<PAGE>   1
                                  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, 1998

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

         Number of common shares outstanding at April 9, 1998: 6,035,334



<PAGE>   2

                         PART I FINANCIAL INFORMATION

                            SOMANETICS CORPORATION



                                 BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                          February 28,    November 30,
ASSETS                                                                        1998            1997
                                                                        --------------- ----------------
CURRENT ASSETS:                                                          (Unaudited)       (Audited)
<S>                                                                    <C>              <C>            
    Cash and cash equivalents .......................................   $  1,518,881    $  2,132,376
    Marketable securities, at cost ..................................        995,349       2,470,780
    Accounts receivable, net of allowance for doubtful accounts of
       approximately $153,000 and $166,000 at February 28, 1998 and
       November 30, 1997, respectively ..............................        767,002         191,968
    Inventory, net ..................................................        748,438         433,014
    Prepaid expenses ................................................         85,315          71,581
                                                                        ------------    ------------
       Total current assets .........................................      4,114,985       5,299,449
                                                                        ------------    ------------
PROPERTY AND EQUIPMENT (at cost):
    Machinery and equipment .........................................        925,089         722,905
    Furniture and fixtures ..........................................        184,949         184,351
    Leasehold improvements ..........................................        166,770         166,770
                                                                        ------------    ------------
       Total ........................................................      1,276,808       1,074,026
    Less accumulated depreciation and amortization ..................       (816,467)       (784,860)
                                                                        ------------    ------------
       Net property and equipment ...................................        460,341         289,166
                                                                        ------------    ------------
OTHER ASSETS:
    Patents and trademarks, net .....................................         70,489          72,217
    Other ...........................................................         33,909          16,600
                                                                        ------------    ------------
       Total other assets ...........................................        104,398          88,817
                                                                        ------------    ------------
TOTAL ASSETS ........................................................   $  4,679,724    $  5,677,432
                                                                        ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
    Accounts payable ................................................   $    558,493    $    390,494
    Accrued liabilities .............................................        405,375         397,982
                                                                        ------------    ------------
       Total current liabilities ....................................        963,868         788,476
                                                                        ------------    ------------
COMMITMENTS AND CONTINGENCIES .......................................          -                 -
SHAREHOLDERS' EQUITY:
    Preferred shares; authorized, 1,000,000 shares of $.01 par value;
       no shares issued or outstanding ..............................          -                 -
    Common shares; authorized, 6,000,000 shares of $.01 par value;
       issued and outstanding, 4,285,334 shares at February 28, 1998
       and November 30, 1997, respectively ..........................         42,853          42,853
    Additional paid-in capital ......................................     41,212,639      41,212,639
    Accumulated deficit .............................................    (37,539,636)    (36,366,536)
                                                                        ------------    ------------
       Total shareholders' equity ...................................      3,715,856       4,888,956
                                                                        ------------    ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ..........................   $  4,679,724    $  5,677,432
                                                                        ============    ============

</TABLE>

                        See notes to financial statements




                                       2
<PAGE>   3

                             SOMANETICS CORPORATION

                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                         For the Three-Month
                                                      Periods Ended February 28,
                                                    ----------------------------
                                                       1998              1997
                                                    -----------     ------------
<S>                                                 <C>             <C>        
NET REVENUES ...................................    $   803,365     $   353,863
COST OF SALES ..................................        389,998         180,271
                                                    -----------     -----------
GROSS MARGIN ...................................        413,367         173,592
                                                    -----------     -----------

OPERATING EXPENSES:
      Research, development and engineering ....        164,788         164,211
      Selling, general and administrative ......      1,480,571       1,359,088
                                                    -----------     -----------
                Total operating expenses .......      1,645,359       1,523,299
                                                    -----------     -----------
OPERATING LOSS .................................     (1,231,992)     (1,349,707)
                                                    -----------     -----------

OTHER INCOME (EXPENSE):
      Interest income ..........................         50,792          33,195
      Other ....................................          8,100           8,100
                                                    -----------     -----------
          Total other income ...................         58,892          41,295
                                                    -----------     -----------
NET LOSS .......................................    $(1,173,100)    $(1,308,412)
                                                    -----------     -----------


NET LOSS PER COMMON SHARE -
   BASIC AND DILUTED ...........................    $      (.27)    $      (.57)
                                                    -----------     -----------

WEIGHTED AVERAGE SHARES
    OUTSTANDING ................................      4,285,334       2,285,351
                                                    ===========     ===========
</TABLE>


