(OUS sales)~~(OUS) sales were 1%12% lower. ~~Comparing~~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. In 1H ~~2018~~2019 compared to 1H ~~2017, total~~2018, U.S. domestic sales were 2%19% higher and ~~OUS~~outside the U.S. (OUS) sales were ~~5% higher.~~12% lower than in 1H 2018.

~~U.S.~~Domestic sales in 2Q 2019 were $6,997 compared to $5,481 in 2Q 2018. Domestic sales in 1H 2019 were $12,791 compared to $10,736 in 1H 2018. The components of domestic sales ~~including direct~~include 1) “direct sales” of UTMD’s medical devices to user facilities (and med/surg stocking distributors for hospitals), excluding Filshie sales, ~~to U.S. clinical facilities, OEM sales~~2) “OEM sales” of components and ~~finished devices to~~ other products manufactured by UTMD for other medical device and non-medical device companies, and ~~sales of the Filshie Clip System~~3) “Filshie sales”, which in 2018 were by UTMD’s UK subsidiary, Femcare Ltd (Femcare), to ~~UTMD's exclusive U.S. distributor,~~ CSI were overall 4% (+$186) and 2% (+$221) higher in 2Q 2018 and 1H 2018, respectively, compared to 2Q 2017 and 1H 2017. U.S. domestic sales are obviously not affected by FX rate fluctuations. U.S. domestic sales were 50% of total consolidated sales in 2Q 2018 compared to 49% in 2Q 2017, and 49% in 1H 2018 compared to 50% in 1H 2017. Sales of Femcare's Filshie Clip System to CooperSurgical Inc. (CSI) for distribution in the U.S., and in 2019 were ~~$14 higher~~by UTMD direct to U.S. clinical users after February 1. Domestic direct sales in 2Q ~~2018 compared to~~2019 excluding Filshie devices, representing 51% of total domestic sales, were $256 (+8%) higher than in 2Q ~~2017, and $38 lower~~2018. Domestic direct sales in 1H ~~2018 compared to~~2019 excluding Filshie devices, representing 55% of total domestic sales, were $517 (+8%) higher than in 1H ~~2017. Femcare's~~2018. OEM sales ~~to CSI~~in 2Q 2019, representing 20% of total domestic sales, were $487 (+52%) higher than in 2Q 2018. OEM sales in 1H 2019, representing 22% of total domestic sales, were $971 (+53%) higher than in 1H 2018. Filshie device sales direct to U.S. domestic end-user facilities were $772 (+64%) higher in 2Q 2019 compared to Filshie device sales to CSI in 2Q 2018. Filshie device sales direct to U.S. domestic end-user facilities were $568 (+24%) higher in 1H 2019 compared to Filshie device sales to CSI in 1H 2018. Filshie device sales by Femcare to CSI in 1H 2018 represented 71% of total 2018 U.S. Filshie device sales.

OUS sales in 2Q 2019 were $4,850 compared to $5,484 in 2Q 2018. OUS sales in 1H 2019 were $9,788 compared to $11,116 in 1H 2018. OUS sales invoiced in GBP, EUR, AUD and CAD currencies were $194 lower in 2Q 2019 and $431 lower in 1H 2019 as a result of changes in FX rates. In other words, 31% of the lower 2Q 2019 OUS sales and 32% of the lower 1H 2019 OUS sales were due to a stronger USD. The foreign currency OUS sales in 2Q 2019 were $3,385, which was 70% of all OUS sales and 29% of total consolidated sales. In comparison, foreign currency OUS sales in 2Q 2018 ~~compared to 23%~~were $3,429, which was 63% of all OUS sales and 31% of total consolidated sales. The foreign currency OUS sales in ~~2Q 2017,~~1H 2019 were $6,590, which was 67% of all OUS sales and ~~22%~~29% of total consolidated sales. Foreign currency OUS sales in 1H 2018 ~~compared to 23%~~were $7,042, which was 63% of all OUS sales and 32% of total consolidated sales. U.S. export sales of neonatal devices (invoiced in ~~1H 2017. Domestic OEM sales~~USD) were ~~26% (+$193) higher~~$408 lower in 2Q ~~2018~~2019 compared to 2Q ~~2017,~~2018, and ~~21% (+$324) higher~~$826 lower in 1H ~~2018~~2019 compared to 1H ~~2017. Direct sales to U.S. user facilities were 1% ($22) lower~~2018, as a result of a pause in ~~2Q 2018 compared to 2Q 2017,~~orders from UTMD distributors in China, Brazil and ~~also 1% ($64) lower in 1H 2018 compared to 1H 2017.~~

The 1% lower 2Q 2018 OUS sales was due to variation in order pattern by UTMD's China distributor of BPM kits. Shipments to the China distributor were $337 lower in 2Q 2018 compared to 2Q 2017. Excluding shipments to the China distributor in both 2Q periods, OUS sales were 6% higher in 2Q 2018.Mexico, presumably while obtaining regulatory device re-registrations.

Trade sales are sales to third parties, excluding sales from one UTMD entity to another (intercompany sales). USD-denominated OUS trade sales are affected by the change in FX rates. FX rates were down 4-8% relative to the USD, depending on the time period and sovereignty per the table above.

Ireland subsidiary USD-denominated trade sales were 33% of OUS sales in 2Q 2019 compared to 22% of OUS sales in 2Q ~~2018 compared to 26%~~2018. Ireland subsidiary USD-denominated trade sales were 30% of OUS sales in ~~2Q 2017. Ireland subsidiary trade sales were~~1H 2019 compared to 22% of OUS sales in 1H ~~2018 compared to 25% of OUS sales in 1H 2017.~~2018. The ~~lower~~higher portion of OUS sales by Ireland was due to the ~~fact that BPM kits~~transfer of manufacture for some devices sold to ~~UTMD's China~~European customers previously manufactured in the U.S., and a strong quarter for international distributor ~~are shipped~~demand, which varies from ~~Ireland.~~quarter-to-quarter due to larger purchase quantities.

~~Trade~~USD-denominated trade sales by ~~UTMD's~~UTMD’s UK subsidiary, Femcare-Nikomed Ltd. (Femcare UK), were 26% of OUS sales in 2Q 19 and 27% in 1H 2019, compared to 27% of OUS sales in both 2Q and 1H ~~2018 compared to 24% of OUS sales in both 2Q and 1H 2017.~~2018. Included in the Femcare UK sales were the direct sales to end users in France which comprised 8%9% of OUS sales in 2Q ~~2018~~2019 and 9%10% of OUS sales in 1H ~~2018.~~

~~Sales of the Filshie Clip System in Europe (by UK and Ireland subsidiaries) were up about 15%.~~2019.

~~Sales~~USD-denominated sales by ~~UTMD's~~UTMD’s Australia subsidiary to Australia end user facilities were 9% of OUS sales in both 2Q ~~2018~~2019 and 1H 2019, compared to ~~11%~~9% of OUS sales in ~~2Q 2017, and 9% in 1H 2018 compared to 11% in 1H 2017. Filshie Clip System sales were weak, down 20% in~~both 2Q 2018 and ~~13% in~~ 1H ~~2018, compared to the same periods in 2017.~~2018.

~~Sales~~USD-denominated sales by ~~UTMD's~~UTMD’s Canada subsidiary direct to Canada end user facilities were 12% of OUS sales in both 2Q 2019 and 1H 2019, compared to 13% of OUS sales in both 2Q 2018 and 1H ~~2018 compared to 15% of OUS sales in both 2Q 2017 and 1H 2017. Canada Filshie Clip System sales were also weak, down 14% in 2Q 2018 and 9% in 1H 2018, compared to the same periods in 2017.~~2018.

