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Somanetics Corp · 424B3 · On 7/10/96

Filed On 7/10/96 · SEC File 33-38438 · Accession Number 950124-96-3069

  As Of               Filer                 Filing     On/For/As Docs:Pgs              Issuer               Agent

 7/10/96  Somanetics Corp                   424B3                  1:26                                     Bowne of Detroit...01/FA

Prospectus · Rule 424(b)(3)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B3       424B3 Prospectus                                      26    167K

Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Exhibits and Reports on Form 8-K Legal Proceedings Liquidity and Capital Resources Submission of Matters to a Vote of Security Holders
1	1st Page
15	Liquidity and Capital Resources
24	Item 1. Legal Proceedings
"	Item 4. Submission of Matters to a Vote of Security Holders
25	Item 6. Exhibits and Reports on Form 8-K

424B3 1st Page of 26 TOC Top Previous Next Bottom Just 1st
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                                                          Pursuant to Rule 424B3
                                                       Registration No. 33-38438

PROSPECTUS SUPPLEMENT DATED, JULY 10, 1996
TO SOMANETICS CORPORATION PROSPECTUS DATED, APRIL 4, 1996 

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 MAY 31, 1996 

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)

                                                        · Enlarge/Download Table

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

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

(810) 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 July 1, 1996: 19,114,118 

424B3 2nd Page of 26 TOC 1st Previous Next Bottom Just 2nd

PART I FINANCIAL INFORMATION

SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

BALANCE SHEETS

                                                        · Enlarge/Download Table

                                                                       May 31,    November 30,
ASSETS                                                                    1996          1995  
                                                                   -------------  ------------
                                                                    (Unaudited)   (Audited)   
                                                                                              
CURRENT ASSETS:                                                                               
  Cash and cash equivalents . . . . . . . . . . . . . . . . . . . $ 1,369,287      $  941,426 
  Accounts receivable, net of allowance for doubtful accounts of                              
    $194,000 at May 31, 1996 and November 30, 1995  . . . . . . .     309,478         443,859 
  Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . .     913,476         936,421 
  Prepaid expenses  . . . . . . . . . . . . . . . . . . . . . . .      44,723          72,161 
                                                                  -----------     ----------- 
    Total current assets  . . . . . . . . . . . . . . . . . . . .   2,636,964       2,393,867 
                                                                  -----------     ----------- 
PROPERTY AND EQUIPMENT (at cost):                                                             
  Machinery and equipment . . . . . . . . . . . . . . . . . . . .     408,539         412,217 
  Furniture and fixtures  . . . . . . . . . . . . . . . . . . . .     192,749         193,339 
  Leasehold improvements  . . . . . . . . . . . . . . . . . . . .     166,770         166,770 
                                                                  -----------     ----------- 
    Total . . . . . . . . . . . . . . . . . . . . . . . . . . . .     768,058         772,326 
  Less accumulated depreciation and amortization  . . . . . . . .    (712,172)       (685,835)
                                                                  -----------     ----------- 
    Net property and equipment  . . . . . . . . . . . . . . . . .      55,886          86,491 
                                                                  -----------     ----------- 
OTHER ASSETS:                                                                                 
  Note receivable - related party . . . . . . . . . . . . . . . .     198,188         190,240 
  Patents and trademarks, net . . . . . . . . . . . . . . . . . .      82,585          86,041 
  Other   . . . . . . . . . . . . . . . . . . . . . . . . . . . .     117,586         104,616 
                                                                  -----------     ----------- 
    Total other assets  . . . . . . . . . . . . . . . . . . . . .     398,359         380,897 
                                                                  -----------     ----------- 
TOTAL ASSETS  . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,091,209     $ 2,861,255 
                                                                  ===========     =========== 

LIABILITIES AND SHAREHOLDERS' EQUITY                                                          

CURRENT LIABILITIES:                                                                          
  Accounts payable  . . . . . . . . . . . . . . . . . . . . . . . $   185,350     $   131,401 
  Accrued liabilities . . . . . . . . . . . . . . . . . . . . . .     174,780         416,356 
                                                                  -----------     ----------- 
    Total current liabilities . . . . . . . . . . . . . . . . . .     360,130         547,757 
                                                                  -----------     ----------- 
COMMITMENTS AND CONTINGENCIES . . . . . . . . . . . . . . . . . .       --               --   
REDEEMABLE CONVERTIBLE PREFERRED SHARES . . . . . . . . . . . . .       --             19,843 
SHAREHOLDERS' EQUITY:                                                                         
  Preferred shares, authorized, 1,000,000 shares of $.01 par                                  
    value; no shares issued or outstanding  . . . . . . . . . . .       --               --   
  Common shares, authorized, 30,000,000 shares of $.01 par                                    
    value; issued and outstanding, 18,985,418 and 17,768,552                                  
    shares at May 31, 1996 and November 30, 1995,                                             
    respectively  . . . . . . . . . . . . . . . . . . . . . . . .     189,856         177,687 
  Additional paid-in capital. . . . . . . . . . . . . . . . . . .  30,367,359      29,023,318 
  Deficit accumulated during the development stage  . . . . . . . (27,826,136)    (26,907,350)
                                                                  -----------     ----------- 
    Total shareholders' equity  . . . . . . . . . . . . . . . . .   2,731,079       2,293,655 
                                                                  -----------     ----------- 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  . . . . . . . . . . . $ 3,091,209     $ 2,861,255 
                                                                  ===========     =========== 

See notes to financial statements 

2 

424B3 3rd Page of 26 TOC 1st Previous Next Bottom Just 3rd

SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

STATEMENTS OF LOSS
(UNAUDITED) 

                                                        · Enlarge/Download Table


                                                Three Months                  Six Months         
                                                Ended May 31,                Ended May 31,       
                                       ---------------------------   --------------------------- 
                                          1996          1995           1996            1995      
                                       -----------    ------------   -----------     ----------- 
                                                                                                 
REVENUES:                                                                                        
 Net Sales............................ $    84,387    $    672,646   $   599,465     $   906,625 
 Research and development activities         --  '           --  '         --  '           --  ' 
                                       -----------    ------------   -----------     ----------- 
   Total revenues.....................      84,387         672,646       599,465         906,625 
COST OF SALES.........................      48,318         313,237       259,451         431,016 
                                       -----------    ------------   -----------     ----------- 
GROSS MARGIN..........................      36,069         359,409       340,014         475,609 
                                       -----------    ------------   -----------     ----------- 
OPERATING EXPENSES:                                                                              
 Research, development, and                                                                      
    engineering.......................      52,732         122,279       102,668         190,564 
 Selling, general and administrative       609,386         935,340     1,199,716       1,850,919 
                                       -----------    ------------   -----------     ----------- 
   Total operating expenses...........     662,118       1,057,619     1,302,384       2,041,483 
                                       -----------    ------------   -----------     ----------- 
OPERATING LOSS........................    (626,049)       (698,210)     (962,370)     (1,565,874)
                                       -----------    ------------   -----------     ----------- 
OTHER INCOME (EXPENSE):                                                                          
 Interest income......................      18,752          21,880        32,411          51,442 
 Interest expense.....................       --  '            (214)        --  '            (772)
 Other................................       8,100             918        11,173             925 
                                       -----------    ------------   -----------     ----------- 
   Total other income.................      26,852          22,584        43,584          51,595 
                                       -----------    ------------   -----------     ----------- 
NET LOSS.............................. $  (599,197)   $   (675,626)  $  (918,786)    $(1,514,279)
                                       ===========    ============   ===========     =========== 
NET LOSS PER COMMON SHARE............. $      (.03)   $       (.04)  $      (.05)    $      (.09)
                                       -----------    ------------   -----------     ----------- 
WEIGHTED AVERAGE NUMBER OF                                                                       
COMMON SHARES OUTSTANDING.............  18,200,325      16,268,552    17,991,538      16,268,123 
                                       ===========    ============   ===========     =========== 



                                              Cumulative                                         
                                            for the Period                                       
                                           January 15, 1982                                      
                                          (Date of Inception)                                    
                                                 To                                              
                                                May 31,                                          
                                                 1996                                            
                                             ------------                                        
                                                                                                 
REVENUES:                                                                                        
 Net Sales............................       $  5,550,198                                        
 Research and development activities              122,500                                        
                                             ------------                                        
   Total revenues.....................          5,672,698                                        
COST OF SALES.........................          2,501,567                                        
                                             ------------                                        
GROSS MARGIN..........................          3,171,131                                        
                                             ------------                                        
OPERATING EXPENSES:                                                                              
 Research, development, and                                                                      
    engineering.......................          7,872,225                                        
 Selling, general and administrative           23,839,500                                        
                                             ------------                                        
   Total operating expenses...........         31,711,725                                        
                                             ------------                                        
OPERATING LOSS........................        (28,540,594)                                       
                                             ------------                                        
OTHER INCOME (EXPENSE):                                                                          
 Interest income......................          1,091,957                                        
 Interest expense.....................           (231,225)                                       
 Other................................           (126,432)                                       
                                             ------------                                        
   Total other income.................            734,300                                        
                                             ------------                                        
NET LOSS..............................       $(27,806,294)                                       
                                             ============                                        
NET LOSS PER COMMON SHARE.............       $      (4.17)                                       
                                             ------------                                        
WEIGHTED AVERAGE NUMBER OF                                                                       
COMMON SHARES OUTSTANDING.............          6,661,553                                        
                                             ============                                        