                        See notes to financial statements



                                       3
<PAGE>   4
                             SOMANETICS CORPORATION

                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                      For the Three Month
                                                                   Periods Ended February 28,
                                                                   --------------------------
                                                                      1998            1997
                                                                   ----------     -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                               <C>            <C>         
  Net loss ....................................................   $(1,173,100)   $(1,308,412)
  Adjustments to reconcile net loss to net cash used in
    operations:
      Depreciation and amortization ...........................        23,617         13,863
      Changes in assets and liabilities:
          Accounts receivable (increase) ......................      (575,304)      (132,340)
          Inventory (increase) ................................      (315,424)       (20,797)
          Prepaid expenses (increase) .........................       (13,734)        (1,697)
          Other assets (increase) .............................       (17,310)             -
          Accounts payable increase ...........................       167,999         42,111
          Accrued liabilities increase (decrease) .............         7,392        (50,157)
                                                                  -----------    -----------
            Net cash (used in) operations .....................    (1,895,864)    (1,457,429)
                                                                  -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of marketable securities .................     1,475,431             --
  Acquisition of property and equipment (net) .................      (193,062)        (1,576)
                                                                  -----------    -----------
            Net cash provided by (used in) investing activities     1,282,369         (1,576)
                                                                  -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of Common Shares .....................            --         11,768
                                                                  -----------    -----------
             Net cash provided by financing activities ........            --         11,768
                                                                  -----------    -----------

NET (DECREASE) IN CASH AND CASH
  EQUIVALENTS .................................................      (613,495)    (1,447,237)

CASH AND CASH EQUIVALENTS, BEGINNING
  OF PERIOD ...................................................     2,132,376      3,291,911
                                                                  -----------    -----------

CASH AND CASH EQUIVALENTS, END
  OF PERIOD ...................................................   $ 1,518,881    $ 1,844,674
                                                                  ===========    ===========
</TABLE>

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest for the three-month period ended February 28, 1998 and
1997 was $0 and $0, respectively.

                        See notes to financial statements



                                       4

<PAGE>   5
                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                FEBRUARY 28, 1998



1.       ORGANIZATION AND OPERATIONS

         Somanetics Corporation (the "Company"), a Michigan corporation formed
in January 1982, develops, manufactures and markets the INVOS Cerebral Oximeter
(the "Cerebral Oximeter), the only FDA-cleared, non-invasive patient monitoring
system that continuously measures changes in the blood oxygen level in the adult
brain. The Cerebral Oximeter is based on the Company's proprietary In Vivo
Optical Spectroscopy ("INVOS(R)") technology. INVOS analyzes various
characteristics of human blood and tissue by measuring and analyzing
low-intensity visible and near infrared light transmitted into portions of the
body. The Company has incurred research, product development and other expenses
involved in designing, developing, marketing and selling its product, as well as
devoting efforts to raising capital.

         The Company was in the development stage at February 28, 1997; during
the year ended November 30, 1997, the Company completed its development
activities and commenced its planned principal operations.

2.       FINANCIAL STATEMENT PRESENTATION

         The accompanying unaudited interim financial statements of Somanetics
Corporation have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, such financial statements do
not include all of the information and footnotes normally included in the
Company's annual financial statements prepared in accordance with generally
accepted accounting principles, although the Company believes that the
disclosures are adequate to make the information presented not misleading.

         The accompanying unaudited interim financial statements reflect all
adjustments which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented. All such adjustments
are of a normal recurring nature, except those not material to the Company's
financial condition or results of operations. Operating results for the
three-month period ended February 28, 1998, are not necessarily indicative of
the results that may be expected for the year ending November 30, 1998, although
the Company expects to continue to incur operating losses for the foreseeable
future. The unaudited interim financial statements should be read in conjunction
with the financial statements and footnotes thereto for the year ended November
30, 1997 included in the Company's Annual Report on Form 10-K for the fiscal
year ended November 30, 1997.

         The Company has not achieved sales necessary to support operations. The
Company has incurred an accumulated deficit of $37,539,636 through February 28,
1998. The Company had working capital of $3,151,117, cash, cash equivalents, and
marketable securities of $2,514,230, total current liabilities of $963,868 and
shareholders' equity of $3,715,856 as of February 28, 1998.

