What changed in this filing

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Item 1. Business

2023-03-27 compared with 2022-03-25 · 84 added, 81 removed, 425 unchanged (28% of the section changed)

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(“UTMD” or “the Company”) is in the business of producing high quality cost effective medical devices that are predominantly differentiated by safety and improved patient outcomes.

Throughout this report, “the Company” refers jointly to Utah Medical Products, Inc.

Throughout this report, “UTMD” or “the Company” refers jointly to Utah Medical Products, Inc.

and all of its subsidiaries.

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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) relationship with other medical companies that have the resources to effectively distribute and support the Company's products.

b) relationship with other companies that have the resources to effectively distribute 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 assembly and packaging, instrumentation, plastics processing and materials.

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Outside the U.S.

(OUS), devices are sold directly to end-users in Canada, the United Kingdom (UK), France, Ireland, Australia and New Zealand (NZ), through other medical device companies and through independent medical products distributors in many other countries.

(OUS), devices are sold directly to end-users in Canada, the United Kingdom (UK), France, Ireland, Australia and New Zealand (NZ), and through other medical device companies and independent medical products distributors in many other countries.

UTMD has representation globally in the major developed countries as well as many underdeveloped countries through more than 206 distributors, 108 of which purchased at least five thousand dollars in UTMD medical devices during 2022.

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UTMD’s IUP catheters include:

· IUP-075 and UTMD’s other custom fluid-filled clear catheter kits utilize a saline-filled catheter that is placed within the uterine cavity, connected to a separate external reusable or disposable pressure transducer.

· UTMD’s initial fluid-filled catheter kits utilized a saline filled catheter placed within the uterine cavity, connected to a separate external reusable or disposable pressure 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.

An intrauterine pressure change was transmitted through the fluid column to the external pressure transducer.

· Introduced in 1987, INTRAN was the first disposable intrauterine pressure catheter that placed the pressure transducer at the pressure source within the uterine cavity.

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BT-CATH® is a patented uterine balloon tamponade catheter for controlling severe postpartum hemorrhage.

Its benefits include the ease of rapid deployment and ability to monitor further bleeding after the tamponade has been placed.

Obstetric hemorrhage, which is unpredictable and potentially life-threatening, creates a medical emergency that is commonplace.

The benefits of BT-CATH include the ease of rapid deployment and ability to monitor further bleeding after the tamponade has been placed.

The CVX-RIPE™ catheter is designed to mechanically improve the favorability of the cervix of pregnant patients at term gestation, for whom induction of labor is medically indicated.

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The product line was designed with the input of experienced neonatal medical 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, 1.9 Fr and 3.0 Fr, and two hub configurations for securement.

The soft, strong silicone PICC-Nate comes in three diameter sizes, 1.1 Fr, 1.9 Fr and 3.0 Fr, and two hub configurations for securement.

UTMD’s most recent addition, the tiny 1.1 Fr catheter, advances the ability of clinicians to care for smaller premature babies.

UTMD added Tecoflex polyurethane versions in the same sizes that offer many of the flexibility and biocompatibility advantages of silicone after insertion, with the greater rigidity of polyurethane preferred by many clinicians for insertion.

Recently, UTMD also added a tiny 1.1Fr Tecoflex PICC-Nate.

UTMD developed a unique enteral feeding-only extension set named NUTRI-LOK® that addresses important safety risks in the NICU – inadvertent connections with IV lines and inadvertent disconnections of components of the system spanning the dispensing container through the infusion catheter.

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Gynecology /Urology /Electrosurgery :

LETZ® System:

FINESSE+ Generator;

Specialty Loop, Ball, and Needle Electrodes;

The LETZ System (loop excision of the transformation zone) is used to excise cervical intraepithelial neoplasia (CIN) and other lower genital tract lesions related to human papilloma virus (HPV) infections.

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UTMD’s LETZ System includes disposable electrodes, the FINESSE® electrosurgical generators 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 UtahLoop® 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® that can be positioned so the physician can accurately monitor and control the amount of tissue being excised.