See notes to financial statements 

3 

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY) 
(UNAUDITED) 
(1 OF 2)

                                                        · Enlarge/Download Table


                                                                                 PRICE                           ADDITIONAL
                                                                                  PER                  SHARE      PAID-IN  
                                                                  DATE           SHARE       SHARES    VALUE      CAPITAL  
                                                                  ----           -----       ------    -----      -------  
ISSUANCE OF COMMON SHARES:                                                                                                 
                                                                                                                           
  For shareholders' contributions of test equipment ......... January, 1982      $0.032      830,376  $ 8,304  $    18,196 
  For cash .................................................. July, 1982          1.31        78,345      783      101,217 
  Net loss from January 15, 1982 (date of inception)                                                                       
     to November 30, 1982 ...................................                                                              
                                                                                           ---------  -------  ----------- 
Balance at November 30, 1982 ................................                                908,721    9,087      119,413 

  For cash .................................................. December, 1982      1.31        39,172      392       50,608 
  For services .............................................. January, 1983       1.31        15,669      157       20,343 
  For cash, less issuance costs of $5,863 ................... July, 1983          2.62       116,243    1,162      297,139 
  For services .............................................. November, 1983      2.62         7,834       78       20,422 
  Net loss for the year ended November 30, 1983 .............                                                              
                                                                                           ---------  -------  ----------- 
Balance at November 30, 1983 ................................                              1,087,639   10,876      507,925 

  For cash, less issuance costs                               December, 1983-                                              
     of $7,735 .............................................. April, 1984         2.62       194,212    1,943      498,503 
  For patents ............................................... February, 1984      2.62        48,944      489      127,580 
  For cash .................................................. November, 1984      3.51        37,303      373      130,563 
  Net loss for the year ended November 30, 1984 .............                                                              
                                                                                           ---------  -------  ----------- 
Balance at November 30, 1984 ................................                              1,368,098   13,681    1,264,571 

  For cash, less issuance costs                               December, 1984-                                              
     of $3,726 .............................................. June, 1985          3.51       130,292    1,303      452,312 
  For cash .................................................. November, 1985      7.02       144,838    1,448    1,015,352 
  Net loss for the year ended November 30, 1985 .............                                                              
                                                                                           ---------  -------  ----------- 
Balance at November 30, 1985 ................................                              1,643,228   16,432    2,732,235 

  Exercise of stock options for cash ........................ December, 1985      3.51         7,834       79       27,421 
  For cash .................................................. January, 1986       7.02       104,442    1,044      732,157 
  Net loss for the year ended November 30, 1986 .............                                                              
                                                                                           ---------  -------  ----------- 
Balance at November 30, 1986 ................................                              1,755,504   17,555    3,491,813 

  For cash, less issuance costs                               March, 1987-                                                 
     of $9,500 .............................................. September, 1987     5.11       103,591    1,036      518,364 
  Net loss for the year ended November 30, 1987 .............                                                              
                                                                                           ---------  -------  ----------- 
Balance at November 30, 1987 ................................                              1,859,095   18,591    4,010,177 

  For cash, less issuance costs                               February, 1988-                                              
     of $10,500 ............................................. April, 1988         5.11        32,905      329      157,171 
  Net loss for the year ended November 30, 1988 .............                                                              
                                                                                           ---------  -------  ----------- 
Balance at November 30, 1988 ................................                              1,892,000   18,920    4,167,348 

  For cash and the exchange of debt                           January, 1989-                                               
     due a shareholder ...................................... July, 1989          5.11        45,244      452      230,548 
  Net loss for the year ended November 30, 1989 .............                                                              
                                                                                           ---------  -------  ----------- 
Balance at November 30, 1989 ................................                              1,937,244   19,372    4,397,896 

  For services .............................................. August, 1990        5.11        47,006      471      239,529 
  Net loss for the year ended November 30, 1990 .............                                                              
                                                                                           ---------  -------  ----------- 
Balance at November 30, 1990 ................................                              1,984,250   19,843    4,637,425 

  For cash, less issuance costs of $1,630,241 ............... March, 1991         2.00     3,600,000   36,000    5,533,759 
  Unit Purchase Option ...................................... March, 1991                                              120 
  Redeemable Convertible Preferred Stock dividend ........... April, 1991                                                  
  For cash, less issuance costs of $126,900 ................. April, 1991         2.00       540,000    5,400      947,700 
  Net loss for the year ended November 30, 1991 .............                                                              
                                                                                           ---------  -------  ----------- 
Balance at November 30, 1991 ................................                              6,124,250  $61,243  $11,119,004 



                                                                                   TOTAL                                   
                                                                   ACCUM-       SHAREHOLDERS'                              
                                                                   ULATED          EQUITY                                  
                                                                  DEFICIT       (DEFICIENCY)                               
                                                                  -------        ----------                                
ISSUANCE OF COMMON SHARES:                                                                                                 
                                                                                                                           
  For shareholders' contributions of test equipment .........   $       -      $     26,500                                
  For cash ..................................................                       102,000                                
  Net loss from January 15, 1982 (date of inception)                                                                       
     to November 30, 1982 ...................................      (107,083)       (107,083)                               
                                                                -----------    ------------                                
Balance at November 30, 1982 ................................      (107,083)         21,417                                

  For cash ..................................................                        51,000                                
  For services ..............................................                        20,500                                
  For cash, less issuance costs of $5,863 ...................                       298,301                                
  For services ..............................................                        20,500                                
  Net loss for the year ended November 30, 1983 .............      (291,986)       (291,986)                               
                                                                -----------    ------------                                
Balance at November 30, 1983 ................................      (399,069)        119,732                                

  For cash, less issuance costs                                                                                            
     of $7,735 ..............................................                       500,446                                
  For patents ...............................................                       128,069                                
  For cash ..................................................                       130,936                                
  Net loss for the year ended November 30, 1984 .............      (700,380)       (700,380)                               
                                                                -----------    ------------                                
Balance at November 30, 1984 ................................    (1,099,449)        178,803                                

  For cash, less issuance costs                                                                                            
     of $3,726 ..............................................                       453,615                                
  For cash ..................................................                     1,016,800                                
  Net loss for the year ended November 30, 1985 .............      (559,871)       (559,871)                               
                                                                -----------    ------------                                
Balance at November 30, 1985 ................................    (1,659,320)      1,089,347                                

  Exercise of stock options for cash ........................                        27,500                                
  For cash ..................................................                       733,201                                
  Net loss for the year ended November 30, 1986 .............    (1,222,772)     (1,222,772)                               
                                                                -----------    ------------                                
Balance at November 30, 1986 ................................    (2,882,092)        627,276                                

  For cash, less issuance costs                                                                                            
     of $9,500 ..............................................                       519,400                                
  Net loss for the year ended November 30, 1987 .............    (1,143,081)     (1,143,081)                               
                                                                -----------    ------------                                
Balance at November 30, 1987 ................................    (4,025,173)          3,595                                

  For cash, less issuance costs                                                                                            
     of $10,500 .............................................                       157,500                                
  Net loss for the year ended November 30, 1988 .............      (352,311)       (352,311)                               
                                                                -----------    ------------                                
Balance at November 30, 1988 ................................    (4,377,484)       (191,216)                               

  For cash and the exchange of debt                                                                                        
     due a shareholder ......................................                       231,000                                
  Net loss for the year ended November 30, 1989 .............      (446,642)       (446,642)                               
                                                                -----------    ------------                                
Balance at November 30, 1989 ................................    (4,824,126)       (406,858)                               

  For services ..............................................                       240,000                                
  Net loss for the year ended November 30, 1990 .............    (1,328,518)     (1,328,518)                               
                                                                -----------    ------------                                
Balance at November 30, 1990 ................................    (6,152,644)     (1,495,376)                               

  For cash, less issuance costs of $1,630,241 ...............                     5,569,759                                
  Unit Purchase Option ......................................                           120                                
  Redeemable Convertible Preferred Stock dividend ...........       (19,843)        (19,843)                               
  For cash, less issuance costs of $126,900 .................                       953,100                                
  Net loss for the year ended November 30, 1991 .............    (2,058,493)     (2,058,493)                               
                                                                -----------    ------------                                
Balance at November 30, 1991 ................................   $(8,230,980)   $  2,949,267                                


4 

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY) 
(UNAUDITED) 
(2 OF 2)

                                                        · Enlarge/Download Table

                                                                                      PRICE                           ADDITIONAL
                                                                                       PER                   SHARE     PAID-IN  
                                                                        DATE          SHARE      SHARES      VALUE     CAPITAL  
                                                                        ----          -----      ------      -----     -------  
                                                                                                                                
Balance at November 30, 1991......................................                              6,124,250  $ 61,243  $11,119,004

  Exercise of Class A Warrants for cash,                           December, 1991-                                              
     less issuance costs of $702,917 ............................. May, 1992           3.00     4,139,000    41,390   11,672,693
                                                                   February, 1992-                                              
  Exercise of Class B Warrants for cash .......................... November, 1992      4.00        34,055       341      135,879
                                                                   July, 1992-         2.00-                                    
  Exercise of stock options for cash ............................. November, 1992      2.19        30,100       301       65,774
  Net loss for year ended November 30, 1992 ......................                                                              
                                                                                               ----------  --------  -----------
Balance at November 30, 1992 .....................................                             10,327,405   103,275   22,993,350

