UTAH MEDICAL PRODUCTS INC (UTMD)

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

General

Utah Medical Products, Inc. (UTMD) manufactures and markets a well-established range of specialty medical devices.  The Company’s Form 10-K Annual Report for the year ended December 31, 2025 provides a detailed description of products, technologies, markets, regulatory issues, business initiatives, resources and business risks, among other details, and should be read in conjunction with this report.  Because of the relatively short span of time, results for any given three- or six-month period in comparison with a previous three- or six-month period may not be indicative of comparative results for the year as a whole. Currency amounts in the report are in thousands, except per share amounts or where otherwise noted.  Currencies in this report are denoted as $ or USD = U.S. Dollars; AUD = Australia Dollars; £ or GBP = UK Pound Sterling; CAD = Canadian Dollars; and € or EUR = Euros.

Analysis of Results of Operations

a)Overview

Income statement results in second calendar quarter (2Q) and first half (1H) 2026 compared to the same periods of 2025 were as follows:

Consolidated total 2Q 2026 revenues were $1,424 (14.3%) lower than in 2Q 2025, with 1H 2026 revenues $2,411 (12.3%) lower than in 1H 2025. The lower sales in comparison with the prior year’s periods were primarily the result of a lack of sales to UTMD’s two previously largest customers, representing a combined $1,065 loss in 2Q 2025 sales, which was 75% of the 2Q decline; and representing a combined $1,923 loss in 1H 2025 sales, which was 80% of the 1H decline. The total 2025 sales to these two former customers were $2,889, which UTMD planned to recover in sales of new products in 2026, mainly to other biopharma OEM customers. Sales to other biopharma new customers were just $211 in 1H 2026, a slower than expected gain. Additional period-to-period sales comparisons follow below.

UTMD’s profit margins compared to those of the prior year’s same periods follow:

Despite a more favorable sales mix relative to 2Q 2025, UTMD’s Gross Profit margin in 2Q 2026 contracted somewhat as a result of lower sales than expected without proportionally lowering consolidated manufacturing overhead costs. Operating Income declined more than the Gross Profit decline due to $213 higher 2Q 2026 U.S. litigation costs compared to 2Q 2025, and $341 higher 1H 2026 litigation costs than in 1H 2025, which costs are included in Operating Expenses.  Non-operating income in 2Q 2026 was about the same as in 2Q 2025, but $91 lower in 1H 2026 as a result of lower interest rates. A lower estimated average income tax provision rate helped to decrease the percentage period-to-period declines in Net Income. Share repurchases during 1H 2026 were minimal compared to the 1H of 2025. Please see the financial statements on the last page of this report.

UTMD’s June 30, 2026 Balance Sheet continued strong, with no debt. Ending Cash and Investments were $87.5 million compared to $85.8 million on December 31, 2025, after paying $2.0 million in cash dividends to stockholders, repurchasing $0.2 million of UTMD common stock, increasing non-cash working capital by $1.7 million (including increasing inventories by $1.1 million while reducing current liabilities by $0.5 million) and investing $0.3 million in capital expenditures during 1H 2026.

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Foreign currency exchange (FX) rates for Balance Sheet purposes are the applicable rates at the end of each reporting period. The FX rates from the applicable foreign currency to USD for assets and liabilities at the end of 2Q 2026 compared to the end of calendar year 2025 and the end of 2Q 2025 were as follows:

b)Revenues

Terms of sale are established in advance of UTMD’s acceptance of customer orders. In the U.S., Ireland, UK, France, Canada, Australia and New Zealand, UTMD accepts orders directly from and ships directly to end user medical facilities, as well as third party medical/surgical distributors, under UTMD’s Standard Terms and Conditions (T&C) of Sale. UTMD’s T&C of Sale to end user facilities are substantially the same in the U.S. and OUS. UTMD also has standard T&C of Sale for OEM customers, other medical device and non-medical device customers for components manufactured by UTMD, which are substantially the same, except that prices are generally quoted prior to acceptance of each order.

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

2Q 2026 Sales

Total consolidated 2Q 2026 UTMD worldwide (WW) sales in USD terms were $8,529 compared to $9,953 in 2Q 2025.