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For example, the Company markets a unique conization electrode for deep endocervical disease called C-LETZ®, designed by UTMD to limit the removal of healthy tissue margins that might compromise adequate cervical function.

UTMD introduced a patented electrode attachment that prevents interference with the colposcope during LETZ.

UTMD introduced the patented DXTender® electrode attachment that prevents interference with the colposcope during LETZ.

UTMD also will continue to provide other components to augment the use of its market-leading specialty electrodes with other manufacturers’ electrosurgical generators.

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The FINESSE+ design includes dispersive pad contact monitoring for improved patient safety, improved circuitry for computer controlled-output that provides a precise tissue specimen for histopathology, a more efficient output stage resulting in less heat generation and longer electronic component life, an update to electronic components which reduces the number of required components and increases service life, and an easy change internal filter for integral smoke evacuation, a unique feature of FINESSE.

FINESSE+ Generator;

Specialty Loop, Ball, and Needle Electrodes;

FILTRESSE® Evacuator;

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Filshie® Clip System

UTMD acquired the Filshie Clip System as part of its acquisition of Femcare in March 2011.

UTMD acquired the Filshie Clip System as part of its acquisition of Femcare Group Ltd in March 2011.

In 2022, sales of Filshie clips, applicators and accessories represented 24% of UTMD’s total U.S.

Dollar denominated sales.

The Filshie Clip is a female surgical contraception device used for tubal ligation, i.e., placed on the fallopian tubes, generally laparoscopically, but also postpartum during a C-Section procedure.

The Filshie Clip, implanted in over six million women worldwide during the last 39 years, has empirically been proven to be the safest and most effective tubal occlusive device, is as easy or easier to achieve occlusion as any of the alternative surgical techniques, and has a substantially higher probability of reversibility when compared to all of the other approaches for women who later decide that they might like to get pregnant.

The Filshie clip is a female surgical contraception device used for tubal ligation, i.e., placed on the fallopian tubes, generally laparoscopically in between pregnancies (interval sterilization), but also postpartum (following childbirth) during C-Sections.

The Filshie clip, implanted in over six million women worldwide during the last 39 years, has empirically been proven to be the safest and most effective tubal occlusive device, is as easy or easier to achieve occlusion as any of the alternative surgical techniques, and has a substantially higher probability of reversibility when compared to all of the other approaches for women who later decide that they would like to get pregnant.

Femcare has obtained numerous regulatory approvals for the Filshie Clip System, which throughout 2022 was sold OUS directly by UTMD and its subsidiaries to medical facilities in Canada, Ireland, France, the UK, Australia and New Zealand, and through specialty distributors in other countries.

Femcare Australia began to distribute the Filshie Clip System directly to New Zealand medical facilities in 4Q 2020.

In February 2019, UTMD purchased the remaining exclusive U.S.

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(CSI), allowing the Company to directly distribute the Filshie Clip System to medical facilities in the U.S.

There are several tubal ligation methods with varying degrees of effectiveness, safety and opportunity to be reversed.

The traditional tubal ligation approach, informally known as “getting one’s tubes tied”, is a form of female sterilization in which the fallopian tubes are severed and sealed, permanently occluded or pinched shut.

There have been several tubal ligation methods with varying degrees of effectiveness, safety and opportunity to be reversed.

The traditional tubal ligation approach, informally known as “getting one’s tubes tied”, is a form of female sterilization in which the fallopian tubes are severed, sealed and permanently pinched shut.

If the sterilization procedure is carried out postpartum, the Pomeroy technique is often adopted.

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A traditional method for interval sterilization is with the use of bipolar cautery (electrocautery).

With this method, a current flows between the tips of forceps when applied to the fallopian tube.

This current then “burns” a portion of the fallopian tube shut.

Bipolar diathermy has a higher rate of ectopic pregnancy, a life-threatening complication, compared to other tubal occlusion methods.

Although these common methods are relatively easy to perform, the failure rate of these methods, defined as the percentage of patients having undergone the procedure who subsequently get pregnant, has been reported to be about 3%.

