<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                                    FORM 10-Q

                                   (Mark One)

(x)  Quarterly report pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934 For the quarterly period ended FEBRUARY 29, 2004

                                       OR

( )  Transition report pursuant to Section 13 or 15(d) of the Securities
    Exchange Act of 1934 For the transition period from__________to_________

                         Commission file number 0-19095

                             SOMANETICS CORPORATION
             (Exact name of registrant as specified in its charter)

           MICHIGAN                                 38-2394784
 (State or other jurisdiction of                 (I.R.S. Employer
  incorporation or organization)                Identification No.)

                              1653 EAST MAPLE ROAD,
                                 TROY, MICHIGAN
                                   48083-4208
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (248) 689-3050
              (Registrant's telephone number, including area code)

    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 whether the registrant is an accelerated filer (as
    defined in Rule 12b-2 of the Exchange Act).

                      Yes      ( )          No        (X)

    Number of common shares outstanding at March 30, 2004: 9,357,777

<PAGE>

                          PART I FINANCIAL INFORMATION

                             SOMANETICS CORPORATION

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                  February 29,              November 30,
                                                                                     2004                       2003
                                                                                ---------------           ---------------
                                                                                 (Unaudited)                 (Audited)
<S>                                                                             <C>                       <C>
ASSETS
CURRENT ASSETS:
    Cash and cash equivalents..........................................         $     2,527,087           $     2,239,192
    Accounts receivable................................................               1,640,627                 2,018,615
    Inventory..........................................................               1,010,341                 1,090,261
    Prepaid expenses...................................................                 172,742                   123,203
                                                                                ---------------           ---------------
       Total current assets............................................               5,350,797                 5,471,271
                                                                                ---------------           ---------------
PROPERTY AND EQUIPMENT (at cost):
    Machinery and equipment............................................               2,192,197                 2,071,758
    Furniture and fixtures.............................................                 239,524                   248,657
    Leasehold improvements.............................................                 171,882                   171,882
                                                                                ---------------           ---------------
       Total...........................................................               2,603,603                 2,492,297
    Less accumulated depreciation and amortization.....................              (1,785,973)               (1,782,559)
                                                                                ---------------           ---------------
       Net property and equipment......................................                 817,630                   709,738
                                                                                ---------------           ---------------
OTHER ASSETS:
    Intangible assets, net.............................................                 958,110                   959,838
    Other..............................................................                  15,000                    15,000
                                                                                ---------------           ---------------
       Total other assets..............................................                 973,110                   974,838
                                                                                ---------------           ---------------
TOTAL ASSETS...........................................................         $     7,141,537           $     7,155,847
                                                                                ===============           ===============

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
    Accounts payable...................................................         $       377,105           $       641,232
    Accrued liabilities................................................                 238,791                   349,547
                                                                                ---------------           ---------------
       Total current liabilities.......................................                 615,896                   990,779
                                                                                ---------------           ---------------
COMMITMENTS AND CONTINGENCIES..........................................
SHAREHOLDERS' EQUITY:
    Preferred shares; authorized, 1,000,000 shares of $.01 par value;
       no shares issued or outstanding.................................                       -                         -
    Common shares; authorized, 20,000,000 shares of $.01 par value;
       issued and outstanding, 9,313,680 shares at February 29, 2004,
       and 9,298,669 shares at November 30, 2003.......................                  93,137                    92,987
    Additional paid-in capital.........................................              59,728,482                59,660,804
    Accumulated deficit................................................             (53,295,978)              (53,588,723)
                                                                                ---------------           ---------------
       Total shareholders' equity......................................               6,525,641                 6,165,068
                                                                                ---------------           ---------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY.............................         $     7,141,537           $     7,155,847
                                                                                ===============           ===============
</TABLE>

                        See notes to financial statements

                                       2

<PAGE>

                             SOMANETICS CORPORATION

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                             For the Three-Month
                                                                Periods Ended
                                                     -----------------------------------
                                                      February 29,          February 28,
                                                          2004                  2003
                                                     -------------         -------------
<S>                                                  <C>                   <C>
NET REVENUES ..................................      $   2,670,265         $   1,950,946
COST OF SALES..................................            520,393               450,197
                                                     -------------         -------------
GROSS MARGIN...................................          2,149,872             1,500,749
                                                     -------------         -------------

OPERATING EXPENSES:
      Research, development and engineering....             87,690               109,173
      Selling, general and administrative......          1,774,900             1,594,930
                                                     -------------         -------------
                Total operating expenses.......          1,862,590             1,704,103
                                                     -------------         -------------
OPERATING INCOME (LOSS)........................            287,282              (203,354)
                                                     -------------         -------------

OTHER INCOME:
      Interest income..........................              5,462                 7,904
                                                     -------------         -------------
          Total other income...................              5,462                 7,904
                                                     -------------         -------------
NET INCOME (LOSS)..............................      $     292,744         $    (195,450)
                                                     -------------         -------------