                                                                   December, 1992-                                              
  Exercise of Class B Warrants for cash .......................... October, 1993       4.00        29,766       298      118,766
                                                                   March, 1993-                                                 
  Exercise of Class M Warrants for cash .......................... October, 1993       1.00       600,179     6,002      594,177
                                                                   March, 1993-        2.00-                                    
  Exercise of Stock Options for cash ............................. September, 1993     4.38         3,100        31       13,119
  Exercise of Unit Purchase                                                                                                     
     Options and Underlying Class A Warrants                       May, 1993-          3.00-                                    
     for cash .................................................... October, 1993       3.30        10,002       100       31,406
  Net loss for the year ended November 30, 1993 ..................                                                              
                                                                                               ----------  --------  -----------
Balance at November 30, 1993 .....................................                             10,970,452   109,706   23,750,818

  For cash, less issuance costs of $490,790 ...................... August, 1994        0.80     5,297,000    52,970    3,693,840
  Exercise of Stock Options for Cash........................... .. November, 1994      1.63-                                    
                                                                                       3.59           100         1          201
  Net loss for the year ended November 30, 1994 ..................                                                              
                                                                                               ----------  --------  -----------
Balance at November 30, 1994 .....................................                             16,267,552  $162,677  $27,444,859

  Exercise of Stock Options for Cash ............................. February, 1995      0.84         1,000        10          834
  For cash, less issuance costs of $282,475 ...................... July, 1995          1.25     1,500,000    15,000    1,577,625

  Net loss for the year ended November 30, 1995 ..................                                                              
                                                                                               ----------  --------  -----------
Balance at November 30, 1995 .....................................                             17,768,552  $177,687  $29,023,318

  Exercise of Stock Options for Cash ............................. January, 1996       0.84        20,000       200       16,675
                                                                   February, 1996      0.84-       46,666       467       44,116
                                                                                       1.00                                     
  For cash, less issuance costs of $143,587 ...................... April, 1996         1.25     1,142,400    11,424    1,272,989
  Exercise of Stock Options for Cash ............................. May, 1996           1.33         7,800        78       10,261
  Net loss for the six month period ended                                                                                       
    May 31, 1996 .................................................                                                              
                                                                                               ----------  --------  -----------

Balance at May 31, 1996 ..........................................                             18,985,418  $189,856  $30,367,359
                                                                                               ==========  ========  ===========



                                                                                       TOTAL                                    
                                                                         ACCUM-    SHAREHOLDERS'                                
                                                                         ULATED       EQUITY                                    
                                                                        DEFICIT    (DEFICIENCY)                                 
                                                                        -------     ----------                                  
                                                                                                                                
Balance at November 30, 1991......................................  $ (8,230,980)  $ 2,949,267                                  

  Exercise of Class A Warrants for cash,                                                                                        
     less issuance costs of $702,917 .............................                  11,714,083                                  

  Exercise of Class B Warrants for cash ..........................                     136,220                                  

  Exercise of stock options for cash .............................                      66,075                                  
  Net loss for year ended November 30, 1992 ......................    (5,390,637)   (5,390,637)                                 
                                                                    ------------   -----------                                  
Balance at November 30, 1992 .....................................   (13,621,617)    9,475,008                                  

  Exercise of Class B Warrants for cash ..........................                     119,064                                  

  Exercise of Class M Warrants for cash ..........................                     600,179                                  

  Exercise of Stock Options for cash .............................                      13,150                                  
  Exercise of Unit Purchase                                                                                                     
     Options and Underlying Class A Warrants                                                                                    
     for cash ....................................................                      31,506                                  
  Net loss for the year ended November 30, 1993 ..................    (6,135,830)   (6,135,830)                                 
                                                                    ------------   -----------                                  
Balance at November 30, 1993 .....................................   (19,757,447)    4,103,077                                  

  For cash, less issuance costs of $490,790 ......................                   3,746,810                                  
  Exercise of Stock Options for Cash........................... ..                                                              
                                                                                           202                                  
  Net loss for the year ended November 30, 1994 ..................    (4,331,500)   (4,331,500)                                 
                                                                    ------------   -----------                                  
Balance at November 30, 1994 .....................................  $(24,088,947)  $ 3,518,589                                  

  Exercise of Stock Options for Cash .............................                         844                                  
  For cash, less issuance costs of $282,475 ......................                   1,592,625                                  

  Net loss for the year ended November 30, 1995 ..................    (2,818,403)   (2,818,403)                                 
                                                                    ------------   -----------                                  
Balance at November 30, 1995 .....................................  $(26,907,350)  $ 2,293,655                                  

  Exercise of Stock Options for Cash .............................                      16,875                                  
                                                                                        44,583                                  

  For cash, less issuance costs of $143,587 ......................                   1,284,413                                  
  Exercise of Stock Options for Cash .............................                      10,339                                  
  Net loss for the six month period ended                                                                                       
    May 31, 1996 .................................................      (918,786)     (918,786)                                 
                                                                    ------------   -----------                                  

Balance at May 31, 1996 ..........................................  $(27,826,136)  $ 2,731,079                                  
                                                                    ============   ===========                                  

See notes to financial statements 

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SOMANETICS CORPORATION  
(A DEVELOPMENT STAGE COMPANY)   

STATEMENTS OF CASH FLOWS  
(UNAUDITED)   

                                                        · Enlarge/Download Table

                                                                                                                      Cumulative    
                                                                                                                    for the Period  
                                                                                                                   January 15, 1982 
                                                                                        Six Months               (Date of Inception)
                                                                                       Ended May 31,  '                    to       
                                                                                      ----------------                   May 31,    
                                                                                    1996  '         1995  '               1996    ' 
                                                                                ----------      -----------          ------------   
                                                                                                                                    
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                               
 Net loss.................................................................      $ (918,786)     $(1,514,279)         $(27,806,294)  
 Adjustments to reconcile net loss to net cash used in operations:                                                                  
    Depreciation and amortization.........................................          31,164           84,157               794,151   
    Expenses paid through the issuance of common shares..                           --               --                   408,068   
    Loss on disposal of property..........................................          --               --                    44,861   
    Changes in assets and liabilities:                                                                                              
       Accounts receivable (increase) decrease............................         134,381         (416,328)             (309,478)  
       Inventory (increase) decrease......................................          22,945           10,189              (913,476)  
       Prepaid expenses (increase) decrease...............................          27,438           13,076               (44,723)  
       Other assets (increase)............................................         (12,970)         (17,393)             (228,318)  
       Accounts payable increase..........................................          53,949          119,522               185,350   
       Accrued liabilities increase (decrease)............................        (241,576)          29,903               174,780   
                                                                                ----------      -----------          -------------  
        Net cash (used in) operations.....................................        (903,455)      (1,691,153)          (27,695,079)  
                                                                                ----------      -----------          ------------   
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                               
 Purchases of marketable securities.......................................          --               --               (12,166,540)  
 Proceeds from sale of marketable securities..............................          --            1,564,826            12,166,540   
 Acquisition of property and equipment (net)..............................           2,897          (20,906)             (839,250)  
 Disbursement under note receivable - related party.......................          (7,948)          (6,854)             (198,188)  
                                                                                ----------      -----------          ------------   
        Net cash (used in) provided by investing activities...............          (5,051)       1,537,066            (1,037,438)  
                                                                                ----------      -----------          ------------   
CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                               
 Proceeds from issuance of Common Shares..................................       1,356,210              844            30,121,647   
 Redemption of Convertible Preferred Shares...............................         (19,843)          --                   (19,843)  
 Proceeds from issuance of notes payable and long-term debt...............          --   '           --                 2,515,223   
 Repayments of notes payable and long-term debt...........................          --   '          (30,000)           (2,515,223)  
                                                                                ----------      ------------         ------------   
        Net cash (used in) provided by financing activities...............       1,336,367          (29,156)           30,101,804   
                                                                                ----------      -----------          ------------   
NET INCREASE (DECREASE) IN CASH AND CASH                                                                                            
 EQUIVALENTS..............................................................         427,861         (183,243)            1,369,287   
CASH AND CASH EQUIVALENTS, BEGINNING                                                                                                
 OF PERIOD................................................................         941,426          840,245                --   '   
                                                                                ----------      -----------          ------------   
CASH AND CASH EQUIVALENTS, END                                                                                                      
 OF PERIOD................................................................      $1,369,287      $   657,002          $  1,369,287   
                                                                                ==========      ===========          ============   
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:                                                                            
 See Statements of Shareholders' Equity (Deficiency) for details of shares issued in exchange for noncash consideration.            
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:                                                                                   
 Cash paid for interest for the six-month periods ended May 31, 1996 and 1995 approximated $0 and $800, respectively.               

See notes to financial statements.  