The Filshie Clip, which can be used either post-partum (following childbirth) or at times unrelated to the post-partum period (interval sterilization), is at least as easy to use, has much less intraoperative risk to apply, has a reported failure rate an order of magnitude less than Bipolar Cautery and is more effective and much simpler to perform than the Pomeroy technique.

Apart from Bipolar Cautery and the Pomeroy technique, other mechanical devices have been the Falope Ring (or Yoon Ring) and the Hulka Clip (which is no longer manufactured).

Both these older methods have a higher failure rate than the Filshie Clip, are associated with more post-operative pain and have generally been abandoned in favor of other sterilization techniques.

Sterilization carried out with the Falope Ring also reduces the chances of a successful reversal being carried out.

With this method, an electric current flows between the tips of forceps when applied to the fallopian tube.

The current then “burns” a portion of the fallopian tube shut.

Bipolar cautery has a higher rate of ectopic pregnancy, a life-threatening complication, compared to other tubal occlusion methods.

Although these common methods are relatively easy to perform, their failure rate - defined as the percentage of patients having undergone the procedure who subsequently get pregnant - has been reported to be about 3%.

The Filshie clip, which can be used either postpartum or at times unrelated to the post-partum period (interval sterilization), is at least as easy to use, has much less intraoperative risk, has a reported failure rate an order of magnitude less than bipolar cautery and is more effective and much simpler to perform than the Pomeroy technique.

Apart from bipolar cautery and the Pomeroy technique, other mechanical devices have been used but are no longer manufactured:

the Falope Ring (or Yoon Ring) and the Hulka clip.

Both these older methods had a higher failure rate than the Filshie clip, are associated with more post-operative pain and have generally been abandoned in favor of other sterilization techniques.

In more recent years, hysteroscopic sterilization devices were introduced as an alternative to laparoscopic tubal ligation.

The devices were the Adiana by Hologic Inc and the ESSURE by Conceptus, Inc.

The devices were the Adiana by Hologic Inc.

and the ESSURE by Conceptus, Inc.

(acquired by Bayer AG in 2013).

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Adiana was stopped in 2012 and ESSURE was stopped in 2017.

Prior to Bayer ceasing the distribution of ESSURE, the device had received a substantial amount of negative publicity regarding unwanted side effects, particularly from patients through social media.

Unfortunately, because both the Filshie Clip and ESSURE are surgically implanted devices designed to achieve sterilization by tubal occlusion, some readers of the media have incorrectly concluded that the negative side effects of ESSURE also apply to Filshie Clips.

Prior to Bayer ceasing the distribution of ESSURE, the device had received a substantial amount of negative publicity regarding unwanted side effects, particularly from patients using social media.

Unfortunately, because both the Filshie clip and ESSURE are surgically implanted devices designed to achieve sterilization by tubal occlusion, some readers of the media - including certain product liability attorneys - have incorrectly concluded that the negative side effects of ESSURE also apply to Filshie clips.

UTMD would like to provide clarification to stockholders why this association is incorrect.

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These symptoms do not apply to Filshie clips as the ESSURE device and Filshie clips are substantially different in design and use.

ESSURE had a metal coil with a tip capable of perforation, with nickel components, hysteroscopically implanted (with some difficulty and risk of unwanted bodily injury) inside the Fallopian tubes, which then caused scar tissue to grow around it over time and occlude the tubes.

Filshie Clips are clamped over the tubes, laparoscopically or following a C-section, with immediately effective occlusion and almost no chance of patient injury beyond the normal risks of laparoscopic surgery.

ESSURE, with components made of nickel, had a metal coil with a tip capable of perforation.

It was hysteroscopically implanted (with some difficulty and risk of unwanted bodily injury) inside the fallopian tubes, which then caused scar tissue to grow around it over time and occlude the tubes.

Filshie clips are clamped over the tubes, laparoscopically or following a C-section, with immediate effective occlusion and almost no chance of patient injury in the course of implantation beyond the normal risks of laparoscopic surgery.

There are no nickel components in the Filshie clip.

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Orthopedic implants, for example, are routinely made of titanium in massively greater amounts.