NET INCOME (LOSS) PER COMMON
  SHARE - BASIC AND DILUTED....................      $         .03         $        (.02)
                                                     -------------         -------------
WEIGHTED AVERAGE SHARES
  OUTSTANDING - BASIC..........................          9,308,607             9,077,891
                                                     =============         =============

WEIGHTED AVERAGE SHARES
  OUTSTANDING - DILUTED........................         11,296,295             9,077,891
                                                     =============         =============
</TABLE>

                        See notes to financial statements

                                       3

<PAGE>

                             SOMANETICS CORPORATION

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                               For the Three Month
                                                                                   Periods Ended
                                                                           ---------------------------
                                                                           February 29,   February 28,
                                                                               2004           2003
                                                                           ------------   ------------
<S>                                                                        <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss).....................................................   $    292,744   $   (195,450)
  Adjustments to reconcile net income (loss) to net cash provided by
   (used in) operations:
      Depreciation and amortization...........................                   60,740         60,641
      Compensation expense for non-employee stock options.....                        -          1,971
      Changes in assets and liabilities:
          Accounts receivable decrease........................                  377,988        154,102
          Inventory (increase) decrease.......................                   79,920        (85,793)
          Prepaid expenses (increase).........................                  (49,539)       (77,507)
          Accounts payable increase (decrease)................                 (264,127)         3,636
          Accrued liabilities increase (decrease).............                 (110,756)        81,178
                                                                           ------------   ------------
            Net cash provided by (used in) operations.........                  386,970        (57,222)
                                                                           ------------   ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of property and equipment (net).................                 (166,903)       (63,573)
                                                                           ------------   ------------
            Net cash (used in) investing activities...........                 (166,903)       (63,573)
                                                                           ------------   ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common shares due to exercise
    of stock options..........................................                   67,828          3,600
                                                                           ------------   ------------
            Net cash provided by financing activities.........                   67,828          3,600
                                                                           ------------   ------------
NET INCREASE (DECREASE) IN CASH AND CASH
  EQUIVALENTS.................................................                  287,895       (117,195)

CASH AND CASH EQUIVALENTS, BEGINNING
  OF PERIOD...................................................                2,239,192      2,381,808
                                                                           ------------   ------------
CASH AND CASH EQUIVALENTS, END
  OF PERIOD...................................................             $  2,527,087   $  2,264,613
                                                                           ============   ============
</TABLE>

                        See notes to financial statements

                                       4
<PAGE>

                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                FEBRUARY 29, 2004

1.       FINANCIAL STATEMENT PRESENTATION

         We prepared our unaudited interim financial statements pursuant to the
Securities and Exchange Commission's rules. Accordingly, they do not include all
of the information and notes normally included in our annual financial
statements prepared in accordance with generally accepted accounting principles.
We believe, however, that the disclosures are adequate to make the information
presented not misleading.

         The unaudited interim financial statements in this report reflect all
adjustments which are, in our opinion, necessary to a fair statement of the
results for the interim periods presented. All of these adjustments that are
material are of a normal recurring nature. Our operating results for the
three-month period ended February 29, 2004 do not necessarily indicate the
results that you should expect for the year ending November 30, 2004. You should
read the unaudited interim financial statements together with the financial
statements and related notes for the year ended November 30, 2003 included in
our Annual Report on Form 10-K for the fiscal year ended November 30, 2003.

2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Inventory is stated at the lower of cost or market on a first-in,
first-out (FIFO) basis. Inventory consists of:

<TABLE>
<CAPTION>
                                      February 29, 2004          November 30, 2003
                                      -----------------          -----------------
<S>                                   <C>                        <C>
Finished goods...................     $         437,241          $         354,024
Work in process..................               127,390                    173,193
Purchased components.............               445,710                    563,044
                                      -----------------          -----------------
     Total.......................     $       1,010,341          $       1,090,261
                                      =================          =================
</TABLE>

         Property and Equipment are stated at cost. Depreciation and
amortization are computed using the straight-line method over the estimated
useful lives of the assets, which range from two to five years. We offer to our
United States customers a no-cap sales program whereby we ship the Cerebral
Oximeter to the customer at no charge, in exchange for the customer agreeing to
purchase SomaSensors. The Cerebral Oximeters that are shipped to our customers
are classified as property and equipment and are depreciated over five years.
During the first quarter of fiscal 2004, we capitalized approximately $136,000
in costs for Cerebral Oximeters being used as demonstration and no-cap units,
and during the first quarter of fiscal 2003 we capitalized approximately $49,000
in costs for Cerebral Oximeters being used as demonstration and no-cap units.
Property and equipment are reviewed for impairment whenever events or changes in
circumstances indicate that the net book value of the asset may not be
recovered.