The following table provides ~~USD~~USD-denominated sales amounts divided into general product categories for total ~~sales~~revenues and the subset of OUS ~~sales:~~revenues:

Global revenues by product category:

	2Q 2018		2Q 2017			1H 2018		1H 2017	2Q 2019		2Q 2018			1H 2019		1H 2018
Obstetrics	$	1,095	$	1,116	$	2,181	$	2,155	$	1,232	$	1,095	$	2,571	$	2,181
Gynecology/ Electrosurgery/ Urology		6,073		6,106		12,275		11,944		6,763		6,073		12,345		12,275
Neonatal		1,735		1,493		3,445		3,063		1,436		1,806		2,947		3,603
Blood Pressure Monitoring and Accessories*		2,062		2,114		3,951		3,926		2,415		1,991		4,716		3,793
Total:	$	10,965	$	10,829	$	21,852	$	21,088	$	11,846	$	10,965	$	22,579	$	21,852

811

OUS revenues by product category:

2Q 2018 2Q 2017 1H 2018 1H 2017
Obstetrics $ 204 $ 216 $ 413 $ 360
Gynecology/ Electrosurgery/ Urology 3,695 3,717 7,602 7,276
Neonatal 704 479 1,449 997
Blood Pressure Monitoring and Accessories* 881 1,121 1,652 1,941
Total: $ 5,484 $ 5,533 $ 11,116 $ 10,574

	2Q 2019		2Q 2018			1H 2019		1H 2018
Obstetrics	$	194	$	204	$	507	$	413
Gynecology/ Electrosurgery/ Urology		3,534		3,695		7,038		7,602
Neonatal		287		707		627		1,455
Blood Pressure Monitoring and Accessories*		835		878		1,616		1,646
Total:	$	4,850	$	5,484	$	9,788	$	11,116

*includes assemblies and molded components sold to OEM customers.

Additional comments on the above tables:

1)	Year-to-date global sales were up 3% despite $828 lower international neonatal product sales (not materially affected by the change in ~~all product categories.~~FX rates because they are manufactured in the U.S. and generally invoiced in USD) plus $431 lower other international sales invoiced in foreign currencies due to a stronger USD.

2)	Filshie Clip System sales represented 67% of ~~both~~ 2Q ~~and 1H 2018~~2019 Gyn/ES/Uro product category ~~sales. With 2Q 2018 U.S.~~ sales, ~~of the Filshie Clip System (to UTMD's exclusive distributor, CSI) about the same as~~and 65% in ~~2Q 2017, the higher Filshie Clip System 2Q 2018 sales in Europe offset the lower sales in Australia and Canada. For~~ 1H ~~2018, global Filshie Clip System sales were up 4% despite CSI sales, representing 28% of total Filshie Clip System sales, being 2% lower.~~

3)	The uneven order patterns of OUS distributors is especially evident in neonatal and BPM product categories. For example, UTMD's China distributor for BPM devices ordered $337 less in 2Q 2018 than in 2Q 2017. UTMD's OUS distributors for neonatal devices ordered $199 more in 2Q 2018 than in 2Q 2017.2019.

Year-to-date Global Filshie Clip System sales were 2% lower due to the impact of FX rates.

Looking forward, ~~CSI current forecasts indicate $424 lower~~UTMD expects that 2H 2019 U.S. domestic direct end-user sales of Filshie devices should exceed 2H 2018 ~~purchases~~Filshie device sales to CSI by about $3,000 (+317%), resulting in total 2019 domestic Filshie device sales more than double 2018 domestic Filshie device sales. UTMD also expects 2H 2019 OEM domestic sales, which were 53% higher in 1H 2019 compared to 1H 2018, to continue to substantially grow. The effect of a stronger USD may continue to diminish foreign currency sales in 2H ~~2017,~~2019 by an unpredictable amount. Whether or not UTMD can recover lost neonatal device distributor sales in China, Brazil and ~~UTMD's China distributor for BPM devices, which placed an annual fixed order, has no shipments scheduled in 4Q 2018, resulting~~Mexico in 2H 2018 sales another $402 lower than in 2H 2017. Trump administration trade policies may have negative consequences as direct exports from Utah represent about 14% of total sales, which could be lost if receiving countries increase tariffs on U.S. goods. Further, possible increased tariffs in Ireland, the UK, Australia and Canada on components and finished devices manufactured in Utah and sold on an intercompany basis could substantially increase subsidiary costs and reduce OUS sales made by UTMD's subsidiaries. While the USD was weaker in 1H 2018 than in 1H 2017, which benefited 1H 2018 sales in USD terms on a comparative basis, it presently2019 is ~~stronger than the average foreign FX rates in 2H 2017, which, if it persists, would have a negative effect on 2H 2018 USD sales on a comparative basis.~~also unpredictable.

c)Gross Profit (GP)

GP results from subtracting the ~~cost~~costs of manufacturing and shipping products to ~~customers (direct materials,~~customers. UTMD’s GP was $516 (+7.4%) higher in 2Q 2019 than in 2Q 2018, and $366 (+2.6%) higher in 1H 2019 than in 1H 2018, roughly consistent with the increase in revenues. UTMD did not get a GPM increase from the February beginning of Filshie device sales direct to U.S. end-users because of selling remaining CSI inventory which it acquired at the same price CSI had previously paid Femcare. In other words, GP resulting from CSI’s price minus the Femcare cost of manufacturing had been realized in 2018, leaving only the distributor margin to-date in 2019. Because UTMD estimates that the remaining CSI inventory may not be depleted until at least 4Q 2019, the Company does not expect a significant improvement in GPM until next year 2020. To date in 2019, the Company has been able to maintain the productivity of its direct labor ~~manufacturing overhead~~ and ~~shipping costs), or the purchase price of distributed finished products manufactured by other companies, from revenues. At UTMD,~~ manufacturing overhead costs fully absorb indirect costs including depreciation of manufacturing equipment and facilities, quality assurance, materials requirements planning and purchasing, manufacturing engineering, production supervision, shipping, royalties paid to other entities and health plan benefits for both direct and indirect manufacturing personnel. UTMD's consolidated GPM remained consistent ~~in 2Q 2018 despite noticeable increases in variable manufacturing costs – direct labor and materials. Just~~with the expectation of tariffs on metals, for example, caused aluminum and stainless steel component vendors to substantially increase prices for parts used in UTMD's electrosurgical generators and specialty electrodes. The higher variable costs were offset by better absorption of overheads and improved productivity. Higher variable costs in combination with projected lower sales in 2H 2018, leading to lower absorption of manufacturing overheads, leads management to expect GPMs in 2H 2018 will be lower than in 2H 2017.prior year’s periods.

d)Operating Income (OI)

OI ~~is GP minus~~results from subtracting Operating Expenses (OE) from GP. OE, comprised of ~~general and administrative (G&A),~~G&A expenses, sales and marketing (S&M) expenses and product development (R&D) ~~expenses. Consolidated USD-denominated OE~~expenses, were $3,019 in 2Q 2019 (25.5% of sales) compared to $1,928 in 2Q 2018 (17.6% of ~~consolidated revenues)~~sales). OE were $5,691 in 1H 2019 (25.2% of sales) compared to ~~$1,859 in 2Q 2017 (17.2% of consolidated revenues). Consolidated OE were~~ $3,880 in 1H 2018 (17.8% of ~~revenues)~~sales).

