10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10‑Q

Quarterly Report Under Section 13 or 15(d) of

The Securities Exchange Act of 1934

For quarter ended: September 30, 2017 Commission File No. 001-12575

UTAH MEDICAL PRODUCTS, INC.

(Exact name of Registrant as specified in its charter)

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

7043 South 300 West

Midvale, Utah  84047

Address of principal executive offices

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and; (2) has been subject to such filing requirements for the past 90 days.   Yes ☒   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 the number of shares outstanding of each of the issuer's classes of common stock as of November 6, 2017: 3,720,600.

UTAH MEDICAL PRODUCTS, INC.

INDEX TO FORM 10‑Q

PART I - FINANCIAL INFORMATION		PAGE
Item 1.	Financial Statements
	Consolidated Condensed Balance Sheets as of September 30, 2017 and December 31, 2016	1
	Consolidated Condensed Statements of Income for the three  and nine months ended September 30, 2017 and September 30, 2016	2
	Consolidated Condensed Statements of Cash Flows for the nine months ended September 30, 2017 and September 30, 2016	3
	Notes to Consolidated Condensed Financial Statements	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	6
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	13
Item 4.	Controls and Procedures	14
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings	15
Item 1A.	Risk Factors	15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 6.	Exhibits	17
SIGNATURES		17

PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements
UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS AS OF
SEPTEMBER 30, 2017 AND DECEMBER 31, 2016
(in thousands)
	(unaudited)			(audited)
ASSETS	SEPTEMBER 30,  2017			DECEMBER 31, 2016
Current assets:
Cash	$	37,438		$	26,296
Investments, available-for-sale		78			64
Accounts & other receivables, net		4,730			3,211
Inventories		5,042			4,542
Other current assets		733			754
Total current assets		48,021			34,867
Property and equipment, net		10,407			9,966
Goodwill		14,028			13,487
Other intangible assets		34,507			31,947
Other intangible assets - accumulated amortization		(16,288	)		(13,683	)
Other intangible assets, net		18,219			18,264
Total assets	$	90,675		$	76,584
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,125		$	906
Accrued expenses		4,058			2,116
Total current liabilities		5,183			3,022
Deferred tax liability - intangible assets		3,176			3,209
Deferred income taxes		1,119			1,109
Total liabilities		9,478			7,340
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 - September 30, 2017, 3,719 shares and December 31, 2016, 3,713 shares		37			37
Accumulated other comprehensive income (loss)		(8,686	)		(12,243	)
Additional paid-in capital		701			378
Retained earnings		89,145			81,072
Total stockholders' equity		81,197			69,244
Total liabilities and stockholders' equity	$	90,675		$	76,584

see notes to consolidated condensed financial statements

1

UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2017 AND SEPTEMBER 30, 2016
(in thousands, except per share amounts - unaudited)
	THREE MONTHS ENDED					NINE MONTHS ENDED
	SEPTEMBER 30,					SEPTEMBER 30,
	2017		2016			2017		2016
Sales, net	$	10,125	$	9,655		$	31,213	$	30,446
Cost of goods sold		3,629		3,880			11,288		12,196
Gross profit		6,496		5,775			19,925		18,250
Operating expense
Selling, general and administrative		1,714		1,701			5,146		5,320
Research & development		103		135			341		364
Total operating expense		1,817		1,836			5,487		5,684
Operating income		4,679		3,939			14,438		12,566
Other income (expense)		17		41			65		206
Income before provision for income taxes		4,696		3,980			14,503		12,772
Provision for income taxes		1,074		1,045			3,476		3,361
Net income	$	3,622	$	2,935		$	11,027	$	9,411
Earnings per common share (basic)	$	0.97	$	0.78		$	2.97	$	2.50
Earnings per common share (diluted)	$	0.97	$	0.78		$	2.95	$	2.49
Shares outstanding - basic		3,719		3,761			3,716		3,757
Shares outstanding - diluted		3,738		3,778			3,734		3,775
Other comprehensive income (loss):
Foreign currency translation net of taxes of $0 in all periods	$	1,219	$	(430	)	$	3,550	$	(3,856	)
Unrealized gain (loss) on investments net of taxes of $2, $2, $5 and ($2)		4		3			9		(3	)
Total comprehensive income	$	4,845	$	2,508		$	14,586	$	5,552

see notes to consolidated condensed financial statements

2

UTAH MEDICAL PRODUCTS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2017 AND SEPTEMBER 30, 2016
(in thousands - unaudited)
	SEPTEMBER 30,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	11,027		$	9,411
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		489			452
Amortization		1,568			1,714
Provision for (recovery of) losses on accounts receivable		(2	)		0
(Gain) loss on disposal of assets		-			5
Deferred income taxes		(281	)		(351	)
Stock-based compensation expense		99			62
Tax benefit attributable to exercise of stock options		25			37
Changes in operating assets and liabilities:
Accounts receivable - trade		(1,340	)		(510	)
Accrued interest and other receivables		(5	)		(35	)
Inventories		(301	)		(222	)
Prepaid expenses and other current assets		40			36
Accounts payable		201			316
Accrued expenses		803			228
Total adjustments		1,296			1,732
Net cash provided by operating activities		12,323			11,143
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for:
Property and equipment		(174	)		(237	)
Intangible assets		-			(9	)
Net cash (used in) provided by investing activities		(174	)		(246	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - options		224			306
Payment of dividends		(1,969	)		(1,954	)
Net cash (used in) provided by financing activities		(1,745	)		(1,648	)
Effect of exchange rate changes on cash		738			(971	)
Net increase in cash and cash equivalents		11,142			8,278
Cash at beginning of period		26,296			23,278
Cash at end of period	$	37,438		$	31,556
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes	$	3,753		$	3,342
Cash paid during the period for interest		-			-

see notes to consolidated condensed financial statements

3

UTAH MEDICAL PRODUCTS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

(unaudited)

(1)   The unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States.  These statements should be read in conjunction with the financial statements and notes included in the Utah Medical Products, Inc. ("UTMD" or "the Company") annual report on Form 10‑K for the year ended December 31, 2016.  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 March 2016, new accounting guidance was issued to simplify several aspects of accounting for employee share-based payment (including stock option) transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under the guidance, entities recognize all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. UTMD adopted this standard on January 1, 2017, which had an insignificant impact on its consolidated financial statements. UTMD made a determination to continue to account for forfeitures by estimating the number of awards that are expected to vest.  Because UTMD primarily issues incentive stock options, excess tax benefits and tax deficiencies have historically been minimal.