         Intangible Assets consist of patents and trademarks, and license
acquisition costs. Patents and trademarks are recorded at cost and are being
amortized on the straight-line method over 17 years. The carrying amount and
accumulated amortization of these patents and trademarks is as follows:

<TABLE>
<CAPTION>
                                         February 29, 2004    November 30, 2003
                                         -----------------    -----------------
<S>                                      <C>                  <C>
Patents and trademarks...........               111,733              111,733
  Less accumulated amortization..               (82,716)             (80,988)
                                           ------------         ------------
     Total.......................          $     29,017         $     30,745
                                           ============         ============
</TABLE>

                                       5
<PAGE>

                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                FEBRUARY 29, 2004

         Amortization expense for the three months ended February 29, 2004 and
February 28, 2003 was approximately $1,700. Amortization expense for each of the
next four fiscal years is expected to be approximately $6,900 per year, and
approximately $3,100 in fiscal 2008.

         License acquisition costs are related to our acquisition of exclusive,
worldwide, royalty-bearing licenses to specified rights relating to the
CorRestore(TM) System, and related products and accessories. The total carrying
amount of these license acquisition costs is as follows:

<TABLE>
<CAPTION>
                                     February 29, 2004      November 30, 2003
                                     -----------------      -----------------
<S>                                  <C>                    <C>
License acquisition costs........        $ 929,093              $ 929,093
</TABLE>

         License acquisition costs are intangible assets with indefinite lives
that are reviewed annually for impairment and whenever events or changes in
circumstances indicate that the carrying value of the asset may not be
recovered.

         Stock Options We have chosen to continue to account for stock-based
compensation of employees using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations. However, we have also adopted the
enhanced disclosure provisions as defined by Statement No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure." During the first quarter
of fiscal 2004, we granted 20,000 stock options to our employees, and four of
our employees and one of our former directors exercised stock options to
purchase 15,011 newly-issued common shares. During the first quarter of fiscal
2003 we granted 11,500 stock options to our employees, and one of our employees
exercised stock options to purchase 2,500 newly-issued common shares.

<TABLE>
<CAPTION>
                                                      FOR THE QUARTER ENDED
                                                   FEBRUARY 29,   FEBRUARY 28,
                                                      2004             2003
                                                      ----             ----
<S>                                                <C>            <C>
Net income (loss)...........................       $    292,744   $   (195,450)
Add:  Stock-based employee compensation
  included in actual net loss...............       $          0   $      1,971
Deduct:  Total stock-based employee
  compensation expense, had fair value
  method been applied.......................       $   (178,209)  $   (144,840)
                                                   ------------   ------------
Pro-forma net income (loss).................       $    114,535   $   (338,319)
                                                   ============   ============
Net income (loss) per common share - basic
  and diluted...............................       $        .03   $       (.02)
Pro forma net income (loss) per common
  share - basic and diluted.................       $        .01   $       (.04)
</TABLE>

                                       6
<PAGE>

                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                FEBRUARY 29, 2004

         Net Income (Loss) Per Common Share - basic and diluted is computed
using the weighted average number of common shares outstanding during each
period. Weighted average shares outstanding - diluted, for the quarter ended
February 29, 2004, includes the potential dilution that could occur for common
stock issuable under stock options or warrants. As of February 29, 2004, the
difference between weighted average shares - diluted and weighted average shares
- basic is calculated as follows:

<TABLE>
<S>                                        <C>
Weighted average shares - basic            9,308,607
Add: effect of dilutive common
shares and warrants                        1,987,688
                                          ----------
Weighted average shares - diluted         11,296,295
</TABLE>

Common shares issuable under stock options and warrants have not been included
in the computation of net loss per common share - diluted for the fiscal quarter
ended February 28, 2003, because such inclusion would be antidilutive. For the
quarter ended February 29, 2004, there were approximately 87,000 stock options
outstanding that were excluded from the computation of net income per common
share - diluted, as the exercise price of these options exceeded the average
price per share of our common stock, and there were approximately 1,633,000
warrants outstanding that were excluded from the computation, as the warrants
are contingent on achieving specified future sales targets. As of February 29,
2004 and February 28, 2003, we had outstanding warrants and options to purchase
common shares of 5,300,841 and 5,164,000, respectively.

3.       ACCRUED LIABILITIES

         Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
                                            February 29, 2004   November 30, 2003
                                            -----------------   -----------------
<S>                                         <C>                 <C>
Insurance...............................    $          75,829   $          29,836
Incentive compensation..................               72,000             166,360
Sales commissions.......................               63,362             123,356
Royalty.................................               20,650              13,645
Warranty................................                6,950               5,850
Professional fees.......................                    -              10,500
                                            -----------------   -----------------
   Total................................    $         238,791   $         349,547
                                            =================   =================
</TABLE>

4.       COMMITMENTS AND CONTINGENCIES

         We may become subject to products liability claims by patients or
physicians, and may become a defendant in products liability or malpractice
litigation. We have obtained products liability insurance and an umbrella
policy. We might not be able to maintain such insurance or such insurance might
not be sufficient to protect us against products liability.

