<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 28, 2005

                                       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 April 11, 2005: 10,175,782

<PAGE>

                          PART I FINANCIAL INFORMATION

                             SOMANETICS CORPORATION

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                  February 28,      November 30,
                                                                                     2005               2004
                                                                                 -------------      -------------
                                                                                  (Unaudited)         (Audited)
<S>                                                                              <C>                <C>
ASSETS
CURRENT ASSETS:
    Cash and cash equivalents .............................................      $  7,502,506       $  7,069,542
    Accounts receivable ...................................................         2,312,049          2,022,544
    Inventory .............................................................           663,979            682,910
    Prepaid expenses ......................................................           183,794            257,893
    Deferred tax asset - current ..........................................           575,184            510,000
                                                                                 ------------       ------------
       Total current assets ...............................................        11,237,512         10,542,889
                                                                                 ------------       ------------
PROPERTY AND EQUIPMENT (at cost):
    Demonstration and no-cap sales equipment at customers .................         1,690,020          1,628,431
    Machinery and equipment ...............................................           712,007            704,581
    Furniture and fixtures ................................................           255,044            255,044
    Leasehold improvements ................................................           171,882            171,882
                                                                                 ------------       ------------
       Total ..............................................................         2,828,953          2,759,938
    Less accumulated depreciation and amortization ........................        (1,686,808)        (1,675,881)
                                                                                 ------------       ------------
       Net property and equipment .........................................         1,142,145          1,084,057
                                                                                 ------------       ------------
OTHER ASSETS:
    Deferred tax asset - non-current ......................................         5,834,309          6,190,000
    Intangible assets, net ................................................           951,198            952,926
    Other .................................................................            15,000             15,000
                                                                                 ------------       ------------
       Total other assets .................................................         6,800,507          7,157,926
                                                                                 ------------       ------------
TOTAL ASSETS ..............................................................      $ 19,180,164       $ 18,784,872
                                                                                 ============       ============

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
    Accounts payable ......................................................      $    697,396       $    529,097
    Accrued liabilities ...................................................           303,204            703,109
                                                                                 ------------       ------------
       Total current liabilities ..........................................         1,000,600          1,232,206
                                                                                 ------------       ------------
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, 10,147,282 shares at February 28, 2005,
       and 10,137,782 shares at November 30, 2004 .........................           101,473            101,378
    Additional paid-in capital ............................................        62,396,312         62,333,435
    Accumulated deficit ...................................................       (44,318,221)       (44,882,147)
                                                                                 ------------       ------------
       Total shareholders' equity .........................................        18,179,564         17,552,666
                                                                                 ------------       ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................................      $ 19,180,164       $ 18,784,872
                                                                                 ============       ============
</TABLE>

                        See notes to financial statements

                                       2
<PAGE>

                             SOMANETICS CORPORATION

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                              For the Three-Month
                                                                Periods Ended
                                                        -------------------------------
                                                         February 28,      February 29,
                                                            2005               2004
                                                        -------------      ------------
<S>                                                     <C>                <C>
NET REVENUES .....................................      $  4,032,617       $  2,670,265
COST OF SALES ....................................           550,149            520,393
                                                        ------------       ------------
GROSS MARGIN .....................................         3,482,468          2,149,872
                                                        ------------       ------------

OPERATING EXPENSES:
      Research, development and engineering ......            95,802             87,690
      Selling, general and administrative ........         2,576,136          1,774,900
                                                        ------------       ------------
                Total operating expenses .........         2,671,938          1,862,590
                                                        ------------       ------------
OPERATING INCOME .................................           810,530            287,282
                                                        ------------       ------------

OTHER INCOME:
      Interest income ............................            43,903              5,462
                                                        ------------       ------------
          Total other income .....................            43,903              5,462
                                                        ------------       ------------
NET INCOME BEFORE INCOME TAXES ...................           854,433            292,744
                                                        ------------       ------------

INCOME TAX PROVISION .............................          (290,507)                --
                                                        ------------       ------------