There have been a few patient complaints of suspected allergic response to Filshie Clips within millions of uses (including from patients allergic to copper, of which there is none in Filshie Clips), but no such reports from clinicians or in the clinical literature.

Out of millions of Filshie clips in use, a few complaints have come from patients who suspected that they were allergic its components - including to copper, which is not in Filshie clips - but there have been no such reports from clinicians or in the clinical literature.

Pain associated normally with any laparoscopic procedure generally resolves within 48 hours, and is not severe, nor does it become chronic unless the result of an infection.

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The obvious recourse for a person experiencing pain that she associates with an implanted device is to remove it.

ESSURE, difficult if not impossible to remove, requires specialized surgical technique.

In contrast, given currently widely available imaging and normal laparoscopic skills, Filshie Clips can be removed safely, although removal is rarely requested by patients or recommended by physicians.

ESSURE, which is difficult if not impossible to remove, requires specialized surgical technique.

In contrast, given widely available imaging and normal laparoscopic skills, Filshie clips can be removed safely, although removal is very rarely requested by patients or recommended by physicians.

A well-known and clinically-reported potential side effect of Filshie clip tubal ligation is clip migration.

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Peritoneal tissue usually encapsulates an implanted clip while still in contact with the fallopian tube.

In some cases where tissue encapsulation is slow, migration of a clip occurs after sterilization has been achieved.

In some cases where tissue encapsulation is slow, migration of a clip may occur after sterilization has been achieved.

Although the silicone lining of the clip helps prevent clip migration and reduces the risk of tubal regeneration, one clinical journal publication indicated migration occurs 6% of the time.

Marcus Filshie, the inventor of the clip, expressed his opinion in 2002 that more than 25% of patients will experience a migration of one or more clips, typically within the abdominal cavity.

Once detached, the clip becomes encompassed in dense adhesive tissue normally without any symptoms, only rarely causing any symptoms.

A low grade inflammatory response can occur.

Because clips are biologically inert and relatively small, physicians generally have concluded that removing a migrated clip represents more risk to long term well-being than leaving it in the body.

In 2019, UTMD retained a clinical expert who in 2010 had published the results of an almost twenty-year retrospective review of all reported Filshie Clip migration events in the English literature, in order to independently review all reported complaints contained in the US FDA MAUDE website and the Australia TGA DAEN website over the most recent ten years.

His February 2019 written report generally observed that “There were no serious clinical or life-threatening complications that related directly or indirectly to the Filshie Clips or their migration.”

Unfortunately, in late 2021, after 25 years’ use in the U.S., implanted in millions of women, a clip migration lawsuit was filed in Texas.

Subsequently, plaintiffs’ lawyers solicited and recruited claimants in five other states.

There are presently a total of seven clip migration lawsuits filed in six states.

In UTMD’s view, the current lawsuits which have not been litigated yet are without merit, and should be resolved without a material impact on UTMD’s consolidated performance.

UTMD stockholders should be confident that Filshie Clips remain a very safe and effective method of tubal occlusion.

Once detached, the clip typically becomes encompassed in dense adhesive tissue without any symptoms.

Rarely, a low grade inflammatory response can occur.

Because clips are biologically inert and small, physicians generally have concluded that removing a migrated clip represents more risk to long term well-being than leaving it in the body.

In 2019, UTMD retained an independent clinical expert, Dr.

Nader Gad in Australia, who in 2010 had published the results of an almost twenty-year retrospective review of all reported Filshie clip migration events in the English literature, in order to independently review all subsequent reported complaints contained in the US FDA MAUDE website and the Australia TGA DAEN website over the most recent ten years.

His February 2019 written report observed that “There were no serious clinical or life-threatening complications that related directly or indirectly to the Filshie clips or their migration.”

In late 2021, after the Filshie clip had been used in the U.S.

for 25 years and implanted in millions of women, a clip migration lawsuit was filed in Texas.

Subsequently, the same law firm solicited and recruited claimants in other states.

As of the end of January 2023, there were a total of fourteen clip migration lawsuits initiated by the same law firm in twelve different states.

UTMD has filed motions to dismiss in most of those lawsuits, one of which has been granted.