         Management believes that markets exist for the product the Company has
developed; however, there is an inherent uncertainty associated with the success
of such product. The likelihood of success of the Company must be considered in
view of the Company's limited resources and current financial condition, the
problems and expenses frequently encountered in connection with formation of a
new business, the ability to raise new funds, the development and application of
new technology, and the competitive environment in which the Company operates.


                                       5

<PAGE>   6
                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                FEBRUARY 28, 1998


         The net proceeds from the public offering of Common Shares in June 1997
were sufficient to fund the Company's working capital requirements for the three
months ended February 28, 1998. Current sales are not sufficient to fund
operations. On April 8, 1998, the Company completed the public offering of
1,750,000 newly-issued Common Shares, at a price of $5.75 per share, for gross
proceeds of $10,062,500, through an offering underwritten by Brean Murray & Co.,
Inc. The net proceeds to the Company, after deducting the underwriting discount
and the estimated expenses of the offering, were approximately $9,200,000.

         The Company believes that the cash, cash equivalents, and marketable
securities on hand at February 28, 1998 together with the net proceeds of the
April 8, 1998 public offering will be sufficient to sustain the Company's
operations at budgeted levels and its needs for liquidity into the year 2000. By
that time the Company will be required to raise additional cash either through
additional sales of its product, through sales of securities, by incurring
indebtedness or by some combination of the foregoing. If the Company is unable
to raise additional cash by that time, it will be required to reduce or
discontinue its operations.

         The estimated length of time current cash, cash equivalents, and
marketable securities will sustain the Company's operations is based on certain
estimates and assumptions made by the Company. Such estimates and assumptions
are subject to change as a result of actual experience. There can be no
assurance that actual capital requirements necessary to market the Cerebral
Oximeter and SomaSensor, to develop enhancements to, and product extensions of,
the Cerebral Oximeter, to conduct research and development concerning additional
potential applications of the Company's technology and for working capital will
not be substantially greater than current estimates.

         The Company does not believe that product sales will be sufficient to
fund the Company's operations in fiscal 1998.

         As of February 28, 1998, there were 60,400 redeemable warrants
outstanding, exercisable at $20.00 per share until July 13, 2000, and 55,120
redeemable warrants outstanding exercisable at $17.50 per share until April 1,
2001. These warrants were issued in the Company's 1995 and 1996 Regulation S
securities offerings. The conditions permitting the Company to redeem these
warrants have not been met as of April 9, 1998. In addition, the placement
agents and their transferees hold warrants to purchase 64,394 Common Shares
exercisable at $12.50 per share and 15,000 warrants exercisable at $14.40 per
share. Also, the underwriter of the June 1997 public offering received warrants
to purchase 200,000 Common Shares exercisable at $4.80 per share. It is unlikely
that these warrants will be exercised if the exercise price exceeds the market
price of the Common Shares.

         The Company has no loan commitments.

         There can be no assurance that even if the Company receives additional
capital, it will be able to achieve the level of sales necessary to sustain its
operations. There can be no assurance that the Company will be able to obtain
any funds on terms acceptable to the Company and at times required by the
Company through sales of the Company's product, sales of securities or loans in
sufficient quantities. The report of the Company's Independent Auditors in the
Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1997
contains an explanatory paragraph relating to an uncertainty concerning the
Company's ability to continue as a going concern.


                                       6

<PAGE>   7

                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                FEBRUARY 28, 1998


         These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.

3.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         Marketable Securities consist of AAA rated corporate bonds, classified
as available for sale, maturing approximately six months from the date of
acquisition and are stated at cost, which approximates fair market value.

         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, 1998   November 30, 1997
                                              -----------------   -----------------
<S>                                                <C>                <C>      
Finished goods ...........................         $  78,636          $ 100,224
Work in process ..........................           292,498            174,363
Purchased components .....................           627,637            514,725
                                                   ---------          ---------
     Sub-total ...........................           998,771            789,312
Less reserve for obsolete
   and excess inventory ..................          (250,333)          (356,298)
                                                   ---------          ---------
     Total ...............................         $ 748,438          $ 433,014
                                                   =========          =========
</TABLE>


         Patents and Trademarks are recorded at cost and are being amortized on
the straight-line method over 17 years. Accumulated amortization was $41,244 and
$39,516 at February 28, 1998 and November 30, 1997, respectively.