In May 2014, new accounting guidance 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.  Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard.  This guidance becomes effective for annual reporting periods beginning after December 15, 2017 and early adoption is permitted for periods beginning after December 15, 2016. Because the vast majority of its revenue is recognized when a physical product is shipped, UTMD expects that the 2018 adoption of this standard will have an insignificant impact on its consolidated financial statements, including the timing of revenue recognition.

In February 2016, new accounting guidance 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 effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. UTMD has yet to assess the impact that this standard will have on its consolidated financial statements when it is adopted. The only significant lease the Company anticipates it will have at that time is for the parking lot at its Utah facility.

(3)   Inventories at September 30, 2017 and December 31, 2016 consisted of the following:

	September 30,		December 31,
	2017		2016
Finished goods	$	982	$	1,327
Work‑in‑process		1,580		942
Raw materials		2,480		2,273
Total	$	5,042	$	4,542

(4)   Stock-Based Compensation. At September 30, 2017, 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") 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 September 30, 2017 and 2016, the Company recognized $30 and $20, respectively, in stock based compensation cost.  In the nine months ended September 30, 2017 and 2016, the Company recognized $99 and $62, respectively, in stock based compensation cost.

4

(5)   Warranty Reserve.  The Company's published warranty is: "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, 2016 or September 30, 2017.

(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 September 30, 2017:

				Fair Value Measurements Using
Description	Total Fair Value at 9/30/2017			Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3 )
Equities		$	78		$	78		$	0		$	0

(7)   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.

5

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 Form 10-K Annual Report for the year ended December 31, 2016 provides a detailed description of products, technologies, markets, regulatory issues, business initiatives, resources and business risks, among other details, and should be read in conjunction with this report.  Because of the relatively short span of time, results for any given three month period in comparison with a previous three month period may not be indicative of comparative results for the year as a whole.  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 third calendar quarter (3Q) and first nine months (9M) of 2017, UTMD achieved results which confirm that the Company is very likely to significantly exceed its previously announced goals for 2017.

Income statement results in 3Q and 9M 2017 compared to the same periods of 2016 were as follows:

	3Q 2017		3Q 2016		change			9M 2017	9M 2016		change
Net Sales	$	10,125	$	9,655	+4.9	%	$	31,213	$	30,446		+2.5	%
Gross Profit		6,496		5,775	+12.5	%		19,925		18,250		+9.2	%
Operating Income		4,679		3,939	+18.8	%		14,438		12,566		+14.9	%
Income Before Tax		4,696		3,980	+18.0	%		14,503		12,772		+13.6	%
Net Income		3,622		2,935	+23.4	%		11,027		9,411		+17.2	%
Earnings per Diluted Share		0.969		0.777	+24.7	%		2.953		2.493		+18.5	%

In contrast to prior calendar quarters, UTMD's relative 3Q performance was enhanced by a weaker USD.  Because the initial large impact of BREXIT on the value of the GBP occurred in late 2Q 2016, the change in relative value of the USD to the GBP in 3Q 2017 compared to 3Q 2016 was minimal.  Revenues in 3Q 2017 would have been $71 lower using the same foreign currency exchange (FX) rates as in the prior year ("constant dollars"), but because of the effect of BREXIT in first half (1H) 2017 compared to 1H 2016, revenues in 9M 2017 would have been $235 higher in constant dollars. UTMD's FX rates for income statement purposes are transaction-weighted averages. The average rates from the applicable foreign currency to USD during 3Q 2017 and 9M 2017 compared to the same periods in 2016 follow:

	3Q 2017		3Q 2016		Change			9M 2017	9M 2016	Change
GBP		1.312		1.314		(0.1	%)	1.277	1.393		(8.3	%)
EUR		1.172		1.118		+4.8	%	1.116	1.116		-
AUD		0.789		0.759		+4.0	%	0.766	0.744		+3.0	%

UTMD's revenues invoiced in the above foreign currencies represented 27.3% of total consolidated USD sales in 3Q 2017 and 24.9% in 9M 2017.   UTMD's revenues invoiced in foreign currencies including CAD represented 34.0% of total consolidated USD sales in 3Q 2017, and 32.0% in 9M 2017.   The weighted average FX rate for CAD was 0.800 USD/CAD in 3Q 2017, and 0.764 USD/CAD in 9M 2017.  UTMD did not invoice customers in CAD in 2016.

The weighted average positive FX impact on GBP, EUR and AUD currency revenues in 3Q 2017 compared to 3Q 2016 was 2.6%, increasing reported USD sales by $71.  The weighted average negative FX impact on GBP, EUR and AUD currency sales in 9M 2017 compared to 9M 2016 was 2.9%, reducing reported USD sales by $235. Total consolidated 3Q 2017 constant currency sales were up 4.1%, and 9M 2017 constant currency sales were up 3.3%, compared to the same periods in 2016.

UTMD's consolidated Gross Profit Margin (GPM), Gross Profit (GP) divided by sales, improved to 64.2% in 3Q 2017 compared to 59.8% in 3Q 2016, and 63.8% in 9M 2017 compared to 59.9% in 9M 2016, primarily due to the 2017 conversion from distributor sales to direct end-user sales of the Filshie Clip System in France and Canada. Consolidated Operating Expenses (OE) were $19 lower in 3Q 2017 compared to 3Q 2016, and $196 lower in 9M 2017 compared to 9M 2016.  Included in G&A OE, the UK amortization of Identifiable Intangible Assets (IIA) expense was about the same in 3Q 2017 but $145 lower in 9M 2017 due to the weaker GBP in first half 2017 compared to first half 2016, accounting for most of the 9M lower OE. The combination of lower OE and higher GPM spurred a 15% increase in 9M 2017 Operating Income (OI) with just a 3% increase in revenues. The 17% higher Net Income (NI) in 9M 2017 was a result of the 15% higher OI plus 1) a reduction in the corporate income tax rate in the UK starting in 2Q 2017, and 2) a lower tax provision in the UK and Ireland based on translation of USD cash balances in those sovereignties when converted to their respective native currencies.

6

Earnings Per Diluted Share (EPS) in 9M 2017 were up 18% as a result of the 17% higher NI together with the benefit of 50,000 shares repurchased in 4Q 2016.  EPS for the most recent twelve months (TTM) were $3.68.