5.       COMMON STOCK

         Effective December 12, 2003, we granted 10-year options under the 1997
Stock Option Plan to purchase 10,000 common shares to one of our employees at an
exercise price of $6.35 per share (the closing sale price of the common shares
as of the date of grant). Effective January 28, 2004, we granted 10-year options
under the 1997 Stock Option Plan to purchase 10,000 common shares to one of our
employees at an exercise price of $9.25 per share (the closing sale price of the
common shares as of the date of grant).

                                       7
<PAGE>

                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                FEBRUARY 29, 2004

         During the first quarter of fiscal 2004, we issued 15,011 newly-issued
common shares as a result of stock option exercises by employees and a former
director, for proceeds of approximately $68,000.

6.       SEGMENT INFORMATION

         We operate our business in one reportable segment, the development,
manufacture and marketing of medical devices. Each of our two product lines have
similar characteristics, customers, distribution and marketing strategies, and
are subject to similar regulatory requirements. In addition, in making operating
and strategic decisions, our management evaluates net revenues based on the
worldwide net revenues of each major product line, and profitability on an
enterprise-wide basis due to shared costs. Approximately 92% of our net revenues
in the first quarter of fiscal 2004 were derived from our INVOS Cerebral
Oximeter product line, compared to 89% of our net revenues in the first quarter
of fiscal 2003.

                                       8
<PAGE>

                             SOMANETICS CORPORATION

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

                                FEBRUARY 29, 2004

         Some of the statements in this report are forward-looking statements.
These forward-looking statements include statements relating to our performance
in this Management's Discussion and Analysis of Financial Condition and Results
of Operations. In addition, we may make forward-looking statements in future
filings with the Securities and Exchange Commission and in written material,
press releases and oral statements issued by us or on our behalf.
Forward-looking statements include statements regarding the intent, belief or
current expectations of us or our officers, including statements preceded by,
followed by or including forward-looking terminology such as "may," "will,"
"should," "believe," "expect," "anticipate," "estimate," "continue," "predict"
or similar expressions, with respect to various matters.

         Our actual results might differ materially from those projected in the
forward-looking statements depending on various important factors. These
important factors include economic conditions in general and in the healthcare
market, the demand for and market for our products in domestic and international
markets, our history of losses, our current dependence on the Cerebral Oximeter
and SomaSensor, the challenges associated with developing new products and
obtaining regulatory approvals if necessary, research and development
activities, the uncertainty of acceptance of our products by the medical
community, the lengthy sales cycle for our products, third party reimbursement,
competition in our markets, including the potential introduction of competitive
products by others, our dependence on our distributors, physician training,
enforceability and the costs of enforcement of our patents, potential
infringements of our patents and the other factors discussed under the caption
"Risk Factors" and elsewhere in our Registration Statement on Form S-1 (file no.
333-74788) effective January 11, 2002 and elsewhere in this report, all of which
constitute cautionary statements identifying important factors with respect to
the forward-looking statements, including certain risks and uncertainties, that
could cause actual results to differ materially from those in such
forward-looking statements.

         All forward-looking statements in this report are based on information
available to us on the date of this report. We do not undertake to update any
forward-looking statements that may be made by us or on our behalf in this
report or otherwise.

RESULTS OF OPERATIONS

OVERVIEW

         We develop, manufacture and market the INVOS Cerebral Oximeter, the
only non-invasive patient monitoring system commercially available in the United
States that continuously measures changes in the blood oxygen level in the
brain. We also develop and market the CorRestore System for use in cardiac
repair and reconstruction, including heart surgeries called surgical ventricular
restoration, or SVR.

         During fiscal 2003 and the first quarter of fiscal 2004, our primary
activities consisted of sales and marketing of the Cerebral Oximeter, the
related disposable SomaSensor, and the CorRestore System.

         We derive our revenues from sales of Cerebral Oximeters, SomaSensors
and CorRestore Systems to our distributors and to hospitals in the United States
through our direct sales employees and independent sales representative firms.
We offer to our customers in the United States a no-cap sales program whereby we
ship the Cerebral Oximeter to the customer at no charge, in exchange for the
customer agreeing to purchase SomaSensors. Payment terms are generally net 30
days for United States sales and net 60 days or longer for international sales.
Our primary expenses, excluding the cost of our products, are selling, general
and administrative and research, development and engineering.

