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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2002. Commission File No. 0-11178
--------

UTAH MEDICAL PRODUCTS, INC.
---------------------------
(Exact name of registrant as specified in its charter)

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

7043 South 300 West
Midvale, UT 84047
-------------------
(Address of principal executive offices)


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

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

None
----

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

Title of each Class
Common Stock, $.01 par value
Preferred Stock Purchase Rights

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and; (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

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

State the aggregate market value of the voting and non-voting common equity held
by non-affiliates computed by reference to the price at which the common equity
was last sold, or the average bid and asked price of such common equity, as of
the last business day of the registrant's most recently completed second fiscal
quarter. As of June 30, 2002, the aggregate market value of the voting and
nonvoting common equity held by nonaffiliates of the registrant was $77,783,000.

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 7, 2003, based on NASDAQ/NMS closing price: $75,658,000.

The number of shares outstanding of the registrant's common stock as of March 7,
2003: 4,448,963


DOCUMENTS INCORPORATED BY REFERENCE

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






PART I.
------


ITEM I - BUSINESS.
Utah Medical Products, Inc. ("UTMD" or "the Company") is in the business of
producing cost-effective healthcare industry devices that are predominantly
proprietary, disposable and for hospital use. Success depends on 1) recognizing
needs of clinicians and patients, 2) rapidly designing or acquiring economical
solutions that gain regulatory approval, 3) reliably producing products that
meet those clinical needs, and then 4) selling through
a) UTMD's own direct channels into markets where the Company enjoys an
established reputation and has a critical mass of sales and support
resources, or
b) establishing relationships with other medical companies that have the
proper resources to effectively introduce and support the Company's
products.

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

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

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

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

UTMD was formed as a Utah corporation in 1978. UTMD publicly raised equity
capital one time in 1982. In 1995, Utah Medical Products Ltd., a wholly-owned
subsidiary located in Ireland, was formed to establish an international
manufacturing capability. In 1997, UTMD purchased Columbia Medical, Inc. (CMI),
a Redmond, Oregon company specializing in silicone injection molding, assembly
and marketing vacuum- assisted obstetrical delivery systems. In July, 1998 UTMD
acquired the neonatal product line of Gesco International, a subsidiary of Bard
Access Systems and C.R. Bard, Inc. On March 8, 2000, UTMD returned to the Nasdaq
Stock Market after trading on the New York Stock Exchange for about 3 years. The
Company was previously listed on Nasdaq for 14 years. The Company's corporate
offices are located at 7043 South 300 West, Midvale, Utah 84047 USA. The
corporate telephone number is (801) 566-1200. European operations are located at
Garrycastle Industrial Estate, Athlone, County Westmeath, Ireland. The telephone
number in Ireland is (902) 73932. CMI's mailing address is 1830 S.E. 1st,
Redmond, Oregon 97756. The phone number in Oregon is (541) 548-7738.



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PRODUCTS
- --------

Labor and Delivery/ Obstetrics:
- ------------------------------
Fetal Monitoring Accessories.
About 60% of births are considered "higher risk" due to lack of prenatal care,
among other factors. In many of these births, labor may become complicated and
does not progress normally. The obstetrician must assess progression of labor to
be able to intervene with drug therapy, infuse a solution to augment amniotic
fluid, or ultimately if necessary, perform an abdominal (C-Section) surgical
procedure, and be prepared for complications following childbirth.

To assist the physician in assessing fetal well-being, changes in fetal heart
rate (FHR) in conjunction with trends in intrauterine pressure are often
electronically monitored. UTMD's intrauterine pressure (IUP) catheter product
line provides for clinician choices from a traditional fluid-filled system to
INTRAN(R) PLUS, the most widely accepted transducer-tipped system. In addition,
adjunct FHR electrodes, leg plates, belly bands and chart paper are offered by
UTMD to complete a package of fetal monitoring supplies. UTMD's IUP catheters
include:

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

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

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

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

Vacuum-Assisted Delivery Systems (VAD).
UTMD's VAD Systems include CMI(R) patented soft silicone bell-shaped birthing
cups and patented hand- held vacuum pumps which UTMD believes are the safest
products for the fetus in vacuum-assisted operative deliveries. UTMD's patented
soft silicone cup is unique in the industry. A soft bell-shaped cup design
should be preferred for fetal well-being in low or outlet fetal stations with
occiput anterior presentations, which should represent more than 90% of the
cases where VAD is indicated. Operative vaginal deliveries using forceps or
vacuum-assisted delivery systems provide knowledgeable physicians with an
alternative to C-section intervention. Although there are risks associated with
operative vaginal deliveries which represent about 15% of all U.S. hospital
births, the procedures are generally regarded as safer for the mother, and at
least as safe for the fetus, as C-Section delivery in comparable clinical
situations. UTMD estimates that the VAD operative approach is used for about
8-10% of all U.S. births, with forceps continuing to lose ground as the
alternative. UTMD's patented bell-shaped soft silicone TENDER TOUCH(R) cups


3




enjoy a low reported complication rate compared to other vacuum cup designs, as
evidenced by the FDA Medical Device Reporting System which reports specific
names of products used in hospitals.

Other Obstetrical Tools.
AROM-COT(TM) is a finger cover with a patented prong design to rupture
maternal membranes with less patient pain and anxiety. MUC-X is an aspiration
device used immediately after birth to clear neonatal respiratory passages and
reduce exposure to potential infections. CORDGUARD(R) is a patented product
which unifies the multiple steps of clamping the neonate's cord close to the
umbilicus, severing the cord without splattering blood, drawing a clean cord
blood sample, and assisting in the removal of the placenta. CORDGUARD's
sharpless, closed system reduces the risk of exposure to potentially infected
blood, and consequently reduces the high cost of exposure treatment under OSHA
and CDC guidelines. In addition, CORDGUARD facilitates obtaining neonatal blood
that is otherwise hard to obtain safely and cleanly.

Neonatal Intensive Care:
- -----------------------
DISPOSA-HOOD(TM)
The DISPOSA-HOOD is an infant respirtatory hood that is used in the NICU to
administer oxygen to neonates and flush CO2 (carbon dioxide) while maintaining a
neutral thermal environment critical to proper physiologic responses. The
DISPOSA-HOOD, placed over the infant's head, incorporates a round diffusor
connection specifically designed to disperse the incoming gases along the inner
surfaces of the hood, rather than allowing them to blow directly on the infant's
head. The design allows more precise FIO2 (fractional inspired oxygen) control,
minimizes convective heat loss from the head and provides optimum flows for
elimination of CO2 by ventilation. Because it is a disposable product, it allows
for excellent visualization of the underdeveloped infant and prevents
cross-contamination.

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

GESCO(R)
In the third quarter of 1998, UTMD acquired the neonatal product line of Gesco
International, a subsidiary of Bard Access Systems and C.R. Bard, Inc. GESCO,
best known for innovative silicone catheters, gained an early distinctive
reputation for its focus on the special developmental needs of tiny
critically-ill babies.

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

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


4





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

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

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

In 2003, UTMD will continue to improve and expand its neonatal product line,
seeking to reinforce a reputation as having some of the most
developmentally-friendly NICU specialty products in the medical device industry.
In addition to products already offered and being developed internally, UTMD
will look to expand sales through distribution arrangements with other
manufacturers, or through selective acquisitions.

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

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


5





FINESSE(R) Generator; Specialty Loop, Ball, and Needle Electrodes; FILTRESSE(R)
Evacuator; Other Specialty Electrodes; Other Supplies and Gynecologic Tools.
UTMD has FDA clearance to market its electrosurgical system and tools for use
in general surgery applications, including dermatology, plastic surgery and
otolaryngology. UTMD recently introduced a new product line of ultra-fine tipped
microdissection needles, called OptiMicro(TM) Needles. The new electrosurgical
needles are particularly useful in plastic and reconstructive surgery
applications. FILTRESSE is a stand-alone surgical smoke filtration system that
combines high filtration efficiency, low cost and convenient use in a surgical
office setting. Other electrosurgery tools and accessories include disposable
electrosurgical pens, dispersive pads, footswitches, filter packs, speculums,
retractors, forceps, tenacula and hooks. UTMD acquired the distribution rights
to a unique reusable four-way expander system which facilitates access to, and
visualization of, the cervix, eliminating the need for less effective specula
and lateral retractors.

EPITOME(R)
EPITOME is a patented electrosurgical scalpel which delivers precise
performance in incision and excision with hemostasis while minimizing thermal
side effects. Where rapid yet precise dissection of dense tissue is necessary,
such as in mammaplasty or abdominoplasty, EPITOME provides exceptional utility.
An independent study concludes that the EPITOME scalpel provides a significant
improvement over older devices in wound healing and patient comfort. EPITOME
allows a rapid incision without countertraction, yielding limited morbidity,
less post-surgical pain and cosmetically superior results. EPITOME is useful
where minimization of thermal tissue injury is important but control of bleeding
needed. A patented bendable version of EPITOME with a smaller active electrode
was introduced in 1998. Designed to significantly reduce the chance of tissue
burns due to inadvertent electrode contact and where a smaller, bent scalpel tip
is needed, the bendable EPITOME is of particular value, e.g., to thoracic
surgeons in harvesting the internal mammary artery during coronary artery bypass
surgery, as well as to otolaryngologists for tonsillectomies.

LIBERTY(R) System
LIBERTY is a device for the conservative treatment and effective control of
urinary incontinence in women. UTMD believes that LIBERTY is the easiest-to-use,
most cost effective incontinence treatment available that yields a therapeutic
effect, not just a cover-up. LIBERTY consists of a battery operated electrical
stimulation unit and an intravaginal electrode probe. This physiotherapy
technique, which can be done in the privacy of the home, involves passive
strengthening of the periurethral muscles. Pulsed, low voltage, high frequency
current is applied primarily to the pudendal neuromuscular tissue causing the
pelvic area muscles to contract, leading to better muscle tone. Because
electrical stimulation has no known adverse side effects, LIBERTY provides women
suffering from mild to moderate incontinence an effective, lower cost and lower
risk alternative to more traumatic treatments such as surgery and drug therapy.
Since HCFA (Health Care Financing Administration) now called CMS (Center for
Medicaid/ Medicare Services) decided in late 2000 to allow reimbursement for
electrical stimulation devices, adoption of Liberty has substantially increased.

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

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

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

6




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

Although other large medical companies manufacture and market disposable
pressure transducers ("DPTs") under rights to UTMD's technology, the Company
believes that the DELTRAN DPT which it manufactures remains the standard in
terms of accuracy, reliability and ease of use. UTMD has an automated assembly
line which allows the Company to effectively compete with the largest suppliers
on the basis of consistent quality and low manufacturing costs. Introduced in
1998, the DELTRAN PLUS provides a closed system for blood sampling, without the
use of needles, reducing the risk of an unwanted infection for both the patient
and the practitioner.

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

MARKETING
- ---------

UTMD competes on the basis of its value-added technologies and cost effective
clinical solutions. UTMD believes that a number of its products are strong
brands because they are recognized as clinically different. The Company's
primary marketing challenge is to keep its customers focused on those
differences and their important clinical benefits. UTMD's specialty focus,
innovation and extensive experience in its specialty are important marketing
attributes which help assure its ability to successfully compete and survive in
a consolidating marketplace where many suppliers are trying to degrade product
differences.