         Loss Per Common Share - basic and diluted, is computed using the
weighted average number of common shares outstanding during each period. During
the first quarter of fiscal 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 128, "Earnings Per Share." The adoption of
SFAS No. 128 had no impact on the reported loss per share for all periods
presented. Common Shares issuable under stock options and warrants have been
considered in the computation of the net loss per Common Share - diluted, but
have not been included because such inclusion would be antidilutive. As of
February 28, 1998 and February 28,1997, the Company had outstanding 949,831 and
490,431, respectively, of warrants and options to purchase Common Shares.


                                       7

<PAGE>   8


                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                FEBRUARY 28, 1998


4.       ACCRUED LIABILITIES

         Accrued liabilities consist of the following:


<TABLE>
<CAPTION>                                      
                                         February 28, 1998  November 30, 1997
                                         -----------------  -----------------
         <S>                                <C>                <C>
         Professional Fees ..........        $ 70,632           $120,726
         Clinical Research ..........          40,880             43,330
         Product Upgrades ...........          22,828             25,842
         Warranty ...................          59,280             31,166
         Accrued Insurance ..........          35,639             29,768
         Accrued Incentive ..........          83,000             50,500
         Other ......................          93,116             96,650     
                                             --------           --------
              Total .................        $405,375           $397,982
                                             ========           ========
</TABLE>
                                       

5.       COMMITMENTS AND CONTINGENCIES


         The Company may become subject to product liability claims by patients
or physicians, and may become a defendant in product liability or malpractice
litigation. The Company has obtained product liability insurance and an umbrella
policy. There can be no assurance that the Company will be able to maintain such
insurance or that such insurance would be sufficient to protect the Company
against such product liability.

6.       SUBSEQUENT EVENTS

         On January 15, 1998, the Company's Board of Directors approved an
amendment and restatement of the Company's Restated Articles of Incorporation to
(i) increase the Company's authorized Common Shares from 6,000,000 to 20,000,000
shares, and (ii) remove provisions relating to the reverse stock split effected
April 10, 1997, all subject to shareholder approval at the 1998 Annual Meeting
of Shareholders. The Company's shareholders approved such amendment and
restatement at the 1998 Annual Meeting of Shareholders on March 17, 1998.

         In addition, on January 15, 1998, the Company's Board of Directors
approved an amendment to the Somanetics Corporation 1997 Stock Option Plan to
increase the number of Common Shares reserved for issuance pursuant to the
exercise of options granted under the 1997 Plan by 450,000 shares, from 295,000
to 745,000 shares, subject to shareholder approval at the 1998 Annual Meeting of
Shareholders. The Company's shareholders approved such amendment at the 1998
Annual Meeting of Shareholders on March 17, 1998.

         Effective January 22, 1998, the Company's Board of Directors granted
10-year stock options under the 1997 Stock Option Plan to purchase an aggregate
of 20,000 Common Shares at $4.75 per share (the closing sale price of the Common
Shares on the date of grant) to four executive officers of the Company. In
addition, effective March 17, 1998, the Company replaced options to purchase
18,522 Common Shares granted under the 1991 Incentive Stock Option Plan or the
1993 Director Stock Option Plan to the three directors of the Company who are
not officers or employees of the Company, with ten-year options granted under
the 1997 Stock Option Plan to purchase the same number of Common Shares at an
exercise price of $5.875 per share (the closing sale price of the Common Shares
on the date of grant). Also effective March 17, 1998, the Company granted such
directors ten-year options under the 1997 Stock Option Plan to purchase an
aggregate of 6,000 Common Shares at an exercise price of $5.875 per share.


                                       8

<PAGE>   9

                             SOMANETICS CORPORATION

                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

                                FEBRUARY 28, 1998


In addition, effective April 2, 1998, the Company granted 10-year options under
the 1997 Stock Option Plan to purchase 430,000 Common Shares to 22 employees and
one consultant of the Company at an exercise price of $5.875 per share (the
closing sale price of the Common Shares as of the date of grant).

         As discussed in Note 2, on April 8, 1998, the Company completed the
public offering of 1,750,000 newly-issued Common Shares, at a price of $5.75 per
share, for gross proceeds of $10,062,500, through an offering underwritten by
Brean Murray & Co., Inc.



                                       9


<PAGE>   10


                             SOMANETICS CORPORATION

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

                                FEBRUARY 28, 1998

         The following Management's Discussion and Analysis of Financial
Condition and Results of Operations includes forward-looking statements with
respect to the Company's future financial performance. These forward-looking
statements are subject to various risks and uncertainties, including the factors
described under the caption "Risk Factors" and elsewhere in the Company's
Registration Statement on Form S-1 (file no. 333-47225) effective April 2, 1998
and elsewhere in this Report, that could cause actual results to differ
materially from historical results or those currently anticipated.