Ignoring the new IIA amortization expense (from purchasing the CSI distribution agreement) which was not present in 2018, 2Q 2019 OE expenses were $1,914 (16.2% of sales), and 1H 2019 OE expenses were $3,849 (17.0% of sales). In 2Q 2019 compared to ~~$3,670~~2Q 2018, a stronger USD reduced OUS OE excluding Femcare IIA amortization expense in USD terms by $26. The £399 Femcare IIA amortization expense in both 2Q 2019 and 2Q 2018 was reduced by $30. In 1H 2019 compared to 1H 2018, a stronger USD reduced OUS OE excluding Femcare IIA amortization expense in USD terms by $64. The constant £798 Femcare IIA amortization expense was reduced by $65.

Consolidated G&A expenses were $2,440 (20.6% of sales) in 2Q 2019 compared to $1,382 (12.6% of sales) in 2Q 2018. The G&A expenses in 2Q 2019 included $512 (4.3% of sales) of non-cash expense from the amortization of IIA resulting from the 2011 Femcare acquisition, which were $542 (4.9% of sales) in 2Q 2018. The lower USD amortization expense was the result of the stronger USD, as the Femcare amortization expense in GBP was £399 in both periods. In addition, 2Q 2019 G&A expenses included a new $1,105 (9.3% of sales) IIA amortization expense resulting from the purchase of the CSI U.S. exclusive Filshie devices distribution rights. Excluding the Filshie-related non-cash IIA amortization expenses, G&A expenses were $823 (6.9% of sales) in 2Q 2019 compared to $839 (7.7% of sales) in 2Q 2018. The change in FX rates reduced 2Q 2019 OUS G&A expenses excluding IIA amortization expense by $18.

Consolidated G&A expenses were $4,580 (20.3% of sales) in 1H ~~2017 (17.4%~~2019 compared to $2,810 (12.9% of ~~revenues).~~ sales) in 1H 2018. The G&A expenses in 1H 2019 included $1,032 (4.6% of sales) of non-cash expense from the amortization of IIA resulting from the 2011 Femcare acquisition, which were $1,097 (5.0% of sales) in 1H 2018. The lower USD amortization expense was the result of the stronger USD, as the Femcare amortization expense in GBP was £798 in both periods.

In addition, 1H 2019 G&A expenses included a new $1,842 (8.2% of sales) IIA amortization expense resulting from the ~~case~~purchase of ~~OE, higher~~the CSI U.S. exclusive Filshie devices distribution rights. The new IIA amortization expense was $1,105 in 2Q 2019 (9.3% of sales), the first full quarter of amortization expense related to the acquisition.

Excluding the Filshie-related non-cash IIA amortization expenses, G&A expenses were $1,706 (7.6% of sales) in 1H 2019 compared to $1,713 (7.8% of sales) in 1H 2018. The change in FX rates ~~(weaker USD) for~~reduced 1H 2019 OUS ~~OE reduce OI. The OE~~G&A expenses excluding IIA amortization expense by $46.

G&A expenses include the cost of ~~UTMD's foreign subsidiaries~~outside financial auditors and corporate governance activities related to the implementation of SEC rules resulting from the Sarbanes-Oxley Act of 2002, as well as estimated stock-based compensation cost, a noncash expense. Option compensation expense included in ~~the aggregate~~G&A expenses was $28 in 2Q 2019 compared to $11 in 2Q 2018, and 1H 2018 would have been $57 and $163 lower, respectively, in constant currency. In other words, the FX rate impact on OE represented 83% of the total increase in 2Q 2018 OE and 78% of the total increase$56 in 1H ~~2018 OE.~~

~~OI in 2Q 2018 and 1H 2018 was $5,056 and $10,027 respectively,~~2019 compared to ~~$5,034 and $9,758~~$42 in ~~2Q 2017 and~~ 1H ~~2017 respectively. Because of consistent GPMs and continuing tightly controlled OE, UTMD's 2Q and 1H 2018 excellent but slightly FX rate diluted OIM~~2018. The change was ~~46.1% and 45.9% respectively, compared~~due to ~~46.5% and 46.3%~~options awarded to employees in ~~the same periods of 2017.~~

December 2018.

Consolidated S&M expenses were $466 (3.9% of sales) in 2Q ~~2018 were~~2019 compared to $430 (3.9% of sales) ~~compared to $409 (3.8%~~in 2Q 2018. S&M expenses were $883 (3.9% of sales) in ~~2Q 2017, and were~~1H 2019 compared to $839 (3.8% of sales) in 1H ~~2018 compared to $790 (3.8% of sales) in 1H 2017.~~2018. S&M expenses include all customer support costs including training. In general, training is not required for ~~UTMD's~~UTMD’s products since they are well-established and have been clinically widely used. Written ~~"Instructions~~“Instructions For ~~Use"~~Use” are packaged with all finished devices. Although UTMD does not have any explicit contracts with customers to provide training, it does have agreements in the U.S. and UK under which it agrees to provide hospital members inservice and clinical training as required and reasonably requested.

UTMD promises prospective customers that it will provide, at no charge in reasonable quantities, copies of instruction materials developed for the use of its products. UTMD provides customer support from offices in the U.S., Canada, the UK, Ireland and Australia by telephone, and employed representatives on a geographically dispersed basis, to answer user questions and help troubleshoot any user issues. Occasionally, on a case-by-case basis, UTMD may utilize the services of an independent practitioner to provide educational assistance to clinicians. All inservice and training expenses are routinely expensed as they occur. All of these services are allocated from S&M overhead costs included in OE. Historically, marginal consulting costs have been immaterial to financial results.

The change in FX rates reduced 2Q 2019 OUS S&M expenses by $9, and 1H 2019 OUS S&M expenses by $18. The higher 2019 S&M expenses were due to incremental marketing expenses associated with beginning to market Filshie devices directly in the U.S.

R&D expenses in 2Q ~~2018~~2019 were ~~$117~~$113 (1.0% of sales) compared to ~~$119 in 2Q 2017~~$117 (1.1% ~~of sales in both periods), and were $230 in 1H 2018 compared to $238 in 1H 2017 (1.1% of sales in both periods).~~

~~Consolidated G&A expenses were $1,382 (12.6%~~ of sales) in 2Q ~~2018~~2018. R&D expenses in 1H 2019 were $228 (1.0% of sales) compared to ~~$1,330 (12.3% of sales) in 2Q 2017, and were $2,810 (12.9%~~$230 (1.1% of sales) in 1H ~~2018 compared to $2,643 (12.5% of sales)~~2018. Since almost all R&D is being carried out in ~~1H 2017. Consolidated G&A expenses included non-cash expense from~~ the ~~amortization of IIA resulting from~~U.S., the Femcare acquisition of $542 (4.9% of consolidated revenues) in 2Q 2018 and $1,097 (5.0% of consolidated revenues) in 1H 2018, compared to $510 (4.7% of consolidated revenues) in 2Q 2017 and $1,004 (4.8% of consolidated revenues) in 1H 2017. The IIA amortization expense increases were only due to FX ~~rate changes, since the IIA amortization expense~~impact was ~~£399 in both 2Q 2018 and 2Q 2017, and £798 in both 1H 2018 and 1H 2017.~~negligible.

G&A expenses include the cost of outside financial auditors and corporate governance activities related to the implementation of SEC rules resulting from the Sarbanes-Oxley Act of 2002, as well as estimated stock-based compensation cost, a noncash expense. Option compensation expense included in G&A expenses was $11 in 2Q 2018 compared to $33 in 2Q 2017, and $42 in 1H 2018 compared to $69 in 1H 2017.