In U.S. hospitals, which represent about 60% of UTMD's sales activity,
marketing efforts are clouded by who in the hospital (or otherwise) actually
makes decisions to purchase medical devices. UTMD regards clinicians who take
responsibility for obtaining optimal care outcomes as the focal point of its
marketing efforts. These people are often not the same ones administratively
responsible for hospital purchasing decisions, but are important participants in
the decision-making process.

DISTRIBUTION
- ------------

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

The length of time and number of administrative steps required in evaluating
new products for use in hospitals has grown substantially in recent years. As a
potential negative factor to future performance, as UTMD introduces new products
it believes are safer and more effective, it may find itself excluded from
certain customers because of the existence of long term supply agreements for

7




existing products. UTMD may also be unable to establish viable relationships
with other medical companies that do have access to users but lack an interest
in the Company's approach.


Historically, UTMD has sold its products, especially those relating to
critical care, through independent distributors and other medical companies in
both domestic and international markets. Since 1991, the Company has developed a
more focused direct sales organization in the United States with its own
directly employed sales force. The current network of direct representatives is
employed to concentrate on select market applications for UTMD products and to
provide proper customer training and support. As of March 2003, the U.S. direct
sales force is comprised of both outside territory representatives operating
remotely geographically, as well as inside representatives who operate by
telephone. Direct representatives are trained to understand the medical
procedures being performed in UTMD's clinical focus. Through the use of its
one-on-one contacts with physicians and other clinicians directly involved in
patient care, the direct sales force positions UTMD to gain market leadership
with solutions to clinical problems. In addition to its direct representatives,
UTMD utilizes third party clinical specialists to augment its training programs.

When hospital customers request it, UTMD provides its products through
national distribution companies, also known as Med/Surg distributors. Sales to
Med/Surg distributors currently comprise less than 10% of total domestic sales.
In contrast, six years ago, national distributors and independent distributors
in the U.S. represented more than 65% of UTMD's direct domestic Ob/Gyn business.

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

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

Internationally, the Company sells its products through about 80 regional
distributors and through about 20 OEMs (other medical manufacturers). The
international business is driven by the initiative and resourcefulness of these
distributors. UTMD's Internet website www.utahmed.com is a frequent conduit for
international customer inquiries.

NEW PRODUCT DEVELOPMENT
- -----------------------

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

Because of UTMD's reputation as a successful innovator, its financial strength
and its established clinician user base, it enjoys a substantial flow of new
product ideas. Internal development, joint development, product acquisitions and
licensing arrangements are all included as viable options in the investigation
of opportunities. Only a small percentage of ideas survive feasibility
screening. For internal development purposes, projects are assigned to a project
manager who assembles an interdisciplinary, cross-functional development team.
The team's objective is to have a clinically proven, manufacturable and FDA
released product ready for marketing by a specific date. Approximately ten
projects on the average, depending on the level of resources required, are
underway at UTMD at any given time. More than 50% of assigned projects do not
succeed in attaining a product that meets all of the Company's criteria. In
particular, this includes a product that is highly reliable, easy to use,
cost-effective, safe, useful and differentiated from the competition. Once a
product is developed, tooled, fully tested and cleared for marketing by the FDA,

8





there remains a reasonable probability it cannot be successfully marketed for
any number of reasons, not the least of which is being beaten to the market by a
competitor with a better solution, or not having access to users because of
limitations in marketing and distribution resources.

UTMD's current product development projects are in four areas of focus: 1)
obstetrics/ fetal monitoring, 2) neonatal intensive care, 3) female incontinence
management, and 4) specialized procedures for the assessment and treatment of
cervical/uterine disease. UTMD has filed, had issued, exclusively licensed or
acquired 11 patents in the last five years. Internal product development
expenses are expected to be in the range of 1-2% of sales in 2003, consistent
with 2002. In 2002, UTMD spent $285 (in thousands) on internal product
development activities, or 1.0% of sales. In 2001, internal new product
development expenses were $364 (1.3% of sales). In 2000, the comparable expenses
were $568 (2.1% of sales). Investment in new product development has declined in
recent years in conjunction with the limitations by hospital GPOs that UTMD has
experienced for new products entering the marketplace.

EMPLOYEES
- ---------

At December 31, 2002, the Company had 216 employees, 11 of which are located
in Oregon, and 33 in Ireland. The average tenure of all of UTMD's employees is
about eight years. The Company's continued success will depend to a large extent
upon its ability to retain skilled employees. No assurances can be given that
the Company will be able to retain or attract such employees in the future,
although management is committed to providing an attractive environment in which
creative and high achieving people want to work.

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

PATENTS AND TECHNOLOGY LICENSES
- -------------------------------

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

The ability of the Company to achieve critical mass in the marketplace depends
in large part on the protection afforded by its patents. The impact on the
Company of expiration of its patents is less clear, however, where UTMD directly
markets products practicing its technology. Because of manufacturing experience,
economies of scale, brand awareness of users and established clinician buying
practices, significant market momentum may persist after expiration of patent
protection. On the other hand, royalties received from the licensing of UTMD's
patents will end immediately upon patent expiration. UTMD's current royalities
reported in non-operating income are received on patents due to expire in 2008.

In the case of UTMD's Patent No. 4,785,822 for inventions relating to a
"Disposable Intracompartmental Pressure Transducer," the patent is due to expire
in 2005. However, for the last six years, UTMD has maintained its leading market
share for its Intran Plus intrauterine pressure catheter practicing this patent
without the protection afforded by the patent. In cases where competitors
introduce products that may infringe on UTMD's technology, the Company has an
obligation to its shareholders to defend its intangible property to the extent
that it can afford to do so. Although the cost of patent litigation is
substantial and reduces the Company's current performance, a successful defense
of a core market franchise may be key to the Company's continued recognition as
an innovator.

In January 2002, UTMD announced that a jury in the United States Federal
District Court for the District of Utah rendered a verdict in favor of UTMD that

9





the Tyco/Kendallo LTP Softrans 4000 Intrauterine Pressure Catheter literally
infringes UTMD's Patent No. 4,785,822. UTMD markets the Intran(R) Plus which
practices this patent. The patent infringement lawsuit had been filed in early
1997. In September 2002, the US Federal District Court issued a formal judgment
awarding UTMD approximately $23 million in damages and accrued interest.
Additional damages for infringing product sold by Tyco after the January verdict
will be determined by the Court at a later date. In addition, the Court issued a
permanent injunction against Tyco prohibiting the manufacturing, marketing,
selling and/or otherwise distributing of the 4000 Softrans IUPC for the duration
of UTMD's patent. Tyco/Kendall has filed an appeal of the decision. Tyco/Kendall
was ordered to produce a $28 million bond by the US Federal District Court, so
the the receipt of awarded damages upheld on appeal is not subject to any risk
of Tyco/Kendall illiquidity. UTMD expects resolution by the end of 2003. Since
the September judgment, Tyco has introduced a substitute intrauterine pressure
catheter called Saflex. No other patent infringement lawsuits are currently
pending.

As a matter of policy, UTMD has acquired and will continue to acquire the use
of technology from third parties that can be synergistically combined with UTMD
proprietary product ideas. During 2002, ongoing royalties included in cost of
goods sold were (in thousands) $3. Other royalties have been previously paid as
a lump sum, or are incorporated into the cost of supplied components which
practice certain patents of third parties. Also as a matter of policy, UTMD
licenses its proprietary technology to others in circumstances where licensing
does not directly compete with UTMD's own marketing initiatives. During 2002,
the Company received $450 in royalty income, compared to $450 in 2001 and $452
in 2000. Royalty income was 4% of earnings before taxes in 2002. The Company's
future financial performance also depends on the performance of other companies
that license UTMD's technology.

GOVERNMENT REGULATION
- ---------------------

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

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

Devices which are classified in Class I are subject only to the general
controls concerning adulteration, misbranding, good manufacturing practices,
record keeping and reporting requirements. Devices classified in Class II must,
in addition, comply with performance standards promulgated by the FDA. The
Company believes all of its present products are Class I or Class II products
and that the Company is in full compliance with all applicable material
performance standards as well as FDA quality standards, record keeping and
reporting.

In 1994, UTMD received certification of its quality system under the ISO
9001/EN 46001 standards ("ISO" stands for "International Organization of
Standardization"). EN 46001 is the European Union's effort to harmonize
different national regulatory requirements for the development, sale, and
manufacture of medical products. Because the ISO standards are in perpetual
modification, UTMD remains on a continuous periodic audit schedule by its
independent notified body in order to stay abreast of international regulatory
standards. In early 1997, UTMD received ISO 9001/EN 46001 certification for its
Ireland facility. UTMD has received formal product certification allowing the
use of the CE Mark (demonstrates proof of compliance with the European
Community's product standards) for essentially all of its products.

SOURCES AND AVAILABILITY OF RAW MATERIALS
- -----------------------------------------

Most of the components which the Company purchases from various vendors are
readily available from a number of sources. Alternate sourcing of various

10





components is continually underway. Vendors are qualified by Corporate Quality
Assurance. The Company has a vendor quality monitoring program that routinely
checks all incoming material for conformance to specifications.

EXPORTS
- -------

Revenues from foreign customers in 2002 were (in thousands) $5,735 (21% of
total sales), as compared to $5,202 (19% of total sales) in 2001, and $5,425
(20% of total sales) in 2000. Blood pressure monitoring products represented 70%
of international sales in 2002, compared to 67% in 2001 and 72% in 2000. Ob/Gyn
and neonatal product foreign sales were $1,743 in 2002, compared to $1,718 in
2001 and $1,506 in 2000. For financial information by geographical area, please
see Notes 1,3 and 8 to the Consolidated Financial Statements.

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

BACKLOG
- -------

As a supplier of primarily disposable products, the nature of UTMD's business
necessitates being very responsive to customer orders and delivering products
quickly. Virtually all direct shipments to end users are accomplished within one
week of receipt of customer purchase order. Backlog shippable in less than 60
days was approximately $0.3 million as of January 1, 2003 and 2002.

SEASONAL ASPECTS
- ----------------

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

PRODUCT LIABILITY RISK MANAGEMENT
- ---------------------------------

The risk of product liability lawsuits is a negative factor in UTMD's business
because UTMD's products are frequently used in inherently life threatening
situations to help physicians achieve a more positive outcome than what might
otherwise be the case. Although UTMD's products are approved by the U.S. FDA as
safe and effective, and have been used safely throughout the products' lives, in
several cases in millions of uses to date, positive outcomes cannot always occur
in the situations where UTMD's products are used. In litigious cultures (such as
the U.S.) which may be driven by attorneys looking for contingency fee
windfalls, patients may be led to regard manufacturers of excellent medical
products as possible scapegoats. The strength of UTMD's balance sheet may be an
inducement for some attorneys to file a claim against UTMD. In any lawsuit
against a company where an individual plaintiff suffers a permanent physical
injury, a possibility of a large award for damages exists whether or not a
causal relationship exists. However, no such damages have been awarded against
UTMD in its 25 year history.

UTMD is self-insured for product liability risk and reserves funds against its
current performance on an ongoing basis to provide for its future defense should
any lawsuits be filed. The best defense the Company has is the consistent
conformance of its proven safe and effective products to specifications. Except
where released by the courts for not being a properly designated defendant, no
product liability lawsuits involving a significant injury have been filed
against the Company for any of its products in the past ten years. UTMD's total
product liability legal cost over the last ten years has been $40 (in
thousands). UTMD is currently named in one lawsuit in which it feels it should
not be named as a defendant, the cost of which should not be material to future
performance.