UTMD profit margins in 3Q 2017 and 9M 2017 compared to 3Q 2016 and 9M 2016 follow:

	3Q 2017 (Jul-Sep)			3Q 2016 (Jul-Sep)			9M 2017 (Jan-Sep)			9M 2016 (Jan-Sep)
Gross Profit Margin (gross profit/ sales):		64.2	%		59.8	%		63.8	%		59.9	%
Operating Income Margin (operating income/ sales):		46.2	%		40.8	%		46.3	%		41.3	%
EBT Margin (profit before income taxes/ sales):		46.4	%		41.2	%		46.5	%		42.0	%
Net Income Margin (profit after taxes/ sales):		35.8	%		30.4	%		35.3	%		30.9	%

UTMD's Balance Sheet continued to strengthen. September 30, 2017 ending Cash and Investments were up $11.2 million, and Stockholders' Equity was up $12.0 million, from December 31, 2016.  FX rates for Balance Sheet purposes are the applicable rates at the end of each reporting period. The FX rates from the applicable foreign currencies to USD for assets and liabilities at the end of September 2017 and the end of September 2016 follow:

	SEP 30, 2017		SEP 30, 2016		change
GBP		1.340		1.301		+3.0	%
EUR		1.181		1.124		+5.1	%
AUD		0.784		0.767		+2.3	%
CAD		0.799		0.762		+4.9	%

b)Revenues

The Company believes that revenue should be recognized at the time of shipment as title generally passes to the customer at the time of shipment, or completion of services performed under contract.  Revenue recognized by UTMD is based upon documented arrangements and fixed contracts in which the selling price is fixed prior to acceptance and completion of an order.  Revenue from product or service sales is generally recognized at the time the product is shipped or service completed and invoiced, and collectibility is reasonably assured.  Over 99% of UTMD's revenue is recognized at the time UTMD ships a physical medical device to a customer or a customer's designated inventory location, where the selling price for the item shipped was agreed prior to UTMD's acceptance and completion of the customer order. There are no post-shipment obligations which have been or are expected to be material to financial results.

There are circumstances under which revenue may be recognized when product is not shipped, which meet the criteria of SAB 104:  the Company provides engineering services, for example, design and production of manufacturing tooling that may be used in subsequent UTMD manufacturing of custom components for other companies.  This revenue is recognized when UTMD's service has been completed according to a fixed contractual agreement.

Terms of sale are established in advance of UTMD's acceptance of customer orders.  In the U.S., Canada, Ireland, UK, France and Australia, UTMD generally accepts orders directly from and ships directly to end user clinical facilities, as well as third party med/surg distributors, under UTMD's Standard Terms and Conditions (T&C) of Sale. About 14% of UTMD's U.S. domestic end user sales 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 T&C of Sale are substantially the same in the U.S., Canada, Ireland, UK, France and Australia.  In other geographic regions, UTMD sells its devices to third party distributors which then distribute the devices to medical facilities within their designated territories. UTMD's T&C of Sale for its international distributors are substantially the same.

7

UTMD may have separate discounted pricing agreements with a 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 determine the fixed price by part number for the next agreement period of one year.  For new customers, the customer's best estimate of volume is accepted by UTMD for determining the ensuing fixed prices for the agreement period.  Except on rare occasions such as when customers do not meet prepayment agreements, 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 disclosure above that the selling price is fixed prior to the acceptance of a specific customer order.

Total 3Q 2017 consolidated sales were $471 (4.9%) higher than in 3Q 2016, and in 9M 2017 were $768 (2.5%) higher than in 9M 2016.  Comparing 3Q 2017 to 3Q 2016, total U.S. domestic sales were about the same and USD sales outside the U.S. (OUS sales) were 10% higher. Comparing 9M 2017 to 9M 2016, total U.S. domestic sales were 3% higher and OUS sales were 2% higher.

U.S. domestic sales were 0% ($8) higher in 3Q 2017 than in 3Q 2016, and 3% ($443) higher in 9M 2017 than in 9M 2016.  Domestic sales were 49% of total consolidated sales in 3Q 2017 and 51% in 3Q 2016, and 49% in both 9M 2017 and 9M 2016. Sales of Femcare's Filshie Clip System to CooperSurgical Inc. (CSI) for distribution in the U.S. were $264 higher in 3Q 2017 compared to 3Q 2016, and $594 higher in 9M 2017 compared to 9M 2016.  CSI purchases included, for the first time, $159 in 3Q 2017 and $244 in 9M 2017 of Filshie Sterishot kits which incorporate single use applicators approved by the FDA in December 2016. Femcare's sales to CSI were 13% of total domestic sales in 3Q 2017 compared to 8% in 3Q 2016, and 20% in 9M 2017 compared to 16% in 9M 2016. Domestic OEM sales were $32 higher in 3Q 2017 compared to 3Q 2016, and $95 higher in 9M 2017 compared to 9M 2016. Direct sales to U.S. user facilities were $287 lower in 3Q 2017 compared to 3Q 2016, and $246 lower in 9M 2017 compared to 9M 2016. All of the lower domestic direct sales were due to a weaker third quarter order pattern from U.S. hospitals in all product categories, partly due to one less shipping day, partly from the effects of hurricanes in the U.S., partly resulting from an end of 3Q 2017 delivery glitch by UTMD's sterilizer, and partly related to a larger volume of late orders that didn't ship until the beginning of October (resulting in a larger than normal 4Q 2017 beginning backlog).

OUS sales consolidated in USD in 3Q 2017 were 10% ($462) higher than in 3Q 2016, and 2% ($325) higher in 9M 2017 than in 9M 2016. In 9M 2017, UTMD lost $235 in OUS sales due to a weaker GBP. In other words, constant dollar OUS sales were 4% ($560) higher in 9M 2017 compared to 9M 2016. Trade sales are sales to third parties, excluding sales from one UTMD entity to another (intercompany sales). UK subsidiary USD-denominated OUS trade sales, including direct sales to France clinical facilities, were 25% of total OUS sales in 3Q 2017 compared to 24% in 3Q 2016, and 24% in both 9M 2017 and 9M 2016. Australia subsidiary USD sales were 11% of total OUS sales in both 3Q 2017 and 9M 2017 compared to 12% in 3Q 2016 and 11% in 9M 2016.  Ireland subsidiary USD trade sales were 26% of total OUS sales in 3Q 2017 compared to 37% in 3Q 2016, and 25% in 9M 2017 compared to 36% in 9M 2016. Canada subsidiary USD sales were 13% of total OUS sales in 3Q 2017 and 14% in 9M 2017 compared to 0% in 2016.

The lower portion of OUS trade sales by Ireland was due primarily to the conversion from Ireland selling Filshie Sterishot kits to Canada and France distributors in 2016 (trade sales) to selling to other UTMD subsidiaries (Utah Medical Products Canada, Inc and Femcare Ltd) for direct distribution into Canada and France (intercompany sales) in 2017. Included in the Femcare UK sales were the direct sales to end users in France which comprised 7% of OUS sales in 3Q 2017 and 6% of OUS sales in 9M 2017.