NET INCOME .......................................      $    563,926       $    292,744
                                                        ------------       ------------

NET INCOME PER COMMON
  SHARE - BASIC ..................................      $        .06       $        .03
                                                        ------------       ------------

NET INCOME PER COMMON
  SHARE - DILUTED ................................      $        .05       $        .03
                                                        ------------       ------------

WEIGHTED AVERAGE SHARES
  OUTSTANDING - BASIC ............................        10,140,015          9,308,607
                                                        ============       ============

WEIGHTED AVERAGE SHARES
  OUTSTANDING - DILUTED ..........................        11,840,093         11,296,295
                                                        ============       ============
</TABLE>

                        See notes to financial statements

                                       3
<PAGE>

                             SOMANETICS CORPORATION

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                          For the Three Month
                                                                                            Periods Ended
                                                                                    ------------------------------
                                                                                    February 28,      February 29,
                                                                                        2005              2004
                                                                                    ------------      ------------
<S>                                                                                 <C>               <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income .................................................................      $   563,926       $   292,744
  Adjustments to reconcile net income to net cash provided by operations:
      Income tax provision ...................................................          290,507                --
      Depreciation and amortization ..........................................           82,563            60,740
      Changes in assets and liabilities:
          Accounts receivable (increase) decrease ............................         (289,505)          377,988
          Inventory (increase) ...............................................          (95,398)          (56,061)
          Prepaid expenses (increase) decrease ...............................           74,099           (49,539)
          Accounts payable increase (decrease) ...............................          168,299          (264,127)
          Accrued liabilities (decrease) .....................................         (399,905)         (110,756)
                                                                                    -----------       -----------
            Net cash provided by operations ..................................          394,586           250,989
                                                                                    -----------       -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of property and equipment (net) ................................          (24,594)          (30,922)
                                                                                    -----------       -----------
            Net cash (used in) investing activities ..........................          (24,594)          (30,922)
                                                                                    -----------       -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common shares due to exercise
    of stock options .........................................................           62,972            67,828
                                                                                    -----------       -----------
            Net cash provided by financing activities ........................           62,972            67,828
                                                                                    -----------       -----------

NET INCREASE IN CASH AND CASH
  EQUIVALENTS ................................................................          432,964           287,895

CASH AND CASH EQUIVALENTS, BEGINNING
  OF PERIOD ..................................................................        7,069,542         2,239,192
                                                                                    -----------       -----------

CASH AND CASH EQUIVALENTS, END
  OF PERIOD ..................................................................      $ 7,502,506       $ 2,527,087
                                                                                    ===========       ===========

Supplemental Disclosure of Non cash investing activities:
  Demonstration and no-cap sales equipment capitalized
    from inventory (Note 2) ..................................................      $   114,329       $   135,981
</TABLE>

                        See notes to financial statements

                                       4
<PAGE>

                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                FEBRUARY 28, 2005

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 28, 2005 do not necessarily indicate the
results that you should expect for the year ending November 30, 2005. You should
read the unaudited interim financial statements together with the financial
statements and related notes for the year ended November 30, 2004 included in
our Annual Report on Form 10-K for the fiscal year ended November 30, 2004.

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 28, 2005          November 30, 2004
                             -----------------          -----------------
<S>                          <C>                        <C>
Purchased components ...         $340,003                   $323,053
Finished goods .........          302,968                    358,815
Work in process ........           21,008                      1,042
                                 --------                   --------
     Total .............         $663,979                   $682,910
                                 ========                   ========
</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 no-cap sales equipment and are depreciated over five years. During
the first quarter of fiscal 2005 and fiscal 2004, costs capitalized from
inventory for Cerebral Oximeters being used as demonstration and no-cap sales
equipment at customer locations were approximately $114,000 and $136,000,
respectively. 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 are as follows:

<TABLE>
<CAPTION>
                                        February 28, 2005        November 30, 2004
                                        -----------------        -----------------
<S>                                     <C>                      <C>
Patents and trademarks ............          111,733                  111,733
  Less accumulated amortization ...          (89,628)                 (87,900)
                                           ---------                ---------
     Total ........................        $  22,105                $  23,833
                                           =========                =========
</TABLE>

                                       5
<PAGE>

                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                FEBRUARY 28, 2005

      Amortization expense for the three months ended February 28, 2005 and
February 29, 2004 was approximately $1,700. Amortization expense for each of the
next three 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 System, and related products and accessories. In exchange for the
licenses and consulting services, we agreed to the following compensation for
CorRestore LLC and its agent, Joe B. Wolfe: (1) a royalty of 10% of our "net
sales" of products subject to the licenses, (2) five-year warrants to purchase
up to 400,000 common shares at $3.00 a share, exercisable to purchase 300,000
shares immediately and to purchase an additional 50,000 shares upon our receipt
of clearance or approval from the FDA to market the CorRestore Patch in the
United States and another 50,000 shares upon our receipt of CE certification for
the CorRestore System, (3) additional five-year warrants to purchase up to
2,100,000 common shares at $3.00 a share, granted when we received clearance
from the FDA to market the CorRestore Patch in the United States, exercisable
based on our cumulative net sales of the CorRestore System products, and (4) a
consulting fee of $25,000 a year to each of the inventors until we sell 1,000
CorRestore Patches. In April 2004, CorRestore LLC exercised its warrant to
purchase 380,000 of our newly-issued common shares, at $3.00 per share, for
proceeds of $1,140,000.

      License acquisition costs consist of professional service fees recorded at
cost, our estimate of the fair value of the ten-year vested stock options to
purchase 50,000 common shares at $3.00 a share granted to one of our then
current directors in connection with negotiating and assisting us in completing
the transaction, and our estimate of the fair value of the 400,000 common share
vested portion of the five-year warrants to purchase common shares at $3.00 a
share issued in the transaction. Consistent with the treatment of the warrants
to purchase 400,000 common shares, we intend to include in license acquisition
costs, and additional paid in capital, the fair value of the vested portion of
the warrants to purchase 2,100,000 common shares, estimated using the
Black-Scholes valuation model, when and if they become vested. However, we do
not expect any of these warrants to become vested before their November 21, 2006
expiration date, based on sales of CorRestore products to date.

      The total carrying amount of these license acquisition costs is as
follows:

<TABLE>
<CAPTION>
                                        February 28, 2005        November 30, 2004
                                        -----------------        -----------------
<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 at the end of our fiscal year, and whenever
events or changes in circumstances indicate that the carrying value of the asset
may not be recovered. We evaluate impairment by comparing the fair value of the
intangible asset, determined using a cash flow method, with its carrying value.

      Stock Options In October 1995, Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation," was issued. In December
2004, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123 (revised), Share Based Payment. This Statement,
which is effective for interim or annual reporting periods that begin after June
15, 2005, revises Statement No. 123, "Accounting for Stock-Based Compensation,"
and requires that compensation costs related to share-based payment
transactions, including stock options, restricted stock and restricted stock
units be recognized in the financial statements. This Statement will be
effective for our fiscal quarter ending November 30, 2005. We

                                       6
<PAGE>

                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                FEBRUARY 28, 2005

expect the equity compensation to be recognized in our statement of operations
for fiscal 2005, related to unvested stock options as of our required adoption
date, will be the equivalent of $.01 per diluted common share, and we expect the
impact for fiscal 2006 will be approximately $.03 per diluted common share. The
future approval of any additional equity incentive plans would have an
additional impact on our financial statements.

      We currently 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 2005 we did not grant any stock
options, and four of our employees and one of our former consultants exercised
stock options to purchase 9,500 newly-issued common shares. 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.