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

NOTES TO FINANCIAL STATEMENTS 
(UNAUDITED) 

MAY 31, 1996

1. ORGANIZATION AND OPERATIONS                                                  

Somanetics Corporation (the "Company") is a Michigan corporation formed in      
January 1982 to develop, manufacture and market computer-based medical          
diagnostic and patient monitoring equipment.  The equipment utilizes the        
Company's "In Vivo Optical Spectroscopy," or "INVOS(R)" technology to provide   
analyses of human blood and tissue.  The Company is in the development stage    
and has incurred research, product development and other expenses involved in   
designing, developing, marketing and selling its products, as well as devoting  
efforts to raising capital.                                                     

The Company is using its INVOS technology in processor-based medical equipment  
(the INVOS Cerebral Oximeter and related single-patient use SomaSensor(R)) that 
non-invasively and continuously monitors trends in regional hemoglobin oxygen   
saturation of blood in the brain of an individual.                              

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.  Operating results for the        
six-month period ended May 31, 1996, are not necessarily indicative of the      
results that may be expected for the year ending November 30, 1996, although    
the Company expects to continue to incur operating losses for the foreseeable   
future.  These financial statements should be read in conjunction with the      
financial statements and footnotes thereto for the year ended November 30,      
1995 included in the Company's Annual Report on Form 10-K for the fiscal year   
ended November 30, 1995.                                                        

The Company is in the development stage and, accordingly, has not achieved      
sales necessary to support operations.  The Company has incurred an accumulated 
deficit of $27,826,136 through May 31, 1996.  The Company had working capital   
of $2,276,834, cash and cash equivalents of $1,369,287, total current           
liabilities of $360,130 and shareholders' equity of  $2,731,079, as of May 31,  
1996.                                                                           

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

NOTES TO FINANCIAL STATEMENTS 
(UNAUDITED) 

MAY 31, 1996

Although on June 6, 1996 the Company received clearance from the FDA to market  
the Cerebral Oximeter in the United States, the Company's current financial     
condition and recent results of operations and the status of its product        
marketing efforts and sales have been affected by the process of obtaining such 
clearance.  On November 22, 1993, the Company received notification that the    
FDA had rescinded the Company's 510(k) clearance to market the Cerebral         
Oximeter.  As a result, all commercial sales of the Company's products were     
suspended and the Company notified its United States distributors to stop       
selling the Cerebral Oximeter and to advise their customers to stop using the   
device.  In February 1994, the Company resumed marketing its products in        
several foreign countries, including Japan, its largest market outside the      
United States.                                                                  

On February 1, 1995, the Company filed a new 510(k) application with the FDA.   
On October 5, 1995, the Company received a written response from the FDA,       
stating that the FDA could not determine if the device was substantially        
equivalent to a legally marketed device, and that the FDA considered the        
Company's 510(k) submission to be withdrawn.  On February 13, 1996, the Company 
filed a new 510(k) application with the FDA presenting additional information   
not previously considered by the agency, identifying alternative predicate      
devices and offering revisions to its product and its labeling.  On June 6,     
1996, the Company received clearance to market the INVOS 3100A Cerebral         
Oximeter in the United States.                                                  

The Company currently is marketing Cerebral Oximeters and SomaSensors in 25     
foreign countries, with sales in 12 countries in the first six months of 1996.  
The Company expects to begin marketing the Cerebral Oximeter in other           
countries after complying with each country's local laws, and it expects to     
begin marketing the Cerebral Oximeter in the United States as soon as it        
completes product introduction activities and replaces existing Cerebral        
Oximeters with the INVOS 3100A Cerebral Oximeter.  There can be no assurance    
that sales will continue or increase as a result of such marketing efforts, or  
that, even if they increase, they will provide sufficient cash to fund the      
Company's operations or make the Company profitable.                            

As of May 31, 1996  the Company had 16 employees. The Company expects to hire   
21 additional employees before the end of the fiscal year, 12 in Sales and      
Marketing, 4 in Manufacturing and Quality Control, 3 in Research, Development   
and Engineering,  and 2 in Administration.  The Company expects to incur these  
expenses before receiving substantially increased proceeds from sales of its    
products, and such expenses will continue even if revenues do not increase.     
Therefore, in the short-run, they are expected to increase the Company's net    
losses.                                                                         

Management believes that markets exist for the products the Company has         
developed; however, there is an inherent uncertainty associated with the        
success of such new products.  The likelihood of success of the Company must be 
considered in view of the Company's                                             

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

NOTES TO FINANCIAL STATEMENTS 
(UNAUDITED) 

MAY 31, 1996

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 intends to operate.        

The net proceeds from previous sales of securities were sufficient to fund the  
Company's working capital requirements into the second quarter ended May 31,    
1996.  Current sales are not sufficient to fund operations.  On April 2, 1996,  
the Company completed the placement of 571,200 Units, at a price of $2.50 per   
Unit, for gross proceeds of $1,428,000, through an offering complying with      
Regulation S under the Securities Act of 1933, as amended.  The net proceeds to 
the Company, after deducting the placement agents' fee and the expenses of the  
offering, were approximately $1,284,000.  Each Unit consists of two             
newly-issued Common Shares, par value $0.01 per share, and one warrant to       
purchase one Common Share.                                                      

The Warrants are immediately exercisable and transferable separately from the   
Common Shares. Each Warrant entitles the holder to purchase one Common Share at 
an initial exercise price of $1.75 per share, subject to adjustment, at any     
time through April 1, 2001, unless earlier redeemed.  The Warrants are          
redeemable for $0.01 by the Company at any time after July 2, 1996, if certain  
conditions are met.                                                             

The Company also granted the placement agent warrants to purchase 114,240       
Common Shares at $1.25 per share exercisable during the four-year period        
beginning April 2, 1997.                                                        

Pursuant to an amended agreement with Rauscher Pierce & Clark, Inc. and         
Rauscher Pierce & Clark Limited (collectively, the "Placement Agent") in        
connection with the Regulation S offering, the Company has agreed to permit a   
person designated by the Placement Agent to attend meetings of the Company's    
Board of Directors until the 1998 Annual Meeting of Shareholders and to         
participate in discussions at such meetings.  The Placement Agent has not yet   
designated such person.  The Company is no longer required by its agreements    
with the Placement Agent to expand the size of its Board of Directors by two    
persons or to appoint persons nominated or acceptable to the Placement Agent to 
fill the vacancies.                                                             

Effective February 28, 1996, the Company redeemed all of its outstanding        
Convertible Preferred Shares for $.01 per share at a total redemption cost to   
the Company of approximately $19,843, and instead of the Convertible Preferred  
Shares formerly issuable upon the exercise of certain options, the Company will 
pay $.01 to the person exercising such options for each Convertible Preferred   
Share otherwise receivable.                                                     

The Company believes that the cash and cash equivalents on hand at May 31, 1996 
will be sufficient to sustain the Company's operations at budgeted levels and   
its needs for liquidity into the fourth quarter of fiscal 1996.  By that time   
the Company will be required to raise                                           

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

NOTES TO FINANCIAL STATEMENTS 
(UNAUDITED) 

MAY 31, 1996

additional cash either through additional sales of products, through sales of   
securities, by incurring additional indebtedness or by some combination of      
the foregoing.  If the Company isunable to raise additional cash by that time,  
it will be required to further reduce or discontinue its operations.            

The expected uses of the Company's cash and cash equivalents are 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 INVOS 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 the third quarter ending August 31, 1996.               

As of May 31, 1996, there were 4,075,179 redeemable Class B Warrants and 5,001  
non-redeemable Class B Warrants outstanding, all exercisable at $3.89 per       
share.  On June 19, 1996, the Company announced the extension of the redemption 
date for its redeemable Class B Warrants, and the expiration date for its       
non-redeemable Class B Warrants, to September 26, 1996. Any Class B Warrants    
which have not been exercised before September 26, 1996 will no longer be       
exercisable to purchase Common Shares.  Holders of Class B Warrants will have   
no further rights beyond September 26, 1996, except to receive, upon surrender  
of the Class B Warrant certificates evidencing redeemed Class B Warrants,       
payment of the redemption price of $.05 for each redeemable Class B Warrant     
outstanding and not already exercised as of September 26, 1996.  There can be   
no assurance that additional Class B Warrant holders will exercise their        
Warrants and it is unlikely they will do so as long as the exercise price       
exceeds the market price of the Common Shares.  The Company has the right to    
reduce the exercise price of the Class B Warrants, to extend the redemption     
date or both.                                                                   

Also as of May 31, 1996, there were 750,000 redeemable warrants outstanding,    
exercisable at $2.00 a share until July 13, 2000, and 571,200 redeemable        
warrants outstanding exercisable at $1.75 a 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 July 2, 1996.  Between June 1, 1996 and July 1, 1996,        
126,000 of the warrants exercisable at $2.00 a share had been exercised.  There 
can be no assurance that additional warrants will be exercised and it is        
unlikely that they will be exercised if the exercise price exceeds the market   
price of the Common Shares.  The Company has the right to reduce the exercise   
price of these warrants.                                                        

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

NOTES TO FINANCIAL STATEMENTS 
(UNAUDITED) 

MAY 31,1996 

Effective March 19, 1996, all outstanding Unit Purchase Options expired.  None  
of the Unit Purchase Options had been exercised between December 1, 1995 and    
March 19, 1996.                                                                 

The Company has no commitments for additional loans.                            