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

Global revenues by product category:

	3Q 2017		3Q 2016			9M 2017		9M 2016
Obstetrics	$	1,218	$	1,229	$	3,372	$	3,428
Gynecology/ Electrosurgery/ Urology		5,529		4,978		17,473		16,170
Neonatal		1,510		1,402		4,574		4,575
Blood Pressure Monitoring and Accessories*		1,868		2,046		5,794		6,273
Total:	$	10,125	$	9,655	$	31,213	$	30,446

8

OUS revenues by product category:

	3Q 2017		3Q 2016			9M 2017		9M 2016
Obstetrics	$	172	$	185	$	533	$	499
Gynecology/ Electrosurgery/ Urology		3,691		3,197		10,966		10,024
Neonatal		543		323		1,540		1,512
Blood Pressure Monitoring and Accessories*		805		1,044		2,746		3,426
Total:	$	5,211	$	4,749	$	15,785	$	15,461

*includes molded components sold to OEM customers.

Looking forward, sales in 4Q 2017 compared to 4Q 2016 are expected to grow more than they did in 3Q 2017 compared to 3Q 2016, for several reasons: 1) 4Q 2016 was UTMD's lowest sales quarter in 2016; 2) a higher than usual 4Q 2017 beginning backlog; 3) the CSI committed 4Q 2017 order indicates 47% higher Filshie Clip System purchases than in 4Q 2016; 4) a continued weaker USD is expected to have a favorable impact on foreign currency consolidated sales; and 5) Bayer has announced that the Essure, the Filshie Clip System's chief competing surgical permanent contraception device, will no longer be sold OUS.

c)Gross Profit (GP)

GP results from subtracting the cost of manufacturing and shipping products to customers (direct materials, 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 GP in 3Q 2017 was $721 higher than in 3Q 2016, while sales were only $471 higher. UTMD's 9M 2017 GP was $1,675 higher than in 9M 2016, while sales were only $768 higher. The higher GPMs in 2017 resulted essentially from direct sales in Canada and France at retail prices which replaced distributor sales at wholesale prices in the prior year.

d)Operating Income (OI)

OI is GP minus OE.  Due to higher GP and lower OE, OI in 3Q and 9M 2017 was $4,679 and $14,438 respectively, compared to $3,939 and $12,566 in 3Q and 9M 2016 respectively. UTMD's 3Q and 9M 2017 continued excellent OIM was 46.2% and 46.3% respectively, compared to 40.8% and 41.3% in the same periods of 2016.

OE are comprised of general and administrative (G&A) expenses, sales and marketing (S&M) expenses and product development (R&D) expenses. Consolidated USD-denominated OE were $1,817 in 3Q 2017 (17.9% of consolidated revenues) compared to $1,836 in 3Q 2016 (19.0% of consolidated revenues). Holding OE relatively constant while increasing sales added leverage to the 12.5% increase in GP in achieving UTMD's 18.8% increase in 3Q 2017 OI.  Consolidated OE were $5,487 in 9M 2017 (17.6% of revenues) compared to $5,684 in 9M 2016 (18.7% of revenues), helping to leverage a 9.2% increase in GP into a 14.9% increase in OI for 9M 2017.

Consolidated S&M expenses in 3Q 2017 were $364 (3.6% of sales) compared to $408 (4.2% of sales) in 3Q 2016, and were $1,154 (3.7% of sales) in 9M 2017 compared to $1,270 (4.2% of sales) in 9M 2016.  Consolidated S&M expenses declined despite an increase in S&M expenses for the new Canada subsidiary of $17 in 3Q 2017 and $48 in 9M 2017. The lower overall S&M expenses resulted from not replacing a few sales employees as quickly as planned, and increased operating efficiencies in customer service and marketing.  In 2017, UTMD was able to begin marketing directly to medical facility end users in France without expanding preexisting UK S&M personnel.

S&M expenses include all customer support costs including training. In general, training is not required for UTMD's medical devices since they are well-established and have been clinically widely used. Written "Instructions For 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.

9

R&D expenses were $103 (1.0% of sales) in 3Q 2017 compared to $135 (1.4% of revenues) in 3Q 2016. In 9M 2017, R&D expenses were $341 (1.1% of revenues) compared to $364 (1.2% of revenues) in 9M 2016. Variations in R&D expenses result from costs of projects, including engineering time, in different stages of completion.  At UTMD, R&D engineers also devote much of their time to manufacturing process improvements.

Consolidated G&A expenses were $1,350 (13.3% of sales) in 3Q 2017 compared to $1,293 (13.4% of sales) in 3Q 2016, and were $3,993 (12.8% of sales) in 9M 2017 compared to $4,050 (13.3% of sales) in 9M 2016. A weaker GBP in the first half of the year helped lower 9M 2017 amortization of IIA resulting from the Femcare acquisition, which are part of G&A expenses, by $145. To be more clear, consolidated G&A expenses included non-cash expense from the amortization of IIA resulting from the Femcare acquisition of $522 (5.2% of consolidated revenues) in 3Q 2017 and $1,526 (4.9% of consolidated revenues) in 9M 2017, compared to $524 (5.4% of consolidated revenues) in 3Q 2016 and $1,671 (5.5% of consolidated revenues) in 9M 2016. The period to period differences in USD-denominated IIA amortization expense were almost all FX-related since the IIA amortization expense was £1,196 in 9M 2017 compared to £1,201 in 9M 2016.  G&A expenses excluding the noncash IIA amortization expense were $828 (8.2% of revenues) in 3Q 2017 compared to $770 (8.0% of revenues) in 3Q 2016.  The increase in 3Q 2017 was due to $44 in G&A expense for the new Canada subsidiary and a stronger EUR which increased Ireland G&A expenses in USD terms.  G&A expenses excluding the noncash IIA amortization expense were $2,467 (7.9% of revenues) in 9M 2017 compared to $2,379 (7.8% of revenues) in 9M 2016.  Again, the increase was due to G&A expenses for the new Canada subsidiary, which added $142 to consolidated G&A expenses in 9M 2017.

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 $30 in 3Q 2017 compared to $20 in 3Q 2016, and $99 in 9M 2017 compared to $62 in 9M 2016.

Summary comparison of (USD) consolidated operating expenses:

	3Q 2017		3Q 2016			9M 2017		9M 2016
S&M Expense	$	364	$	408	$	1,154	$	1,270
R&D Expense		103		135		341		364
G&A Expense		1,350		1,293		3,993		4,050
Total Operating Expenses:	$	1,817	$	1,836	$	5,487	$	5,684

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 technology. Negative NOE is NOI.  Net NOI in 3Q 2017 was $17 compared to $41 in 3Q 2016. Net NOI in 9M 2017 was $65 compared to $206 in 9M 2016.  A gain on remeasured foreign currency balances in 3Q 2017 was $4 compared to a gain of $18 in 3Q 2016.  In 9M 2017, a gain on remeasured foreign currency balances was $5 compared to a gain of $129 in 9M 2016.  Royalties received were $23 in 3Q 2017 compared to $22 in 3Q 2016, and $65 in 9M 2017 compared to $67 in 9M 2016.

f)Income Before Income Taxes (EBT)

Consolidated EBT results from subtracting net NOE or adding NOI from or to, as applicable, consolidated OI.  Consolidated 3Q 2017 EBT was $4,696 (46.4% of sales) compared to $3,980 (41.2% of sales) in 3Q 2016. Consolidated 9M 2017 EBT was $14,503 (46.5% of sales) compared to $12,772 (42.0% of sales) in 9M 2016.