11





FORWARD LOOKING INFORMATION
- ---------------------------

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

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

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

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


ITEM 2 - PROPERTIES

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

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



12





ITEM 3 - LEGAL PROCEEDINGS

The Company may be a party from time to time in ordinary routine litigation
incidental to its business. The outcomes of lawsuits which are currently pending
are not projected to have a materially adverse effect on UTMD's financial
condition or results of operations.

Please refer to the PATENTS AND TECHNOLOGY LICENSES section on pages 9-10 for
a description of the status of the patent infringement lawsuit filed by UTMD in
1997 against Graphic Controls, now Kendallo LTP/Tyco International, which UTMD
believes continues to not have a materially adverse effect on the Company's
financial condition or results of operations.

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

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







[Remainder of Page Intentionally Left Blank]


13





PART II.
--------

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.

Market Information.
UTMD's common stock began trading on the Nasdaq National Market (symbol:UTMD)
on March 8, 2000. Between December 26, 1996 and March 7, 2000, it traded on the
New York Stock Exchange (symbol: UM). It previously traded on the Nasdaq
National Market, also under the UTMD symbol. The following table sets forth the
high and low sales price information as reported by Nasdaq and NYSE for the
periods indicated:

2002 2001

High Low High Low
---- ----- ---- -----
1st Quarter $ 16.36 $ 12.51 $ 10.50 $ 7.03
2nd Quarter 16.35 14.90 12.40 8.80
3rd Quarter 17.04 13.48 14.00 9.40
4th Quarter 20.07 16.55 13.64 9.80

Stockholders.
The approximate number of beneficial stockholders of UTMD's common stock as of
March 7, 2003 was 2,800.

Dividends.
The Company does not currently intend to pay cash dividends on its common
stock in the foreseeable future. It is the present intention of the Company to
use earnings to finance future growth, for selective infusions of technological,
marketing or product manufacturing rights to broaden the Company's product
offerings, and for continued share repurchases when the price of the stock
remains undervalued.




[Remainder of Page Intentionally Left Blank]


14





ITEM 6 - SELECTED FINANCIAL DATA.
(in thousands, except per share data)

The following selected consolidated financial data of UTMD and its subsidiaries
for the five years ended December 31, 2002, are derived from the audited
financial statements and notes thereto of UTMD and its subsidiaries, certain of
which are included in this report. The selected consolidated financial data
should be read in conjunction with UTMD's Consolidated Financial Statements and
the Notes thereto included elsewhere in this report.



Year Ended December 31
----------------------

2002 2001 2000 1999 1998
---- ---- ---- ---- ----

Net Sales $27,361 $26,954 $27,193 $29,444 $27,677

Net Income 7,165 5,934 5,373 5,468 4,585

Earnings Per Common
Share (Diluted) 1.36 1.14 .90 .76 .59

Total Assets 23,387 23,572 25,423 27,756 31,968

Long-term Debt 4,956 2,501 10,000 5,934 3,098

Cash Dividends
Per Common Share None None None None None



Quarterly Data for 2002
-----------------------

First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
Net Sales $6,705 $6,800 $7,005 $6,854

Gross Profit 3,816 3,917 4,079 3,951

Net Income 1,712 1,785 1,883 1,785

Earnings Per Common
Share (Diluted) .32 .33 .36 .35


Quarterly Data for 2001
-----------------------

First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------

Net Sales $6,567 $6,794 $6,791 $6,802

Gross Profit 3,763 3,921 3,896 3,812

Net Income 1,391 1,481 1,532 1,531

Earnings Per Common
Share (Diluted) .27 .29 .29 .29



15





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

The following comments should be read in conjunction with accompanying financial
statements. Dollar amounts are in thousands except per-share amounts and where
noted.

Productivity of Assets and Working Capital.
a) Assets. Year-ending 2002 total assets were almost the same in all
categories as 2001. Because total assets were slightly lower ($185) and sales
activity increased 2% relative to 2001, UTMD continued to increase its total
asset turns from 1.1 to 1.2, which helped 2002 return on average shareholders'
equity (ROE). Ending 2002 current assets declined $116 as a result of
substantially reduced receivables ($492) which more than offset higher
inventories. Net fixed assets increased $13 despite depreciation of $1,090 that
exceeded new purchases of $517 because the U.S. dollar (USD) value of the
Company's existing assets in Ireland increased due to currency conversion from
EURO to USD. Net intangible assets declined $82 from amortization of patents and
other intellectual property. After 2002 adoption of FASB Rule No. 142, UTMD
suspended amortizing goodwill from acquisitions which in 2001 resulted in a $569
decrease in intangible assets. Year-ending 2002 and 2001 net intangible assets
were 29% of total assets. In 2003, asset turns are expected to benefit from
projected sales growth while working capital remains about the same, excluding
cash. Depreciation of fixed assets should continue to exceed purchases. Net
intangible assets will not materially change, absent a new acquisition or a
determination that current goodwill is impaired. Cash accumulation which results
from operations and/or receipt of damages from Tyco may reduce asset turns in
the absence of a new acquisition or share repurchases. Management targets 2003
total asset turns (excluding cash accumulation) at or higher than 2002 in order
to not negatively affect ROE.

Net Property, Plant and Equipment (PP&E) in the U.S., due to depreciation in
excess of acquisitions, decreased $452, while in Ireland increased $465, despite
no significant new Ireland purchases and depreciation expense of $293. With
higher consolidated sales and constant PP&E in USD terms, 2002 PP&E turns
increased to 3.1 from 3.0. The current book value of consolidated PP&E is 38% of
acquisition cost. Management believes PP&E to be in good working order and
capable of supporting increased sales activity. As a result, going forward,
financial performance should be enhanced by lower rates of depreciation and
continuing higher PP&E turns.

Under FASB Statement No. 142, which UTMD adopted in 2002, goodwill and
indefinite lived intangible assets are no longer amortized but are reviewed
annually for impairment, or more frequently if impairment indicators arise.
UTMD's future income statement performance would only be affected in the case of
impairment. The goodwill on UTMD's balance sheet is the result of two
acquisitions in 1997 and 1998 which were made in cash at conservative
valuations. As of December 31, 2001, the goodwill on the balance sheet had been
reduced by 27% from the acquisition price, as a result of UTMD using previous
GAAP for the purchase method of acquisition accounting. The acquired Gesco
neonatal products and CMI continue to be viable parts of UTMD's overall business
activities, representing 22% of total sales in 2002. Net goodwill on the
December 31, 2002 balance sheet is 23% of 2002 sales. UTMD does not expect its
goodwill intangible assets to become impaired in the foreseeable future.

Average inventory turns decreased in 2002 to 3.4 from 3.7 because of UTMD's
decision to build Intran Plus inventory to be properly prepared for anticipated
increased demand as a result of the injunction against Tyco/Kendall for its
infringing product, and the possibility of better access to physicians in
hospitals as a result of new GPO codes of conduct prohibiting bundling of
"physician preference" products with unrelated products. Management continues to
target 4.0 average inventory turns as its objective, and believes inventory
turns will improve in 2003. Year-ending 2002 accounts receivable (A/R) balances
declined 14%. Calculated average days in A/R at 41 on December 31, 2002, based
on 4Q 2002 shipment activity, were well within management's objective of 55
days. A/R over 90 days from invoice date were about 7% of total A/R at year end,
compared to 6% at year-end 2001. The Company believes these older A/R are
collectible or within its reserve balances for uncollectible accounts.

Working capital at year-end 2002 was the same as year-end 2001 at $5.4 million
because current assests and current liabilities both decreased by $0.1 million.
UTMD's current ratio improved to 3.3 from 3.2.

16





Excluding use of cash for acquisitions or share repurchases, UTMD expects that
2003 working capital will increase as a result of cash generated from operations
after bank debt is repaid.

b) Liabilities. In the three years 2000-2002, UTMD's total liabilities and
total debt ratio have been driven by the timing of debt incurred for financing
share repurchases, not in providing cash to operate its business. Except for the
Oregon facility involved as part of the 1997 CMI acquisition and a portion of
UTMD's Midvale parking lot, the Company generally owns its PP&E assets. PP&E
assets are dominated by Utah and Ireland manufacturing facilities, molds,
production tooling and equipment, test equipment, computer/ communications
equipment and software. At the end of 2002, UTMD's total debt ratio increased to
33% from 23% at the end of 2001 because the year-end line-of-credit balance
increased by $2.5 million. The timing of borrowing about $5 million in November
2002 to complete a tender offer under which UTMD repurchased 0.5 million shares
at a cost of $8.6 million was responsible for the change. UTMD had previously
borrowed $9.3 million in July 1999 to complete a tender offer repurchase of 1.2
million shares and another $9.2 million in September 2000 to complete a tender
offer repurchase of another 1.1 million shares. The debt incurred to finance
those previous repurchases had been fully repaid in early 2002. Without
additional significant share repurchases or a new acquisition, UTMD will be able
to eliminate its current bank debt in 2003, yielding a total debt ratio less
than 15% by the end of the year.

Results of Operations.
a) Revenues. Global consolidated sales increased 2% in 2002 compared to 2001.
Foreign (international) sales increased ten percent, and U.S. (domestic) sales
declined less than one percent.

UTMD divides its domestic sales into two primary distribution channels:
"direct sales" which are sales to end user customers by UTMD's direct sales
force, independent commissioned sales reps, specialty distributors and national
hospital distribution companies, and "OEM sales" which are sales to other
companies where products are packaged and resold as part another company's
product offerings. As a percentage of total domestic sales, 2002 direct sales
represented 94% compared to 92% in both 2001 and 2000. The remaining 6% of
domestic sales in 2002 were domestic OEM sales. In each of the years 2000- 2002,
domestic direct sales represented 74% of global consolidated sales.

International sales in 2002 were 21% of global consolidated sales compared to
19% and 20% in years 2001 and 2000 respectively. Of the 2002 foreign sales, 58%
were made in Europe compared to 58% and 56% in 2001 and 2000. Ireland operations
shipped 59% of foreign sales (in U.S. dollar terms) in 2002 compared to 54% in
2001 and 64% in 2000. Shipments from UTMD Ltd. (Ireland) were up 14% in Euro
terms and up 21% in U.S. dollar terms compared to the prior year.

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

Revenues by product category:
1. Worldwide obstetrics product sales decreased 2% and represented 44% of
total sales in 2002. Obstetrics sales dollars were $11,977 in 2002 compared to
$12,276 in 2001 and $12,499 in 2000. Of the $298 decline in total obstetrics
sales, $222 was from lower sales of vacuum-assisted delivery systems (VADS). The
lower sales resulted from increased competition, GPO restrictions and lower
utilization by U.S. hospital customers. Despite hospital concern, UTMD agrees

17




with ACOG (The American College of Obstetricians & Gynecologists) that using
VADS remains the trained physician's best choice in many operative deliveries,
and will continue its educational programs regarding appropriate indications and
proper use of the procedure. U.S. sales of Intran(R) Plus, the market-leading
IUP catheter, increased 1%. Cheaper priced, less clinically-effective products
represent significant competition where hospital administrators are constrained
by GPO contracts or may not take the total cost of care into consideration,
including increased risk of complications and utilization rates. International
obstetrics sales decreased from $679 in 2001 to $613 in 2002 primarily because
of the loss of one European distributor to bankrupcy.