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                              

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

                                                                · Download Table

                                    May 31, 1996      November 30, 1995
                                    ------------      -----------------
                                                                       
Finished goods                        $385,150           $516,420      
Work in process                        306,388            219,076      
Purchased components                   221,938            200,925      
                                      --------           --------      
       Total                          $913,476           $936,421      
                                      ========           ========      

Patents and Trademarks are recorded at cost and are being amortized on the      
straight-line method over 17 years.  Accumulated amortization was $29,148 and   
$25,692 at May 31, 1996 and November 30, 1995, respectively.                    

Loss Per Common Share is computed using the weighted average number of Common   
Shares outstanding during each period.  Common Shares issuable under stock      
options and warrants have not been considered in the computation of the net     
loss per Common Share because such inclusion would be antidilutive.             

4.      ACCRUED LIABILITIES                                                     

Accrued liabilities consist of the following:                                   

                                                                · Download Table

                                   May 31, 1996      November 30, 1995
                                   ------------      -----------------
                                                                      
Professional fees                   $ 15,000             $ 75,702     
Warranty                              14,185               15,000     
Insurance                             12,489                  --      
Product Upgrades                     150,280              149,954     
Shareholder Lawsuits (Note 5)        (17,174)             144,717     
Other                                    --                30,983     
                                    --------             --------     
        Total                       $174,780             $416,356     
                                    ========             ========     


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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

NOTES TO FINANCIAL STATEMENTS 
(UNAUDITED) 

MAY 31, 1996

5. COMMITMENTS AND CONTINGENCIES                                                

Before the Company received FDA clearance to market the Cerebral Oximeter in    
the United States, several domestic distributors of the INVOS Cerebral Oximeter 
expressed their desire to terminate their distributor agreements with the       
Company.  The Company does not believe that its distributor agreements require  
it to accept returns of products sold to distributors in connection with a      
termination of the distribution agreement.  The Company, however, has reserved  
$194,000 at May 31, 1996, for the uncollectibility of accounts receivable from  
such distributors.                                                              

Under the domestic distributor replacement program, the Company believes        
receivables previously reserved will ultimately become collected once the       
Cerebral Oximeters owned or sold by United States distributors are replaced     
with the INVOS 3100A Cerebral Oximeter. Distributors might terminate their      
agreements with the Company or be terminated by the Company.    Distributor     
terminations may increase the Company's costs.  In preparation for the          
reintroduction of the Cerebral Oximeter in the United States, the Company has   
terminated certain distributors and added new distributors.  The Company will   
be required to engage additional United States distributors for the Cerebral    
Oximeter as a result of such terminations.  The Company's inability to retain   
distributors or engage replacement distributors could have a material adverse   
effect on its ability to market and sell its product.                           

Purchasers of eight units (out of a total of eighteen units) of the INVOS 2100  
System, a product previously marketed by the Company have requested refunds     
claiming, in some cases, that the device identified too many women as having a  
high risk of breast cancer.  The Company believes that the devices are          
functioning as intended and that the purchasers have no contractual or other    
right to return the devices and are not entitled to refunds.  No provision has  
been recorded in the financial statements for any refunds that may become due   
to such purchasers or for any product liability claims because the Company      
believes that successful assertion of the claims does not appear probable and   
the ultimate amount of the loss, if any, cannot be reasonably estimated.  If    
the Company must refund all or a significant portion of the sales price for the 
INVOS 2100, or is exposed to any product liability claims, its financial        
condition and liquidity could be adversely affected.                            

The Company has not received any correspondence or inquiries regarding the      
INVOS 2100 since fiscal 1991, except for a letter dated August 3, 1994, from    
the FDA warning manufacturers of breast transillumination devices that these    
devices are in violation of the Federal Food Drug and Cosmetics Act ("the Act") 
in that their labeling is false or misleading and fails to bear adequate        
directions for use.  The Company responded to the FDA by explaining the INVOS   
2100 had not been available for sale by the Company commercially or             

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

NOTES TO FINANCIAL STATEMENTS 
(UNAUDITED) 

MAY 31, 1996

otherwise since January 1989.  The Company has not received any correspondence  
or inquiries regarding the INVOS 2100 since fiscal 1991 (other  than the August 
3, 1994 letter from the FDA) and believes the devices currently in the domestic 
marketplace are no longer being used, based on the manner in which the unit is  
to be used and the instructions in the user manual.  The Company believes no    
further action is required.                                                     

On March 14, 1994, a shareholder of the Company filed suit in the United States 
District Court for the Eastern District of Michigan, individually and on behalf 
of all others similarly situated, against the Company, four of its present and  
former directors and four other officers, former officers or employees of the   
Company in an action captioned Jacobson, et al v. Somanetics Corporation, et    
al.  The plaintiff alleges that various registration statements filed under the 
Securities Act of 1933, various reports filed under the Securities Exchange Act 
of 1934 and various annual reports and press releases contained material        
misstatements and omissions and that the Company and the named officers, former 
officers and employees of the Company made material misstatements and           
omissions.  The plaintiffs seek recovery pursuant to Sections 11, 12(2) and 15  
of the Securities Act of 1933, Sections 10(b) and 20(a) of the Securities       
Exchange Act of 1934, Rule 10b-5 under the Securities Exchange Act of 1934 and  
under common law for (i) rescission of their investment and compensation for    
the lost use of the money invested, (ii) other compensatory damages, (iii)      
punitive damages in the amount of $10,000,000, (iv) consequential damages, (v)  
reasonable attorney's fees, (vi) costs and disbursements and (vii) such other   
relief as the court may deem just and proper.                                   

On April 25, 1994, another shareholder of the Company filed suit in the United  
States District Court for the Eastern District of Michigan, individually and on 
behalf of all others similarly situated, against the Company and Gary D. Lewis, 
the Company's former Chairman of the Board, in an action captioned Benjamin     
Langford v. Somanetics Corporation and Gary D. Lewis.  The allegations, relief  
requested and consequences of the action are similar to those in the Jacobson   
case described above.                                                           

The Company has entered into a Stipulation And Agreement Of Compromise And      
Understanding (the "Agreement") with counsel for plaintiff Earl J. Jacobson.    
The Agreement (along with an understanding with the Company's insurance         
company) requires the Company to pay $250,000 in cash, less the amount of its   
legal fees incurred in this action, and the Company's insurance company is      
required to pay $250,000 in cash, plus the amount the Company has incurred in   
attorneys' fees.  Pursuant to the Agreement, the Company and its insurance      
company paid an aggregate of $500,000 to an escrow agent in the second quarter  
ended May 31, 1996.  The Agreement is subject to approval of the court and the  
court's certification of the class, and at a hearing on June 28, 1996, the      
court stated on the record that it would approve the Agreement and certify the  
class. As of the date of this filing, the court has not yet issued a final      
judgment approving the settlement, although the Company expects it will.        
However, approximately 11 persons, including Benjamin Langford, have opted out  
of                                                                              

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

NOTES TO FINANCIAL STATEMENTS 
(UNAUDITED) 

MAY 31, 1996

the Jacobson action and this settlement and, therefore, are not barred by       
the settlement from pursuing their own claims against the Company.  Mr.         
Langford's action is still pending against the Company, although it is no       
longer a class action.  A hearing on the Company's motion to dismiss the action 
is scheduled for July 17, 1996.                                                 

The ultimate outcome of the litigation cannot presently be determined.  If the  
Company must pay any significant additional amount to defend or settle either   
of these lawsuits or if it must pay a significant judgment in connection with   
either of these lawsuits, its financial condition and liquidity could be        
materially adversely affected, and capital intended for use in the marketing of 
the Cerebral Oximeter or to develop enhancements to, or product extensions of,  
the Cerebral Oximeter or other products may have to be reallocated to satisfy   
any such requirements.  In addition, any such expenses will, when incurred,     
have the effect of increasing the Company's net loss (or decreasing its net     
income) during the periods in which they are incurred.                          

The Company may become subject to product liability claims by patients or       
doctors 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     
retain such insurance or that such insurance would be sufficient to protect the 
Company against such product liability.                                         

6. SUBSEQUENT EVENTS                                                            

On June 6, 1996, the Company received clearance from the United States Food and 
Drug Administration to market its INVOS 3100A Cerebral Oximeter in the United   
States.  The Company has been preparing its operations for commercial activity  
in the United States and intends to devote the months ahead to completing       
product introduction activities and replacing existing Cerebral Oximeters with  
the INVOS 3100A Cerebral Oximeter.  No assurance can be given that sales of the 
Cerebral Oximeter and SomaSensor will increase, and it is not expected that     
such sales will provide sufficient cash to fund the Company's operations in the 
third quarter ending August 31, 1996.                                           

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

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

MAY 31, 1996

LIQUIDITY AND CAPITAL RESOURCES                                                 

Somanetics Corporation is a development stage company formed to develop,        
manufacture and market computer-based medical diagnostic and patient monitoring 
equipment using INVOS(R) technology.  Since inception (January 15, 1982), the   
Company has incurred an accumulated deficit of $27,826,136 through May 31,      
1996.                                                                           

Net cash used in operations during the six-month period ended May 31, 1996 was  
approximately $903,000.  Cash was used primarily to (i) fund the Company's net  
loss, consisting primarily of selling, general and administrative expenses and  
research, development and engineering expenses (approximately $888,000, net of  
depreciation and amortization  expense), and (ii) decrease accrued liabilities  
(approximately $242,000) primarily as a result of the (a) payment of            
professional fees and (b) payment of expenses and settlement costs associated   
with the class action lawsuits.  These uses of cash were partially offset by    
(i) a decrease in accounts receivable (approximately $134,000) due to reduced   
sales in the second quarter, (ii) a $54,000 increase in accounts payable due to 
increased legal expenses associated with the preparation and filing of year-end 
and related public documents, and (iii) a decrease in inventory and prepaid     
expenses (approximately $50,000).  The reduction in inventory is due to reduced 
purchasing activity while the Company awaited FDA clearance.  Management        
expects working capital requirements to increase if sales increase.             