The EBT of Utah Medical Products, Inc. (U.S. only) was $2,331 in 3Q 2017 compared to $2,347 in 3Q 2016, and $6,815 in 9M 2017 compared to $6,750 in 9M 2016. The EBT of Utah Medical Products, Ltd (Ireland) was EUR 717 in 3Q 2017 compared to EUR 855 in 3Q 2016, and EUR 2,229 in 9M 2017 compared to EUR 2,455 in 9M 2016 . The lower 2017 EBT in Ireland was due to Ireland selling its manufactured Filshie Sterishot kits on a discounted intercompany basis to UTMD Canada and UTMD UK for distribution directly into France, instead of selling on a wholesale trade basis to external distributors distributing Filshie devices in Canada and France.  The trade-off to lower Ireland EBT was higher UK subsidiary trade revenues and profits, and new revenues and profits by UTMD Canada. The EBT of Femcare Group Ltd (Femcare-Nikomed, Ltd., UK and Femcare Australia) was GBP 835 in 3Q 2017 compared to GBP 566 in 3Q 2016, and GBP 3,141 in 9M 2017 compared to GBP 2,374 in 9M 2016.  The 3Q 2017 and 9M 2017 EBT of Utah Medical Products Canada, Inc. was CAD 435 and CAD 1,497, respectively, compared to zero in 2016.

10

Excluding the noncash effects of depreciation, amortization of intangible assets and stock option expense, 3Q 2017 consolidated EBT excluding the remeasured bank balance currency gain or loss and interest expense (adjusted consolidated EBITDA) were $5,417 (53.5% of sales) compared to $4,670 (48.4% of sales) in 3Q 2016. Adjusted consolidated EBITDA in 9M 2017 were $16,653 (53.4% of sales) compared to $14,871 (48.8% of sales) in 9M 2016. Based on this 9M performance, management now projects approximately $21.5 million in adjusted consolidated EBITDA for the 2017 year.  TTM adjusted consolidated EBITDA were $21,000.

g)Net Income (NI)

NI is EBT minus a provision for income taxes.  NI in 3Q 2017 of $3,622 (35.8% of sales) was $686 (+23.4%) higher than the NI of $2,935 (30.4% of sales) in 3Q 2016.  In addition to the 18.0% growth in EBT, NI in 3Q 2017 was further leveraged by a lower accrued income tax provision. The consolidated income tax provision rate in 3Q 2017 was 22.9% compared to 26.3% for 3Q 2016.  NI in 9M 2017 of $11,027 (35.3% of sales) was $1,616 (+17.2%) higher than the NI of $9,411 (30.9% of sales) in 9M 2016. The consolidated income tax provision rates were 24.0% in 9M 2017 and 26.3% in 9M 2016.  On April 1, 2017, the corporate income tax rate in the UK was lowered from 20% to 19%. For foreign subsidiaries, the tax provision booked in consolidated results is based on taxable income in the applicable sovereignty, not based on U.S. GAAP EBT.  As UTMD held about $19 million in cash in USD currency in Ireland and UK subsidiary bank accounts as of September 30, 2017, and the USD weakened relative to the applicable native currency, the resulting translation loss for each subsidiary created a tax credit for those subsidiaries. In summary, although there was not a corresponding translation loss for consolidated UTMD EBT results, which are obviously expressed in USD, there was an income tax provision benefit.

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 the money," i.e., have exercise prices below the applicable period's weighted average market value). Diluted EPS in 3Q 2017 were $0.969 compared to $0.777 in 3Q 2016.  In 9M 2017, diluted EPS were $2.953 compared to $2.493 in 9M 2016.  With some help from lower diluted shares outstanding, 3Q 2017 EPS increased 24.7% (19.2 cents) compared to 3Q 2016, and 9M 2017 EPS increased 18.5% (46.0 cents) compared to 9M 2016.

Diluted shares outstanding used to calculate 3Q 2017 EPS were 3,738,190 compared to 3,777,537 in 3Q 2016.  The number of shares added as a dilution factor in 3Q 2017 was 19,300 compared to 16,837 in 3Q 2016. Diluted shares outstanding used to calculate 9M 2017 EPS were 3,734,102 compared to 3,775,166 in 9M 2016.  The number of shares added as a dilution factor in 9M 2017 was 17,647 compared to 17,885 in 9M 2016. Although UTMD has not to date in 2017 repurchased any of its shares in the open market, in 4Q 2016 UTMD repurchased 50,000 shares which reduced outstanding shares in 9M 2017 compared to 9M 2016.

Outstanding shares at the end of 3Q 2017 were 3,719,328 which included 9M 2017 employee and outside director option exercises of 6,409 shares.  The number of shares used for calculating earnings per share was higher than ending shares because of a time-weighted calculation of average outstanding shares plus dilution from unexercised employee options.  The total number of outstanding unexercised employee options at September 30, 2017 was 57,019 shares at an average exercise price of $45.35/ share, including shares awarded but not vested. This compares to 49,398 unexercised option shares outstanding at September 30, 2016, at an average exercise price of $39.55/ share. No option shares have been awarded to date in 2017.

During both 9M 2017 and 9M 2016, UTMD did not repurchase its shares in the open market. The Company retains the financial ability for repurchasing its shares when they seem undervalued.

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' equity for the applicable time period.  Annualized ROE in 9M 2017 was 14% compared to 12% in 9M 2016.  Annualized ROE (before stockholder dividends) in 9M 2017 was 20% compared to 18% in 9M 2016.  The higher ROE in 9M 2017 was due to the increase in NI.  Targeting a high ROE of 20% (before dividends) remains a key financial objective for UTMD management.  ROE can be increased by increasing NI, or by reducing stockholders' equity by paying cash dividends to stockholders or by repurchasing shares.

11

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 $12,323 in 9M 2017 compared to $11,143 in 9M 2016.  The most significant differences in the two periods were the $1,616 increase in net income, a $831 use of cash from a larger increase in 9M 2017 trade accounts receivable compared to 9M 2016, and a $575 benefit to cash from an larger increase in accrued expenses in 9M 2017 compared to 9M 2016.