                                        9
<PAGE>

                             SOMANETICS CORPORATION

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

                                FEBRUARY 29, 2004

         As described in more detail below, our net income for the quarter ended
February 29, 2004 was $292,744, or $0.03 per basic and diluted common share. Our
net income was primarily a result of a 37% increase in net revenues, a 4%
increase in gross margin percentage and control of our operating expenses, which
increased approximately 9%. Our increase in net revenues was primarily
attributable to increased unit sales and increased average selling prices for
our disposable SomaSensor, our increase in gross margin percentage was also
primarily attributable to the increase in average selling prices for our
disposable SomaSensors, and our increase in operating expenses was primarily
attributable to increased commissions paid to our independent sales
representative firms and direct sales employees as a result of increased sales.
We had $386,970 of cash provided by operations in the first quarter of fiscal
2004, and a net increase in cash and cash equivalents of $287,895, primarily as
a result of our net income. We expect to hire additional direct sales personnel
in the second quarter of 2004 and to incur expenses associated with the
termination of some of our sales representative firms. We also expect our
research and development expenses to increase in 2004. We project an increase in
net revenues for fiscal 2004 of 30% to 40% and net income per basic common share
of approximately $0.12 to $0.15. We also expect our gross margin percentage to
increase in fiscal 2004, compared to fiscal 2003, and to realize a net increase
in cash and cash equivalents.

THREE MONTHS ENDED FEBRUARY 29, 2004 COMPARED TO THREE MONTHS ENDED FEBRUARY 28,
2003

         Our net revenues increased approximately $719,000, or 37%, from
$1,950,946 in the three-month period ended February 28, 2003 to $2,670,265 in
the three-month period ended February 29, 2004. The increase in net revenues is
primarily attributable to

           -      an increase in United States sales of approximately $632,000,
                  or 38%, from approximately $1,652,000 in the first quarter of
                  fiscal 2003 to approximately $2,283,000 in the first quarter
                  of fiscal 2004. This increase is primarily due to an increase
                  in sales of the disposable SomaSensor of approximately
                  $522,000, or 39%, and an increase in Cerebral Oximeter
                  revenues of approximately $166,000, or 180%, due to the timing
                  of purchases by several pediatric hospitals. This increase was
                  partially offset by a decrease in sales of the CorRestore
                  System of approximately $56,000, or 25%, and

           -      an increase in international sales of approximately $88,000,
                  or 29%, from approximately $299,000 in the first quarter of
                  fiscal 2003 to approximately $387,000 in the first quarter of
                  fiscal 2004, primarily attributable to increased purchases of
                  the Cerebral Oximeter by Edwards Lifesciences Ltd. in Japan
                  and net revenues of approximately $41,000 related to the
                  CorRestore System, which we began selling internationally in
                  the fourth quarter of fiscal 2003.

         During the quarter, we had a 22% increase in the average selling price
of SomaSensors in the United States. The increase in the average selling price
is primarily attributable to

           -      the addition of new customers at our higher suggested retail
                  prices, which were effective September 1, 2003,

           -      increased sales of our small adult SomaSensor that was
                  launched in the third quarter of fiscal 2003,

           -      increased sales of our pediatric SomaSensor, and

           -      the upgrade of certain customers to our most recent model
                  Cerebral Oximeter in exchange for the customer agreeing to pay
                  a higher price for the disposable SomaSensor.

                                       10
<PAGE>

                             SOMANETICS CORPORATION

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

                                FEBRUARY 29, 2004

         In addition, we had a 14% increase in SomaSensor unit sales in the
United States to 24,220 units. We expect the average selling price of
SomaSensors in the United States will increase by approximately 15%-20% in 2004
compared to 2003.

         We placed 30 new Cerebral Oximeters in the United States in the first
quarter of 2004, and we estimate that the installed base of Cerebral Oximeters
in the United States is approximately 600 as of February 29, 2004.

         Approximately 14% of our net revenues in the first quarter of fiscal
2004 were from export sales, compared to approximately 15% of our net revenues
in the first quarter of fiscal 2003. We expect international net revenues to
represent approximately 20% of total net revenues in 2004.

         Sales of our products as a percentage of net revenues were as follows:

<TABLE>
<CAPTION>
                                                PERCENT OF NET REVENUE
                                               FIRST QUARTER OF FISCAL
PRODUCT                                       2004                 2003
-------                                 -----------------   -----------------
<S>                                     <C>                 <C>
SomaSensors........................                    76%                 77%
Cerebral Oximeters.................                    16%                 12%
CorRestore Systems.................                     8%                 11%
                                        -----------------   -----------------
    Total..........................                   100%                100%
                                        =================   =================
</TABLE>

For 2004, we expect sales of SomaSensors to account for 70%-75% of net revenues,
sales of Cerebral Oximeters 15%-20%, and sales of CorRestore Systems 5%-10%.

         Gross margin as a percentage of net revenues was approximately 81% for
the quarter ended February 29, 2004 and approximately 77% for the quarter ended
February 28, 2003. The increase in gross margin as a percentage of net revenues
is primarily attributable to the increase in the average selling price of
SomaSensors described above. We expect gross margins to increase in the second
half of fiscal 2004, primarily as a result of our expected reduction in the cost
of our SomaSensor by approximately 40% due to changes in our manufacturing
process. The expected increase in gross margins will be partially offset by our
expected increase in international sales, which have lower gross margins than
sales in the United States.