Consistent with the projection in UTMD’s SEC 10-K Report at the beginning of the year, 1) sales of biopharma pressure monitoring devices and accessories to UTMD’s previously largest OEM customer, PendoTECH, were zero in 2Q 2026, which were $196 in 2Q 2025 domestic OEM sales, and 2) sales of blood pressure monitoring kits to UTMD’s previously largest distributor outside the U.S. (OUS) located in China were also zero, which were $870 in international sales in 2Q 2025.  The combined sales to those two entities, which were zero in 2Q 2026, were $1,066 in 2Q 2025 and $1,007 in 2Q 2024.

Domestic sales are invoiced in USD and obviously not subject to foreign currency conversion (FX) rate fluctuations. The components of domestic sales include 1) “direct non-Filshie device sales” of UTMD’s medical devices to user facilities (and med/surg stocking distributors for hospitals), 2) “OEM sales” of components and other products manufactured by UTMD for other medical device and non-medical device companies, and 3) “domestic Filshie device sales”. UTMD separates domestic Filshie device sales from other medical device sales direct to medical facilities because UTMD is simply a distributor for Femcare in the U.S.

In the aggregate, 2Q 2026 domestic sales were 11.9% lower, at just $5,166 compared to $5,865 in 2Q 2025. Non-PendoTECH domestic OEM sales were $166 higher, $52 of which were higher sales to new domestic biopharma customers. Domestic sales of the Filshie Clip System at $843 in 2Q 2026 were $263 lower than in 2Q 2025, a weak quarter following unusually strong sales in 1Q 2026.  Domestic direct sales of other devices were $406 lower than in 2Q 2025, about 90% of which were due to lower neonatal device sales.

OUS sales in 2Q 2026 were $725 (17.7%) lower at $3,363 compared to $4,088 in 2Q 2025.  Excluding the $870 lower sales to UTMD’s former China distributor mentioned above, 2Q 2026 OUS sales were $145 higher.  In 2Q 2026, 39% of OUS sales were direct to medical facilities located in Ireland, the UK, France, Canada, Australia and New Zealand, compared to 37% in 2Q 2025. OUS direct to end-user sales are invoiced in foreign currencies. There was a negligible foreign currency impact from a slightly weaker USD compared to other invoiced currencies.

Remaining OUS sales to distributors, excluding the China distributor, were $353 higher in 2Q 2026. These sales included export sales from the U.S. to OUS distributors invoiced in USD, and shipments to OUS distributors of products manufactured by UTMD subsidiaries in Ireland and the UK invoiced in EUR and GBP. The timing of

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shipments to OUS distributors can cause significant fluctuations in quarterly comparisons since distributors tend to order larger quantities each time in order to minimize transit and other logistical costs.

The portion of OUS sales invoiced in foreign currencies in USD terms was 25% of total WW consolidated 2Q 2026 sales compared to 31% in 2Q 2025. The average USD FX rates increased 2Q 2026 total consolidated sales $16 for sales invoiced in foreign currencies. FX rates for income statement purposes are transaction-weighted averages. The average FX rates from the applicable foreign currency to USD during 2Q 2026 and 2Q 2025 for revenue purposes follow:

The $16 weighted average favorable impact on 2Q 2026 consolidated sales was negligible, about 0.2%.  In constant currency terms, foreign currency sales in 2Q 2026 in USD terms were 30.7% lower than in 2Q 2025. “Constant currency” sales means exchanging foreign currency sales into USD-denominated sales at the same FX rate as was in the previous period of time being compared.

1H 2026 Sales

Total consolidated 1H 2026 UTMD worldwide (WW) sales in USD terms were 12.3% lower at $17,252 compared to $19,663 in 1H 2025.

Sales of biopharma pressure monitoring devices and accessories to UTMD’s previously largest OEM customer, PendoTECH, were zero in 1H 2026, compared to $265 in domestic OEM sales in 1H 2025. Sales of blood pressure monitoring kits to UTMD’s previously largest distributor outside the U.S. (OUS) located in China were also zero in 1H 2026, compared to $1,658 in international sales in 1H 2025.  The combined 1H 2026 zero sales to those two entities were in comparison to $1,923 in 1H 2025 and $2,098 in 1H 2024.