2. Consolidated global gynecology/ electrosurgery/ urology product sales
increased 7% overall in 2002, and represented 19% of total revenues. Gyn/ES/Uro
sales dollars were $5,271 in 2002 compared to $4,924 in 2001 and $4,552 in 2000.
Electrosurgery product sales increased 11%, direct urology product sales
increased 16%, OEM urology product sales decreased 64% and sales of gynecology
tools and instruments, including the EndoCurette, decreased 4%. International
sales in this category increased 8%. A number of UTMD products in this
fragmented category are patented, so sales should continue to grow as physicians
learn more about their advantages.

3. Consolidated global neonatal product sales increased 1%, and represented
14% of total sales. Neonatal product sales were $3,852 in 2002 compared to
$3,801 in 2001 and $3,781 in 2000. International neonatal product sales
increased 10%.

4. Worldwide blood pressure monitoring and accessories (BPM) sales increased
5%, and represented 23% of total revenues. Sales of BPM and accessories products
were $6,261 in 2002 compared to $5,953 in 2001 and $6,360 in 2000. The increase
was led by a 15% increase in international sales of BPM products, helped by a
weaker U.S. dollar. Domestic OEM sales in this category, which includes plastic
molded components used in other industries affected by the weak U.S. economy,
declined 8%.

Looking forward to 2003, UTMD expects better sales growth primarily as a
result of mandated changes in U.S. hospital group purchasing practices that in
recent years increasingly excluded smaller innovative companies from access to
clinicians through high compliance contracts that bundled "physician-preference"
products with unrelated commodity products. Hospital complied in order to avoid
substantial financial penalties from the larger, more diversified medical device
companies. In addition, after the injunction against Tyco for its infringing
intrauterine pressure catheter, UTMD expects hospitals to return to Intran Plus,
the leader in IUPC safety and effectiveness. The combination of these factors
leads UTMD to project that Intran Plus demand will lead its 2003 sales growth,
projected overall to be 5%. UTMD's patent which Tyco infringed will expire in
2005. The primary negative 2003 sales factor is the discontinuance of
manufacturing the Pulsion (International OEM) PiCCO catheters, which in 2002
contributed about $404 in sales. The adoption of the PiCCO technology in the
U.S. has been slower than Pulsion had projected.

b) Gross Profit. UTMD's average 2002 gross profit margin (GPM), the surplus
after costs of manufacturing, inspecting, packaging, sterilizing, and shipping
products (COGS) are subtracted from net revenues, was a Company record 57.6%
compared to 57.1% in 2001 and 55.6% in 2000. Royalties paid to others are also
included in COGS. UTMD experienced a decline in sales of lower margin domestic
OEM products, an increase in sales of higher margin domestic direct Ob/Gyn
products, higher production yields, lower depreciation expense on fixed assets,
and higher sales without a proportionate increase in overhead costs.

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


18





UTMD targets an average GPM greater than or equal to 55%, which it believes is
necessary to successfully support the significant operating expenses required in
a highly complex and competitive marketplace. Management expects to achieve its
GPM target again in 2003. Expected favorable influences include growth in sales
volume without a similar increase in manufacturing overhead expenses, a larger
percentage of total sales from higher margin products and a continued emphasis
on reengineering products and processes to reduce costs. Expected unfavorable
influences are continued competitive pressure on pricing and higher wage rates.

c) Operating Profit. Operating profit, or income from operations, is the
surplus after operating expenses are subtracted from gross profits. Operating
expenses include sales and marketing (S&M) expenses, research and development
(R&D) expenses and general and administrative (G&A) expenses. Operating profit
increased 14% compared to the prior year. In 2002, operating profit was $10,542,
compared to $9,278 in 2001 and $8,367 in 2000. UTMD's operating profit margin
(operating profits divided by total sales) was also a Company record in 2002.
The 2002 operating profit margin was 38.5%, compared to 34.4% in 2001 and 30.8%
in 2000. Operating expenses as a percentage of sales decreased to 19.1% in 2002,
from 22.7% in 2001 and 24.9% in 2000. A major portion of the decrease in
operating expenses was due to UTMD's required GAAP adoption of SFAS Statement
No. 142, under which the Company recognized no goodwill amortization expense
(GWA) in 2002. GWA was $569 in both 2001 and 2000. For comparison, $569
represents 2.1% of 2002 sales. Looking forward to 2003, UTMD expects to continue
to improve its operating margin, primarily as a result of an increase in sales
coupled with an increase in GPM without a corresponding increase in operating
expenses. In 2003, UTMD plans to hold operating expenses as a percent of sales
consistent with 2002.

i) S&M expenses: S&M expenses are the costs of communicating UTMD's
differences and product advantages, providing training and other customer
service in support of the use of UTMD's solutions and processing orders. Because
UTMD sells internationally through third party distributors, its S&M expenses
are predominantly needed for U.S. business activity where it sells directly to
clinical users. The largest component of S&M expenses is the cost of directly
employing representatives that provide coverage across the country. U.S. GPO
contract administration fees are also included in S&M expenses. Year 2002 S&M
expenses decreased to $2,472 from $2,773 in 2001 and $3,250 in 2000, as UTMD
continued to improve the productivity of its direct sales force. As a percent of
total sales, S&M expenses were 9.0% in 2002, 10.3% in 2001 and 12.0% in 2000.
Looking forward, UTMD plans higher S&M expenses during 2003 due to Group
Purchasing Organization fees, increased advertising expenses and new marketing
initiatives, but intends to manage S&M expenses to remain less than 10% of total
sales.

ii) R&D expenses: R&D expenses include the costs of investigating
clinical needs, developing innovative concepts, testing concepts for viability,
validating methods of manufacture, completing regulatory documentation and other
activities required for design control, responding to customer requests for
product enhancements, and assisting manufacturing engineering on an ongoing
basis in developing new processes or improving existing processes. Internal R&D
expenses were $285 in 2002, $364 in 2001 and $568 in 2000. As a percent of
sales, 2002 R&D expenses were 1.0% compared to 1.3% in 2001 and 2.1% in 2000. In
2002, the efforts of R&D aided UTMD's continued GPM improvements. In addition to
new products still being developed, a number of existing products were enhanced
or updated, including OptiMicro(TM) dissection needles, Hemo-Nate(R),
EndoCurette(R), Deltran(R), LUMIN(R), GESCO(R) stopcocks and catheter hubs, and
Intran(R) Plus. In 2003, UTMD will opportunistically employ R&D resources and
invest R&D expenditures where management anticipates it can get a significant
return on its investments with future new product sales. Those expenses are
again likely to be in the range of 1%-2% of 2003 sales.

iii) G&A expenses: G&A expenses include the "front office" functional
costs of executive management, finance and accounting, corporate information
systems, human resources, shareholder relations, legal, risk management and
protection of intellectual property. In addition to employing the personnel
required to coordinate or manage the preceding functions, G&A expenses include
outside director costs, outside legal counsel, independent accounting audit
fees, 401(k) administration, NASDAQ exchange fees, write-offs of uncollectible
receivables, business insurance costs, and corporate contributions to charitable
organizations. As previously noted, prior to 2002, G&A expenses also included
GWA. G&A expenses were $2,464 in 2002, $2,978 in 2001 and $2,940 in 2000. As a
percent of sales, G&A expenses

19





were 9.0% in 2002, 11.0% in 2001 and 10.8% in 2000. All three years included
considerable litigation expenses relating to the patent infringement lawsuit
with Tyco/Kendallo LTP. Additional 2003 litigation expense will be required to
respond to the Tyco/Kendallo LTP appeal. UTMD expects G&A expenses in 2003 will
be about 9% of total sales.

d) Non-operating Income, Non-operating Expense and EBT. Non-operating income
includes royalties from licensing UTMD's technology to other companies, rent
from leasing unutilized property to others, interest earned from investing the
Company's cash, and gains or losses from the sale of assets offset by non-
operating expenses like interest expenses and bank fees on the revolving
line-of-credit. Non-operating income was $454 in 2002, $202 in 2001 and $53 in
2000. Royalties received were $450 in both 2002 and 2001, and $452 in 2000.
Future royalties may vary depending on the success of other companies in selling
products licensed by UTMD, and the remaining life of the applicable patents.
Interest expense associated with the line-of-credit which reduce non-operating
income was $36 in 2002, $370 in 2001 and $496 in 2000. Interest costs in 2002
were lower compared to 2001 and 2000 because the only significant borrowing
occureed during the last month and a half of the year, and because interest
rates were lower. Assuming interest rates remain about the same as current for
the year of 2003, and no new borrowing for acquisitions or share repurchases,
UTMD expects total non-operating income to be about $60 lower in 2003 than 2002.
The difference is due to a projected higher average line of credit balance and
less rental income.

Earnings before income taxes (EBT) result from adding UTMD's non-operating
income to its operating profits. EBT were $10,996 in 2002, $9,480 in 2001 and
$8,420 in 2000. EBT in 2002 increased by $1.5 million, 16% higher than in 2001,
because of higher sales, record gross profit and operating profit margins
combined with $252 higher non-operating income. Given the projections noted
above, including 5% higher sales, improved gross and operating profit margins,
offset by lower non-operating income, management is targeting about a 7%
increase in 2003 EBT.

e) Net Income, EPS and ROE. Net income is EBT minus income taxes. Net income
increased 21% to $7,165 in 2002, from $5,934 in 2001 and $5,373 in 2000. The
growth in Net Income was greater than EBT growth because UTMD's 2002 effective
tax rate was lower than in 2001. The effective income tax rate in 2002 was 34.8%
compared to 37.4% in 2001 and 36.2% in 2000. Year to year fluctuations in the
tax rate have resulted from 1) the use of a foreign sales corporation, 2) amount
of exercised employee options which result in a tax benefit to the Company, 3)
differences in distribution of state income taxes, 4) differences in profits of
the Ireland subsidiary which is taxed at a 10% rate on exported manufactured
products, and 5) other factors such as R&D tax credits and the timing of actual
versus accrued litigation expense. The most important factor in the tax rate
decrease in 2002 was a tax credit from exercise of employee stock options. The
Company eliminated its foreign sales corporation in 2002. Looking forward,
marginal tax rates increase by 1% for EBT above $10 million. UTMD expects its
2003 income tax rate to be higher than in 2002, particularly if it receives a
large damages award in the Tyco/ Kendallo LTP patent infringement lawsuit.

UTMD's net income expressed as a percentage of sales ranks in the top
performance tier of all U.S. publicly-traded companies at 26.2%, 22.0% and 19.8%
for years 2002, 2001 and 2000, respectively. This profitability performance
factor is the primary driver for UTMD's return on shareholders' equity (ROE).

Earnings per share (EPS) is net income divided by the weighted average number
of shares of stock outstanding (diluted to take effect for stock options awarded
which have exercise prices below the period's weighted average market value).
Diluted 2002 EPS were $1.36, up 20% from $1.14 in 2001. In 2000, EPS were $.90
with sales about the same as 2002. The combination of higher profitability and
fewer outstanding shares have accounted for the substantial increase in EPS
since 2000. UTMD management believes shareholder value is improved primarily by
consistently increasing EPS. In the last five year period since 1997, UTMD has
increased EPS at an annually compounded rate of 22% per year. The end of 2002
weighted average number of diluted common shares (the number used to calculate
diluted EPS) were 5,263 (in thousands) compared to 5,210 shares in 2001 and
5,978 shares in 2000. Dilution for options for the year 2002 was 350 (in
thousands) shares compared to 191 in 2001, and 24 in 2000. The number of
unexercised options outstanding was about the same in all three years. The small
increase in 2002 dilution was due to a higher share price in the stock market.
Actual outstanding common shares as of December 31, 2002 were 4,443 (in
thousands).