      Had compensation expense for stock options that vested in the first
quarter been determined based on the fair value of the options on the grant date
pursuant to the methodology of SFAS No. 123, our results of operations, on a pro
forma basis, would have been as follows:

<TABLE>
<CAPTION>

                                                  FOR THE QUARTER ENDED
                                              FEBRUARY 28,     FEBRUARY 29,
                                                  2005             2004
                                              ------------     ------------
<S>                                           <C>              <C>
Net income ..............................       $ 563,926       $ 292,744
Add: Stock-based employee compensation
  included in actual net income .........       $       0       $       0
Deduct: Total stock-based employee
  compensation expense, had fair value
  method been applied ...................       $(197,268)      $(178,209)
                                                ---------       ---------
Pro-forma net income ....................       $ 366,658       $ 114,535
                                                =========       =========
Net income per common share - diluted ...       $     .05       $     .03

Pro forma net income per common
  share - diluted .......................       $     .03       $     .01
</TABLE>

      Net Income 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 includes the potential dilution
that could occur for common stock issuable under stock options or warrants. The
difference between weighted average shares - diluted and weighted average shares
- basic is calculated as follows:

<TABLE>
<CAPTION>
                                       February 28, 2005        February 29, 2004
                                       -----------------        -----------------
<S>                                    <C>                      <C>
Weighted average shares - basic            10,140,015               9,308,607
Add: effect of dilutive common
shares and warrants                         1,700,078               1,987,688
                                           ----------              ----------
Weighted average shares - diluted          11,840,093              11,296,295
</TABLE>

                                       7
<PAGE>

                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                FEBRUARY 28, 2005

      For the quarters ended February 28, 2005 and February 29, 2004, the number
of stock options that were excluded from the computation of net income per
common share - diluted, because the exercise price of the options exceeded the
average price per share of our common stock, was approximately 500 and 87,000,
respectively. For the quarters ended February 28, 2005 and February 29, 2004,
the number of warrants that were excluded from the computation, because the
warrants are contingent on achieving specified future sales targets that we do
not expect to achieve, was approximately 2,100,000 and 1,633,000, respectively.
As of February 28, 2005 and February 29, 2004, we had outstanding warrants and
options to purchase common shares of 4,426,815 and 5,300,841, respectively.

Reclassifications Certain reclassifications have been made to the financial
statements for 2004 to conform to 2005 presentation.

3.    ACCRUED LIABILITIES

      Accrued liabilities consist of the following:

<TABLE>
<CAPTION>
                                            February 28, 2005           November 30, 2004
                                            -----------------           -----------------
<S>                                         <C>                         <C>
Incentive compensation .......                  $135,000                    $390,978
Sales commissions ............                    75,712                     153,180
Professional fees ............                    55,000                      42,000
Royalty ......................                    12,907                       9,130
Warranty .....................                    12,500                      10,750
401(k) match .................                    12,085                      97,071
                                                --------                    --------
       Total .................                  $303,204                    $703,109
                                                ========                    ========
</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

      During the first quarter of fiscal 2005, we issued 9,500 newly-issued
common shares as a result of stock option exercises by employees and a former
consultant, for proceeds of approximately $63,000.

      On February 24, 2005, our Board of Directors adopted the Somanetics
Corporation 2005 Stock Incentive Plan, subject to shareholder approval at the
2005 Annual Meeting of Shareholders. The Plan permits us to grant stock options,
including both nonqualified options and incentive options, restricted stock and
restricted stock units to our officers, other employees, non-employee directors,
consultants, advisors, independent contractors and agents, up to 600,000 common
shares.

                                       8
<PAGE>

                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                FEBRUARY 28, 2005

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 97% of our net revenues
in the first quarter of fiscal 2005 were derived from our INVOS Cerebral
Oximeter product line, compared to 92% of our net revenues in the first quarter
of fiscal 2004.

                                       9
<PAGE>

                             SOMANETICS CORPORATION

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

                                FEBRUARY 28, 2005

      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 of
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
infringement 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 2004 and the first quarter of fiscal 2005, 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.