Summary comparison of (USD) consolidated operating expenses:

	2Q 2018		2Q 2017			1H 2018		1H 2017	2Q 2019		2Q 2018			1H 2019		1H 2018
S&M Expense	$	430	$	410	$	839	$	790	$	466	$	430	$	883	$	839
R&D Expense		117		119		230		238		113		117		228		230
G&A Expense		1,382		1,330		2,810		2,642		2,440		1,382		4,580		2,810
Total Operating Expenses:	$	1,928	$	1,859	$	3,880	$	3,670	$	3,019	$	1,928	$	5,691	$	3,880

e)Non-operating expense (NOE)/ Non-operating income (NOI)

NOE/NOI includes the combination of 1) expenses from loan interest and bank fees; 2) expenses or income from losses or gains from remeasuring the value of EUR cash bank balances in the UK, and GBP cash balances in Ireland, in USD terms; and 3) income from rent of underutilized property, investment income and royalties received from licensing the ~~Company's~~Company’s technology. Negative NOE is NOI. Net NOI in 2Q ~~2018~~2019 was ~~$501~~$85 compared to ~~$23~~$501 NOI in 2Q ~~2017.~~2018. Net NOI in 1H ~~2018~~2019 was ~~$538~~$120 compared to ~~$49~~$538 NOI in 1H ~~2017.~~2018. Included in the 2Q 2018 NOI was a one-time $418 gain on the sale of a storage facility in Utah that is no longer needed, and a $32 gain on the sale of other investments.

The gain on remeasured foreign currency balances in 2Q ~~2018~~2019 was ~~$10~~$3 compared to a ~~loss/~~gain of $0$10 in 2Q ~~2017.~~2018. In 1H ~~2018, the gain~~2019, a loss of $46 on remeasured foreign currency balances was $8recognized compared to a gain of $1$8 in 1H ~~2017.~~2018. Royalties received were ~~$19~~$4 in 2Q ~~2018~~2019 compared to $19 in 2Q ~~2017,~~2018, and $6 in 1H 2019 compared to $41 in 1H ~~2018 compared to $42~~2018. The royalties received in ~~1H 2017.~~

both years were part of the former distribution agreement with CSI which was terminated as of February 1, 2019.

f)Income Before Income Taxes (EBT)

Consolidated EBT results from subtracting net ~~NOE~~non‑operating expense (NOE) or adding NOI from or to, as applicable, ~~consolidated~~ OI. Consolidated 2Q ~~2018~~2019 EBT was $4,565 (38.5% of sales) compared to $5,556 (50.7% of sales) ~~compared to $5,057 (46.7%~~in 2Q 2018. Consolidated 1H 2019 EBT was $8,702 (38.5% of sales) ~~in 2Q 2017. Consolidated 1H 2018 EBT was~~compared to $10,565 (48.3% of sales) in 1H 2018.

NOE/NOI includes the combination of 1) expenses from loan interest and bank fees; 2) expenses or income from losses or gains from remeasuring the value of EUR cash bank balances in the UK, and GBP cash balances in Ireland, in USD terms; and 3) income from rent of underutilized property, investment income and royalties received from licensing the Company’s technology. Negative NOE is NOI. Net NOI in 2Q 2019 was $85 compared to ~~$9,807 (46.5%~~$501 NOI in 2Q 2018. In 2Q 2018, UTMD realized $450 NOI from the sale of ~~sales)~~unneeded assets which did not repeat in 2Q 2019. Net NOI in 1H ~~2017. Although not directly related~~2019 was $120 compared to ~~sales, 2018 EBTMs were enhanced by the one-time~~$538 NOI ~~gain from sale of assets.~~in 1H 2018.

The EBT of Utah Medical Products, Inc. ~~(U.S.)~~in the U.S. was ~~$2,885~~$5,515 in ~~2Q 2018~~1H 2019 compared to ~~$2,233 in 2Q 2017, and~~ $5,136 in 1H ~~2018 compared to $4,484 in 1H 2017.~~2018. The EBT of Utah Medical Products, Ltd (Ireland) was EUR ~~943~~1,479 in ~~2Q 2018~~1H 2019 compared to ~~EUR 875 in 2Q 2017, and~~ EUR 1,740 in 1H ~~2018 compared to EUR 1,512 in 1H 2017 .~~2018. The EBT of Femcare Group Ltd ~~(Femcare-Nikomed,~~(Femcare Ltd., UK and Femcare ~~Australia)~~Australia Pty Ltd) was GBP ~~1,117~~1,172 in ~~2Q 2018~~1H 2019 compared to ~~GBP 1,146 in 2Q 2017, and~~ GBP 2,180 in 1H ~~2018 compared to GBP 2,306 in~~2018. The 1H ~~2017. The 2Q 2018~~2019 EBT of Utah Medical Products Canada, Inc. (dba Femcare Canada) was CAD ~~446~~732 in 1H 2019 compared to ~~CAD 567 in 2Q 2017, and~~ CAD 917 in 1H ~~2018 compared~~2018. EBT of subsidiaries varies as a result of intercompany shipments. The lower Femcare Group EBT was primarily the result of the lack of any UK shipments of Filshie devices to ~~CAD 1,062~~CSI in ~~1H 2017.~~2019. The lower Femcare Canada EBT was due to lower sales activity.

Excluding the noncash effects of depreciation, amortization of intangible assets and stock option expense, 2Q ~~2018~~2019 consolidated EBT excluding the remeasured bank balance currency gain or loss and interest expense ~~(adjusted~~(“adjusted consolidated ~~EBITDA)~~EBITDA”) were ~~$6,312 (57.6% of sales)~~$6,397 compared to ~~$5,779 (53.4% of sales)~~$6,312 in 2Q ~~2017. Adjusted~~2018. 1H 2019 adjusted consolidated EBITDA were $12,062 compared to $12,122 in 1H 2018 which included a $450 gain from sale of assets which did not recur in 2019. Management believes that 1H 2019 performance has set up conditions for a substantial improvement in adjusted consolidated EBITDA in ~~1H 2018 were $12,122 (55.5% of sales)~~2H 2019 compared to ~~$11,236 (53.3% of sales)~~2H 2018. 1H 2019 operating performance was consistent with achieving UTMD’s overall financial objectives for the year 2019, as previously provided in ~~1H 2017. The increases in adjusted EBITDA were largely due to the one-time 2Q~~its 2018 ~~asset sales. TTM adjusted EBITDA were $22,864.~~SEC 10-K Report.

g)Net Income (NI)

NI is EBT minus a provision for income taxes. ~~In addition to the increase in EBT, NI in 2018 was further leveraged by lower tax provisions in the U.S. (both federal and state).~~ NI in 2Q ~~2018~~2019 of ~~$4,308~~$3,525 was ~~$438 (+11.3%) higher~~18.2% lower than the NI of ~~$3,870~~$4,308 in 2Q ~~2017.~~2018. UTMD’s NIM, NI divided by consolidated sales, was 29.8% in 2Q 2019 and 39.3% in 1Q 2018. The average consolidated income tax ~~provision rate~~provisions (as a % of EBT) in 2Q 2019 and 2Q 2018 ~~was~~were 22.8% and 22.5% ~~compared to 23.5% for 2Q 2017.~~ , respectively.

NI in 1H ~~2018~~2019 of ~~$8,400~~$6,664 was ~~$995 (+13.4%) higher~~20.7% lower than the NI of ~~$7,405~~$8,400 in 1H ~~2017.~~2018. UTMD’s NIM was 29.5% in 1H 2019 and 38.4% in 1H 2018. The average consolidated income tax ~~provision rates were 20.5%~~provisions (as a % of EBT) in 1H 2019 and 1H 2018 were 23.4% and ~~24.5%~~20.5%, respectively.