20





Return on shareholders' equity (ROE) is the portion of net income retained by
UTMD to internally finance its growth, divided by the average accumulated
shareholders' equity during the period. ROE in 2002 was 42% compared to 39% in
2001, and 34% in 2000. This ratio determines how fast the Company can afford to
grow without adding external financing that would dilute shareholder interests.
For example, a 20% ROE will financially support 20% growth in revenues without
issuing more stock. Record profitability, higher utilization of assets, and
increased financial leverage all contributed to an outstanding 2002 ROE result.
In UTMD's opinion, achieving growth in revenues and EPS without diluting
shareholder interests maximizes shareholders' value. Management's goal is to
consistently achieve ROE in excess of 25%. UTMD's ROE has averaged 31% per year
over the last 17 years. Although the accumulation of cash in the absence of
share repurchases or acquisitions could reduce total asset turns, and the
elimination of long term debt would reduce financial leverage that enhances ROE,
management expects to be able to achieve its ROE objective again in 2003
primarily by accomplishing another record year in profitability.

Liquidity and Capital Resources.
a) Cash flows. Cash (and equivalent) balances were $285 at the end of 2002.
UTMD effectively maintains zero-balance "sweep" cash account balances that
minimize the line-of-credit balance, except for operating balances needed to
meet requirements in Ireland and separate physical reserves set aside for
contractual commitments.

Net cash provided by operating activities, including adjustments for
depreciation and other non-cash operating expenses, along with changes in
working capital, totaled $8,656 in 2002 compared to $7,860 in 2001 and $7,825 in
2000. The reason that 2002 cash provided by operating activities did not
increase by as much as net income was that a substantial part of the increase in
income was due to lower non-cash depreciation and amortization expense, as
previously noted. Net cash in 2002 was also aided by the tax benefit
attributable to exercise of employee options.

For net cash used in investing activities, the Company expended $517 and $524
during 2002 and 2001, respectively, for puchases of property and equipment,
comprised of normal replacement molds and other equipment to sustain
manufacturing capabilities. Management believes that investing activities of
$500-600 in 2003 will continue to sustain effective manufacturing capabilities
and facilities in good condition. In 2000, the $600 expended for investing
activities included $250 for the purchase of certain technology rights.

In 2002, UTMD received $1,113 from issuing 137,089 shares of stock upon the
exercise of employee stock options and repurchased 720,953 shares of stock in
the open market at a cost of $11,787. In addition, the Company received and
retired 1,727 shares as the result of employees trading UTMD shares in payment
for the exercise of stock options, at a cost of $31. Option exercises in 2002
were at an average price of $8.12 per share. Share repurchases in the open
market were at an average cost of $16.35 per share, including commissions and
costs of the tender offer. In 2001, the Company received $316 from issuing
44,500 shares of stock on the exercise of employee stock options (about $800
less than in 2002) and paid $193 to repurchase 18,500 shares (about $11,600 less
than in 2002). In 2000, the Company received $85 from issuing 12,524 shares of
stock on the exercise of employee stock options and paid $11,598 to repurchase
1,463,032 shares of stock in the open market. In 2000, the Company completed a
tender offer for its stock similar in dollar magnitude to 2002.

During 2002, UTMD made repayments of $2,501 on its note payable, which was the
remaining balance at the end of 2001, while receiving $4,956 in proceeds from
the note (line of credit) to finance the new tender offer in November 2002. The
Company repurchased 502,853 shares in the 2002 tender offer at a total cost of
$8,603. In 2001, UTMD made loan repayments of $7,499 and received $0 in proceeds
from the note. In 2000, UTMD made loan repayments of $4,884 and received $8,950
in proceeds from the note to help finance a tender offer in September 2000.

Management believes that future income from operations and effective
management of working capital will provide the liquidity needed to finance
growth plans and repay debt. Planned 2003 capital expenditures are expected to
be in the range of $500-600 to keep facilities, equipment and tooling in good
working order. In addition to the capital expenditures, UTMD plans to use cash

21





in 2003 for selective infusions of technological, marketing or product
manufacturing rights to broaden the Company's product offerings, for continued
share repurchases if the price of the stock remains undervalued, and if
available for a reasonable price, acquisitions that strategically fit UTMD's
business and are accretive to performance. UTMD plans to use any cash not needed
for the above pursuits during 2003 to eliminate the line-of-credit balance. The
revolving credit line will continue to be used for liquidity when the timing of
acquisitions or repurchases of stock require a large amount of cash in a short
period of time.

Other Financial Measures
EBITDA (equals EBT, plus depreciation and amortization expenses, plus interest
expense) is a term used for measuring a company's ability to generate cash from
its operations without regard for changes in working capital, cash consumed for
fixed asset purchases, its cost of borrowing or income tax burden. UTMD's EBITDA
in 2002 was $12.2 million, or 45% as a ratio of sales. UTMD's EBITDA has
averaged 40% of sales over the last five years. The extraordinarily strong cash
generation performance resulted from a combination of outstanding operating
profit performance and royalty income from others' use of UTMD's technology.
With an increase in sales of 5%, management projects performance factors will
remain intact for 2003 that will allow EBITDA approaching $13 million.

Please note that EBITDA is not defined or described by Generally Accepted
Accounting Principles (GAAP). As such, it is not prepared in accordance with
GAAP, is not a measure of liquidity, and is not a measure of operating results.
However, the components of EBITDA are prepared in accordance with GAAP, and UTMD
believes that EBITDA is an important measure of the Company's operating
performance and financial well-being.

Management's Outlook.
In summary, in 2003 UTMD plans to
1) realize improved results from 2002 initiatives to expand sales activity;
2) continue outstanding operating performance, and set new Company records for
profitability as a percent of sales;
3) sustain the patent infringement verdict and recover damages; and
4) actively look for new acquisitions to build a platform for continued
growth.

The following factors provide optimism that 2003 will demonstrate better top
line growth:
1) The new codes of conduct adopted by hospital group purchasing organizations
(GPOs) at the direction of the U.S. Senate Judiciary Subcommittee on Antitrust,
Business Rights and Competition in mid-2002 represent a "sea change" for small,
innovative medical device firms that market differentiated products to hospital
clinicians, if the new codes are honored by hospital members. Continuing the
inquiry into the role of GPOs and monitoring compliance with the 2002 reforms
remains on the top of the Subcommittee's 2003 agenda according to a February 25,
2003 joint press release from Senators Mike DeWine (R-OH) and Herb Kohl (D-WI)
in an important bipartisan effort to improve the quality and cost of healthcare.
2) UTMD recently completed formal supply agreements with two major GPO's:
Premier, for UTMD's L&D specialty products; and MedAssets, for all of UTMD's
specialty mother and baby products including L&D, NICU and gynecology/urology
products. A number of other GPO's, perhaps spurred by the new codes of conduct
or the injunction against Tyco for its infringing IUPC, have recently requested
contract proposals from UTMD. This is a change from the past.
3) UTMD's electrosurgery/gynecology/urology products which have not been as
constrained by hospital GPO contracts continue to gain acceptance and
demonstrate good sales growth.
4) International demand should continue strong in 2003 with a continuing
weaker USD, despite the loss of the Pulsion PiCCO catheter business.
5) UTMD expects some improvement in U.S. OEM activity after a soft year in
2002.

Of course, UTMD is gratified with the January 2002 jury verdict and subsequent
September 2002 U.S. District Court judgment for about $23 million in damages and
interest and permanent injunction of Softrans, Tyco/Kendallo LTP's infringing
product. UTMD believes the Tyco/Kendallo LTP appeal will be resolved in 2003.
Because of the complexity of patent law, UTMD cannot predict the outcome of the
appeal. Given the uncertainty, UTMD will reserve its projection of the impact

22





that an ultimate victory would have on its business until the case is finally
closed. The appeal process does not require new discovery or new testimony by
witnesses.

UTMD will continue to focus on differentiating itself, especially from
commodity-oriented competitors. UTMD is small, but its employees are experienced
and diligent in their work. Our passion is in providing innovative clinical
solutions that will help reduce health risks for women and their babies. The
Company has a defined focus, and does not seek to become big as a primary
motivation. We just want to do an excellent job in meeting our customers' needs,
and provide our shareholders with excellent returns. The reliability and
performance of UTMD's products is high and represents significant clinical
benefits as well as minimal total cost of care. Physicians do care about the
well-being of their patients, but their time is limited to evaluate choices, and
they have hospital administrators to deal with who often look at the initial
price of a product, period. UTMD is hopeful that recent Federal congressional
attention on the activities of GPO's will continue to shine a brighter light on
anti-competitive practices that are not in the best interest of U.S. patients or
their physicians. In the U.S., UTMD will continue to leverage its reputation as
an innovator which will responsively take on challenges to work with physicians
who use its products in specialty hospital areas, or outside the hospital in
their office practices. Internationally, where UTMD must depend on the
knowledge, focus, relationships and energy of independent distributors,
management will continue to closely monitor performance and recruit needed new
business partners. In 2003, UTMD expects its Ireland subsidiary, which grew its
shipments in U.S. Dollar terms by 21% in 2002, to continue to improve its
contribution to overall performance.

In 2002, UTMD again demonstrated a high positive cash flow reflected by
achieving record EBITDA performance of 45% of sales, managing working capital
effectively and keeping new capital expenditures below its rate of depreciation
of existing assets. UTMD's balance sheet is strong enough to finance an
acquisition in 2003 through debt, which is preferred because it doesn't dilute
shareholders' interest by issuing more stock. In considering acquisitions, UTMD
looks to acquire successful companies that will enhance its specialist focus.
When UTMD acquires a company, it probably will be for cash, and with the idea
that UTMD will be able to retain key resources that helped make it successful.
Because current market values seem closer to acquisition values that will allow
realistic accretive results, UTMD intends to increase its acquisition search
activity in 2003.

UTMD's technologies are current, and ideas often leading, but we believe in
the "old-fashioned" approach of building a long term stable business that will
achieve predictable future results allowing job security for our employees who
are diligent in their work, consistent returns for our shareholders and
continued reliable services for customers who depend on us. Rather than devoting
limited resources to a large public relations effort promoting the Company's
stock, we focus our resources on Company business.

Over the last five years, UTMD has achieved some significant accomplishments:
1) compounded EPS growth of 22% per year; 2) repurchase of 46% of the ownership
of the Company (including all option exercises) for $36 million (3.9 million net
shares at an average cost of $9.24 per share including commissions, other
repurchase costs and the difference between option exercise price and market
price for shares exercised); 3) two acquisitions costing $11.5 million which
accounted for 22% of total sales in 2002; and, 4) an apparent successful effort
defending the patent rights of UTMD's flagship product technology and core
franchise of UTMD's market identity, plus a $23 million award.

Looking back, UTMD's EPS were up 20% in 2002, and the $19.10 ending share
price was up 40% relative to the end of 2001. The NASDAQ Composite, S&P 500
Index and DJIA were all down, 32%, 23% and 17% respectively. With 2002 EPS of
$1.36, UTMD's year-end price to trailing earnings ratio (PER) was still only 14,
suggesting that a combination of PER expansion closer to the market average and
continued increase in EPS performance could again provide excellent shareholder
returns in 2003.