                                       10
<PAGE>

                             SOMANETICS CORPORATION

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

                                FEBRUARY 28, 2005

      As described in more detail below, we achieved an increase in net income
before income taxes of approximately 192%, primarily as a result of an increase
in net revenues of approximately 51% and an increase in gross margin percentage
to approximately 86%. Our increase in net revenues was primarily a result of
increased unit sales and increased average selling prices for our disposable
SomaSensor in the United States, and increased international sales. Our increase
in gross margin percentage was also primarily attributable to the increase in
average selling prices for our disposable SomaSensors, as well as the reduction
in the cost of our disposable SomaSensor by approximately 40%, effective May
2004, as a result of changes in our manufacturing process. Our operating
expenses increased approximately 43% for the quarter primarily due to our hiring
additional sales personnel in fiscal 2004 and 2005, and increased commissions
paid to our independent sales representative firms and direct sales employees as
a result of increased sales. We had approximately $395,000 of cash provided by
operations in the first quarter of fiscal 2005, and a net increase in cash and
cash equivalents of approximately $433,000.

      For 2005, we project an increase in net revenues of approximately 47% to
52%, and we also project an increase in net income before income taxes of
approximately 70% to 80%, to approximately $3.4 million to $3.6 million. In
addition, we expect to realize a net increase in cash and cash equivalents of
approximately $3 million, to approximately $10 million. While we do not expect
to pay income taxes for fiscal 2005, beginning in the first quarter of 2005, we
began recognizing income tax expense at an estimated effective tax rate of 34%
on our statement of operations. As 2005 progresses and we assess our plans for
future years, we will review the appropriateness of adjusting our deferred tax
asset valuation allowance and recognizing additional net deferred tax assets.

THREE MONTHS ENDED FEBRUARY 28, 2005 COMPARED TO THREE MONTHS ENDED FEBRUARY 29,
2004

      Our net revenues increased $1,362,352, or 51%, from $2,670,265 in the
three-month period ended February 29, 2004 to $4,032,617 in the three-month
period ended February 28, 2005. The increase in net revenues is primarily
attributable to

      -     an increase in United States sales of approximately $1,081,000, or
            47%, from approximately $2,283,000 in the first quarter of fiscal
            2004 to approximately $3,364,000 in the first quarter of fiscal
            2005. This increase is primarily due to an increase in sales of the
            disposable SomaSensor of approximately $1,063,000, or 57%, as a
            result of a 37% increase in SomaSensor unit sales and a 15% increase
            in SomaSensor average selling prices, and an increase in Cerebral
            Oximeter revenues of approximately $75,000, or 29%, due to increased
            purchases by pediatric hospitals. This increase was partially offset
            by a decrease in sales of the CorRestore System of approximately
            $56,000, or 34%, and

      -     an increase in international sales of approximately $281,000, or
            73%, from approximately $387,000 in the first quarter of fiscal 2004
            to approximately $668,000 in the first quarter of fiscal 2005,
            primarily attributable to increased purchases of the Cerebral
            Oximeter and SomaSensors by Tyco Healthcare.

                                       11
<PAGE>

                             SOMANETICS CORPORATION

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

                                FEBRUARY 28, 2005

      As described above, during the first quarter we achieved a 15% 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 and increased sales of our
pediatric SomaSensor, which sells for a premium price. In addition, as described
above, we had a 37% increase in SomaSensor unit sales in the United States to
33,102 units. We expect that the average selling price of SomaSensors in the
United States will increase by at least 10% in 2005 compared to 2004 as a result
of the factors described above.

      We placed 66 new Cerebral Oximeters in the United States in the first
quarter of 2005, and we estimate that the installed base of Cerebral Oximeters
in the United States is approximately 835, in approximately 410 hospital
accounts, as of February 28, 2005.

      Approximately 17% of our net revenues in the first quarter of fiscal 2005
were from export sales, compared to approximately 14% of our net revenues in the
first quarter of fiscal 2004. We expect international net revenues to represent
approximately 15% to 20% of total net revenues in 2005. During the first quarter
of 2005, one international distributor (Europe) represented approximately 10% of
our net revenues.