The differences in period-to-period NI were consistent with the differences in EBT leveraged by a slightly higher estimated consolidated income tax rate. The higher estimated income tax provisions in 1H ~~2017. The combined U.S. federal and Utah state income tax rates~~2019 were ~~25.95% in~~due to 1) no 1H 2018 ~~compared to 39%~~estimate for the new GILTI tax levied as part of the TCJA enacted by Congress in ~~1H 2017. For foreign subsidiaries,~~December 2017, 2) a shift of U.S. Filshie-related EBT from the tax provision booked in consolidated results is based on taxable income in the applicable sovereignty, not based on U.S. GAAP EBT. In 1H 2017, UTMD held about $16 million in cash in USD currency in Ireland and UK ~~subsidiary bank accounts, and the USD weakened relative~~ to the ~~applicable native~~U.S. taxed at a 6.95% higher tax rate, and 3) offset by a higher remeasured currency ~~resulting in a translation~~ loss for each subsidiary that created a significant 2017 tax credit for those subsidiaries in their applicable native currencies. This did not recur in 1H 2018, which offset the benefit of the reduction in the U.S. tax rates.lower valued foreign currency cash balances.

h)Earnings Per Share (EPS)

EPS are consolidated NI divided by the number of shares of stock outstanding (diluted to take into consideration stock option awards which are ~~"in~~“in the money,"” i.e., have exercise prices below the applicable ~~period's~~period’s weighted average market value). Diluted EPS of $.944 in 2Q 2019 were 17.8% lower than $1.148 in 1Q 2018, and EPS of $1.783 in IH 2019 were 20.4% lower than $2.239 in 1H 2018, which was consistent with the changes in NI attenuated by slightly lower diluted shares. Diluted shares were 3,735,070 in 2Q 2019 compared to 3,753,608 in 2Q 2018, ~~were $1.148~~and 3,736,872 in 1H 2019 compared to ~~$1.037~~3,751,072 in 1H 2018. The lower diluted shares in 2019 were the combined result of 15,000 shares repurchased in 4Q 2018 plus 5,000 shares repurchased in 2Q 2017. In 1H 2018, EPS were $2.239 compared to $1.985 in 1H 2017. With some hindrance from higher diluted shares outstanding, 2Q 2018 EPS increased 10.7% (11.1 cents) compared to 2Q 2017, and 1H 2018 EPS increased 12.8% (25.4 cents) compared to 1H 2017. Looking forward, management is now projecting 2018 EPS greater than $4.00.

~~EPS for the most recent twelve months were $2.53, which includes the 4Q 2017 recognition of~~2019, employee option exercises, a ~~$6,288 one-time U.S. and Utah repatriation tax (REPAT) on foreign subsidiary cash and cumulative earnings (E&P) resulting from the "Tax Cuts and Jobs Act" enacted~~new option award in December ~~2017. Excluding the REPAT tax, TTM EPS were $4.15.~~

~~Diluted shares outstanding used to calculate 2Q~~ 2018 ~~EPS were 3,753,608 compared to 3,731,859 in 2Q 2017. The number of shares added as~~and a lower dilution factor ~~in 2Q 2018 was 23,084 compared~~for unexercised options due to ~~15,686 in 2Q 2017. Diluted shares outstanding used to calculate 1H 2018 EPS were 3,751,072 compared to 3,730,478 in 1H 2017. The number of shares added as~~ a ~~dilution factor in 1H 2018 was 23,326 compared to 15,253 in 1H 2017.~~lower share price.

Outstanding shares at the end of 2Q ~~2018~~2019 were ~~3,731,920 which included 1H 2018~~3,719,100 compared to 3,719,700 at the end of calendar year 2018. The difference was due to employee ~~and outside director~~ option exercises of ~~12,927 shares.~~4,391 during 1H 2019 offset by 5,000 shares repurchased in the open market. Outstanding shares were 3,731,900 at the end of 2Q 2018. The number of shares used for calculating ~~earnings per share~~EPS was higher than ending shares because of a time-weighted calculation of average outstanding shares plus dilution from unexercised employee and director options. The total number of outstanding unexercised employee and outside director options at June 30, ~~2018~~2019 was ~~41,413 shares~~55,308 at an average exercise price of ~~$45.89/~~$57.90, including shares awarded but not yet vested. This compares to 61,020 unexercised option shares at the end of 2018 at an average exercise price of $56.78/ share, including shares awarded but not vested. ~~This compares~~

The number of shares added as a dilution factor in 2Q 2019 was 14,180 compared to ~~62,324 unexercised~~23,080 in 2Q 2018. The number of shares added as a dilution factor in 1H 2019 was 15,400 compared to 23,330 in 1H 2018. In December 2018, 22,400 option shares ~~outstanding~~were awarded to 45 employees at ~~June 30, 2017 at~~ an ~~average~~ exercise price of ~~$46.15/~~$74.64 per share. No ~~option shares have been~~other options were awarded ~~to date in 2018. Despite the lower number of outstanding option shares, the dilution factor~~ in 2018, ~~was higher primarily because~~and no options were awarded in 1H 2019.

UTMD paid $1,028 ($0.275/share) in dividends to stockholders in 2Q 2019 compared to $1,006 ($0.270/ share) paid in 2Q 2018. Dividends paid to stockholders during 2Q 2019 were 29% of ~~a higher share market price.~~NI. UTMD paid $2,055 ($0.275/share) in dividends to stockholders in 1H 2019 compared to $2,011 ($0.270/ share) paid in 1H 2018. Dividends paid to stockholders during 1H 2019 were 31% of NI.

1115

~~During both 1H~~Near the end of December 2018, ~~and 1H 2017,~~ UTMD ~~did not repurchase~~repurchased 15,000 of its shares in the open ~~market.~~market at $80.35/ share. No other UTMD shares were purchased in 2018. During 2Q 2019 (and 1H 2019 in total), UTMD repurchased 5,000 of its shares at $79.52/ share. The Company retains the strong desire and financial ability for repurchasing its shares ~~when they seem undervalued.~~at a price it believes is attractive for remaining stockholders. UTMD’s closing share price at the end of 2Q 2019 was $95.70, up 8% from $88.25 at the end of 1Q 2019, and up 15% from the $83.08 closing price at the end of 2018. The closing share price at the end of 2Q 2018 was $110.15.

i)Return on Equity (ROE)

ROE is the portion of NI retained by UTMD to internally finance its growth, divided by the average accumulated ~~stockholders'~~stockholders’ equity for the applicable time period. Annualized ROE (before stockholder dividends) in 1H ~~2018~~2019 was ~~21%~~15% compared to ~~18%~~21% in 1H ~~2017.~~2018. The ~~higher~~lower ROE in 1H ~~2018~~2019 was due to the ~~increase in NI.~~lower NI resulting from the new IIA amortization expense resulting from the $21 million purchase of the remaining life of the exclusive U.S. Filshie device distribution rights from CSI. Targeting a high ROE of 20% remains a key financial objective for UTMD management. ROE can be increased by increasing NI, or by reducing ~~stockholders'~~stockholders’ equity by paying cash dividends to stockholders or by repurchasing shares.