23





Accounting Policy Changes.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
no. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections." This statement requires the classification of gains or losses from
the extinguishments of debt to meet the criteria of APB Opinion No. 30
"Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently occurring
Events and Transactions" before they can be classified as extraordinary in the
income statement. As a result, companies that use debt extinguishment as part of
their risk management cannot classify the gain or loss from that extinguishment
as extraordinary. The statement also requires sale-leaseback accounting for
certain lease modifications that have economic effects similar to sale-leaseback
transactions. The Company does not expect the adoption of SFAS 145 to have a
material impact on its financial position or future operations.

In June 2002, the Financial Accounting Standards Board issued Statement No.
146, "Accounting for Costs Associated with Exit or Disposal Activities." This
Standard, which is effective for exit or disposal activities initiated after
December 31, 2002, provides new guidance on the recognition, measurement and
reporting of costs associated with these activities. The standard requires
companies to recognize costs associated with exit or disposal activities when
they are incurred rather than at the date of the company commits to an exit or
disposal plan. The adoption of SFAS No. 146 by the Company is not expected to
have a material impact on the Company's financial position or future operations.

In December 2002, the Financial Accounting Standards Board issued SFAS No. 148
"Accounting for Stock-Based Compensation - Transition and Disclosure - an
amendment of FASB Statement No. 123," which is effective for all fiscal years
ending after December 15, 2002. SFAS No. 148 provides alternative methods of
transition for a voluntary change to fair value based method of accounting for
stock-based employee compensation under SFAS No. 123 from intrinsic value based
method of accounting prescribed by Accounting Principles Board Opinion No. 25.
SFAS 148 also changes the disclosure requirement of SFAS 123, requiring a more
prominent disclosure of the pro-forma effect of the fair value based method of
accounting for stock-based compensation. The adoption of SFAS No. 148 by the
Company did not have any impact on the Company's financial position or
operations for the year ended December 31, 2002 and is not expected to have any
impact on future operations.

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

Prior to January 1, 2002, the Company had manufacturing operations, including
related assets, in Ireland denominated in Irish Pounds, and sold products under
agreements denominated in various Western European currencies. On January 1,
2002, UTMD converted its Irish operations and assets to the EURO currency,
consistent with conversion of Ireland and many other Western European countries
to the new common EURO currency. The EURO, Irish Pound and other currencies are
subject to exchange rate fluctuations that are beyond the control of UTMD. The
exchange rate for the EURO was .9551 per U.S. Dollar as of December 31, 2002.
The exchange rate for the Irish Pound was .8869 and .8354 per U.S. Dollar as of
December 31, 2001 and 2000, respectively. Please see Note 1, page F-11. UTMD
manages its foreign currency risk without separate hedging transactions by
converting currencies as transactions occur.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

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

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

None.


24



PART III.
--------

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

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

ITEM 11 - EXECUTIVE COMPENSATION.

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

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.

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

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

None.

ITEM 14 - CONTROLS AND PROCEDURES.

UTMD maintains a system of internal controls and procedures designed to provide
reasonable assurance as to the reliability of its consolidated financial
statements and other disclosures included in this report. UTMD's Board of
Directors, operating through its audit committee, provides oversight to its
financial reporting process.

Within the 90-day period prior to the date of this report, UTMD evaluated the
effectiveness of the design and operation of its disclosure controls and
procedures pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. Based
on that evaluation, UTMD's Chief Executive Officer and Acting Chief Financial
Officer concluded that its disclosure controls and procedures are effective in
alerting them in a timely manner to material information relating to UTMD
required to be included in this annual report on Form 10- K.

There have been no significant changes in UTMD's internal controls or in other
factors that could significantly affect internal controls subsequent to the date
that it carried out its evaluation and there were no corrective actions
regarding significant deficiencies or material weaknesses.


25




PART IV.
--------

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

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

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

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

3. Exhibits.




SEC
Exhibit # Reference # Title of Document Location
- --------- ----------- ----------------- --------

1 3 Articles of Restatement of the Articles of Incorporated by
Incorporation Reference(1)

2 3 Bylaws Incorporated by
Reference(1)

3 4 Rights Agreement dated as of October 28, 1994, Incorporated by
between Utah Medical Products, Inc., and Reference(1)
Registrar and Transfer Company

4 4 Designation of Rights, Privileges, and Preferences Incorporated by
of Series "A" Preferred Stock Reference(1)

5 10 Employment Agreement dated December 21, 1992 Incorporated by
with Kevin L. Cornwell* Reference(2)

6 10 Amendment, effective May 15, 1998, to Employment Incorporated by
Agreement dated December 21, 1992 with Kevin L. Reference(3)
Cornwell*

7 10 Utah Medical Products, Inc., 1994 Employee Incorporated by
Incentive Stock Option Plan* Reference(1)

8 10 Utah Medical Products, Inc., 1993 Directors' Incorporated by
Stock Option Plan Reference(1)

9 10 Utah Medical Products, Inc., Performance Incorporated by
Option Plan* Reference(1)

10 10 Loan Agreement, dated 3 July, 2002 between Incorporated by
Utah Medical Products, Inc and U.S. Bank Reference(4)
National Association

11 10 Revolving Promissory Note, dated July 3, 2002 Incorporated by
by Utah Medical Products, Inc. to U.S. Bank Reference(4)
National Association.

26





SEC
Exhibit # Reference # Title of Document Location
- --------- ----------- ----------------- --------

12 21 Subsidiaries of Utah Medical Products, Inc. Incorporated by
Reference(5)

13 23 Consent of Tanner + Co., Company's independent This Filing
auditors for the years ending December 31, 2002,
December 31, 2001, and December 31, 2000

14 99 Certification of CEO pursuant to 18 U.S.C.ss.1350, This Filing
as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002

15 99 Certification of Principal Financial Officer pursuant to This Filing
18 U.S.C.ss.1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002


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

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

(2) Incorporated by reference from the Company's annual report on form
10-K filed with the Commission for the year ended December 31, 1992.

(3) Incorporated by reference from the Company's annual report on form
10-K filed with the Commission for the year ended December 31, 1998.

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

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



(b) Reports on Form 8-K.
On January 23, 2002, UTMD filed a report on Form 8-K, Item 5, Other
Events, reporting its audited financial results for 2002.





27





SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned this 26th day of March, 2003.

UTAH MEDICAL PRODUCTS, INC.



By: /s/ Kevin L. Cornwell
-------------------------------------------------
Kevin L. Cornwell
Chief Executive Officer



By: /s/ Paul O. Richins
-------------------------------------------------
Paul O. Richins
Principal Financial Officer


Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on this 26th day of March, 2003.




By: /s/ Stephen W. Bennett
-------------------------------------------------
Stephen W. Bennett, Director



By: /s/ Kevin L. Cornwell
-------------------------------------------------
Kevin L. Cornwell, Director



By: /s/ Ernst G. Hoyer
-------------------------------------------------
Ernst G. Hoyer, Director



By: /s/ Barbara A. Payne
-------------------------------------------------
Barbara A. Payne, Director



By: /s/ Paul O. Richins
-------------------------------------------------
Paul O. Richins, Director


28



CERTIFICATION

I, Kevin L. Cornwell, Chief Executive Officer of the Company, certify that:

1. I have reviewed this annual report on Form 10-K of Utah Medical
Products, Inc.

2. Based on my knowledge, this annual 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 annual
report.

3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report.

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures 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 annual report
is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, 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 in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls.

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 26, 2003


/s/ Kevin L. Cornwell
- -----------------------
Kevin L. Cornwell
Chief Executive Officer

29





CERTIFICATION

I, Paul O. Richins, Acting Principal Financial Officer of the Company, certify
that:

1. I have reviewed this annual report on Form 10-K of Utah Medical
Products, Inc.

2. Based on my knowledge, this annual 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 annual
report.

3. Based on my knowledge, the financial statements, and other financial
information included in this annual 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 annual report.

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures 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 annual report
is being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this annual report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, 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 in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls.

6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 26, 2003


/s/ Paul O. Richins
- -------------------------
Paul O. Richins
Principal Financial Officer


30






UTAH MEDICAL PRODUCTS, INC.
December 31, 2002 and 2001
Consolidated Financial Statements






UTAH MEDICAL PRODUCTS, INC.
Index to Consolidated Financial Statements

- --------------------------------------------------------------------------------


Page
----

Independent Auditors' Report F-2

Consolidated balance sheet F-3

Consolidated statement of income and other comprehensive income F-4

Consolidated statement of stockholders' equity F-5

Consolidated statement of cash flows F-6

Notes to consolidated financial statements F-8




F-1




INDEPENDENT AUDITORS' REPORT







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


We have audited the consolidated balance sheet of Utah Medical Products,
Inc. as of December 31, 2002 and 2001, and the related consolidated
statements of income and other comprehensive income, stockholders' equity,
and cash flows for the years ended December 31, 2002, 2001 and 2000. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Utah
Medical Products, Inc. as of December 31, 2002 and 2001, and the results of
their operations and their cash flows for the years ended December 31,
2002, 2001 and 2000 in conformity with accounting principles generally
accepted in the United States of America.






/s/ Tanner + Co.


Salt Lake City, Utah
January 21, 2003

F-2



UTAH MEDICAL PRODUCTS, INC.
Consolidated Balance Sheet
(In Thousands)

December 31,
- --------------------------------------------------------------------------------


Assets 2002 2001
- ------ ---------------------

Current assets:
Cash $ 285 $ 370
Accounts receivable, net (note 2) 3,093 3,585
Inventories (note 2) 3,478 3,248
Prepaid expenses and other current assets 502 155
Deferred income taxes (note 6) 399 515
---------------------

Total current assets 7,757 7,873

Property and equipment, net (note 3) 8,890 8,877

Other assets, net (note 2) 6,740 6,822
---------------------

Total $ 23,387 $ 23,572
=====================


Liabilities and Stockholders' Equity
- ------------------------------------

Current liabilities:
Accounts payable $ 631 $ 457
Accrued expenses (note 2) 1,688 2,017
---------------------

Total current liabilities 2,319 2,474

Note payable (note 4) 4,956 2,501
Deferred income taxes (note 6) 390 390
---------------------

Total liabilities 7,665 5,365
---------------------

Commitments and contingencies (notes 5 and 9) -- --

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 4,443 shares in 2002 and
5,029 shares in 2001 44 50
Cumulative foreign currency translation adjustment (1,115) (1,816)
Retained earnings 16,793 19,973
---------------------

Total stockholders' equity 15,722 18,207
---------------------

Total $ 23,387 $ 23,572
=====================



See accompanying notes to consolidated financial statements. F-3





UTAH MEDICAL PRODUCTS, INC.
Consolidated Statement of Income and Other Comprehensive Income
(In Thousands, Except Per Share Amounts)

Years Ended December 31,
- --------------------------------------------------------------------------------


2002 2001 2000
-----------------------------------

Net sales (notes 8 and 9) $ 27,361 $ 26,954 $ 27,193

Cost of sales (note 9) 11,598 11,561 12,068
-----------------------------------

Gross margin 15,763 15,393 15,125
-----------------------------------

Expenses:
Sales and marketing 2,472 2,773 3,250
Research and development 285 364 568
General and administrative 2,464 2,978 2,940
-----------------------------------

Income from operations 10,542 9,278 8,367

Other income (expense):
Dividend and interest income 6 9 39
Royalty income 450 450 452
Interest expense (36) (370) (496)
Other, net 34 113 58
-----------------------------------

Income before income
tax expense 10,996 9,480 8,420

Income tax expense (note 6) (3,831) (3,546) (3,047)
-----------------------------------