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

<TABLE>
<CAPTION>
                                  PERCENT OF NET REVENUE
                                 FIRST QUARTER OF FISCAL
PRODUCT                      2005                      2004
------------------------     ----                      ----
<S>                          <C>                       <C>
SomaSensors ............      80%                       76%
Cerebral Oximeters .....      17%                       16%
CorRestore Systems .....       3%                        8%
                             ---                       ---
    Total ..............     100%                      100%
                             ===                       ===
</TABLE>

For 2005, we expect sales of SomaSensors to account for 75% to 80% of net
revenues, sales of Cerebral Oximeters 15% to 20%, and sales of CorRestore
Systems less than 5%.

      Gross margin as a percentage of net revenues was approximately 86% for the
quarter ended February 28, 2005 and approximately 81% for the quarter ended
February 29, 2004. 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, and the reduction in the cost of our SomaSensor by
approximately 40%, in May 2004, as a result of changes in our manufacturing
process. We expect our gross margin percentage to be approximately 87% in fiscal
2005, primarily due to the factors described above.

      Our research, development and engineering expenses increased approximately
$8,000, or 9%, from $87,690 for the three months ended February 29, 2004 to
$95,802 for the three months ended February 28, 2005. The increase is primarily
attributable to increased development costs associated with the Cerebral
Oximeter.

      Selling, general and administrative expenses increased approximately
$801,000, or 45%, from $1,774,900 for the three months ended February 29, 2004
to $2,576,136 for the three months ended February 28, 2005, primarily due to a
66% increase in our sales and marketing expenses during the first quarter of
fiscal 2005 because of our increased sales headcount and our increased sales and
marketing efforts. The increase in selling, general and administrative expense
is primarily attributable to

                                       12
<PAGE>

                             SOMANETICS CORPORATION

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

                                FEBRUARY 28, 2005

            -     a $242,000 increase in travel, trade show and selling-related
                  expenses as a result of our increased sales headcount and
                  increased sales and marketing efforts,

            -     a $213,000 increase in salaries, wages, and related expenses,
                  primarily as a result of an increase in the number of
                  employees, principally sales and marketing (from an average of
                  28 employees for the first quarter ended February 29, 2004 to
                  an average of 37 employees for the first quarter ended
                  February 28, 2005),

            -     a $153,000 increase in commissions paid to our sales
                  employees, as a result of hiring additional sales employees in
                  fiscal 2004 and 2005 and increased sales,

            -     an $89,000 increase in commissions paid to our independent
                  sales representative firms as a result of increased sales,

            -     a $63,000 increase in accrued incentive compensation expense
                  due to our year-to-date 2005 financial performance, primarily
                  increased sales and net income, in accordance with the 2005
                  Incentive Compensation Plan, and

            -     $38,000 in costs for the first quarter of fiscal 2005
                  associated with our employer 401(k) matching program, which
                  was implemented in the fourth quarter of fiscal 2004.

We expect our selling, general and administrative expenses to further increase
in fiscal 2005, primarily as a result of our current plans to hire additional
direct sales personnel in fiscal 2005, increased sales commissions payable to
our independent sales representative firms as sales increase and increased sales
and marketing expenses.

      During the first quarter of fiscal 2005, we began recognizing income tax
expense at an estimated effective tax rate of 34% on our statement of
operations, and we expect this to continue for future periods.

      For the three-month period ended February 28, 2005, we realized net income
of $.05 per diluted common share, compared to $.03 per diluted common share for
the first quarter of 2004. The increase in net income per diluted common share
is primarily attributable to

            -     a 51% increase in net revenues, and

            -     a 5% increase in gross margin percentage.

We achieved the increase in net income despite a 43% increase in operating
expenses and the recognition of income tax expense.