Looking forward, the combined year 2026 sales to those two entities are expected to be zero compared to $2,458 in 2025 and $5,063 in 2024.  In its SEC Form 10-K at the beginning of 2026, UTMD planned to offset the 2025 revenue losses with new product sales in 2026, including sales to other biopharma OEM customers, projecting 2026 consolidated revenues about the same as in 2025.  Unfortunately, in 1H 2026 the new sales did not develop as quickly as expected, so that the beginning plan for 2026 full year revenues is no

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

Currency amounts are in thousands except per-share amounts and where noted.  Currencies are abbreviated as follows: the U.S. Dollar (USD or $), the Great Britain Pound (GBP or £), the Euro (EUR or €), the Australian Dollar (AUD or A$), the New Zealand Dollar (NZD) and the Canadian Dollar (CAD or C$).

The following comments should be read in conjunction with the accompanying financial statements.

Overview.

With some unexpected circumstances in 2025, Utah Medical Products, Inc (UTMD) did not achieve its beginning of year financial projections.  Nevertheless, the Company retained excellent profit margins, and increased its year-ending cash balances to $85.8 million despite paying $4.0 million in dividends to stockholders and repurchasing 4.5% (since the end of 2024) of its shares in the open market for $8.4 million.

In 2025, income statement measures of Utah Medical Products, Inc. (Nasdaq: UTMD) consolidated financial performance were lower than in 2024, as follows.

Profit margins in 4Q and year 2025 were hampered by higher operating costs coupled with lower sales, as described later in this report:

Because revenue results for any given three-month period in comparison with a previous three-month period are not indicative of comparative results for the year as a whole, UTMD suggests that investors should focus primarily on the annual results in 2025.

Focusing on the causes of the $2.4 million consolidated worldwide (WW) decline in annual revenues in 2025, the lower sales can be explained by the three following categories:

UTMD’s China distributor for Deltran blood pressure monitoring kits (Item 2), for which a non-changeable/noncancellable order in late 2024 for 2025 shipments was surprisingly cancelled just before the final shipment in 3Q 2025, resulted in $431 lower revenues than had been committed, and $310 lower sales than in 2024. Furthermore, $0.4 million of the $2.1 million sales in 2025 was written off in G&A expense as an uncollectible receivable.

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The decline in WW Filshie device revenues (item 3 above) can be divided into three parts:

OUS Direct Filshie revenues were sales by UTMD subsidiaries directly to medical facilities in the UK, France, Ireland, Canada, Australia and New Zealand. In contrast to a sales increase in the U.S., OUS Filshie sales were significantly lower.

Because of additional cost-of-living adjustments for employees in 2025 and continued inflation in raw material costs, UTMD realized an expected decrease in its 2025 gross profit margin compared to 2024.  Notably though, UTMD was able to maintain its GP margin in 4Q 2025 consistent with 4Q 2024, in part due to the low gross profit margin of former sales to its China distributor which were absent in the 4Q of both years.

Although WW operating expenses remained about the same as in the previous year, UTMD’s Operating Income margin in 2025 was lower than in 2024 as a result of lower sales. Legal costs associated with the Filshie clip litigation in the U.S., which are captured in G&A operating expenses, were $783 lower in 2025. But that benefit was more than offset by the following three unusual G&A expense elements: 1) recognition of $395 write-off of cancellation fees due from the China distributor, 2) recognition of a $195 loss from embezzled funds by UTMD’s Australia subsidiary manager, who pled guilty, but hasn’t repaid, and 3) a $100 increase in OUS G&A expenses relative to 2024 FX rates due to a much stronger EUR and GBP in 2025 relative to the USD.  The remaining $93 increase in WW operating expenses was due essentially to higher salaries and recorded noncash option expense for the same number of people.

Non-operating income was lower primarily as a result of lower interest rates on UTMD’s higher cash balances. Year-to-year income tax provision rates varied as a result of the mix of pretax profits in various sovereignties, including truing up for prior tax provisions after actually filing in 2025.  EPS benefited from UTMD repurchasing over 4.5% of its shares during the year.

Foreign currency exchange (FX) rates for Balance Sheet purposes are the applicable rates at the end of each reporting period. The FX rates from the applicable foreign currency to USD for assets and liabilities at the end of calendar year 2025 compared to the end of 2024, and the end of 3Q 2025 follow:

Despite $3,983 in stockholder dividends and $8,355 in share repurchases in 2025, which reduced both cash and Stockholders’ Equity, measures of the Company’s liquidity and overall financial condition remained strong as of the end of 2025 compared to the end of 2024.  Because of the increase in cash, 2025 year-end working capital increased $2,570. The Company’s current ratio improved to 37.6 at the end of 2025 from 25.6 at the end of 2024. As a result of continued strong positive cash flow from normal operations, 2025 year-end Stockholders’ Equity increased $1,841 despite the $12,338 share repurchases and cash dividends. In comparison, UTMD paid $4,260 in stockholder cash dividends and made $19,968 in share repurchases in 2024. The Company also used $371 in cash in 2025 along with $231 in 2024 to invest in new manufacturing equipment and fixtures, as well as maintaining existing Property, Plant and Equipment (PP&E) in good working order. Two-year net capital expenditures for PP&E were $955 less than depreciation.

