Aspect Medical Systems Reports Operating Results for the Second Quarter of 2009

-- Total revenue declined 1% to $24.9 million

-- Installed base of monitor and module units grew 18% and exceeded 60,600

-- GAAP income from operations was $633,000, or a 2.5% GAAP operating margin, compared with a loss of $946,000, or a (3.8%) GAAP operating margin, in Q2 2008; non-GAAP income from operations was $2.1 million, or an 8.6% non-GAAP operating margin, compared with $1.0 million, or a 3.9% non-GAAP operating margin, in Q2 2008

-- GAAP earnings per diluted share was $0.02 compared with $0.10 in Q2 2008, and non-GAAP net income per diluted share was $0.08 in Q2 2009 compared with $0.17 per diluted share in Q2 2008; Q2 2008 GAAP and non-GAAP earnings per share included a gain of $0.10 per diluted share related to repurchases of convertible senior notes due 2014

-- Q2 2009 ending cash and investments were $78.3 million and there were convertible notes outstanding of $58.0 million, an improvement in cash and investments of $2.1 million compared with the end of Q1 2009

Aspect Medical Systems, Inc. (NASDAQ: ASPM), reported today that
worldwide sensor revenue was $21.5 million for Q2 2009, a 1% increase
from $21.4 million in Q2 2008 and total revenue was $24.9 million, a
decline of 1% from $25.2 million in Q2 2008.

With the adoption of Statement of Financial Accounting Standards
No.123(R), or "SFAS No.123R", as of January 1, 2006, Aspect began
reporting non-GAAP financial results that exclude the impact of
stock-based compensation. See below under the heading "Use of Non-GAAP
Financial Measures" for a discussion of the Company's use of such
measures. The reconciliation of GAAP (U.S. generally accepted accounting
principles) to non-GAAP measures is contained in an attached table.

"We are pleased with the further improvement in our operating margins
during Q2, and we believe we will continue to improve operating margins
over the balance of the year. We also believe that the impact of the
recession on procedure volumes and hospital spending in the U.S. is
diminishing, and that we may see a modest uptick in our top-line by Q4.
During Q2, U.S. sensor revenue in our core business appeared to
stabilize despite the difficult economic environment, while
international sensor revenue continued to grow nicely, "said Nassib
Chamoun, President and CEO of Aspect.

"Two other important developments were the establishment of a
distribution and licensing agreement with LiDCO and the announcement of
our multi-year agreement with the Cleveland Clinic. The LiDCO agreement
represents the first important component of our business development
strategy, and we expect to incorporate LiDCO's advanced hemodynamic
monitoring system into our product portfolio in stages by the end of the
year."

"We also believe our agreement with the Cleveland Clinic provides a
unique strategic advantage for Aspect. Most important, the collaboration
provides us with the opportunity to identify clinical factors and
interventions that make a difference in patient outcomes in a model
health care system, and to rapidly evaluate these interventions with
prospective data. This, in turn, will allow Aspect to strengthen and
expand our value proposition, and to identify clinical practices and
tools, including BIS and advanced hemodynamic measures, that will assist
anesthesia professionals to deliver optimal care. The research
collaboration actually began last year, and several abstracts describing
our initial findings have already been accepted for presentation at the
upcoming annual meeting of the American Society of Anesthesiologists in
October."

Operating Results

Revenue declined by 1% in Q2 2009 as compared with Q2 2008. Despite the
overall decline in revenue, there was a 1% growth in worldwide sensor
revenue. U.S. sensor revenue declined 4% in Q2 2009 compared with Q2
2008 due principally to a 2% decrease in units sold and 1% due to Q2
2009 commissions to OEM partners that are recorded as a reduction to
sensor revenue. International sensor revenue increased 13% in Q2 2009 as
compared with Q2 2008 due to a 9% increase in units sold and a 4%
increase in average selling prices. Worldwide equipment revenue declined
by 11% in Q2 2009 as compared to Q2 2008 due mostly to a 30% decrease in
OEM module revenue resulting from a 28% reduction in average selling
prices.

Foreign currency exchange accounted for a 1.8% decline in Q2 2009
worldwide revenue and a 5.7% decline in total international revenue when
compared with Q2 2008.