A dismissal can be appealed, but as of yet hasn’t been.

Management expects others to be dismissed based on legal grounds such as lack of jurisdiction or U.S.

FDA preemption.

In lawsuits where UTMD’s early motions for dismissal have been denied, those denials will be challenged by facts presented by UTMD at a later stage.

In UTMD’s view, the current lawsuits which have not been litigated yet are without merit as UTMD believes that they are preempted by federal law.

FDA approved the Filshie clip for marketing in the U.S.

in 1996 after a PMA submission which included a prospective clinical trial involving 5,454 women implanted with Filshie Clips.

As mandated by the FDA, Femcare, the developer and manufacturer of the Filshie Clip System, must submit an annual experience report for FDA’s continual review and vigilance of the safety and effectiveness of the PMA device.

In late 2016, the FDA approved the use of Femcare’s Sterishot single use applicator for applying Filshie Clips.

An applicator is a precision instrument which closes the implanted Filshie Clip on the Fallopian tube to achieve proper permanent tubal ligation.

Reused applicators require extra handling, cleaning, resterilization and storage which have the potential to damage or misalign the delicate mechanism.

in 1996 after a Premarket Approval (PMA) submission, which included a prospective clinical trial involving 5,454 women implanted with Filshie clips.

As mandated by the FDA, Femcare (the developer and manufacturer of the Filshie Clip System) is required to submit an annual experience report for FDA’s continual review and vigilance of the safety and effectiveness of the PMA device.

In late 2016, the FDA approved the use of Femcare’s Sterishot single use applicator for implanting Filshie clips.

(An applicator is a precision instrument which closes the implanted Filshie clip on the Fallopian tube to achieve proper permanent tubal ligation.) Reused applicators require extra handling, cleaning, resterilization and storage, which all have the potential to damage or misalign the delicate mechanism.

Timely periodic servicing and recalibration is needed, but often not sought by hospitals.

In addition, the reuse of a surgical instrument introduces the possibility of infection if not properly cleaned and resterilized between procedures.

The precalibrated, single-use sterile Sterishot eliminates these safety, effectiveness and cost exposures.

The precalibrated, single-use sterile Sterishot applicator eliminates these safety, effectiveness and cost exposures.

After more than ten years since being introduced outside the U.S.

(OUS), the patented Sterishot is used in the majority of Filshie Clip ligation procedures OUS, but was not effectively marketed by CSI.

Beginning in February 2019, UTMD began directly marketing the Filshie Clip System in the U.S., recommending the adoption of Sterishot kits.

(OUS), the patented Sterishot is used in the majority of Filshie clip ligation procedures OUS, but was not effectively marketed by CSI, Femcare’s distributor in the U.S.

Beginning in February 2019, UTMD began directly marketing the Filshie Clip System in the U.S., strongly recommending that all hospitals use a Sterishot kit for each procedure.

PATHFINDER PLUS™

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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.

Pulsed, low voltage, low 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.

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OUS sales in 2022, as a percentage of consolidated total USD sales, represented 39% compared to 38% in 2021 and 39% in 2020.

The lower OUS share of total sales in 2021 was the result of more restrictions on medical procedures OUS, especially in Europe, due to the COVID-19 pandemic.

In USD terms, 64% of 2022 OUS sales were invoiced in foreign currencies.

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This OEM distribution channel is simply maximizing utilization of manufacturing capabilities that are otherwise needed for UTMD's primary business, and does not compete with or dilute UTMD’s direct distribution and marketing programs.

OUS, the Company and its subsidiaries distribute directly to end-user facilities in Canada, the UK, France, Ireland, New Zealand and Australia, and in 2021 sold to over 220 regional distributors and OEMs (other medical device manufacturers and/or distributors) in over a hundred countries.

OUS, the Company and its subsidiaries distribute directly to end-user facilities in Canada, the UK, France, Ireland, New Zealand and Australia, and in 2022 sold to 206 regional distributors and OEMs (other medical device manufacturers and/or distributors) in over a hundred countries.

Ten percent of UTMD’s independent OUS distributors comprised 78% of UTMD’s indirect OUS sales in the years of 2020 - 2022.