Liquidity and Capital Resources

j)Cash flows

Net cash provided by operating activities, including adjustments for depreciation and amortization and other non-cash expenses along with changes in working capital, totaled $5,043 in 1H 2019 compared to $7,747 in 1H ~~2018 compared to $7,743 in 1H 2017.~~2018. The most significant differences in the two periods were the ~~$995 increase~~$1,736 decrease in net income which was offset by a ~~$165 benefit~~$1,774 increase in amortization expense, no gain from sale of assets compared to a $418 gain in 1H 2018, a $264 reduction in cash from a ~~smaller~~higher increase in 1H ~~2018~~2019 trade accounts receivable compared to 1H ~~2017,~~2018, a ~~$798 benefit to~~$417 reduction in cash from ~~an increase~~a decrease in accrued expenses in 1H ~~2018~~2019 resulting primarily from ~~the REPAT~~income tax ~~following a decrease in 1H 2017,~~payments, and a ~~$449~~$2,278 greater use of cash from investment in higher inventories, primarily as a ~~gain on investments and disposal~~result of ~~assets 1H 2018 that did not occur in~~ the ~~same period in 2017.~~purchase of remaining Filshie device inventories from CSI.

Capital expenditures for property and equipment (PP&E) were $130 in 1H 2019 compared to $201 in 1H ~~2018 compared to $114 in 1H 2017.~~2018. Depreciation of PP&E was $355 in 1H 2019 compared to $395 in 1H ~~2018 compared to $330 in 1H 2017. The difference in depreciation was due primarily to the new facility in the UK put in service in 4Q 2017.~~2018.

UTMD made cash dividend payments of $2,055 in 1H 2019 compared to $2,011 in 1H ~~2018 compared to $984 in 1H 2017.~~2018. The difference was due to a 1.9% annual increase in the ~~fact that the 2017 year-end~~ dividend ~~was paid in January 2018, whereas the 2016 year-end dividend was paid~~and 0.3% higher average shares outstanding due to option exercises which offset 15,000 shares repurchased in December ~~2016. The Company did not use cash to repurchase any of its own~~2018 and 5,000 shares ~~during either 1H 2018 or 1H 2017.~~repurchased in May 2019.

In 1H 2019, UTMD received $170 and issued 4,391 shares of its stock upon the exercise of employee and director stock options. Option exercises in 1H 2019 were at an average price of $38.83 per share. In comparison, in 1H 2018, UTMD received $347 and issued 10,488 shares of its stock upon the exercise of employee and director stock options, net of 2,439 shares retired upon employees trading those shares in payment of the stock option exercise price. Option exercises in 1H 2018 were at an average price of $44.23 per share. In comparison, in 1H 2017 the Company received $168 and issued 4,860 shares of stock on the exercise of employee and director stock options. Option exercises in 1H 2017 were at an average price of $34.67 per share.

Management believes that current cash balances, income from operations and effective management of working capital will provide the liquidity needed to finance internal growth plans. The Company may utilize cash not needed to support normal operations in one or a combination of the following: 1) in general, to continue to invest at an opportune time in ways that will enhance future profitability; 2) to make additional investments in new technology and/or processes; and/or 3) to acquire a product line or company that will augment revenue and EPS growth and better utilize ~~UTMD's~~UTMD’s existing infrastructure. If there are no better strategic uses for ~~UTMD's~~UTMD’s cash, the Company will continue to return cash to stockholders in the form of dividends and share repurchases when the stock appears undervalued.

k)Assets and Liabilities

June 30, ~~2018~~2019 total consolidated assets were ~~$97,045,~~$103,361, an increase of ~~$4,300~~$3,593 from December 31, ~~2017.~~2018. The increase was due to the combination of an $18,063 increase in intangible assets (net of 1H 2019 amortization) together with a ~~$5,918~~$2,299 increase in inventories and $1,280 increase in trade accounts receivable, minus an $18,232 decrease in cash and ~~investments.~~investments, essentially associated with the purchase of the Filshie device exclusive U.S. distribution rights and inventory from CSI. Other significant changes in ~~assets~~liabilities included a ~~$909 increase~~$121 reduction in ~~consolidated net trade receivables, a $1,656 decrease in net intangible assets, a $852 decrease in the current USD value of net property and equipment, a $617~~accounts payable, an $801 decrease in L/T taxes payable ~~due to payment of the first installment of the REPAT tax,~~ and a ~~$275~~$202 decrease in ~~the current USD value of~~ the deferred tax liability associated with the UK amortization of acquired Femcare identifiable intangible assets (IIA)~~. UTMD's~~ in 2011. UTMD’s Ireland subsidiary EUR-denominated assets and liabilities were translated into USD at an FX rate ~~2.9%~~0.6% lower (weaker EUR) than the FX rate at the end of ~~2017. UTMD's~~2018. UTMD’s UK subsidiary GBP-denominated assets were translated into USD at an FX rate ~~2.4%~~0.4% lower (weaker GBP) than the FX rate at the end of ~~2017. UTMD's~~2018. UTMD’s Australia subsidiary AUD-denominated assets were translated into USD at an FX rate ~~5.3%~~0.5% lower (weaker AUD) than the FX rate at the end of ~~2017. UTMD's~~2018. UTMD’s Canada subsidiary CAD-denominated assets were translated into USD at an FX rate ~~4.7% lower (weaker~~4.3% higher (stronger CAD) than the FX rate at the end of ~~2017.~~2018. The net book value of consolidated property, plant and equipment ~~decreased $852~~increased $207 at June 30, ~~2018~~2019 from the end of ~~2017~~2018 due to the net effect of period-ending changed FX rates, ~~$201~~$130 in new asset purchases minus $355 in depreciation, and ~~$395 in depreciation.~~the adoption of right of use assets totaling $433 (which were zero at December 31, 2018).

Working capital (current assets minus current liabilities) was ~~$50,748~~$42,405 at June 30, ~~2018~~2019 compared to ~~$43,909~~$55,643 at December 31, ~~2017.~~2018. Cash balances were ~~$45,873~~$32,880 of the working capital. A current asset ~~increase~~decline of ~~$6,808~~$14,678 was led by the ~~$5,918 increase~~$18,232 decrease in cash and investments. ~~Current~~In addition to the CSI use of cash, current liabilities were ~~about the same, with a slight $31 decrease from~~$1,439 lower than at the end of ~~2017.~~2018. UTMD management believes that its working capital remains sufficient to meet normal operating needs, new capital expenditures and projected cash dividend payments to stockholders.

June 30, ~~2018~~2019 net intangible assets (goodwill plus other intangible assets) ~~decreased $1,656~~increased $18,063 from the end of ~~2017.~~2018. The ~~decrease~~increase was due to the ~~lower~~$21,000 IIA purchase from CSI net of amortization and the FX rate ~~(stronger USD)~~change for ~~GBP Femcare intangibles as of June 30, 2018 compared to year-end 2017, plus the $1,097 1H 2018 amortization of Femcare~~UK IIA. At June 30, ~~2018,~~2019, net intangible assets including goodwill ~~declined to 31%~~were 45% of total consolidated assets compared to ~~34%~~29% at year-end ~~2017,~~2018, and ~~37%~~31% at June 30, ~~2017.~~2018.

The deferred tax liability balance for Femcare IIA ($9,084 on the date of the acquisition), was $2,339 at June 30, 2019 compared to $2,541 at December 31, 2018 and $2,827 at June 30, ~~2018 compared to $3,102 at December 31, 2017 and $3,178 at June 30, 2017.~~2018. Reduction of the deferred tax liability occurs as the book/tax difference of amortization is eliminated over the remaining useful life of the Femcare IIA, i.e. as Femcare pays its taxes in the UK without the benefit of a deduction for IIA amortization expense.