Effective February 28, 1996, the Company redeemed all of its outstanding        
Convertible Preferred Shares for $.01 per share at a total redemption cost to   
the Company of approximately $19,843, and instead of the Convertible Preferred  
Shares formerly issuable upon the exercise of certain options, the Company will 
pay $.01 to the person exercising such options for each Convertible Preferred   
Share otherwise receivable.                                                     

As of May 31, 1996, the Company had working capital of $2,276,834 and cash and  
cash equivalents of $1,369,287.                                                 

On April 2, 1996, the Company completed the placement of 571,200 Units, at a    
price of $2.50 per Unit, for gross proceeds of $1,428,000, through an offering  
complying with Regulation S under the Securities Act of 1933, as amended.  The  
net proceeds to the Company, after deducting the placement agents' fee and the  
estimated expenses of the offering, were approximately $1,284,000.  Each Unit   
consists of two newly-issued Common Shares, par value $0.01 per share, and one  
warrant to purchase one Common Share.                                           

The Warrants are immediately exercisable and transferable separately from the   
Common Shares. Each Warrant entitles the holder to purchase one Common Share at 
an initial exercise                                                             

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

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

MAY 31, 1996

price of $1.75 per share, subject to adjustment, at any time through April 1,   
2001, unless earlier redeemed.  The Warrants are redeemable for $0.01 by the    
Company at any time after July 2, 1996, if certain conditions are met.          

The Company also granted the placement agent warrants to purchase 114,240       
Common Shares at $1.25 per share exercisable during the four-year period        
beginning April 2, 1997.                                                        

The Company believes that the cash and cash equivalents on hand at May 31, 1996 
will be sufficient to sustain the Company's operations at budgeted levels and   
its needs for liquidity into the fourth quarter of fiscal 1996.  By that time   
the Company will be required to raise additional cash either through additional 
sales of products, through sales of securities, by incurring additional         
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 further reduce or 
discontinue its operations.                                                     

The expected uses of the Company's cash and cash equivalents are 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 and to conduct research and development    
concerning additional potential applications of INVOS technology and for        
working capital will not be substantially greater than current estimates.       

Although on June 6, 1996 the Company received clearance from the FDA to market  
the Cerebral Oximeter in the United States, the Company's current financial     
condition and recent results of operations and the status of its product        
marketing efforts and sales have been affected by the process of obtaining such 
clearance.  On November 22, 1993, the Company received notification that the    
FDA had rescinded the Company's 510(k) clearance to market the Cerebral         
Oximeter.  As a result, all commercial sales of the Company's products were     
suspended and the Company notified its United States distributors to stop       
selling the Cerebral Oximeter and to advise their customers to stop using the   
device.  In February 1994, the Company resumed marketing its products in        
several foreign countries, including Japan, its largest market outside the      
United States.                                                                  

On February 1, 1995, the Company filed a new 510(k) application with the FDA.   
On October 5, 1995, the Company received a written response from the FDA,       
stating that the FDA could not determine if the device was substantially        
equivalent to a legally marketed device, and that the FDA considered the        
Company's 510(k) submission to be withdrawn.  On February 13, 1996, the Company 
filed the new 510(k) application with the FDA presenting additional information 
not previously considered by the agency, identifying alternative predicate      
devices and offering revisions to its product and its labeling.  On June 6,     
1996, the Company received                                                      

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

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

MAY 31, 1996

clearance to market the INVOS Cerebral Oximeter in the United States.           

The Company does not believe that product sales will be sufficient to fund the  
Company's operations in the third quarter ending August 31, 1996.               

The Company did not receive any proceeds from the exercise of Class B or Class  
M Warrants during the six-month period ended May 31, 1996.  As of March 31,     
1992, the Company gave notice of the redemption of the redeemable Class B       
Warrants at $.05 per Class B Warrant.  The Company has extended the redemption  
date nine times, most recently to September 26, 1996.  Any redeemable Class B   
Warrants which have not been exercised before September 26, 1996, will no       
longer be exercisable to purchase Common Shares.  Holders of redeemable Class B 
Warrants will have no further rights beyond September 26, 1996, except to       
receive, upon surrender of the Class B Warrant certificates evidencing redeemed 
Class B Warrants, payment of the redemption price of $.05 for each redeemable   
Class B Warrant outstanding and not already exercised as of September 26, 1996. 
As of July 1, 1996, the closing sale price of the Common Shares was $2.625.     
As of May 31, 1996, 4,080,180 Class B Warrants were outstanding, including      
5,001 non-redeemable Class B Warrants, each exercisable to purchase one Common  
Share at $3.89 a share.  There can be no assurance that additional Class B      
Warrant holders will exercise their Warrants and it is unlikely that they will  
do so as long as the exercise price exceeds the market price of the Common      
Shares.  The Company has the right to reduce the exercise price of the Class B  
Warrants, extend the redemption date, or both.  The maximum potential           
redemption price for the Class B Warrants is $203,759, which the Company will   
be required to pay in September 1996 if the Class B Warrants are redeemed.      

Also as of May 31, 1996, there were 750,000 redeemable warrants outstanding,    
exercisable at $2.00 a share until July 13, 2000, and 571,200 redeemable        
warrants outstanding exercisable at $1.75 a 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  July 2, 1996.  Between June 1, 1996 and July 1, 1996,       
126,000 of the warrants exercisable at $2.00 a share had been exercised.  There 
can be no assurance that additional warrants will be exercised and it is        
unlikely that they will be exercised if the exercise price exceeds the market   
price of the Common Shares.  The Company has the right to reduce the exercise   
price of these warrants.                                                        

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 products, sales of securities or loans   
in sufficient quantities.                                                       

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

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

MAY 31, 1996

Before the Company received FDA clearance to market the Cerebral Oximeter in    
the United States, several domestic distributors of the INVOS Cerebral Oximeter 
expressed their desire to terminate their distributor agreements with the       
Company.  The Company does not believe that its distributor agreements require  
it to accept returns of products sold to distributors in connection with a      
termination of the distribution agreement. The Company, however, has reserved   
$194,000 at May 31, 1996, for the uncollectibility of accounts receivable from  
such distributors.                                                              

Under the domestic distributor replacement program, the Company believes        
receivables previously reserved will ultimately become collected once the       
Cerebral Oximeters owned or sold by United States distributors are replaced     
with the INVOS 3100A Cerebral Oximeter.  Distributors might terminate their     
agreements with the Company or be terminated by the Company.  Distributor       
terminations may increase the Company's costs.  In preparation for the          
re-introduction of the Cerebral Oximeter in the United States, the Company has  
terminated certain existing distributors and added new distributors.  The       
Company will be required to engage additional United States distributors for    
the Cerebral Oximeter as a result of such terminations.  The Company's          
inability to retain distributors or engage replacement distributors could have  
a material adverse effect on its ability to market and sell its product.        

On March 14, 1994, a shareholder of the Company filed suit in the United States 
District Court for the Eastern District of Michigan, individually and on behalf 
of all others similarly situated, against the Company, four of its present and  
former directors and four other officers, former officers or employees of the   
Company in an action captioned Jacobson, et al v. Somanetics Corporation, et    
al.  The plaintiff alleges that various registration statements filed under the 
Securities Act of 1933, various reports filed under the Securities Exchange Act 
of 1934 and various annual reports and press releases contained material        
misstatements and omissions and that the Company and the named officers, former 
officers and employees of the Company made material misstatements and           
omissions.  The plaintiffs seek recovery pursuant to Sections 11, 12(2) and 15  
of the Securities Act of 1933, Sections 10(b) and 20(a) of the Securities       
Exchange Act of 1934, Rule 10b-5 under the Securities Exchange Act of 1934 and  
under common law for (i) rescission of their investment and compensation for    
the lost use of the money invested, (ii) other compensatory damages, (iii)      
punitive damages in the amount of $10,000,000, (iv) consequential damages, (v)  
reasonable attorney's fees, (vi) costs and disbursements and (vii) such other   
relief as the court may deem just and proper.                                   