RESULTS OF OPERATIONS

OVERVIEW

         Somanetics Corporation develops, manufactures and markets the INVOS
Cerebral Oximeter, the only FDA-cleared, non-invasive patient monitoring system
that continuously measures changes in the blood oxygen level in the adult brain.
In June 1996, the Company received clearance from the FDA to market the Cerebral
Oximeter and the related disposable SomaSensor in the United States. In October
1997, the Company obtained FDA clearance for new advances in its INVOS
technology that are incorporated in its next generation INVOS 4100 Cerebral
Oximeter. The next generation Cerebral Oximeter was introduced in October 1997
and became available in the first quarter of fiscal 1998.

         During fiscal 1997, the Company's primary activities consisted of
research and development of the INVOS technology, the Cerebral Oximeter and the
related disposable SomaSensor. During the first quarter of fiscal 1998, the
Company's primary activities consisted of sales and marketing related to the new
model 4100 Cerebral Oximeter. The Company recently emerged from the development
stage and had an accumulated deficit of $37,539,636 through February 28, 1998.
The Company believes that its accumulated deficit will continue to increase for
the foreseeable future.

         The Company derives its revenues from sales of Cerebral Oximeters and
SomaSensors to its distributors and, since the June 1996 FDA clearance, to
hospitals in the United States through its direct sales employees. The Company
recognizes revenues when it ships its product to its distributors or to
hospitals. Payment terms are generally net 30 days for United States sales and
net 60 days or longer for international sales. The Company's primary expenses,
excluding the cost of its product, are selling, general and administrative and
research, development and engineering, which are generally expensed as incurred.
The Company capitalizes its patent costs and amortizes them over 17 years. Since
May 1994, the Company has exchanged model 3100A Cerebral Oximeters for its model
3100 Cerebral Oximeters. Until the model 4100 Cerebral Oximeter became available
in the first quarter of fiscal 1998, the Company refurbished the model 3100
Cerebral Oximeters it received and sold them approximately at cost in countries
that do not require compliance with the standards met by the model 3100A. In the
first quarter of 1998, the Company began offering to exchange model 4100
Cerebral Oximeters for model 3100A Cerebral Oximeters and cash equal to the
difference in sales prices of the two models. Such sales reduce the Company's
average unit sales price and overall gross margin.



                                       10

<PAGE>   11


                             SOMANETICS CORPORATION

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

                                FEBRUARY 28, 1998


THREE MONTHS ENDED FEBRUARY 28, 1998 COMPARED TO THREE MONTHS ENDED FEBRUARY 28,
1997

         Net revenues increased by approximately $450,000, or 127%, from
$353,863 in the three-month period ended February 28, 1997 to $803,365 in the
three-month period ended February 28, 1998. The increase in revenues was
primarily attributable to an increase in United States sales of approximately
$260,000, from approximately $132,000 in the first quarter of fiscal 1997 to
approximately $392,000 in the first quarter of fiscal 1998, and an increase in
international sales of approximately $189,000, from approximately $222,000 in
the first quarter of fiscal 1997 to approximately $411,000 in the first quarter
of fiscal 1998. The increase in net revenues is primarily attributable to sales
of the model 4100 Cerebral Oximeter and Somasensor which became available in the
first quarter of fiscal 1998, stocking orders for the model 4100 Cerebral
Oximeter from both existing distributors and new international distributors, a
10% increase in the average selling price of Cerebral Oximeters due to (i) a
change in the mix between sales directly to hospitals and sales through
distributors and (ii) the higher price of the new model 4100 Cerebral Oximeter,
partially offset by exchanges of model 4100 Cerebral Oximeters for model 3100A
Cerebral Oximeters with existing customers. The sales increase for the first
quarter of fiscal 1998 as compared to the first quarter of fiscal 1997 was also
partially offset by reduced shipments to Baxter Limited in Japan, which is
delaying purchases until shipment of the model 4100 Cerebral Oximeter is
permitted in Japan. There can be no assurance that the application for such
permission will be approved before the fourth quarter of fiscal 1998.