~~UTMD's~~UTMD’s total debt ratio (total liabilities/ total assets) as of June 30, ~~2018~~2019 was ~~14%~~9% compared to ~~16%~~11% at the end of ~~2017. UTMD's~~2018. UTMD’s total debt ratio as of June 30, ~~2017~~2018 was ~~only 10%~~14% because it ~~did not include~~included a REPAT tax liability estimate from the TCJA enacted in December ~~2017. Excluding the REPAT liability for comparison purposes, the June 30, 2018 debt ratio~~2017 that was ~~8% and the December 31, 2017 debt ratio~~$3.2 million too high, which was ~~9%.~~corrected in 3Q 2018.

l)Management's Outlook

As outlined in its December 31, ~~2017~~2018 SEC 10-K report, ~~UTMD's~~UTMD’s plan for ~~2018~~2019 is to

1)	~~continue to~~ exploit distribution and manufacturing synergies by further integrating capabilities and resources in its multinational operations;
2)	focus on effective direct marketing of the benefits of the Filshie® Tubal Ligation System in the U.S.;
2)3)	introduce additional products helpful to clinicians through internal new product development;

3)4)	continue ~~achieving~~to achieve excellent overall financial operating performance;

4)5)	utilize positive cash generation to continue providing cash dividends to stockholders and ~~make~~making open market share repurchases if/when the UTMD share price seems undervalued; and

5)6)	be vigilant for accretive acquisition opportunities which may be ~~increasingly~~ brought about by difficult burdens on small, innovative companies.

Generally, the Company continues to effectively execute its plan as outlined above. Based on results of 1H ~~2018,~~2019, management expects to ~~exceed~~substantially achieve the financial objectives for the full year of ~~2018~~2019 as stated in the Form SEC 10-K at the beginning of the year.

m)Accounting Policy Changes

On January 1, 2018 UTMD adopted ASU 2014-09, Revenue from Contracts with Customers. Refer to Note 2 for further information. On January 1, 2019 UTMD adopted ASC Update No. 2016-02, Leases (Topic 842). Refer to Note 2.

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"~~“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. Financial estimates are subject to change and are not intended to be relied upon as predictions of future operating results, and the Company assumes no obligation to update or disclose revisions to those estimates.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

UTMD has manufacturing and trading operations, including related assets, in the U.S. denominated in the U.S. Dollar (USD), in Ireland denominated in the Euro (EUR), in England denominated in the British Pound (GBP), in Australia denominated in the Australia Dollar (AUD), and ~~starting in 2017,~~ in Canada denominated in the Canadian Dollar (CAD). The currencies are subject to exchange rate fluctuations that are beyond the control of UTMD. The exchange rates were ~~.8564, .8319~~.8785, .8729 and ~~.8763~~.8564 EUR per USD as of June 30, ~~2018,~~2019, December 31, ~~2017~~2018 and June 30, ~~2017,~~2018, respectively. Exchange rates were ~~.7578, .7395~~.7865, .7837 and ~~.7696~~.7578 GBP per USD as of June 30, ~~2018,~~2019, December 31, ~~2017~~2018 and June 30, ~~2017,~~2018, respectively. Exchange rates were ~~1.3515, 1.2796~~1.4260, 1.4193 and ~~1.3028~~1.3515 AUD per USD on June 30, ~~2018,~~2019, December 31, ~~2017~~2018 and June 30, ~~2017,~~2018, respectively. Exchange rates were ~~1.3141, 1.2519,~~1.3080, 1.3644, and ~~1.2982~~1.3141 CAD per USD on June 30, ~~2018,~~2019, December 31, ~~2017~~2018 and June 30, ~~2017,~~2018, respectively. UTMD manages its foreign currency risk without separate hedging transactions by either invoicing customers in the local currency where costs of production were incurred, by converting currencies as transactions occur, and by optimizing global account structures through liquidity management accounts.

Item 4. Controls and Procedures

The ~~Company's~~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~~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, ~~2018.~~2019. Based on this evaluation, the Chief Executive Officer and Principal Financial Officer concluded that, as of June 30, ~~2018,~~2019, the ~~Company's~~Company’s disclosure controls and procedures were effective.

There were no changes in the ~~Company's~~Company’s internal controls over financial reporting that occurred during the six months ended June 30, ~~2018,~~2019, that have materially affected, or are reasonably likely to materially affect, the ~~Company's~~Company’s internal controls over financial reporting.

1419

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

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

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~~“Item 1A. Risk ~~Factors"~~Factors” in ~~UTMD's~~UTMD’s Annual Report on Form 10-K for the year ended December 31, ~~2017,~~2018, 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~~Company’s business, financial condition and/or operating results.

Legislative healthcare reform in the United States, as embodied in The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 (the ~~"Acts"~~“Acts”) added a substantial excise tax (MDET) in 2013-2015 that increased administrative costs and has led to decreased revenues in the U.S.:

The voluminous Acts, administrative rules to enforce the Acts and promised efforts to reform the Acts, make the U.S. medical device marketplace unpredictable, particularly for the thousands of small medical device manufacturers including UTMD that do not have the overhead structure that the larger medical device companies can afford. Fortunately, the U.S. Congress has suspended the MDET for years of 2016 through 2019. To the extent that the Acts will in the future continue to place additional burdens on small medical device companies in the form of the excise tax on medical device sales, additional oversight of marketing and sales activities and new reporting requirements, the result is likely to continue to be negative for ~~UTMD's~~UTMD’s ability to effectively compete and support continued investments in new product development and marketing of specialty devices in the U.S.

Increasing regulatory burdens including premarketing approval delays may result in significant loss of revenue, unpredictable costs and loss of management focus on helping the Company proactively conform with requirements and thrive:

The ~~Company's~~Company’s experience in 2001-2005, when the FDA improperly sought to shut it down, highlights the ongoing risk of being subject to a regulatory environment which can be arbitrary and capricious. The risks associated with such a circumstance relate not only to the substantial costs of litigation in millions of dollars, but also loss of business, the diversion of attention of key employees for an extended period of time, including new product development and routine quality control management activities, and a tremendous psychological and emotional toll on dedicated and diligent employees.

Since the FDA reserves to itself the interpretation of which vague industry standards comprise law at any point in time, it is impossible for any medical device manufacturer to ever be confident that it is operating within the ~~Agency's~~Agency’s version of the law. The unconstitutional result is that companies, including UTMD, are considered guilty prior to proving their innocence.

Premarketing submission administrative burdens and substantial increases in ~~"user fees"~~“user fees” increase product development costs and result in delays to revenues from new or improved devices. It ~~recently~~ took two and a half years to gain FDA approval of the use of a clearly safer ~~single use~~single-use Sterishot Filshie Clip applicator, which had previously been in use for over seven years OUS, in lieu of a reused applicator approved in the U.S. ~~since 1996,~~ made of substantially equivalent materials for the same intended use applying the same implanted clip.

The growth of Group Purchasing Organizations (GPOs) adds non-productive costs, typically weakens the ~~Company's~~Company’s marketing and sales efforts and may result in lower revenues:

GPOs, theoretically acting as bargaining agents for member hospitals, but actually collecting revenues from the companies that they are negotiating with, have made a concerted effort to turn medical devices that convey special patient safety advantages and better health outcomes, like ~~UTMD's,~~UTMD’s, into undifferentiated commodities. GPOs have been granted an antitrust exemption by the U.S. Congress. Otherwise, their business model based on ~~"kickbacks"~~“kickbacks” would be a violation of law. These bureaucratic entities do not recognize or understand the overall cost of care as it relates to safety and effectiveness of devices, and they create a substantial administrative burden that is primarily related to collection of their administrative fees.