Net income $ 7,165 $ 5,934 $ 5,373
===================================

Earnings per common share (basic)
(notes 1 and 2) $ 1.46 $ 1.18 $ 0.90
===================================

Earnings per common share (diluted)
(notes 1 and 2) $ 1.36 $ 1.14 $ 0.90
===================================

Other comprehensive income - foreign
currency translation net of taxes of
$(244), $87, and $109 457 (170) (200)
===================================

Total comprehensive income $ 7,622 $ 5,764 $ 5,173
===================================



See accompanying notes to consolidated financial statements. F-4








UTAH MEDICAL PRODUCTS, INC.
Consolidated Statement of Stockholders' Equity
(In Thousands)

Years Ended December 31, 2002, 2001 and 2000
- -------------------------------------------------------------------------------------------------------------------

Cumulative
Foreign
Common Stock Additional Currency
------------------------ Paid-in Translation Retained
Shares Amount Capital Adjustment Earnings Total
---------------------------------------------------------------------------

Balance, January 1, 2000 6,453 $ 64 $ - $ (1,250) $ 19,975 $ 18,789

Shares issued upon exercise of
employee stock options for cash 13 - 85 - - 85

Tax benefit attributable to appreciation
of stock options - - 7 - - 7

Common stock purchased and retired (1,463) (14) (92) - (11,492) (11,598)

Foreign currency translation adjustment - - - (309) - (309)

Net income - - - - 5,373 5,373
---------------------------------------------------------------------------

Balance, December 31, 2000 5,003 50 - (1,559) 13,856 12,347

Shares issued upon exercise of
employee stock options for cash 45 - 316 - - 316

Tax benefit attributable to appreciation
of stock options - - 60 - - 60

Common stock purchased and retired (19) - (376) - 183 (193)

Foreign currency translation adjustment - - - (257) - (257)

Net income - - - - 5,934 5,934
---------------------------------------------------------------------------

Balance, December 31, 2001 5,029 50 - (1,816) 19,973 18,207

Shares issued upon exercise of
employee stock options for cash 137 1 1,112 - - 1,113

Shares received and retired upon
exercise of stock options (2) - (31) - - (31)

Tax benefit attributable to appreciation
of stock options - - 354 - - 354

Common stock purchased and retired (721) (7) (1,435) - (10,345) (11,787)

Foreign currency translation adjustment - - - 701 - 701

Net income - - - - 7,165 7,165
---------------------------------------------------------------------------

Balance, December 31, 2002 4,443 $ 44 $ - $ (1,115) $ 16,793 $ 15,722
---------------------------------------------------------------------------





See accompanying notes to consolidated financial statements. F-5







UTAH MEDICAL PRODUCTS, INC.
Consolidated Statement of Cash Flows
(In Thousands)

Years Ended December 31,
- -------------------------------------------------------------------------------------

2002 2001 2000
--------------------------------

Cash flows from operating activities:
Net income $ 7,165 $ 5,934 $ 5,373
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 1,172 1,933 2,191
Provision for recovery of losses on accounts
receivable 18 70 27
Loss on disposal of assets -- 6 1
Deferred income taxes 108 (26) (13)
Tax benefit attributable to exercise
of stock options 354 60 7
(Increase) decrease in:
Accounts receivable 577 164 57
Accrued interest and other receivables (316) 121 (12)
Inventories (168) (239) 165
Prepaid expenses and other current assets (31) (20) 27
Increase (decrease) in:
Accounts payable 154 (208) 149
Accrued expenses (377) 65 (147)
--------------------------------

Net cash provided by operating activities 8,656 7,860 7,825
--------------------------------

Cash flows from investing activities:
Capital expenditures for:
Property and equipment (517) (524) (361)
Intangible assets -- -- (250)
Proceeds from sale of property and equipment -- -- 11
--------------------------------

Net cash used in investing activities (517) (524) (600)
--------------------------------

Cash flows from financing activities:
Proceeds from issuance of common stock - options 1,113 316 85
Common stock purchased and retired (11,787) (193) (11,598)
Common stock purchased and retired - options (31) -- --
Proceeds from note payable 4,956 -- 8,950
Repayments of note payable (2,501) (7,499) (4,884)
--------------------------------

Net cash used in financing activities (8,250) (7,376) (7,447)
--------------------------------

Effect of exchange rate changes on cash 26 (4) (11)
--------------------------------

Net decrease in cash and cash equivalents (85) (44) (233)

Cash at beginning of year 370 414 647
--------------------------------

Cash at end of year $ 285 $ 370 $ 414
================================




See accompanying notes to consolidated financial statements. F-6





UTAH MEDICAL PRODUCTS, INC.
Consolidated Statement of Cash Flows
(In Thousands)
(Continued)
- -------------------------------------------------------------------------------

Supplemental disclosures of cash flow information:


Years Ended
December 31,
--------------------------------------------
2002 2001 2000
--------------------------------------------

Cash paid during the year for:

Income taxes $ 3,568 $ 3,399 $ 3,308
--------------------------------------------

Interest $ 25 $ 370 $ 496
--------------------------------------------





F-7


UTAH MEDICAL PRODUCTS, INC.

Notes to Consolidated Financial Statements
Years Ended December 31, 2002, 2001 and 2000
- --------------------------------------------------------------------------------

1. Summary of
Significant
Accounting
Policies

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

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

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

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

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



F-8


UTAH MEDICAL PRODUCTS, INC.
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------

1. Summary of
Significant
Accounting
Policies
Continued


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

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

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

Revenue Recognition
Revenue from product sales is generally recognized at the time the
product is shipped and invoiced and collectibility is reasonably
assured. The Company also provides for the estimated cost that may be
incurred for product warranties and unforeseen uncollectible accounts.
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. This policy meets the criteria of Staff Accounting Bulletin
101 in that there is persuasive evidence of an existing contract or
arrangement, delivery has occurred, the price is fixed and
determinable and the collectibility is reasonably assured.

Intangible Assets
Costs associated with the acquisition of patents, trademarks, license
rights, and non-compete agreements are capitalized and are being
amortized using the straight-line method over periods ranging from 5
to 17 years.


F-9


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

- --------------------------------------------------------------------------------

1. Summary of
Significant
Accounting
Policies
Continued

Intangible Assets - Continued
On January 1, 2002, the Company adopted SFAS No. 142, "Goodwill and
Other Intangible Assets". SFAS No. 142 changes the accounting for
goodwill and intangible assets with indefinite lives from an
amortization method to an impairment approach. Other intangible assets
will continue to be amortized over their estimated useful lives.
Amortization of goodwill which relates to the Company's 1997 and 1998
acquisitions ceased on January 1, 2002. Goodwill amortization expense
in 2001 and 2000 was (in thousands) $569.

The Company has completed its transitional and annual impairment test
of goodwill required by SFAS No. 142 and no impairment was indicated.

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

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

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

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

2002 2001 2000
-------------------------
Weighted average number of shares
outstanding - basic 4,913 5,019 5,954
Dilutive effect of stock options 350 191 24
-------------------------
Weighted average number of shares
outstanding, assuming dilution 5,263 5,210 5,978
=========================



F-10



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

- --------------------------------------------------------------------------------

1. Summary of
Significant
Accounting
Policies
Continued

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

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

Loans to Related Parties
Except as listed below or further disclosed in these notes, the
Company has not made loans to related entities including employees,
directors, shareholders, suppliers or customers, nor does it guarantee
the debt of related entities.

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

The Company's customer base consists primarily of hospitals, medical
product distributors, physician practices and others directly related
to healthcare providers. Although the Company is affected by the
well-being of the global healthcare industry, management does not
believe significant trade receivable credit risk exists at December
31, 2002.

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

F-11


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

- --------------------------------------------------------------------------------

1. Summary of
Significant
Accounting
Policies
Continued

Stock-Based Compenstion
At December 31, 2002, the Company has stock-based employee
compensation plans, which are described more fully in Note 7. The
Company accounts for those plans under the recognition and measurement
principles of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and related Interpretations, and has adopted the
disclosure-only provisions of Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation."
Accordingly, no compensation cost has been recognized in the financial
statements, as all options granted under those plans had an exercise
price equal to or greater than the market value of the underlying
common stock on the date of grant. Had compensation cost for the
Company's stock option plans been determined based on the fair value
at the grant date for awards starting in 1995 consistent with the
provisions of SFAS No. 123, the Company's net earnings and earnings
per share would have been reduced to the pro forma amounts indicated
below (in thousands, except per share amounts):

Years Ended
December 31,
-----------------------------------
2002 2001 2000
-----------------------------------

Net income as reported $ 7,165 $ 5,934 $ 5,373
Deduct:
Total stock-based employee
compensation expense
determined under fair value
based method for all awards,
net of related tax effects (175) (248) (403)
-----------------------------------
Net income pro forma $ 6,990 $ 5,686 $ 4,970
===================================
Earnings per share:

Basic - as reported $ 1.46 $ 1.18 $ .90
===================================
Basic - pro forma $ 1.42 $ 1.13 $ .83
===================================

Diluted - as reported $ 1.36 $ 1.14 $ .90
===================================
Diluted - pro forma $ 1.33 $ 1.09 $ .83
===================================



F-12


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

- --------------------------------------------------------------------------------

2. Detail of
Certain
Balance
Sheet
Accounts


December 31,
----------------------
2002 2001
----------------------
Accounts receivable (in thousands):
Receivables $ 3,252 $ 3,726
Accrued interest and other 8 9
Less allowance for
doubtful accounts (167) (150)
----------------------
$ 3,093 $ 3,585
======================

Inventories (in thousands):
Finished products $ 1,236 $ 1,142
Work-in-process 907 835
Raw materials 1,335 1,271
----------------------
$ 3,478 $ 3,248
======================

Other assets (in thousands):
Goodwill $ 8,533 $ 8,533
Patents 1,893 1,893
Licensed rights 293 293
Trademarks 224 224
Non-compete agreements 175 175
----------------------
11,118 11,118

Accumulated amortization (4,378) (4,296)
----------------------
$ 6,740 $ 6,822
======================

Accrued expenses (in thousands):
Payroll and payroll taxes $ 1,019 $ 1,021
Reserve for litigation costs 125 538
Other 544 458
----------------------
$ 1,688 $ 2,017
======================



F-13

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

- --------------------------------------------------------------------------------

2. Detail of
Certain
Balance
Sheet
Accounts
Continued

The following table reflects a comparison of net income and net income
per share for each of the three years ended December 31, adjusted to
give effect to the adoption of SFAS 142 (in thousands, except per
share amounts):

2002 2001 2000
-------------------------------------
Reported net income $ 7,165 $ 5,934 $ 5,373
Add-back goodwill amortization,
net of taxes -- 484 488
-------------------------------------
Adjusted net income $ 7,165 $ 6,418 $ 5,861
=====================================
Reported earnings per share - basic $ 1.46 $ 1.18 $ .90
Add-back goodwill amortization -- .10 .08
-------------------------------------
Adjusted earnings per share - basic $ 1.46 $ 1.28 $ .98
=====================================
Reported earnings per share - diluted $ 1.36 $ 1.14 $ .90
Add-back goodwill amortization -- .09 .08
-------------------------------------
Adjusted net income per share - diluted $ 1.36 $ 1.23 $ .98
=====================================

The changes in the carrying amount of goodwill during the year ended
December 31, 2002 are as follows:


Balance as of December 31, 2001 $8,533
Goodwill acquired during the year --
Adjustments to goodwill --
------
Balance as of December 31, 2002 $8,533
======