Capital expenditures for property and equipment (PP&E) were $174 in 9M 2017 compared to $237 in 9M 2016. Capital expenditures of approximately $1.5 million for the fit-out of the UK facility will occur in 4Q 2017.  Depreciation of PP&E was $489 in 9M 2017 compared to $452 in 9M 2016.

UTMD made cash dividend payments of $1,969 in 9M 2017 compared to $1,954 in 9M 2016.  The Company did not use cash to repurchase any of its own shares during either 9M 2017 or 9M 2016.

In 9M 2017, UTMD received $224 and issued 6,198 shares of its stock upon the exercise of employee and director stock options, net of 211 shares retired upon employees trading those shares in payment of the stock option exercise price. Option exercises in 9M 2017 were at an average price of $37.39 per share.  In comparison, in 9M 2016 the Company received $306 and issued 10,062 shares of stock on the exercise of employee and director stock options, net of 861 shares retired upon optionees trading those shares in payment of the stock option exercise price. Option exercises in 9M 2016 were at an average price of $33.12 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, for example, to fit-out a UK facility and property purchased in late 2016 specific to UTMD's needs; 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 existing infrastructure.  If there are no better strategic uses for 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

September 30, 2017 total consolidated assets were $90,675, an increase of $14,091 from December 31, 2016. The increase was due mainly to a $11,156 increase in cash and investments. Other significant changes in assets included a $1,519 increase in consolidated net trade receivables, a $500 increase in consolidated inventories, and a $496 increase in net intangible assets. UTMD's Ireland subsidiary EUR-denominated assets and liabilities were translated into USD at an FX rate 11.9% higher (stronger EUR) than the FX rate at the end of 2016. UTMD's UK subsidiary GBP-denominated assets were translated into USD at an FX rate 8.6% higher (stronger GBP) than the FX rate at the end of 2016.  UTMD's Australia subsidiary AUD-denominated assets were translated into USD at an FX rate 8.4% higher (stronger AUD) than the FX rate at the end of 2016.  The net book value of consolidated property, plant and equipment increased $441 at September 30, 2017 from the end of 2016 due to period-ending changed FX rates, $174 in new asset purchases and $489 in depreciation.

Working capital (current assets minus current liabilities) was $42,838 at September 30, 2017, compared to $31,845 at December 31, 2016.  A current asset increase of $13,153 was led by the $11,156 increase in cash and investments. Current liabilities increased $2,161, including a $1,941 increase in accrued liabilities. The accrued liabilities increase was mainly due to the $986 3Q 2017 quarterly dividend payment to stockholders accrued but not paid until October 3, whereas the $984 4Q 2016 dividend was paid before the end of December 2016.  UTMD management believes that its working capital remains sufficient to meet normal operating needs, new capital expenditures and projected cash dividend payments to stockholders.

September 30, 2017 intangible assets (goodwill plus other intangible assets) increased $496 from the end of 2016.  The increase was due to the higher FX rate for GBP Femcare intangibles as of September 30, 2017, compared to year-end 2016, offset somewhat by the $1,526 9M 2017 amortization of Femcare IIA.  At September 30, 2017, net intangible assets including goodwill declined to 36% of total consolidated assets compared to 41% at both year-end 2016 and September 30, 2016.

12

The deferred tax liability balance for Femcare IIA ($9,084 on the date of the acquisition), was $3,176 at September 30, 2017, compared to $3,209 at December 31, 2016, and $3,612 at September 30, 2016.  Reduction of the deferred tax liability occurs as the book/tax difference of IIA amortization is eliminated over the remaining useful life of the Femcare IIA. UTMD's total debt ratio (total liabilities/ total assets) as of September 30, 2017 and December 31, 2016 was 10%.  UTMD's total debt ratio as of September 30, 2016 was 12%.

l)Management's Outlook

As outlined in its December 31, 2016 SEC 10-K report, UTMD's plan for 2017 is to

1)	continue to exploit distribution and manufacturing synergies by further integrating capabilities and resources in its multinational operations;
2)	introduce additional products helpful to clinicians through internal new product development;
3)	continue achieving excellent overall financial operating performance;
4)	utilize positive cash generation to  continue cash dividends to stockholders and make open market share repurchases if/when the UTMD share price seems undervalued; and
5)	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 9M 2017, management expects to exceed the financial objectives for the full year of 2017 as stated in the Form SEC 10-K at the beginning of the year.

m)Accounting Policy Changes

Accounting Standards Update No. 2016-09, Improvements to Employee Share-Based Payment Accounting, was adopted by the Company effective January 1, 2017, as required by the ASU. This update to ASC 718, Compensation - Stock Compensation was issued by the Financial Accounting Standards Board as part of their simplification initiative.  This adoption had an immaterial impact on UTMD's retained earnings and other components of equity as of the date of adoption. In the statement of cash flows, the effect of the required change related to excess tax benefits, which was immaterial, was retrospectively applied. Stock compensation expense continues to reflect estimated forfeitures.

Forward-Looking Information.   This report contains certain forward-looking statements and information relating to the Company that are based on the beliefs of management as well as assumptions made by management based on information currently available.  When used in this document, the words "anticipate," "believe," "project," "estimate," "expect," "intend" and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements.  Such statements reflect the current view of the Company respecting future events and are subject to certain risks, uncertainties and assumptions, including the risks and uncertainties stated throughout the document.  Although the Company has attempted to identify important factors that could cause the actual results to differ materially, there may be other factors that cause the forward statement not to come true as anticipated, believed, projected, expected, or intended.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those described herein as anticipated, believed, projected, estimated, expected or intended.  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 .8465, .9474 and .8897 EUR per USD as of September 30, 2017, December 31, 2016 and September 30, 2016, respectively.  Exchange rates were .7463, .8105 and .7685 GBP per USD as of September 30, 2017, December 31, 2016 and September 30, 2016, respectively.  Exchange rates were 1.2756, 1.3829 and 1.3044 AUD per USD on September 30, 2017, December 31, 2016, and September 30, 2016, respectively.  Exchange rates were 1.2513 CAD per USD on September 30, 2017. 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.

13

Item 4. Controls and Procedures

The Company's management, under the supervision and with the participation of the Chief Executive Officer and the Principal Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of September 30, 2017. Based on this evaluation, the Chief Executive Officer and Principal Financial Officer concluded that, as of September 30, 2017, the Company's disclosure controls and procedures were effective.

There were no changes in the Company's internal controls over financial reporting that occurred during the nine months ended September 30, 2017, that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting.

14

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 1A. Risk Factors" in UTMD's Annual Report on Form 10-K for the year ended December 31, 2016, which could materially affect its business, financial condition or future results.  The risks described in the Annual Report on Form 10-K are not the only risks facing the Company.  Additional risks and uncertainties not currently known to UTMD or currently deemed to be immaterial also may materially adversely affect the Company's business, financial condition and/or operating results.