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Productivity of Fixed Assets and Working Capital Assets.

Assets.

Year-end 2025 total consolidated assets were $122,542 comprised of $97,742 in current assets, $9,908 in consolidated net PP&E and $14,892 in net intangible assets.  This compares to $122,538 total assets at the end of 2024 comprised of $96,330 in current assets, $9,763 in consolidated net PP&E and $16,445 in net intangible assets. Total asset turns (total consolidated sales divided by average total assets for the year) in 2025 were 31% compared to 32% in 2024, reflecting the decrease in sales.

Current assets increased $1,412 due to the $2,780 increase in year-end cash and investments offset by $877 lower inventories and $573 lower accounts and other receivables. The remaining net increase was due to Other Current Assets $81 higher. Year-end 2025 and 2024 cash and investment balances were $85,756 and $82,976, representing 70% and 68% of total assets, respectively.  Net (after allowance for doubtful accounts) year-end trade accounts receivable (A/R) balances were $573 lower at the end of 2025 compared to 2024 because 4Q 2025 sales were $113 lower than in 4Q 2024 and days in receivables were also lower. Ending 2025 average days in A/R were 35 based on 4Q trade sales, instead of 40 days at the end of 2024. A/R over 90 days from invoice date declined to 2.2% of total A/R at the end of 2025 from 6.4% at the end of 2024.  The Company believes any older A/R will be collected or are within its reserve balances for uncollectible amounts. Inventories net of reserves for obsolescence at 2025 year-end were 10% lower from the end of 2024 when 2025 sales were just 6% lower.

Working capital (current assets minus current liabilities) at year-end 2025 was 3% higher at $95,144 compared to $92,574 at year-end 2024, primarily due to an increase in cash from profitable operations. The end of 2025 working capital exceeds UTMD’s needs for normal operations in an uncertain economic environment, funding of future organic growth and timely payment of accrued tax liabilities. Management believes that, despite the negative impact on Return on Stockholders’ Equity, retaining a high cash balance increases its likelihood of being able to allow for substantial funding of any future accretive acquisition without diluting stockholder interest, as well as repurchase of UTMD shares while paying a consistent dividend, and thus will leverage stockholder value in the long term.

December 31, 2025 net $9,908 total PP&E includes Utah, Ireland and England manufacturing molds, production tooling and equipment, test equipment, and product development laboratory equipment.  In addition, PP&E includes computers and software, warehouse equipment, furniture and fixtures, facilities and real estate for all five locations in Utah, Ireland, UK, Canada and Australia. Manufacturing facilities in Utah, Ireland and the UK are standalone buildings with a combined 220,000 square feet on 15 acres of land.  The distribution facilities in Australia and Canada with a combined 8,000 square feet are part of larger industrial condominiums.  Management estimates the fair market value of the five owned facilities to be at least $35 million excluding the contents, the fungible value of which increases stockholder enterprise value relative to most of UTMD’s industry peers which lease their facilities.

Compared to the end of 2024, ending 2025 net consolidated PP&E (depreciated book value of all fixed assets) increased $145 despite depreciation exceeding new capital expenditures by $455 because of the effect of foreign currency exchange (FX) rates on year-end foreign subsidiary asset balances, because at the end of 2025 compared to the end of 2024, the EUR was 13% higher, the GBP was 7% higher, the AUD was 8% higher and the CAD was 5% higher relative to the USD.

The following end-of-year FX rates to USD were applied to assets and liabilities of each applicable foreign subsidiary:

The year-end 2025 net book value (after accumulated depreciation) of consolidated PP&E was 28% of purchase cost.  End-of-year PP&E turns (Net Sales divided by Net PP&E) was 3.9 in 2025 compared to 4.2 in 2024 due to 6% lower 2025 sales and higher USD-denominated asset values of foreign subsidiary assets. A fut

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