         Our research, development and engineering expenses decreased
approximately $21,000, or 20%, from $109,173 for the three months ended February
28, 2003 to $87,690 for the three months ended February 29, 2004. The decrease
is primarily attributable to approximately $22,000 in decreased development
costs associated with the Cerebral Oximeter. We expect our research,
development, and engineering expenses to increase primarily as a result of new
product development projects related to the Cerebral Oximeter and development
and testing costs associated with our Left Ventricular Balloon Sizing System.

         Selling, general and administrative expenses increased approximately
$180,000, or 11%, from $1,594,930 for the three months ended February 28, 2003
to $1,774,900 for the three months ended February 29, 2004. The increase in
selling, general and administrative expense is primarily attributable to

                                       11
<PAGE>

                             SOMANETICS CORPORATION

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

                                FEBRUARY 29, 2004

           -      a $157,000 increase in commissions paid to our independent
                  sales representative firms as a result of increased sales,

           -      a $47,000 increase in salaries, wages, commissions and related
                  expenses, primarily as a result of increased sales commissions
                  paid to our sales employees, and

           -      a $37,000 increase in insurance expenses, primarily as a
                  result of a products liability insurance premium refund
                  received in fiscal 2003.

         These increases were partially offset by a $97,000 decrease in customer
education expenses for the CorRestore System. We expect our selling, general and
administrative expenses to increase primarily as a result of hiring additional
direct sales personnel in the second quarter of 2004 and expenses associated
with the termination of some of our independent sales representative firms.

         For the three-month period ended February 29, 2004, we realized net
income of $.03 per share, compared to a loss per share of $.02 in the same
period in fiscal 2003. This is primarily attributable to

           -      a 37% increase in net revenues, and

           -      a 4% increase in gross margin percentage.

We achieved net income despite a 9% increase in operating expenses.

LIQUIDITY AND CAPITAL RESOURCES

         Net cash provided by operations during the three-month period ended
February 29, 2004 was approximately $387,000. Cash was provided primarily by

           -      a decrease in accounts receivable of approximately $378,000,
                  primarily because of lower first quarter 2004 sales than
                  fourth quarter 2003 sales, the timing of sales within those
                  quarters, and more timely collections in the first quarter of
                  fiscal 2004,

           -      our net income of approximately $293,000, after depreciation
                  and amortization expense of approximately $60,000, and

           -      a decrease in inventories of approximately $80,000, primarily
                  as a result of first quarter 2004 sales.

Cash provided by operations was partially offset by

           -      a decrease in accounts payable of approximately $264,000,
                  primarily as a result of lower inventory levels and more
                  timely payments made to vendors in the first quarter of fiscal
                  2004,

           -      a decrease in accrued liabilities of approximately $111,000,
                  primarily as a result of payments made in fiscal 2004 for 2003
                  accrued bonuses and sales commissions, partially offset by an
                  increase in accrued insurance as a result of the renewal of
                  our products liability insurance policy in the first quarter
                  of fiscal 2004.

         We expect our working capital requirements to increase as sales
increase.

         Capital expenditures in the first three months of fiscal 2004 were
approximately $167,000. These expenditures were primarily for Cerebral Oximeter
demonstration units and no-cap sales units. We expect capital expenditures in
2004 will be approximately $500,000, primarily for new demonstration and no-cap
equipment.

                                       12
<PAGE>

                             SOMANETICS CORPORATION

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

                                FEBRUARY 29, 2004

         During the first quarter of fiscal 2004, we issued 15,011 common shares
as a result of stock option exercises by employees and a former director, for
net proceeds of approximately $68,000.

         As of February 29, 2004, we had working capital of $4,734,901, cash and
cash equivalents of $2,527,087, total current liabilities of $615,896 and
shareholder's equity of $6,525,641. We had an accumulated deficit of $53,295,978
through February 29, 2004.

         We believe that the cash and cash equivalents on hand at February 29,
2004 will be adequate to satisfy our operating and capital requirements for more
than the next twelve months. For 2004, we expect to realize positive cash flow
from operations, as well as a net increase in cash and cash equivalents, with
year-end cash on hand expected to be in the range of $3.5 million to $4.5
million.

         The estimated length of time current cash and cash equivalents will
sustain our operations is based on estimates and assumptions we have made. These
estimates and assumptions are subject to change as a result of actual
experience. Actual funding requirements necessary to market the Cerebral
Oximeter, the disposable SomaSensor, and the CorRestore System, to undertake
other product development activities, and for working capital might be
substantially greater than current estimates.

CRITICAL ACCOUNTING POLICIES

         We believe our most significant accounting policies relate to the
recording of an intangible asset for license acquisition costs related to our
acquisition of exclusive, worldwide, royalty-bearing licenses to specified
rights relating to the CorRestore System and related products and accessories,
and our accounting treatment of stock options issued to employees.