LIQUIDITY AND CAPITAL RESOURCES

      Net cash provided by operations during the three-month period ended
February 28, 2005 was approximately $395,000. Cash was provided primarily by

            -     net income of approximately $564,000, non-cash income tax
                  expense of approximately $291,000, and depreciation and
                  amortization expense of approximately $83,000,

            -     an increase in accounts payable of approximately $168,000,
                  primarily because of increased inventories, increased
                  operating expenses, and the timing of payments to vendors, and

            -     a decrease in prepaid expenses of approximately $74,000,
                  primarily because of the amortization of prepaid insurance
                  payments made in fiscal 2004.

                                       13
<PAGE>

                             SOMANETICS CORPORATION

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

                                FEBRUARY 28, 2005

Cash provided by operations was partially offset by

            -     a decrease in accrued liabilities of approximately $400,000,
                  primarily due to payments made in the first quarter for
                  incentive compensation, sales commissions for employees, and
                  employer 401(k) matching contributions,

            -     an increase in accounts receivable of approximately $290,000,
                  primarily because of higher first quarter 2005 sales, and

            -     an increase in inventories of approximately $95,000, primarily
                  due to the increased acquisition of SomaSensors and components
                  associated with our Cerebral Oximeter.

      Inventories on our balance sheet declined because we capitalized Cerebral
Oximeters that are being used as demonstration units and no-cap sales equipment.
We capitalized approximately $114,000 of costs from inventory for Cerebral
Oximeters being used as demonstration units and no-cap sales equipment at
customer locations during the first quarter of 2005, compared to approximately
$136,000 in the first quarter of fiscal 2004. We depreciate these assets over
five years.

      In addition, we had capital expenditures in the first three months of
fiscal 2005 of approximately $25,000. These expenditures were primarily for
tooling for the SomaSensor.

      During the first quarter of fiscal 2005, we issued 9,500 common shares as
a result of stock option exercises by employees and a former consultant, for
proceeds of approximately $63,000.

      As of February 28, 2005, we had working capital of $10,236,912, cash and
cash equivalents of $7,502,506, total current liabilities of $1,000,600 and
shareholder's equity of $18,179,564. We had an accumulated deficit of
$44,318,221 through February 28, 2005.

      We believe that the cash and cash equivalents on hand at February 28, 2005
will be adequate to satisfy our operating and capital requirements for more than
the next twelve months. For 2005, 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 approximately $10,000,000.

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,
our accounting treatment of stock options issued to employees, our accounting
treatment for income taxes, and our revenue recognition associated with our
no-cap sales program.

                                       14
<PAGE>

                             SOMANETICS CORPORATION

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

                                FEBRUARY 28, 2005

      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.
Consistent with the treatment of the vested warrants to purchase commmon shares,
we intend to include in license acquisition costs, and additional paid in
capital, the fair value of the vested portion of the unvested warrants to
purchase common shares, estimated using the Black-Scholes valuation model, when
and if they become vested. However, we do not expect any of these remaining
warrants to become vested before their November 21, 2006 expiration date, based
on sales of CorRestore products to date.

      We estimated the value of the stock options to purchase common shares and
the vested 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.

      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, we recorded no amortization expense
related to these license acquisition costs in fiscal 2005 or 2004. 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. Indefinite lived intangible assets are reviewed annually for
impairment at the end of our fiscal year, and whenever events or changes in
circumstances indicate that the carrying value of the asset may not be
recovered. We evaluate impairment by comparing the fair value of the intangible
asset, determined using a cash flow method, with its carrying value.

      In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," was issued. In December 2004, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123 (revised), Share Based Payment. This Statement, which is
effective for interim or annual reporting periods that begin after June 15,
2005, revises Statement No. 123, "Accounting for Stock-Based Compensation," and
requires that compensation costs related to share-based payment transactions,
including stock options, stock appreciation rights and restricted stock be
recognized in the financial statements. This Statement will be effective for our
fiscal quarter ending November 30, 2005.