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") 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 two years of 2016 and 2017.  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 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 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 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" 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 Filshie Clip applicator, which had 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 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, into undifferentiated commodities. GPOs have been granted an antitrust exemption by the U.S. Congress. Otherwise, their business model based on "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.

15

The 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 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 clinical advantages much more difficult.

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

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 reliance on third party distributors in some markets may result in less predictable revenues:

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 products.  In some countries, notably China, Pakistan and India not subject to similarly rigorous standards, by copying, a distributor of UTMD's products may eventually become a competitor with a cheaper but lower quality version of 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 benefits programs are key to recruiting and retaining talented employees.  An increase in 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 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

UTMD did not purchase any of its own securities during 9M 2017.

16

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: 11/7/17	By: /s/ Kevin L. Cornwell
	Kevin L. Cornwell
	CEO
Date: 11/7/17	By: /s/ Paul O. Richins
	Paul O. Richins

17

EX-31.1

Exhibit 31. 1

CERTIFICATION OF CEO

PURSUANT TO RULE 13a-14(a) AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kevin L. Cornwell, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Utah Medical Products, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 7, 2017

/s/ Kevin L. Cornwell

Kevin L. Cornwell

Chief Executive Officer

EX-31.2

Exhibit 31. 2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO RULE 13a-14(a) AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Paul O. Richins, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Utah Medical Products, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)	designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b)	designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c)	evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d)	disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)	all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
(b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 7, 2017

/s/ Paul O. Richins

Paul O. Richins

Principal Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Utah Medical Products, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Kevin L. Cornwell, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Kevin L. Cornwell

Kevin L. Cornwell

Chief Executive Officer

November 7, 2017

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Utah Medical Products, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Paul O. Richins, Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:

(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

 /s/ Paul O. Richins

Paul O. Richins

Principal Financial Officer

November 7, 2017

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - USD ($)	9 Months Ended
	Sep. 30, 2017	Nov. 06, 2017	Jun. 30, 2017
Document and Entity Information:
Entity Registrant Name	UTAH MEDICAL PRODUCTS INC
Document Type	10-Q
Document Period End Date	Sep. 30, 2017
Amendment Flag	false
Entity Central Index Key	0000706698
Current Fiscal Year End Date	--12-31
Entity Common Stock, Shares Outstanding		3,720,600
Entity Public Float			$ 242,289,134
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Trading Symbol	utmd

XML

UTAH MEDICAL PRODUCTS, INC. CONSOLIDATED BALANCE SHEET - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Current assets:
Cash	$ 37,438	$ 26,296
Investments, available-for-sale	78	64
Accounts & other receivables, net	4,730	3,211
Inventories	5,042	4,542
Other current assets	733	754
Total current assets	48,021	34,867
Property and equipment, net	10,407	9,966
Goodwill	14,028	13,487
Other intangible assets	34,507	31,947
Other intangible assets - accumulated amortization	(16,288)	(13,683)
Other intangible assets, net	18,219	18,264
TOTAL ASSETS	90,675	76,584
Current liabilities:
Accounts payable	1,125	906
Accrued expenses	4,058	2,116
Total current liabilities	5,183	3,022
Deferred tax liability - intangible assets	3,176	3,209
Deferred income taxes	1,119	1,109
TOTAL LIABILITIES	9,478	7,340
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 - September 30, 2017, 3,719 shares and December 31, 2016, 3,713 shares	37	37
Accumulated other comprehensive income (loss)	(8,686)	(12,243)
Additional paid-in capital	701	378
Retained earnings	89,145	81,072
Total stockholders' equity	81,197	69,244
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 90,675	$ 76,584

XML

UTAH MEDICAL PRODUCTS, INC. CONSOLIDATED BALANCE SHEET (Parenthetical) - $ / shares shares in Thousands	Sep. 30, 2017	Dec. 31, 2016
Statement of Financial Position
Preferred Stock, Par Value Per Share	$ 0.01	$ 0.01
Preferred Stock, Shares Authorized	5,000	5,000
Preferred Stock, Shares Issued
Preferred Stock, Shares Outstanding
Common Stock, Par Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	50,000	50,000
Common Stock, Shares Issued	3,719	3,713
Common Stock, Shares Outstanding	3,719	3,713

XML

UTAH MEDICAL PRODUCTS, INC. CONSOLIDATED STATEMENT OF INCOME AND COMPREHENSIVE INCOME - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement
Sales, net	$ 10,125	$ 9,655	$ 31,213	$ 30,446
Cost of goods sold	3,629	3,880	11,288	12,196
Gross profit	6,496	5,775	19,925	18,250
Operating expense:
Selling, general and administrative	1,714	1,701	5,146	5,320
Research & development	103	135	341	364
Total operating expense	1,817	1,836	5,487	5,684
Operating income	4,679	3,939	14,438	12,566
Other income (expense)	17	41	65	206
Income before provision for income taxes	4,696	3,980	14,503	12,772
Provision for income taxes	1,074	1,045	3,476	3,361
Net income	$ 3,622	$ 2,935	$ 11,027	$ 9,411
Earnings per common share (basic)	$ 0.97	$ 0.78	$ 2.97	$ 2.50
Earnings per common share (diluted)	$ 0.97	$ 0.78	$ 2.95	$ 2.49
Shares outstanding (basic)	3,719	3,761	3,716	3,757
Shares outstanding (diluted)	3,738	3,778	3,734	3,775
Other comprehensive income (loss):
Foreign currency translation net of taxes of $0 in all periods	$ 1,219	$ (430)	$ 3,550	$ (3,856)
Unrealized gain (loss) on investments net of taxes of $2, $2, $5 and ($2)	4	3	9	(3)
Total comprehensive income	$ 4,845	$ 2,508	$ 14,586	$ 5,552

XML

UTAH MEDICAL PRODUCTS, INC. CONSOLIDATED STATEMENT OF INCOME (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Income Statement
Foreign currency translation tax adjustment	$ 0	$ 0	$ 0	$ 0
Unrealized gain (loss) on investments tax adjustment	$ 2	$ 2	$ 5	$ (2)