         Sales of model 4100 Cerebral Oximeters, model 4100 exchanges and
refurbished model 3100 Cerebral Oximeters, model 3100A Cerebral Oximeters, and
SomaSensors comprised approximately 65%, 13%, 7%, and 13%, respectively, of the
Company's net revenues in the first quarter of fiscal 1998 and 0%, 5%, 73%, and
22%, respectively, of the Company's net revenues in the first quarter of fiscal
1997. Approximately 51% of the Company's net revenues in the first quarter of
fiscal 1998 were export sales, compared to 63% of the Company's net revenues in
the first quarter of fiscal 1997. One United States distributor and two
international distributors accounted for approximately 21%, 16%, and 10%,
respectively, of net revenues for the three months ended February 28, 1998, and
one international distributor and two United States distributors accounted for
approximately 42%, 14% and 11%, respectively, of total net revenues for the
three months ended February 28, 1997.

         Gross margin as a percentage of net revenues for the quarters ended
February 28, 1998 and February 28, 1997 was approximately 51% and 49%,
respectively. Gross margin as a percentage of net revenues increased in the
first quarter ended February 28, 1998 from the first quarter of fiscal 1997
primarily because the Company realized a higher average selling price for the
new model 4100 Cerebral Oximeters. This increase was partially offset by (i) the
exchanges of model 4100 Cerebral Oximeters for model 3100A Cerebral Oximeters
with existing customers, and (ii) the higher cost to the Company of the
SomaSensor in the first quarter of fiscal 1998.

         The Company's research, development and engineering expenses incurred
for the three months ended February 28, 1998 were $164,788, as compared to
$164,211 for the three months ended February 28, 1997. Although the research,
development, and engineering projects during the first quarter of fiscal 1998
were different from those during the first quarter of fiscal 1997, the Company's
expenditure levels and personnel remained relatively constant.



                                       11

<PAGE>   12
                             SOMANETICS CORPORATION

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

                                FEBRUARY 28, 1998


         Selling, general and administrative expenses increased approximately
$121,000, or 9%, from $1,359,088 for the three months ended February 28, 1997 to
$1,480,571 for the three months ended February 28, 1998. The increase in
selling, general and administrative expense is primarily attributable to a
$98,000 increase in salaries, wages and related expenses as a result of
additional employees hired since March 1, 1997 (from 39 employees as of February
28, 1997 to 46 employees as of February 28, 1998), and an $81,000 increase in
selling-related expenses attributable to employee travel, industry trade shows
and advertising, and a $22,000 increase in accrued warranty expense for sales of
new product, partially offset by a $48,000 decrease in professional services
fees and regulatory certification fees, and a $27,000 decrease in employee
related expenses.

         For the three-month period ended February 28, 1998, the Company
realized a 10% decrease in its net loss over the same period in fiscal 1997. The
decrease is primarily attributable to a 127% increase in net revenues, partially
offset by an 8% increase in operating expenses.


LIQUIDITY AND CAPITAL RESOURCES

         Net cash used in operations during the three-month period ended
February 28, 1998 was approximately $1,896,000. Cash was used primarily to (i)
fund the Company's net loss, primarily selling, general and administrative
expenses and research, development and engineering expenses (approximately
$1,149,000, net of depreciation and amortization expense), (ii) increase
accounts receivable (approximately $575,000) primarily due to higher sales in
the first quarter of fiscal 1998 than in the prior quarter, and (iii) increase
inventories of the model 4100 Cerebral Oximeter and its components
(approximately $315,000). These uses of cash were partially offset by an
increase in accounts payable (approximately $168,000) primarily due to increased
inventory purchases for the model 4100 Cerebral Oximeter and its components.
Management expects working capital requirements to increase if sales increase.
The Company capitalized approximately $171,000 of costs for model 4100 Cerebral
Oximeters being used as demonstration units in the first quarter of fiscal 1998.
The Company expects to depreciate these costs as a marketing expense over three
years.

         As of February 28, 1998 the Company has working capital of $3,151,117,
cash, cash equivalents and marketable securities of $2,514,230, total current
liabilities of $963,868 and shareholder's equity of $3,715,856. The Company has
no loan commitments.

         On April 8, 1998, the Company completed the public offering of
1,750,000 newly-issued Common Shares, at a price of $5.75 per share, for gross
proceeds of $10,062,500, through an offering underwritten by Brean Murray & Co.,
Inc. The net proceeds to the Company, after deducting the underwriting discount
and the estimated expenses of the offering, were approximately $9,200,000.