F-14


UTAH MEDICAL PRODUCTS, INC.
Notes to Consolidated Financial Statements
Continued
- --------------------------------------------------------------------------------

3. Property
and
Equipment

Property and equipment consists of the following (in thousands):

2002 2001
--------------------
Land $ 980 $ 927
Buildings and improvements 7,816 7,199
Furniture, equipment, and tooling 14,113 13,683
Construction-in-progress 190 202
--------------------
23,099 22,011
Accumulated depreciation and
amortization (14,209) (13,134)
--------------------
$ 8,890 $ 8,877
====================

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


December 31, 2002
---------------------------------------------
Utah Oregon Ireland Total
---------------------------------------------
Land $ 621 $ -- $ 359 $ 980
Building and improvements 3,931 32 3,853 7,816
Furniture, equipment, and
tooling 12,111 1,244 758 14,113
Construction-in-progress 190 -- -- 190
---------------------------------------------
Total 16,853 1,276 4,970 23,099

Accumulated depreciation
and amortization (11,862) (1,256) (1,091) (14,209)
---------------------------------------------
Property and equipment, net $ 4,991 $ 20 $ 3,879 $ 8,890
=============================================



F-15


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

- --------------------------------------------------------------------------------

3. Property
and
Equipment
Continued

December 31, 2001
---------------------------------------------
Utah Oregon Ireland Total
---------------------------------------------
Land $ 621 $ -- $ 306 $ 927
Building and improvements 3,900 32 3,267 7,199
Furniture, equipment, and
tooling 11,793 1,251 639 13,683
Construction-in-progress 202 -- -- 202
---------------------------------------------
Total 16,516 1,283 4,212 22,011

Accumulated depreciation
and amortization (11,200) (1,136) (798) (13,134)
---------------------------------------------
Property and equipment, net $ 5,316 $ 147 $ 3,414 $ 8,877
=============================================

4. Note
Payable

The Company has an unsecured bank line-of-credit agreement, which
allows the Company to borrow up to a fixed maximum amount (in
thousands) of $15,000 at an interest rate equal to either the bank's
LIBOR rate plus 1.25%, the bank's prime rate less 1.00%, or a daily
rate based on LIBOR plus 1.35%. The line-of-credit-balance matures on
May 31, 2004 and has an outstanding balance of (in thousands) $4,956
at December 31, 2002. The principal financial loan covenants are a
restriction on the total amount available for borrowing to 1.25 times
the last twelve months' EBITDA, which as of December 31, 2002 was
equal to (in thousands) $12,204, and a requirement to maintain a net
worth in excess of $10 million, which at the end of 2002 was (in
thousands) $15,722.

As of December 31, 2001, the Company had an unsecured bank line-of-
credit agreement, which allowed the Company to borrow up to a fixed
maximum amount (in thousands) of $14,500 at an interest rate equal to
the bank's LIBOR rate plus 1.35% or the bank's prime rate. The balance
on the line-of-credit as of December 31, 2001 was (in thousands)
$2,501.


F-16



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

- --------------------------------------------------------------------------------

5. Commitments
and
Contingencies

Operating Leases
The Company has a lease agreement for land adjoining the Company's
Utah facility for a term of forty years commencing on September 1,
1991. On September 1, 2001 and subsequent to each fifth lease year,
the basic rental was and will be adjusted for published changes in a
price index. The Company also leases its CMI building in Oregon under
a short-term noncancelable operating lease. Rent expense charged to
operations under these operating lease agreements was approximately
(in thousands) $ 104, $101, and $98 for the years ended December 31,
2002, 2001 and 2000, respectively.

Future minimum lease payments under its lease obligations as of
December 31, 2002 were as follows (in thousands):

Year's Ending December 31: Amount
------------------------- ---------
2003 $ 37
2004 37
2005 37
2006 37
2007 37
Thereafter 883
---------
Total future minimum lease payments $ 1,068
=========

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

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


F-17


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

- --------------------------------------------------------------------------------

5. Commitments
and
Contingencies
Continued

Litigation
The Company has been involved in lawsuits, which are an expected
consequence of its operations, and in the ordinary course of business.
The Company believes that pending litigation will not have a material
adverse effect on its financial condition or results of operations.

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

6. Income
Taxes

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

December 31,
----------------------------------
2002 2001
----------------------------------
Current Long-term Current Long-term
----------------------------------
Inventory write-downs and
differences due to UNICAP $ 178 $-- $ 184 $ --
Allowance for doubtful accounts 57 -- 51 --
Accrued liabilities and reserves 164 -- 264 --
Other -- -- 16 183
----------------------------------
Depreciation and amortization -- 162 -- (60)
Earnings from subsidiary -- (552) -- (513)
----------------------------------
Deferred income taxes, net $ 399 $(390) $ 515 $ (390)
==================================

The components of income tax expense are as follows (in thousands):

Year Ended
December 31,
--------------------------
2002 2001 2000
--------------------------
Current $3,715 $ 3,520 $3,039
Deferred 116 26 8
--------------------------
Total $3,831 $3,546 $3,047
==========================



F-18

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

- --------------------------------------------------------------------------------

6. Income Taxes
Continued

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

Years Ended
December 31,
------------------------------
2002 2001 2000
------------------------------
Federal income tax expense
at the statutory rate $ 3,738 $ 3,062 $ 2,863
State income taxes 482 474 436
ETI, Foreign sales
corporation, and tax credits (182) (60) (79)
Other (207) 70 (173)
------------------------------
Total $ 3,831 $ 3,546 $ 3,047
==============================

7. Options

The Company has stock option plans, which authorize the grant of stock
options to eligible employees, directors, and other individuals to
purchase up to an aggregate of 2,800,000 shares of common stock, of
which 988,315 are outstanding as of December 31, 2002. All options
granted under the plans are granted at current market value at date of
grant, and may be exercised between six months and ten years following
the date of grant. The plans are intended to advance the interest of
the Company by attracting and ensuring retention of competent
directors, employees, and executive personnel, and to provide
incentives to those individuals to devote their utmost efforts to the
advancement of the Company.


F-19


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

- --------------------------------------------------------------------------------

7. Options
Continued

Changes in stock options were as follows:

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

2001
Granted 81,400 $ 9.13 - $ 12.00
Expired or canceled 28,855 6.50 - 14.25
Exercised 44,500 6.50 - 11.50
Total outstanding at December 31 1,082,878 6.50 - 14.25
Total exercisable at December 31 912,185 6.50 - 14.25

2000
Granted 96,200 $ 6.63 - $ 7.75
Expired or canceled 107,500 6.50 - 14.25
Exercised 12,524 6.50 - 7.75
Total outstanding at December 31 1,074,833 6.50 - 14.25
Total exercisable at December 31 821,462 6.50 - 14.25

For the years ended December 31, 2002, 2001 and 2000, the Company reduced
current income taxes payable and increased additional paid-in capital by
(in thousands) $354, $60 and $7, respectively, for the income tax benefit
attributable to sale by optionees of common stock received upon the
exercise of stock options.




F-20


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

- --------------------------------------------------------------------------------

7. Options
Continued

Stock-Based Compensation
The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock-Based Compensation," as described in Note 1.

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

Years Ended
December 31,
--------------------------------
2002 2001 2000
--------------------------------
Expected dividend yield - - -
Expected stock price volatility 41.7% 44.6% 45.9%
Risk-free interest rate
(weighted average) 4.3% 4.9% 6.6%
Expected life of options 5.2 years 5.0 years 4.5 years

The per-share weighted average fair value of options granted during
2002, 2001 and 2000 is $6.52, $4.27 and $3.09, respectively.

The following table summarizes information about stock options
outstanding at December 31, 2002:

Options Outstanding Options Exercisable
-------------------------------------------------------
Weighted
Average
Remaining Weighted Weighted
Range of Contractual Average Average
Exercise Number Life Exercise Number Exercise
Prices Outstanding (Years) Price Exercisable Price
-----------------------------------------------------------------------
$ 6.50 - 8.00 498,495 4.66 $ 6.94 474,029 $ 6.95
9.125 - 15.01 489,820 4.22 11.90 396,385 11.64
-----------------------------------------------------------------------
$ 6.50 - 15.01 988,315 4.44 $ 9.40 870,414 $ 9.09
=======================================================================



F-21



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

- --------------------------------------------------------------------------------

8. Geographic
Sales
Information

The Company had sales in the following geographic areas (in
thousands):

Year United States Europe Other
---- ----------------------------------
2002 $ 21,626 $ 3,337 $ 2,398
2001 $ 21,752 $ 3,012 $ 2,190
2000 $ 21,768 $ 3,043 $ 2,382

9. Product Sale
and Purchase
Commitments

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

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

10. Employee
Benefit
Plan

The Company has a contributory 401(k) savings plan for employees, who
are at least 21 years of age, work 30 hours or more each week, and
have a minimum of one year of service with the Company. The Company's
contribution is determined annually by the board of directors. Company
contributions were approximately (in thousands) $94, $85 and $87 for
the years ended December 31, 2002, 2001 and 2000, respectively.

11. Fair Value
Financial
Instruments

None of the Company's financial instruments, which are current assets
and liabilities that could be readily traded, are held for trading
purposes. The Company estimates that the fair value of all financial
instruments at December 31, 2002, does not differ materially from the
aggregate carrying value of its financial instruments recorded in the
accompanying consolidated balance sheet.




F-22



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

- --------------------------------------------------------------------------------

12. Recent
Accounting
Pronounce-
ments

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB
Statements no. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections." This statement requires the classification of
gains or losses from the extinguishments of debt to meet the criteria
of APB Opinion No. 30 "Reporting the Results of Operations-- Reporting
the Effects of Disposal of a Segment of a Business, and Extraordinary,
Unusual and Infrequently occurring Events and Transactions" before
they can be classified as extraordinary in the income statement. As a
result, companies that use debt extinguishment as part of their risk
management cannot classify the gain or loss from that extinguishment
as extraordinary. The statement also requires sale-leaseback
accounting for certain lease modifications that have economic effects
similar to sale-leaseback transactions. The Company does not expect
the adoption of SFAS 145 to have a material impact on its financial
position or future operations.

In June 2002, the Financial Accounting Standards Board issued
Statement No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities." This Standard, which is effective for exit or
disposal activities initiated after December 31, 2002, provides new
guidance on the recognition, measurement and reporting of costs
associated with these activities. The standard requires companies to
recognize costs associated with exit or disposal activities when they
are incurred rather than at the date of the company commits to an exit
or disposal plan. The adoption of SFAS No. 146 by the Company is not
expected to have a material impact on the Company's financial position
or future operations.

In December 2002, the Financial Accounting Standards Board issued SFAS
No. 148 "Accounting for Stock-Based Compensation - Transition and
Disclosure - an amendment of FASB Statement No. 123," which is
effective for all fiscal years ending after December 15, 2002. SFAS
No. 148 provides alternative methods of transition for a voluntary
change to fair value based method of accounting for stock- based
employee compensation under SFAS No. 123 from intrinsic value based
method of accounting prescribed by Accounting Principles Board Opinion
No. 25. SFAS 148 also changes the disclosure requirement of SFAS 123,
requiring a more prominent disclosure of the pro-forma effect of the
fair value based method of accounting for stock-based compensation.
The adoption of SFAS No. 148 by the Company did not have any impact on
the Company's financial position or operations for the year ended
December 31, 2002 and is not expected to have any impact on future
operations.




F-23