Q2 2009 GAAP net income was $307,000, or $0.02 per diluted share,
compared with $1.9 million or $0.10 per diluted share in Q2 2008. Q2
2008 GAAP net income included a gain of $3.9 million, or $0.10 per
diluted share, on convertible note repurchases. Q2 2009 non-GAAP net
income was $1.4 million, or $0.08 per diluted share, compared with $3.4
million, or $0.17 per diluted share in Q2 2008. Q2 2008 non-GAAP net
income included a gain of $3.9 million, or $0.11 per diluted share, on
convertible note repurchases. Q2 2009 GAAP income from operations was
$633,000, after the impact of stock-based compensation, and Q2 2009
non-GAAP income from operations was $2.1 million compared with a Q2 2008
GAAP loss from operations of $946,000 and a Q2 2008 non-GAAP income from
operations of $1.0 million. GAAP and non-GAAP gross margins improved to
75.1% and 75.6%, respectively, in Q2 2009 as compared with GAAP and
non-GAAP gross margins of 74.8% and 75.3%, respectively, in Q2 2008. The
increases in GAAP and non-GAAP gross margin were primarily due to
favorable manufacturing variances and Q2 2009 cost reductions. Q2 2009
GAAP and non-GAAP operating expenses decreased by 9% and 7%,
respectively, compared with Q2 2008 due mainly to decreases in sales and
marketing expenses as the result of 2009 focused cost reductions and
2008 non-recurring expenses as part of the U.S. salesforce expansion. Q2
2009 GAAP and non-GAAP operating expenses decreased by 7% compared with
Q1 2009.

At July 4, 2009, the Company had cash and investments of $78.3 million
and debt of $58.0 million, which consisted of 2.50% convertible senior
notes due 2014. At December 31, 2008, the Company had cash and
investments of $83.5 million and convertible notes outstanding of $65.0
million. The outstanding debt decreased by $7.1 million during Q1 2009
due to the Company's repurchases at an aggregate repurchase price of
$3.8 million.

Outlook

The Company's outlook for Q3 2009 is as follows:

--
Revenue is expected to be within a range of $24.0 million to $25.0
million;

--
GAAP net income per fully-diluted share is expected to be within a
range of a $0.01 per share to $0.03 per share; and

--
Non-GAAP net income per fully-diluted share is expected to be within a
range of $0.06 per share to $0.08 per share.

The outlook for Q3 2009 excludes the impact of the transaction and
related transaction costs associated with the previously-announced LiDCO
distribution and licensing agreement with LiDCO Limited which the
Company announced this morning.

For Q4 2009:

--
We expect a modest uptick in total revenue compared to the prior
quarter and year; and

--
We expect Q4 2009 GAAP operating margin to be within a range of 7% to
9% and Q4 2009 non-GAAP operating margin to be within a range of 12%
to 14%

All non-GAAP amounts are exclusive of stock-based compensation. See
below under the heading "Use of non-GAAP Financial Measures" for a
discussion of the Company's use of such measures. See attached table for
the reconciliation of GAAP to non-GAAP items for Q2 2009 and guidance
for Q3 2009 and Q4 2009.

Use of Non-GAAP Financial Measures

In addition to disclosing financial results calculated in accordance
with GAAP, this earnings release contains non-GAAP financial measures
that exclude the effects of share-based compensation and the
requirements of Statement of Financial Accounting Standards No. 123(R),
or "SFAS No. 123R".

Stock-based compensation related to stock options, restricted stock
and other stock-based awards is excluded from the Company's non-GAAP
costs of revenue, non-GAAP gross profit margin, non-GAAP profit margin
percent, non-GAAP total operating expenses (research and development,
sales and marketing and general and administrative), non-GAAP income
from operations, non-GAAP operating margin, non-GAAP income before
income taxes, non-GAAP income before income taxes per diluted share,
non-GAAP income tax expense, non-GAAP effective income tax rate,
non-GAAP net income, and non-GAAP diluted earnings per share:

Stock-based compensation expenses consist of expenses for stock options,
restricted stock and other stock-based awards under SFAS No. 123R. The
Company excludes these stock-based compensation expenses and the related
tax effects from non-GAAP measures primarily because they are non-cash
expenses, because of the complexity and considerable judgment involved
in calculating their values, and because they have in the past and are
expected in the future to be driven by a different set of factors than
other expenses in these categories.