         The Company believes that the cash, cash equivalents and marketable
securities on hand at February 28, 1998 together with the net proceeds of the
April 8, 1998 public offering will be sufficient to sustain the Company's
operations at budgeted levels and its needs for liquidity into the year 2000. By
that time the Company will be required to raise additional cash either through
additional sales of its product, through sales of securities, by incurring
indebtedness or by some combination of the foregoing. If the Company is unable
to raise additional cash by that time, it will be required to reduce or
discontinue its operations.


                                       12


<PAGE>   13


                             SOMANETICS CORPORATION

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

                                FEBRUARY 28, 1998


         The estimated length of time current cash and cash equivalents will
sustain the Company's operations is based on certain estimates and assumptions
made by the Company. Such estimates and assumptions are subject to change as a
result of actual experience and there can be no assurance that actual capital
requirements necessary to market the Cerebral Oximeter and SomaSensor, to
develop enhancements to, and product extensions of, the Cerebral Oximeter, to
conduct research and development concerning additional potential applications of
the Company's technology and for working capital will not be substantially
greater than current estimates.

         The Company does not believe that product sales will be sufficient to
fund the Company's operations in fiscal 1998.

         As of February 28, 1998, there were 60,400 redeemable warrants
outstanding, exercisable at $20.00 per share until July 13, 2000, and 55,120
redeemable warrants outstanding exercisable at $17.50 per share until April 1,
2001. These warrants were issued in the Company's 1995 and April 1996 Regulation
S securities offerings. The conditions permitting the Company to redeem these
warrants have not been met as of April 9, 1998. In addition, the placement
agents and their transferees hold warrants to purchase 64,394 Common Shares
exercisable at $12.50 per share and 15,000 warrants exercisable at $14.40 per
share. Also, the underwriter of the June 1997 public offering received warrants
to purchase 200,000 Common Shares exercisable at $4.80 per share. It is unlikely
that these warrants will be exercised if the exercise price exceeds the market
price of the Common Shares.

         The Company has no loan commitments.

         There can be no assurance that even if the Company receives additional
capital, it will be able to achieve the level of sales necessary to sustain its
operations. There can be no assurance that the Company will be able to obtain
any funds on terms acceptable to the Company and at times required by the
Company through sales of the Company's product, sales of securities or loans in
sufficient quantities. The report of the Company's Independent Auditors in the
Company's Annual Report on Form 10-K for the fiscal year ended November 30, 1997
contains an explanatory paragraph relating to an uncertainty concerning the
Company's ability to continue as a going concern.





                                       13

<PAGE>   14



ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

         Not applicable.




                                       14

<PAGE>   15


                            PART II OTHER INFORMATION


Item 2.  Changes in Securities

         Effective March 18, 1998, the Company amended and restated its articles
of incorporation to (i) increase the Company's authorized Common Shares from
6,000,000 to 20,000,000 shares, and (ii) remove provisions relating to the
reverse stock split effected April 10, 1997. As a result of this amendment, the
additional 14,000,000 Common Shares so authorized are available for issuance by
the Board of Directors of the Company for raising additional capital, stock
options, acquisitions, stock splits, stock dividends or other corporate
purposes.



Item 6.  Exhibits and Reports on Form 8-K

           (a)    Exhibits

                  3(i)     Restated Articles of Incorporation of Somanetics
                           Corporation.

                  10.1     Form of Underwriting Agreement, dated April 3, 1998,
                           between Somanetics Corporation and Brean Murray &
                           Co., Inc.

                  27.1     Financial Data Schedule.

         (b)      Reports on Form 8-K

                  No reports on Form 8-K were filed by the Company during the
                  quarter for which this report is filed.





                                       15

<PAGE>   16


                                   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 9, 1998                              By:/s/ Raymond W. Gunn
         ------------------                         ------------------------
                                                    Raymond W. Gunn
                                                    Executive Vice President 
                                                    and Chief
                                                    Financial Officer (Duly 
                                                    Authorized and Principal 
                                                    Financial Officer)
                                                    



                                       16

<PAGE>   17


                                  EXHIBIT INDEX



EXHIBIT                            DESCRIPTION

3(i)    Restated Articles of Incorporation of Somanetics Corporation.
10.1    Form of Underwriting  Agreement,  dated April 3, 1998, between 
        Somanetics Corporation and Brean Murray & Co., Inc.
27.1    Financial Data Schedule.







                                       17