                                       15
<PAGE>

                             SOMANETICS CORPORATION

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

                                FEBRUARY 28, 2005

      We currently 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 2005, we did not grant any
stock options to our employees, and during the first quarter of fiscal 2004, we
granted 20,000 stock options to our employees.

      Had we recognized compensation expense for stock options that vested in
the first quarter of fiscal 2005 and 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 $197,000, or $.02 per diluted common share, and
$178,000, or $.02 per diluted common share, respectively.

      During fiscal 2004, we adjusted our deferred tax asset valuation allowance
resulting in the recognition of a deferred tax asset of $6,700,000 related to
the expected future benefits of our net operating loss carryforwards, in
accordance with Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes." We have performed the required assessment of positive and
negative evidence regarding realization of our deferred tax assets in accordance
with SFAS No. 109, including our past operating results, the existence of
cumulative losses over our history up to the most recent two fiscal years, and
our forecast for future net income. The primary assumption underlying our
determination that the net asset will be realized is that our revenues and
pre-tax income will grow in future years consistent with the growth guidance
given for fiscal 2005. Our assessment of our deferred tax assets, and the
reversal of part of our valuation allowance, included evaluating our financial
plans and our future projected earnings, making allowance for the uncertainties
surrounding, among other things, our future rate of growth in net revenues, the
rate of adoption of our products in the marketplace, and the potential for
competition to enter the marketplace.

      In reversing a portion of our valuation allowance, we have concluded that
it is more likely than not that such assets will be realized. Given the
assumptions inherent in our financial plans, it is possible to calculate a
different value for our deferred tax asset by changing one or more of the
variables in our assessment. However, we believe that our evaluation of our
financial plans was reasonable, and that the judgments and assumptions that we
made at the time of developing the plan were appropriate.

      During the first quarter of fiscal 2005, we began recognizing income tax
expense at an estimated effective tax rate of 34% on our statement of
operations. As 2005 progresses and we assess our plans for future years, we will
review the appropriateness of adjusting our deferred tax asset valuation
allowance and recognizing additional net deferred tax assets.

      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. We recognize SomaSensor
revenue when we receive purchase orders and ship the product to the customer.
Under our no-cap sales program, we do not recognize any revenue upon the initial
shipment of the Cerebral Oximeter. At the time of shipment, we capitalize the
Cerebral Oximeter as an asset and depreciate this asset over five years. We
believe this is consistent with our stated revenue recognition policy, which is
compliant with Staff Accounting Bulletin No. 104 and Emerging Issues Task Force
No. 00-21, "Revenue Arrangements with Multiple Deliverables."

                                       16
<PAGE>

                             SOMANETICS CORPORATION

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

                                FEBRUARY 28, 2005

CONTRACTUAL OBLIGATIONS

      As of February 28, 2005, 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, 2004 under the
caption "Contractual Obligations".

                                       17
<PAGE>

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

      Not applicable.

                                       18
<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 28, 2005, and, based on their evaluation,
our principal executive and principal financial officers have concluded that
these controls and procedures are effective as of February 28, 2005. 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 28, 2005 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.

                                       19
<PAGE>

PART II OTHER INFORMATION

ITEM 6.      EXHIBITS

             10.1    Somanetics Corporation 2005 Stock Incentive Plan,
                     incorporated by reference to Exhibit 10.1 to the Somanetics
                     Corporation Current Report on Form 8-K, dated February 24,
                     2005.

             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
<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: April 11, 2005                   By: /s/ William M. Iacona
                                           ------------------------------------
                                       William M. Iacona
                                       Vice President, Finance, Controller, and
                                       Treasurer (Duly Authorized and Principal
                                       Financial Officer)

                                       21
<PAGE>

                                  EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit                                  Description
-------       ------------------------------------------------------------------
<S>           <C>
10.1          Somanetics Corporation 2005 Stock Incentive Plan, incorporated by
              reference to Exhibit 10.1 to the Somanetics Corporation Current
              Report on Form 8-K, dated February 24, 2005.

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.
</TABLE>

                                       22