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EMPLOYEES AND OTHERS

At December 31, 2021, the Company worldwide had 178 full-time employees, 33 part-time employees, 7 regular consultants, 20 independent manufacturer’s sales representatives and an additional 11 subcontract production employees in Utah.

The Utah subcontract employees represent UTMD’s desire to provide handicapped persons additional work opportunities, hired through the Utah state-supported Work Activity Center.

The Company utilizes independent consultants, some of which were prior employees.

At December 31, 2022, the Company worldwide had 186 full-time employees, 35 part-time employees, 6 regular consultants, 19 independent sales representatives and 8 outside directors of UTMD and its subsidiaries.

The Company utilizes independent consultants and directors, some of which were prior employees.

Almost all of UTMD’s internally-manufactured devices are made either in Utah or in Ireland.

In Ireland, the average tenure of full-time employees declined from 15 years to 10 years as a result of a significant increase in production employees in 2021.

In the U.S., the average tenure of full-time employees increased from 15 years to 16 years.

At the end of 2021, the average tenure with the Company of the combined 166 full-time employees in the U.S.

and Ireland is now 14 years.

At the end of 2022, the average tenure with the Company of the combined 186 full-time employees worldwide is now 13 years.

In Utah, 20% of full-time employees have been with the Company for more than 30 years.

This experience conveys an important benefit due to the level of training required to produce consistently high quality medical devices and appreciation of how UTMD’s devices provide unique benefits for clinicians and patients.

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UTMD and Femcare remain on a continuous periodic audit schedule by its independent notified body and authorized MDSAP auditing organization in order to stay current with international regulatory standards, and retain its certifications.

UTMD has received CE Mark certifications (demonstrates proof of compliance with the European Community’s ISO standards) for all of its major products.

UTMD and Femcare have received CE Mark certifications (demonstrates proof of compliance with the European Community’s ISO standards) for all major products.

SOURCES AND AVAILABILITY OF RAW MATERIALS

Most of the components which the Company purchases from various vendors are available from a number of sources and in a number of locations worldwide.

That notwithstanding, the Company maintains safety stocks that anticipate potential disruption to its supply chain from changes in government policies including tariffs, as well as disruptions resulting from the COVID-19 pandemic, including the time required to source and qualify new vendors.

Fortunately, given availability of its significant cash reserves, UTMD has the financial ability to mitigate supply chain risk by carrying extra inventories during periods of increased uncertainty.

That notwithstanding, the Company maintains safety stocks that anticipate potential disruption to its supply chain from changes in government policies including tariffs, including the time required to source and qualify new vendors.

Fortunately, given availability of its significant cash reserves, UTMD has had the financial ability to mitigate supply chain risk by carrying extra inventories during periods of increased uncertainty.

Alternative sourcing of various components is continually underway.

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and 3) from a manufacturing point of view, reduced dependence on one manufacturing site and increased capacity for meeting customer needs.

Total 2021 trade revenues in USD terms from customers OUS were $18,395 (38% of total consolidated USD sales) compared to $16,312 (39% of sales) in 2020 and $19,411 (41% of total sales) in 2019.

Total 2022 trade USD revenues from customers OUS were $20,310 (39% of total consolidated USD sales) compared to $18,395 (38% of total consolidated USD sales) in 2021 and $16,312 (39% of sales) in 2020.

OUS trade sales (U.S.

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The risk of product liability lawsuits is a negative factor in the medical device industry because devices are frequently used in inherently risky situations to help clinicians achieve a more positive outcome than what might otherwise be the case.

In any lawsuit against a company where an individual plaintiff suffers 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 44-year history of shipping many millions of devices.

In any lawsuit against a company where an individual plaintiff claims to have suffered permanent physical injury, a possibility of a large award for damages exists whether or not a causal relationship exists.

UTMD is self-insured for product liability risk, and reserves funds against its current performance on an ongoing basis to provide for its costs of defense should any lawsuits be filed.

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The Company’s average cost of defense of the six lawsuits was $15/year, well below the deductible level of product liability insurance policies and hundreds of thousands of dollars less than product liability insurance premiums.