- The manner in which management uses the non-GAAP financial measure
to conduct or evaluate its business:

The non-GAAP financial measures used by management and disclosed by the
Company exclude the income statement effects of all forms of share-based
compensation. Reconciliations of the GAAP to non-GAAP income statement
financial measures for the three and six months ended July 4, 2009 and
June 28, 2008 and expected net income per diluted share for Q3 2009 are
set forth in the financial tables attached to this earnings release and
the reconciliations to those GAAP financial measures should be carefully
considered.

The Company applied the modified prospective method of adoption of SFAS
No. 123R, under which the effects of SFAS No. 123R are reflected in the
Company's GAAP financial statement presentations for the three and six
months ended July 4, 2009 and June 28, 2008. Gross profit, gross profit
margin, costs of revenue, total operating expenses (research and
development, sales and marketing, general and administrative), operating
income, operating margin, net income before taxes per share, net income
and net income per share (referred to as earnings per share, or EPS) are
the primary financial measures management uses for planning and
forecasting future periods that are affected by share-based
compensation. Because management reviews these financial measures in a
manner calculated without taking into account the effects of SFAS No.
123R, these financial measures are treated as "non-GAAP financial
measures" under Securities and Exchange Commission rules. Management
uses the non-GAAP financial measures for internal managerial purposes,
including as a means to compare period-to-period results on a
consolidated basis and as a means to evaluate the Company's results on a
consolidated basis compared to those of other companies. In addition,
management uses certain of these measures when publicly providing
forward-looking statements on expectations regarding future consolidated
financial results. Management and the Board of Directors will continue
to compare the Company's historical consolidated results of operations
(revenue, costs of revenue, gross profit margin, gross profit margin
percent, research and development expenses, sales and marketing
expenses, general and administrative expenses, total operating expenses,
operating margin, income before income taxes, income before income taxes
per diluted share, income tax expense, effective income tax rate,
operating income as well as net income (loss) and earnings per diluted
share and (loss) per share), excluding stock-based compensation, to
financial information prepared on the same basis during the Company's
budget and planning process, to assess the business, make resource
allocation decisions and to compare consolidated results to the
objectives identified for the Company. The Company's budget and planning
process culminates with the preparation of a consolidated annual budget
that includes these non-GAAP financial measures. This budget, once
finalized and approved, serves as the basis for allocation of resources
and management of operations. While share-based compensation is a
significant expense affecting the Company's results of operations,
management excludes share-based compensation from the Company's
consolidated budget and planning process to facilitate period to period
comparisons and to assess changes in gross margin, net income and
earnings per share targets in relation to changes in forecasted revenue.

Profit-dependent cash incentive pay to employees, including senior
management, also is calculated using formulae that incorporate the
Company's annual results excluding share-based compensation expense.

- The economic substance behind management's decision to use such
non-GAAP financial measures:

The Company discloses non-GAAP information to the public to enable
investors to more easily assess the Company's performance on the same
basis applied by management and to ease comparison on both a GAAP and
non-GAAP basis among other companies that separately identify
share-based compensation expenses. In particular, the Company believes
that it is useful to investors to understand how the expenses and other
adjustments associated with the application of SFAS No. 123R are being
reflected on the Company's income statements.

- Why management believes the non-GAAP financial measure provides
useful information to investors:

Management believes that each of the non-GAAP measures reveals important
information about the economic model of the Company and the Company
discusses each of these items with the public on a regular basis on both
a GAAP and non-GAAP basis. The Company discloses this information to the
public to enable investors to more easily assess the Company's past
performance and estimate future performance on the same basis applied by
management and to ease comparison on both a GAAP and non-GAAP basis
among other companies that separately identify share-based compensation
expense. In particular, the Company believes that it is useful to
investors to understand how the expenses and other adjustments
associated with the application of SFAS No. 123R are being reflected on
the Company's income statements.

- The material limitations associated with use of non-GAAP financial
measure as compared to the use of the most directly comparable GAAP
financial measures:

The non-GAAP financial measures disclosed by the Company are not meant
to be considered superior to or a substitute for results of operations
prepared in accordance with GAAP. The non-GAAP financial measures
disclosed by the Company may be different from, and therefore may not be
comparable to, similar measures used by other companies.