On April 25, 1994, another shareholder of the Company filed suit in the United  
States District Court for the Eastern District of Michigan, individually and on 
behalf of all others similarly situated, against the Company and Gary D. Lewis, 
the Company's former Chairman of the Board, in an action captioned Benjamin     
Langford v. Somanetics Corporation and Gary D. Lewis.  The allegations, relief  
requested and consequences of the action are similar to those in                

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

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

MAY 31, 1996

the Jacobson case described above.                                              

The Company has entered into a Stipulation And Agreement Of Compromise And      
Understanding (the "Agreement") with counsel for plaintiff Earl J. Jacobson.    
The Agreement (along with an understanding with the Company's insurance         
company) requires the Company to pay $250,000 in cash, less the amount of its   
legal fees incurred in this action, and the Company's insurance company is      
required to pay $250,000 in cash, plus the amount the Company has incurred in   
attorneys' fees.  Pursuant to the Agreement, the Company and its insurance      
company paid an aggregate of $500,000 to an escrow agent in the second quarter  
ended May 31, 1996.  The Agreement is subject to approval of the court and the  
court's certification of the class, and at a hearing on June 28, 1996, the      
court stated on the record that it would approve the Agreement and certify the  
class.  As of the date of this filing, the court has not yet issued a final     
judgment approving the settlement, although the Company expects it will.        
However, approximately 11 persons, including Benjamin Langford, have opted out  
of the Jacobson action and this settlement and, therefore, are not barred by    
the settlement from pursuing their own claims against the Company.  Mr.         
Langford's action is still pending against the Company although it is no longer 
a class action.  A hearing on the Company's motion to dismiss the action is     
scheduled for July 17, 1996.                                                    

The ultimate outcome of the litigation cannot presently be determined.  If the  
Company must pay any significant additional amount to defend or settle either   
of these lawsuits or if it must pay a significant judgment in connection with   
either of these lawsuits, its financial condition and liquidity could be        
materially adversely affected, and capital intended for use in the marketing of 
the Cerebral Oximeter or to develop enhancements to, or product extensions of,  
the Cerebral Oximeter or other products may have to be reallocated to satisfy   
any such requirements.  In addition, any such expenses will, when incurred,     
have the effect of increasing the Company's net loss (or decreasing its net     
income) during the periods in which they are incurred.                          

RESULTS OF OPERATIONS                                                           

Since the Company's inception (January 15, 1982) its primary activities have    
consisted of research and development of the INVOS technology, the INVOS 2100,  
the INVOS Cerebral Oximeter and the related disposable SomaSensor.  The Company 
is in the development stage and has accumulated losses of $27,806,294.          

For the three and six-month periods ended May 31, 1996, the Company realized an 
11% and a 39% reduction in the respective net losses over the same periods in   
fiscal 1995.  The decrease for the six-month period is primarily attributable   
to a 36% reduction in operating expenses, partially offset by a 34% reduction   
in sales.                                                                       

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

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

MAY 31, 1996

During the three-month periods ended May 31, 1996 and 1995, the Company         
recognized revenues of $84,387 and $672,646, respectively.  For the six-month   
periods ended May 31, 1996 and 1995, the Company recognized revenues of         
$599,465 and $906,625, respectively.  The decrease in sales for the second      
quarter of 1996, as compared to the second quarter of 1995, is primarily        
attributable to lower sales to the Company's distributor in Japan and lower     
sales in the European market.  Sales during the second quarter of 1995 included 
the shipment of an initial stocking order to Baxter Limited in Japan.  The      
decrease in sales for the six-month period was primarily attributable to        
reduced shipments to Europe and to Baxter Limited in Japan.                     

Sales of refurbished units, commercial units and SomaSensors comprised          
approximately 25%, 24% and 51%, respectively, of the Company's sales in the     
second quarter of fiscal 1996 and 5%, 85%, and 10%, respectively, of the        
Company's sales in the second quarter of fiscal 1995.  Sales of refurbished     
units, commercial units and SomaSensors comprised approximately 7%, 76% and     
17%, respectively, of the Company's sales in the six months ended May 31, 1996, 
and 8%, 80% and 12%, respectively, of the Company's sales in the six months     
ended May 31, 1995.  All 1996 and 1995 sales were export sales.  Two            
international distributors accounted for approximately 76% and 9%,              
respectively, of total revenues for the six months ended May 31, 1996 and three 
international distributors accounted for approximately 24%, 17% and 17%,        
respectively, of total revenues for the three months ended May 31, 1996.  Two   
international distributors accounted for approximately 58% and 8%,              
respectively, of total revenues in the  six months ended May 31, 1995, and two  
international distributors accounted for approximately 79% and 8%,              
respectively, of total revenues in the three months ended May 31, 1995.         

As described above in "Liquidity and Capital Resources," all commercial sales   
were suspended in late November 1993, upon notification from the FDA that it    
was rescinding the Company's 510(k) clearance.  FDA clearance is necessary to   
allow the Company to market its product in the United States.  On June 6, 1996, 
the Company received clearance from the United States Food and Drug             
Administration to market its INVOS 3100A Cerebral Oximeter in the United        
States.  See "Liquidity and Capital Resources" for a description of the effects 
of the FDA's rescission of the Company's 510(k) clearance in 1993 on the        
Company's distributors and terminations of distributors.                        

There can be no assurance that the publication of adverse results from research 
regarding the Cerebral Oximeter, the events leading to a voluntary recall of    
SomaSensors in October 1993, the FDA's rescission of the Company's 510(k)       
clearance for the Cerebral Oximeter in 1993, the FDA's actions relating to the  
INVOS 2100 and the Company's financial condition will not adversely affect the  
Company's reputation or its ability to market and sell its device.              

The Company expects Cerebral Oximeter sales in the second half of fiscal 1996   
to increase as                                                                  
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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

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

MAY 31, 1996

a result of obtaining 510(k) clearance from the FDA, although                   
(i) the Company expects to devote the months ahead to completing product        
introduction activities and replacing existing Cerebral Oximeters with the      
INVOS 3100A Cerebral Oximeter, (ii) Baxter Limited is not expected to order     
again until the fourth quarter and (iii) European sales appear to decrease      
during the late July and August summer vacation season.  The Company expects    
sales of the disposable SomaSensor to become a larger portion of the Company's  
revenues in the future after the Company sells a significant number of Cerebral 
Oximeters to distributors and they are resold to hospitals.  No assurance can   
be given that sales of the Cerebral Oximeter and SomaSensor will provide        
sufficient cash to fund the Company's operations. and the Company does not      
believe that product sales will be sufficient to fund the Company's operations  
in the third quarter ending August 31, 1996.                                    

Gross margin as a percentage of revenues for the quarters ended May 31, 1996    
and 1995 were approximately 43% and 53%, respectively.  Gross margin as a       
percentage of revenues for the six-month periods ended May 31, 1996 and 1995    
were approximately 57% and 52%, respectively.  Gross margin as a percentage of  
revenues decreased for the quarter ended May 31, 1996 from the fiscal 1995      
level, primarily because 25% of total revenues in the three- month period ended 
May 31, 1996 consisted of sales of refurbished Cerebral Oximeters, which are    
sold approximately at cost, thereby reducing overall gross margin.  Gross       
margin as a percentage of revenues increased in the six-month period ended May  
31, 1996 over the same period in 1995 primarily because a smaller portion of    
revenues in 1996 were derived from sales of refurbished units.  Excluding sales 
of refurbished units, gross margins remained approximately the same as 1995.    
Lower initial manufacturing, tooling and engineering costs and the reduced      
level of personnel were offset by the lower level of sales over which fixed     
costs of sales were spread.                                                     

The direct and indirect costs to manufacture Cerebral Oximeters are expected to 
decline as a percentage of sales as and if (i) the Company increases sales,     
production and volume purchases, and (ii) the Company ceases to incur           
non-recurring tooling and initial manufacturing charges.  However, the Company  
expects to incur additional non-recurring tooling costs, initial manufacturing  
costs and engineering costs in fiscal 1996 in connection with enhancements to   
the SomaSensor and the production of the Cerebral Oximeter.  Any new products or
enhancements developed during fiscal 1996 might also increase such costs.  In   
addition, the lower average selling prices of Cerebral Oximeters and SomaSensors
to United States distributors is expected to reduce the gross margin percentage.

The Company incurred research, development and engineering expenses of $52,732  
and $122,274 for the fiscal quarters ended May 31, 1996 and 1995, respectively, 
and $102,668 and $190,564 for the six-month periods ended May 31, 1996 and      
1995, respectively.  The decreases are primarily attributable to an             
approximately $70,000 charge (in 1995) to                                       

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

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

MAY 31, 1996

engineering expenses for obsolete purchased parts inventory relating to         
engineering design changes to the Cerebral Oximeter model designed to comply    
with TUV.  Research, development and engineering activities in fiscal 1996      
consisted primarily of defending the previous 510(k) applications, preparing    
and filing a new 510(k) application in February 1996, developing improvements   
to the SomaSensor and completing modifications to the INVOS Cerebral Oximeter   
requested by the FDA.  Such activities in fiscal 1995 consisted primarily of    
developing improvements to the SomaSensor, evaluating the results of the        
clinical trials supporting the 510(k) submission, preparing the 510(k)          
application and gaining the CE mark and CSA certification for the INVOS 3100A   
Cerebral Oximeter.  Research, development and engineering expenses are expected 
to increase due to the Company's plans to (i) hire three more persons in this   
department during fiscal 1996 to support new projects, and (ii) identify        
and begin projects for new product development, testing and possible future     
marketing.  The Company expects to incur research, development and engineering  
expense to develop and test product extensions of the Cerebral Oximeter for use 
on newborns in operating rooms and intensive care units, enhancements to the    
Cerebral Oximeter and other uses of the Company's technology.                   