XML

UTAH MEDICAL PRODUCTS, INC. CONSOLIDATED CONDENSED STATEMENT OF CASH FLOW - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 11,027	$ 9,411
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	489	452
Amortization	1,568	1,714
Provision for (recovery of) losses on accounts receivable	(2)	0
(Gain) loss on disposal of assets	0	5
Deferred income taxes	(281)	(351)
Stock-based compensation expense	99	62
Tax benefit attributable to exercise of stock options	25	37
Changes in operating assets and liabilities:
Accounts receivable - trade	(1,340)	(510)
Accrued interest and other receivables	(5)	(35)
Inventories	(301)	(222)
Prepaid expenses and other current assets	40	36
Accounts payable	201	316
Accrued expenses	803	228
Total adjustments	1,296	1,732
Net cash provided by operating activities	12,323	11,143
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures for property and equipment	(174)	(237)
Capital expenditures for intangible assets	0	(9)
Net cash provided by (used in) investing activities	(174)	(246)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - options	224	306
Payment of dividends	(1,969)	(1,954)
Net cash provided by (used in) financing activities	(1,745)	(1,648)
Effect of exchange rate changes on cash	738	(971)
Net increase in cash and cash equivalents	11,142	8,278
Cash at beginning of period	26,296	23,278
Cash at end of period	37,438	31,556
Cash paid during the period for income taxes	3,753	3,342
Cash paid during the period for interest	$ 0	$ 0

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2017

Notes

Basis of Presentation

(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, 2016.  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.

XML

New Accounting Pronouncements and Changes in Accounting Principles

9 Months Ended

Sep. 30, 2017

Notes

New Accounting Pronouncements and Changes in Accounting Principles

(2) Recent Accounting Standards.

In March 2016, new accounting guidance was issued to simplify several aspects of accounting for employee share-based payment (including stock option) transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under the guidance, entities recognize all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. UTMD adopted this standard on January 1, 2017, which had an insignificant impact on its consolidated financial statements. UTMD made a determination to continue to account for forfeitures by estimating the number of awards that are expected to vest.  Because UTMD primarily issues incentive stock options, excess tax benefits and tax deficiencies have historically been minimal.

In May 2014, new accounting guidance 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.  Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard.  This guidance becomes effective for annual reporting periods beginning after December 15, 2017 and early adoption is permitted for periods beginning after December 15, 2016. Because the vast majority of its revenue is recognized when a physical product is shipped, UTMD expects that the 2018 adoption of this standard will have an insignificant impact on its consolidated financial statements, including the timing of revenue recognition.

In February 2016, new accounting guidance 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 effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. UTMD has yet to assess the impact that this standard will have on its consolidated financial statements when it is adopted. The only significant lease the Company anticipates it will have at that time is for the parking lot at its Utah facility.

XML

Inventories

9 Months Ended

Sep. 30, 2017

Notes

Inventories

(3) Inventories at September 30, 2017 and December 31, 2016 consisted of the following:

		September 30, 2017		December 31, 2016
Finished goods	$	982	$	1,327
Work-in-process		1,580		942
Raw materials		2,480		2,273
Total	$	5,042	$	4,542

XML

Stock-Based Compensation

9 Months Ended

Sep. 30, 2017

Notes

Stock-Based Compensation

(4) Stock-Based Compensation. At September 30, 2017, 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”) 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 September 30, 2017 and 2016, the Company recognized  $30 and $20, respectively, in stock based compensation cost.  In the nine months ended September 30, 2017 and 2016, the Company recognized $99 and $62, respectively, in stock based compensation cost.

XML

Warranty Reserve

9 Months Ended

Sep. 30, 2017

Notes

Warranty Reserve

(5) Warranty Reserve.  The Company’s published warranty is: “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, 2016 or September 30, 2017.

XML

Fair Value Measurements

9 Months Ended

Sep. 30, 2017

Notes

Fair Value Measurements

(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 September 30, 2017:

			Fair Value Measurements Using
Description		Total Fair Value at 9/30/2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3 )
Equities	$	78	$	78	$	0	$	0

XML

Subsequent Events

9 Months Ended

Sep. 30, 2017

Notes

Subsequent Events

 (7) 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.

XML

New Accounting Pronouncements and Changes in Accounting Principles: New Accounting Pronouncements, Policy (Policies)

9 Months Ended

Sep. 30, 2017

Policies

New Accounting Pronouncements, Policy

In March 2016, new accounting guidance was issued to simplify several aspects of accounting for employee share-based payment (including stock option) transactions, including the accounting for income taxes, forfeitures and statutory tax withholding requirements, as well as classification in the statement of cash flows. Under the guidance, entities recognize all excess tax benefits and tax deficiencies as income tax expense or benefit in the income statement. UTMD adopted this standard on January 1, 2017, which had an insignificant impact on its consolidated financial statements. UTMD made a determination to continue to account for forfeitures by estimating the number of awards that are expected to vest.  Because UTMD primarily issues incentive stock options, excess tax benefits and tax deficiencies have historically been minimal.

In May 2014, new accounting guidance 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.  Entities have the option of using either a full retrospective or a modified retrospective approach for the adoption of the new standard.  This guidance becomes effective for annual reporting periods beginning after December 15, 2017 and early adoption is permitted for periods beginning after December 15, 2016. Because the vast majority of its revenue is recognized when a physical product is shipped, UTMD expects that the 2018 adoption of this standard will have an insignificant impact on its consolidated financial statements, including the timing of revenue recognition.

In February 2016, new accounting guidance 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 effective for annual reporting periods beginning after December 15, 2018, with early adoption permitted. UTMD has yet to assess the impact that this standard will have on its consolidated financial statements when it is adopted. The only significant lease the Company anticipates it will have at that time is for the parking lot at its Utah facility.

XML

Inventories: Schedule of Inventory, Current (Tables)

9 Months Ended

Sep. 30, 2017

Tables/Schedules

Schedule of Inventory, Current

		September 30, 2017		December 31, 2016
Finished goods	$	982	$	1,327
Work-in-process		1,580		942
Raw materials		2,480		2,273
Total	$	5,042	$	4,542

XML

Fair Value Measurements: Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis (Tables)

9 Months Ended

Sep. 30, 2017

Tables/Schedules

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

			Fair Value Measurements Using
Description		Total Fair Value at 9/30/2017		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3 )
Equities	$	78	$	78	$	0	$	0

XML

Inventories: Schedule of Inventory, Current (Details) - USD ($) $ in Thousands	Sep. 30, 2017	Dec. 31, 2016
Details
Finished goods	$ 982	$ 1,327
Work-in-process	1,580	942
Raw materials	2,480	2,273
Total	$ 5,042	$ 4,542

XML

Stock-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Details
Allocated Share-based Compensation Expense	$ 30	$ 20	$ 99	$ 62

XML

Fair Value Measurements: Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis (Details) $ in Thousands	Sep. 30, 2017 USD ($)
Fair Value, Inputs, Level 1
Equities	$ 78
Fair Value, Inputs, Level 2
Equities	0
Fair Value, Inputs, Level 3
Equities	0
Fair Value, Measurements, Recurring
Equities	$ 78