In its 44 year history of shipping over 50 million finished devices used in critical care and over 400 million components, there has never been a product liability judgment against UTMD.

This experience validates that the most important aspect of product liability risk management is the safe design and reliable integrity of manufactured products.

The best defense the Company believes that it has is the consistent conformance to specifications of its proven safe and effective products.

Prior to late 2021, there were three Filshie Clip System lawsuits since UTMD acquired Femcare in 2011, all of which were dismissed with prejudice prior to the conclusion of discovery.

The average annual cost of all Filshie Clip System lawsuits since 2011 up to late 2021 was $7 per year (less than $25 per lawsuit to achieve resolution).

In late 2021, Femcare was added as a defendant in a clip migration lawsuit in Texas, which now has expanded to five other states with a total of seven lawsuits as plaintiffs’ lawyers have sought to solicit and recruit claimants in other states.

As there is no basis for a claim of a poor device design which is approved by the U.S.

FDA, no evidence of defective clips implanted in the patients and no lack of proper disclosure to physicians who have used Filshie Clips for decades in millions of patients, the current lawsuits, which are currently in the early stages of discovery and have not been litigated yet, are clearly without merit.

Although the cost of defense will be higher than UTMD’s historical average, the Company believes that they should be resolved without a material impact on UTMD’s consolidated financial performance.

There has never been an adverse judgment against Femcare in over 13 million Filshie Clip implantations over a period of 39 years.

Other than Filshie Clip System claims, there have been no product liability lawsuits for any UTMD device during the last ten years.

Except for the six non-Filshie Clip System lawsuits described above, there have been no other product liability claims filed over the last 29 years after distribution and use of over 20 million critical care and surgical finished devices.

In summary, since 1993, during which time over one hundred million finished devices and OEM components were manufactured and distributed by UTMD and its subsidiaries, there have been no adverse judgments resulting from a claim of defect in UTMD’s or its subsidiaries’ designs or manufacture of products, or a fault in informational materials.

After acquisition by UTMD in 2011 and prior to late 2021, there were three Filshie Clip System lawsuits, all of which were dismissed with prejudice prior to the conclusion of discovery.

The average annual cost of those Filshie Clip System lawsuits since 2011 up to late 2021 was $7 per year (less than $25 per lawsuit to achieve resolution).

However, in late 2021, Femcare was added as a defendant in a clip migration lawsuit in Texas, which has expanded to eleven other states with a total of fourteen lawsuits as plaintiffs’ lawyers have sought to solicit and recruit claimants in other states.

There is no basis for a claim of either a poor device design which was and remains approved by the U.S.

FDA, and has remained the same since 1996 FDA approval for more than two decades of use, or no evidence of defective clips implanted in the patients who have filed complaints, or no lack of proper disclosure to physicians who are learned intermediaries.

Filshie clips have been prescribed by knowledgeable physicians for decades, and implanted in millions of patients.

The current lawsuits are currently in the early stages of discovery and have not been litigated yet.

Although the cost of defense will be unusually high compared to UTMD’s historical average, the Company believes that the costs can be absorbed without a material impact on UTMD’s overall consolidated financial performance.

Other than Filshie Clip System claims, there have been no product liability lawsuits for any UTMD device during the last eleven years.

Except for the six non-Filshie Clip System lawsuits described above, there have been no other product liability claims filed over the last 30 years after distribution and use of over 20 million UTMD critical care and surgical finished devices.

Since 1993, during which time over one hundred million finished devices and OEM components were manufactured and distributed by UTMD and its subsidiaries, there have been no adverse judgments resulting from a claim of defect in UTMD’s or its subsidiaries’ designs or manufacture of products, or a fault in informational materials.

Although it hasn’t happened in the past 44 years, a product liability lawsuit could result in significant legal expenses and a large award against the Company.

In the current tort system, particularly in the U.S., meritless product liability cases do get filed where aggressive attorneys calculate that a company will find it cheaper to settle for what they consider a nominal amount in lieu of potentially substantial defense costs of discovery and going to court.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business