Selling, general and administrative expenses for the fiscal quarters ended May  
31, 1996 and 1995 totaled $609,386 and $935,340, respectively, and $1,199,716   
and $1,850,919 for the six-month periods ended May 31, 1996 and 1995,           
respectively.  For the three-month period ended May 31, 1996 over the same      
period in 1995, the decrease is primarily due to a $211,000 reduction in        
salaries, wages and related expenses, a $55,000 reduction in selling-related    
expenses and a $37,000 reduction in facility expenses.  The decrease for the    
six-month period ended May 31, 1996 from the same period in 1995 is primarily   
due to a $400,000 reduction in salaries, wages and related expenses, a $148,000 
reduction in selling-related expenses and an $87,000 reduction in facility      
expenses.                                                                       

Salaries, wages, and related expenses, including expenses for temporary         
employees and consulting services, decreased approximately $211,000, or 43%,    
for the fiscal quarter ended May 31, 1995 over the fiscal quarter ended May 31, 
1995, and approximately $400,000, or 40%, for the six-month period ended May    
31, 1996 over the same period in 1995.  The decreases for the three- and        
six-month periods over the comparable periods in 1995 are primarily             
attributable to reductions in payroll and related benefits as a result of a     
reduction in workforce from 24 employees at May 31, 1995 to 16 employees at May 
31, 1996, incentive compensation accrual and consulting services.  The Company  
expects to hire 21 additional employees as needed, 12 in Sales and Marketing, 4 
in Manufacturing and Quality Control, 3 in Research, Development and            
Engineering and 2 in Administration during the remainder of fiscal 1996 which   
will increase salaries, wages and related expenses in the future.  The Company  
expects to incur these expenses before receiving substantially increased        
proceeds from sales of its products, and such expenses will continue even if    
revenues do not increase.  Therefore, in the short-run, they are expected to    
increase the Company's net losses.                                              

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SOMANETICS CORPORATION
(A DEVELOPMENT STAGE COMPANY) 

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

MAY 31, 1996

Selling expenses, including expenses for travel, entertainment, marketing,      
clinical research and industry trade show participation, decreased              
approximately $55,000, or 69%, for the fiscal quarter ended May 31, 1996 over   
the fiscal quarter ended May 31, 1995, and approximately $148,000, or 77%, for  
the six-month period ended May 31, 1996 over the same period in 1995.  The      
decreases for both periods were primarily due to reduced travel expenses        
associated with training the Company's international distributors and reduced   
expenses associated with trade show participation.  The Company expects         
selling, marketing and trade show expenses to increase in conjunction with      
resumed marketing in the United States, engaging new United States distributors 
and supporting existing distributors and increased sales efforts in the         
international markets.  Clinical research expenses are expected to increase as  
the Company tests product extensions of the Cerebral Oximeter                   
in a clinical setting.                                                          

Monthly office expenses, including lease commitments, supplies, subscriptions   
and related expenses decreased approximately $37,000, or 29%, for the           
three-month period ended May 31, 1996, over the same period last year, and      
approximately $87,000, or 33%, for the six- month period ended May 31, 1996     
over the same period in 1995, primarily due to the reduction in personnel and   
the expiration of operating lease commitments.  The Company expects these       
expenses to increase when the Company hires additional personnel.               

Other income, including interest income and expense, increased approximately    
$4,000 for the three-month period ended May 31, 1996 over the comparable        
three-month period in fiscal 1995, and decreased approximately $8,000 for the   
six-month period ended May 31, 1996 over the comparable six-month period in     
fiscal 1995.  The increase in the three-month period ended May 31, 1996 over    
the same period last year, is the result of sub-lease income received on a      
portion of the Company's facilities, partially offset by a reduction in         
interest income primarily as a result of the lower balance of cash available    
for investment in the first half of the quarter.  For the six-month period      
ended May 31, 1996, the reduction is the result of reduced interest income,     
partially offset by sub-lease income from a portion of the Company's            
facilities.  The Company expects interest income to decrease as it continues to 
use cash in its operations.                                                     

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PART II OTHER INFORMATION 

Item 1.  Legal Proceedings                                                      

For a description of a suit filed by a shareholder of the Company on March 14,  
1994 in the United States District Court for the Eastern District of Michigan,  
individually and on behalf of all others similarly situated, against the        
Company, four current and former directors and four other officers, former      
officers or employees of the Company in an action captioned Jacobson, et al v.  
Somanetics Corporation, et al, see Note 5 of Notes to Financial Statements      
included in Part I of this Report, which description is incorporated in this    
Item 1 by reference.                                                            

For a description of a suit filed by another shareholder of the Company on      
April 25, 1994 in the United States District Court for the Eastern District of  
Michigan, individually and on behalf of all others similarly situated, against  
the Company and Gary D. Lewis, the Company's former Chairman, in an action      
captioned Benjamin Langford v. Somanetics Corporation and Gary D. Lewis, see    
Note 5 of Notes to Financial Statements included in Part I of this Report,      
which description is incorporated in this Item 1 by reference.                  

As described in Note 5, at a hearing on June 28, 1996, the court stated on the  
record that it would approve the Stipulation And Agreement of Compromise And    
Understanding, regarding the settlement of the Jacobson action, and certify the 
class.  As of the date of this filing, the court has not yet issued a final     
judgment approving the settlement, although the Company expects it will.        
However, approximately 11 persons, including Benjamin Langford, have opted out  
of the Jacobson action and this settlement and, are not barred by the           
settlement from pursuing their own claims against the Company. Mr. Langford's   
action is still pending against the Company, although it is no longer a class   
action.  A hearing on the Company's motion to dismiss the action is scheduled   
for July 17, 1996.                                                              

Item 4. Submission of Matters to a Vote of Security Holders                     

The Annual Meeting of Shareholders of the Company was held on May 21, 1996.  At 
the Annual Meeting, Daniel S. Follis and James I. Ausman, M.D., Ph.D. were      
elected as Directors of the Company, and the terms of office of Bruce J.        
Barrett, H. Raymond Wallace and Gary D. Lewis as Directors of the Company       
continued after the meeting.  12,866,877 votes were cast for Mr. Follis'        
election and 236,100 votes were withheld from Mr. Follis' election.  12,976,477 
votes were cast for Dr. Ausman's election, and 124,520 votes were withheld from 
Dr. Ausman's election.  There were no abstentions or broker non-votes in        
connection with the election of the Directors at the Annual Meeting.            

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Item 6.  Exhibits and Reports on Form 8-K                                       

(a) Exhibits                                                          

            10.1 Amendment to Side Letter, dated June 18, 1996 among
                      Somanetics Corporation, Rauscher Pierce & Clark Ltd. and
Rauscher Pierce & Clark, Inc.     

27.1 Financial Data Schedule                

(b) Reports on Form 8-K                                               

      The Company filed a Form 8-K, dated April 3, 1996, to announce under
   Item 5 that it had completed the placement of 571,200 Units, at a
   price $2.50 per Unit, for gross proceeds of $1,428,000 through an
  offering complying with Regulation S under the Securities Act of
1933, as amended (the "Act").  Each Unit consists of two      
newly-issued Common Shares, par value $0.01 per share, and one
warrant to purchase one Common Share.                         

      The Warrants are immediately exercisable and transferable separately
from the Common Shares.  Each Warrant entitles the holder to  
     purchase one Common Share at an initial exercise price of $1.75 per
  share, subject to adjustment, at any time through April 1, 2001,
    unless earlier redeemed.  The Warrants are redeemable for $0.01 by
   the Company at any time after July 2, 1996, if certain conditions
are met.                                                      

    The Company also announced that it had granted the placement agent
warrants to purchase 114,240 Common Shares at $1.25 per share 
  exercisable during the four-year period beginning April 2, 1997.

25

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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:    July 10, 1996                     By: /s/  Raymond W. Gunn             
   --------------------                 ----------------------------------
                     Raymond W. Gunn
                                        Executive Vice President and Chief
                                        Financial Officer (Duly Authorized
                                      and Principal Financial Officer)

26

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Dates Referenced Herein and Documents Incorporated By Reference

		Referenced-On Page
This 424B3 Filing	Date	First	Last	Other Filings

	3/31/92	17
	11/30/92	5
	11/22/93	8	16
	11/30/93	5
	3/14/94	13	24
	4/25/94	13	24
	8/3/94	12	13
	11/30/94	5
	2/1/95	8	16
	5/31/95	6	23
	10/5/95	8	16
	11/30/95	2	11
	12/1/95	11
	2/13/96	8	16
	2/28/96	9	15
	3/19/96	11
	4/2/96	9	15
	4/3/96	25
	4/4/96	1
	5/21/96	24
	5/31/96	1	23	10-Q
	6/1/96	10	17
	6/6/96	8	20
	6/18/96	25
	6/19/96	10
	6/28/96	13	24
	7/1/96	1	17
	7/2/96	9	25
Filed On / Filed As Of	7/10/96	1	26	10-Q
	7/17/96	14	24
	8/31/96	10	21	10-Q
	9/26/96	10	17
	11/30/96	7		10-K
	4/2/97	9	25
	7/13/0	10	17
	4/1/1	9	25

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Somanetics Corp · 424B3 · On 7/10/96

Filed On 7/10/96 · SEC File 33-38438 · Accession Number 950124-96-3069

Prospectus · Rule 424(b)(3)Filing Table of Contents

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Dates Referenced Herein and Documents Incorporated By Reference

Prospectus · Rule 424(b)(3)
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