         In fiscal years 2000, 2001 and 2003, we recorded an intangible asset
related to our acquisition of exclusive, worldwide, royalty-bearing licenses to
specified rights relating to the CorRestore System and related products and
accessories. License acquisition costs included our estimate of the fair value
of ten-year vested stock options to purchase common shares granted to one of our
directors in connection with negotiating and assisting us in completing the
transaction, and our estimate of the fair value of the vested portion of
five-year warrants to purchase common shares issued in the transaction.

         We estimated the value of the stock options to purchase common shares
and the warrants to purchase common shares using the Black-Scholes valuation
model. The Black-Scholes valuation model requires the following assumptions:
expected life period of the security, expected volatility of our stock price
during the period, risk-free interest rate, and dividend yield. Given the
assumptions inherent in the Black-Scholes valuation model, it would have been
possible to calculate a different value for our intangible asset by changing one
or more of the valuation model variables or by using a different valuation
model. However, we believe that the model is appropriate, that the judgments and
assumptions that we made at the time of valuation were also appropriate, and
that the reported results would not have been materially different had one or
more of the variables been different or had a different valuation model been
used.

                                       13

<PAGE>

                             SOMANETICS CORPORATION

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS

                                FEBRUARY 29, 2004

         We have adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets." This statement establishes accounting
and reporting standards for goodwill and other intangible assets. The effect of
adopting this Statement has been to discontinue amortizing our license
acquisition costs related to our acquisition of exclusive, worldwide,
royalty-bearing licenses to specified rights relating to the CorRestore System
and related products and accessories described above because we believe these
licenses have an indefinite life. Therefore, no amortization expense has been
recorded related to these license acquisition costs since December 1, 2001, the
date we adopted Statement No. 142. It is possible to determine a different life
for these licenses, and if they had a definite life, we would amortize the
intangible asset over the remaining useful life. However, we believe it is
appropriate to use an indefinite life for these licenses.

         In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," was issued by the Financial
Accounting Standards Board. In addition, in December 2002, Statement of
Financial Accounting Standards No. 148, "Accounting for Stock-Based Compensation
- Transition and Disclosure," was issued by the Financial Accounting Standards
Board, and amends Statement No. 123. We have chosen to continue to account for
stock-based compensation of employees using the intrinsic value method
prescribed in Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. Accordingly, compensation
costs for stock options granted to employees are measured as the excess, if any,
of the market price of our stock at the date of the grant over the amount an
employee must pay to acquire the stock. No compensation expense has been charged
against income for stock option grants to employees because our stock option
grants are priced at the market value as of the date of grant. During the first
quarter of fiscal 2004, we granted 20,000 stock options to our employees, and
during the first quarter of fiscal 2003, we granted 11,500 stock options to our
employees.

         Had we recognized compensation expense for stock options granted to
employees in the first quarter of fiscal 2004, using the fair value method of
accounting based on the fair value of the options on the grant date using the
Black-Scholes valuation model, our net income, on a pro forma basis, would have
decreased by approximately $178,000, or $.02 per common share. Had we recognized
compensation expense for our stock options granted to employees in the first
quarter of fiscal 2003, using the fair value method of accounting based on the
fair value of the options on the grant date using the Black-Scholes valuation
model, our net loss, on a pro forma basis, would have increased by approximately
$143,000, or $.02 per common share.

CONTRACTUAL OBLIGATIONS

         As of February 29, 2004, there have been no material changes outside
the ordinary course of business in the contractual obligations disclosed in our
Annual Report on Form 10-K for the fiscal year ended November 30, 2003 under the
caption "Contractual Obligations".

                                       14

<PAGE>

ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

       Not applicable.

                                       15

<PAGE>

ITEM 4.      CONTROLS AND PROCEDURES

         Our management has evaluated, with the participation of our principal
executive and principal financial officers, the effectiveness of our disclosure
controls and procedures as of February 29, 2004, and, based on their evaluation,
our principal executive and principal financial officers have concluded that
these controls and procedures are effective as of February 29, 2004. There was
no change in our internal control over financial reporting identified in
connection with such evaluation that occurred during our first fiscal quarter
ended February 29, 2004 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

         Disclosure controls and procedures are our controls and other
procedures that are designed to ensure that information required to be disclosed
by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to
ensure that information required to be disclosed by us in the reports that we
file or submit under the Exchange Act is accumulated and communicated to our
management, including our principal executive and principal financial officers,
as appropriate to allow timely decisions regarding required disclosure.

                                       16

<PAGE>

PART II OTHER INFORMATION

ITEM 2.      CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF
             EQUITY SECURITIES

         Effective January 28, 2004, our Board of Directors amended and restated
our Bylaws, which affects the holders of our Common Shares, par value $.01 per
share. The changes in the Bylaws primarily

     -    update the Bylaws to take advantage of changes in the Michigan
          Business Corporation Act, including

               -    those authorizing the use of electronic transmissions,
                    including electronic notices, electronic consents, remote
                    communications in connection with Board and shareholder
                    meetings, the use of electronic networks to make shareholder
                    lists available at shareholder meetings, and electronic
                    distribution of financial reports required under the act,
                    and

               -    those concerning the conduct of shareholders meetings,
                    including the power of the Chairman of the Board or the
                    President to determine the order of business and to
                    establish rules for the conduct of the meeting and closing
                    the polls for each matter voted upon, and

     -    update the Bylaw relating to nominating directors.