1520

The ~~Company's~~Company’s business strategy may not be successful in the future:

As the level of complexity and uncertainty in the medical device industry increases, evidenced, for example, by the unpredictable regulatory environment, the ~~Company's~~Company’s views of the future and product/ market strategy may not yield financial results consistent with the past.

As the healthcare industry becomes increasingly bureaucratic it puts smaller companies like UTMD at a competitive disadvantage:

An aging population is placing greater burdens on healthcare systems, particularly hospitals. The length of time and number of administrative steps required in adopting new products for use in hospitals has grown substantially in recent years. Smaller companies like UTMD typically do not have the administrative resources to deal with broad new administrative requirements, resulting in either loss of revenue or increased costs. As UTMD introduces new products it believes are safer and more effective, it may find itself excluded from certain clinical users because of the existence of long term supply agreements for preexisting products, particularly from competitors which offer hospitals a broader range of products and services. Restrictions used by hospital administrators to limit clinician involvement in device purchasing decisions makes communicating ~~UTMD's~~UTMD’s clinical advantages much more difficult.

A product liability lawsuit could result in significant legal expenses and a large award against the Company:

~~UTMD's~~UTMD’s devices are frequently used in inherently risky situations to help physicians achieve a more positive outcome than what might otherwise be the case. In any lawsuit where an individual plaintiff suffers permanent physical injury, the possibility of a large award for damages exists whether or not a causal relationship exists.

The ~~Company's~~Company’s reliance on third party distributors in some markets may result in less predictable revenues:

~~UTMD's~~UTMD’s distributors have varying expertise in marketing and selling specialty medical devices. They also sell other devices that may result in less focus on the ~~Company's~~Company’s products. In some countries, notably China, Pakistan and India not subject to similarly rigorous standards, by copying, a distributor of ~~UTMD's~~UTMD’s products may eventually become a competitor with a cheaper but lower quality version of ~~UTMD's~~UTMD’s devices.

The loss of one or more key employees could negatively affect UTMD performance:

In a small company with limited resources, the distraction or loss of key personnel at any point in time may be disruptive to performance. The ~~Company's~~Company’s benefits programs are key to recruiting and retaining talented employees. An increase in ~~UTMD's~~UTMD’s employee healthcare plan costs, for example, may cause the Company to have to reduce coverages which in turn represents a risk to retaining key employees.

Fluctuations in foreign currencies relative to the USD can result in significant differences in period to period financial results:

Since a significant portion of ~~UTMD's~~UTMD’s sales are invoiced in foreign currencies and consolidated financial results are reported in USD terms, a stronger USD can have negative revenue effects. Conversely, a weaker USD would increase foreign subsidiary operating costs in USD terms. For the portion of sales to foreign entities made in fixed USD terms, a stronger USD makes the devices more expensive and weakens demand. For the portion invoiced in a foreign currency, not only USD-denominated sales are reduced, but also gross profits may be reduced because finished distributed products and/or U.S. made raw materials and components are likely being purchased in fixed USD.

~~Future increases in sales of the Filshie Clip System due to Bayer stopping sales of the Essure device are uncertain, and may not materialize.~~

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

During 1H 2019, UTMD purchased 5,000 of its shares in the open market for $398 including commissions and fees. UTMD did not purchase any of its own securities during 1H 2018.

1621

Item 6. Exhibits

Exhibit #	SEC Reference #	Title of Document

1	31	Certification of CEO pursuant to Rule 13a-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

2	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

3	32	Certification of CEO pursuant to 18 U.S.C. §1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

4	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

5	101 ins	XBRL Instance

6	101.sch	XBRL Schema

7	101.cal	XBRL Calculation

8	101.def	XBRL Definition

9	101.lab	XBRL Label

10	101.pre	XBRL Presentation

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.
	REGISTRANT

Date: 8/7/1819	By: /s/ Kevin L. Cornwell
	Kevin L. Cornwell
	CEO

Date: 8/7/1819	By: /s/ Brian L. Koopman
	Brian L. Koopman
	Principal Financial Officer

UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME FOR THE
THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND JUNE 30, 2017
(in thousands, except per share amounts - unaudited)

	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2018			2017		2018			2017
Sales, net	$	10,965		$	10,829	$	21,852		$	21,088

Cost of goods sold		3,981			3,936		7,946			7,660
Gross profit		6,984			6,893		13,906			13,428

Operating expense
Selling, general and administrative		1,811			1,740		3,649			3,432
Research & development		117			119		230			238
Total operating expenses		1,928			1,859		3,879			3,670
Operating income		5,056			5,034		10,027			9,758

Other income (expense)		500			23		538			49
Income before provision for income taxes		5,556			5,057		10,565			9,807

Provision for income taxes		1,248			1,187		2,165			2,402
Net income	$	4,308		$	3,870	$	8,400		$	7,405

Earnings per common share (basic)	$	1.15		$	1.04	$	2.25		$	1.99

Earnings per common share (diluted)	$	1.15		$	1.04	$	2.24		$	1.98

Shares outstanding - basic		3,731			3,716		3,728			3,715

Shares outstanding - diluted		3,754			3,732		3,751			3,732

Other comprehensive income (loss):
Foreign currency translation net of taxes of $0 in all periods	$	(2,836	)	$	1,680	$	(1,535	)	$	2,336
Total comprehensive income	$	1,472		$	5,550	$	6,865		$	9,741

UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2018 AND JUNE 30, 2017
(in thousands - unaudited)

	Six Months Ended June 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	8,400		$	7,405
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		395			330
Amortization		1,128			1,031
Gain on Investments		(32	)		0
Provision for (recovery of) losses on accounts receivable		1			(1	)
(Gain) loss on disposal of assets		(418	)		-
Deferred income taxes		(225	)		(182	)
Stock-based compensation expense		42			69
Tax benefit attributable to exercise of stock options		39			21
Changes in operating assets and liabilities:
Accounts receivable		(992	)		(1,157	)
Accrued interest and other receivables		0			(5	)
Inventories		(45	)		(100	)
Prepaid expenses and other current assets		(3	)		60
Accounts payable		51			68
Accrued expenses		(594	)		203
Total adjustments		(653	)		337
Net cash provided by operating activities		7,747			7,742

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for:
Property and equipment		(201	)		(114	)
Intangible assets		-			-
Purchases of investments		-			-
Proceeds from sale of investments		74
Proceeds from sale of property and equipment		862			-
Net cash provided by (used in) investing activities		735			(114	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - options		347			168
Payment of dividends		(2,011	)		(984	)
Net cash provided by (used in) financing activities		(1,664	)		(816	)

Effect of exchange rate changes on cash		(820	)		629
Net increase (decrease) in cash and cash equivalents		5,998			7,441
Cash at beginning of period		39,875			26,296
Cash at end of period	$	45,873		$	33,737

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes	$	3,016		$	2,676
Cash paid during the period for interest		0			0

				Fair Value Measurements Using
Description	Total Fair Value at 6/30/2018			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3 )
Equities		$	0		$	0		$	0		$	0

	2Q 2018 (Apr-Jun)			2Q 2017 (Apr-Jun)			1H 2018 (Jan-Jun)			1H 2017 (Jan-Jun)
Gross Profit Margin (gross profit/ sales):		63.7	%		63.7	%		63.6	%		63.7	%
Operating Income Margin (operating income/ sales):		46.1	%		46.5	%		45.9	%		46.3	%
EBT Margin (profit before income taxes/ sales):		50.7	%		46.7	%		48.3	%		46.5	%
Net Income Margin (profit after taxes/ sales):		39.3	%		35.7	%		38.4	%		35.1	%