         Under the revised Bylaw concerning nominations for director,
nominations may be made by or at the direction of our Board of Directors or one
of its committees or by any shareholder entitled to vote for the election of
directors at the meeting who complies with the notice procedures in the Bylaw
and who is a shareholder or record on the date of the notice described below and
on the record date for the meeting. Such shareholder nominations must be made
pursuant to timely notice in writing to our Secretary, at Somanetics
Corporation, 1653 East Maple Road, Troy, Michigan 48083-4208, of the
shareholder's intent to make such nomination at the meeting. To be timely, the
notice generally must be received at our offices at least 120 days before the
anniversary of the mailing of our proxy statement relating to the previous
annual meeting of shareholders.

          The notice must set forth:

          -    with respect to the director candidate,

                    -    the candidate's name, age, business address and
                         residence address,

                    -    the candidate's principal occupation or employment,

                    -    the number of our common shares beneficially owned by
                         the candidate,

                    -    information with respect to the candidate's
                         independence, as defined under Nasdaq's listing
                         standards for independent directors in general and with
                         respect to Audit Committee members,

                    -    information with respect to other boards on which the
                         candidate serves,

                    -    information with respect to direct or indirect
                         transactions, relationships, arrangements and
                         understandings between the candidate and us and
                         between the candidate and the shareholder giving the
                         notice, and

                    -    any other information relating to the candidate that we
                         would be required to disclose in our proxy statement if
                         we were to solicit proxies for the election of the
                         candidate as one of our directors or that is otherwise
                         required under Securities and Exchange Commission
                         rules, including the candidate's written consent to
                         being named in the proxy statement as a nominee and to
                         serving as a director if elected, and

          -    with respect to the shareholder giving the notice,

                    -    the name and address of the shareholder as they appear
                         on our stock transfer records,

                    -    the number of our common shares beneficially owned by
                         the shareholder (and the period they have been held),

                    -    a representation that the shareholder is a shareholder
                         of record and intends to appear in person at the
                         meeting to nominate the person specified in the notice,
                         and

                    -    whether the shareholder intends, or is part of a group
                         that intends, to solicit proxies from other
                         shareholders in support of such nomination.

                                       17

<PAGE>

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

         (a) Exhibits

                  4.1      Amended and Restated Bylaws of Somanetics
                           Corporation, incorporated by reference to Exhibit
                           3(ii) to the Company's Annual Report on Form 10-K for
                           the year ended November 30, 2003.

                  31.1     Certifications of Chief Executive Officer Pursuant to
                           Rule 13a-14(a), as Adopted Pursuant to Section 302 of
                           the Sarbanes-Oxley Act of 2002.

                  31.2     Certifications of Chief Financial Officer Pursuant to
                           Rule 13a-14(a), as Adopted Pursuant to Section 302 of
                           the Sarbanes-Oxley Act of 2002.

                  32.1     Certifications of Chief Executive Officer and Chief
                           Financial Officer Pursuant to 18 U.S.C. Section 1350,
                           as Adopted Pursuant to Section 906 of the
                           Sarbanes-Oxley Act of 2002.

         (b)      Reports on Form 8-K

                  No reports on Form 8-K were filed by us during the first
                  quarter ended February 29, 2004. We furnished a Current Report
                  on Form 8-K on January 14, 2004, reporting under Item 12 that
                  on January 13, 2004, we announced our financial results for
                  our fourth quarter and fiscal year ended November 30, 2003 and
                  certain other information. No financial statements were filed,
                  although we furnished the financial information included in
                  the press release furnished with the Form 8-K.

                                       18

<PAGE>

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                        Somanetics Corporation
                                        (Registrant)

Date:    March 30, 2004                 By:/s/ William M. Iacona
                                           -----------------------
                                        William M. Iacona
                                        Vice President, Finance, Controller, and
                                        Treasurer (Duly Authorized and Principal
                                        Financial Officer)

                                       19

<PAGE>

                                  EXHIBIT INDEX

Exhibit                           Description

4.1               Amended and Restated Bylaws of Somanetics Corporation,
                  incorporated by reference to Exhibit 3(ii) to the Company's
                  Annual Report on Form 10-K for the year ended November 30,
                  2003.

31.1              Certifications of Chief Executive Officer Pursuant to Rule
                  13a-14(a), as Adopted Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.

31.2              Certifications of Chief Financial Officer Pursuant to Rule
                  13a-14(a), as Adopted Pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.

32.1              Certifications of Chief Executive Officer and Chief Financial
                  Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

                                       20