Although these non-GAAP financial measures adjust expense, and diluted
share items to exclude the accounting treatment of share-based
compensation, they should not be viewed as a pro-forma presentation
reflecting the elimination of the underlying share-based compensation
programs, as those programs are an important element of the Company's
compensation structure and generally accepted accounting principles
indicate that all forms of share-based payments should be valued and
included as appropriate in results of operations.

- The manner in which management compensates for these limitations
when using non-GAAP financial measures:

Management takes into consideration the limitations in using non-GAAP
financial measures by evaluating the dilutive effect of the Company's
share-based compensation arrangements on the Company's basic and diluted
earnings per share calculations and by reviewing other quantitative and
qualitative information regarding the Company's share-based compensation
arrangements. Management also uses these non-GAAP measures in
conjunction with GAAP measures to assess the impact of share-based
compensation.

Conference Call Scheduled for 8:30 a.m. ET Today

Aspect will hold a conference call to discuss the results of the second
fiscal quarter of 2009 and management's outlook for Q3 2009 and Q4 2009
at 8:30 a.m. Eastern Time today, Wednesday, July 29, 2009. The call can
be accessed live by dialing 1-866-700-6293 (domestic),
1-617-213-8835 (international), access code 82544782 or via the webcast
at http://www.aspectmedical.com
on the Investor page, or http://www.earnings.com.
It also will be available for replay until August 6, 2009, by dialing
1-888-286-8010 (domestic), or 1-617-801-6888 (international), access
code 73522198. The webcast replay will also be available on Aspect's
website at http://www.aspectmedical.com
on the investor page.

About the Company

Aspect Medical Systems, Inc. (NASDAQ: ASPM | Quote | Chart | News | PowerRating) is a global market leader in
brain monitoring technology. To date, the Company's Bispectral Index
(BIS) technology has been used to assess approximately 34 million
patients and has been the subject of more than 3,300 published articles
and abstracts. BIS technology is installed in approximately 78 percent
of hospitals listed in the July 2009 U.S. News and World Report
ranking of America's Best Hospitals and in approximately 74 percent
of all U.S. operating rooms. In the last twelve months BIS technology
was used in approximately 19 percent of all U.S. surgical procedures
requiring general anesthesia or deep sedation. Aspect Medical Systems
has OEM agreements with eight leading manufacturers of patient
monitoring systems.

Safe Harbor Statement

Certain statements in this release are forward-looking within the
meaning of the Private Securities Litigation Reform Act of 1995 and may
involve risks and uncertainties, including without limitation statements
with respect to: Aspect's ability to improve operating margins and top
line growth over the remainder of 2009; its expectation that the affect
of adverse economic conditions on hospital spending is diminishing; its
ability to incorporate LiDCO's monitoring system into its product
portfolio by year end; the expected benefits of its agreement with the
Cleveland Clinic; and its guidance with respect to total revenue for Q3
and Q4 2009, net income per fully diluted share for Q3 2009 on both a
GAAP and non-GAAP basis and operating margin for Q4 2009 on both a GAAP
and non-GAAP basis. There are a number of factors that could cause
actual results to differ materially from those indicated by these
forward-looking statements. For example, the Company may not be able to
control expenses or grow its sales force or successfully implement its
sales and marketing strategies. The Company may not be able to
successfully integrate LiDCO's monitoring system and may not realize any
economic or other benefits from the arrangement specifically, or from
its diversification strategies generally. The Company may not achieve
the anticipated outcomes and benefits of its collaboration with the
Cleveland Clinic. The Company may also not be able to achieve widespread
market acceptance of its BIS monitoring technology, or to compete with
new products or alternative techniques that may be developed by others,
including third-party anesthesia monitoring products approved by the FDA
and currently available for sale. The Company also faces competitive and
regulatory risks relating to its ability to successfully develop and
introduce enhancements and new products such as its recently-introduced
BIS VISTA Bilateral, BIS VIEW, BIS VISTA and BIS Bilateral sensor. In
addition, the Company's ability to become and remain profitable will
depend upon its ability to promote frequent use of the BIS system by
hospitals and anesthesia providers so that sales of its BIS sensors, BIS
monitors and original equipment manufacturers products all increase.
Cases of awareness with recall during monitoring with the BIS system and
significant product liability claims are among the factors that could
limit market acceptance. The Company also faces operational and
financial risks as a result of adverse global economic conditions. The
Company incurred substantial indebtedness in connection with the
issuance of convertible notes in June 2007 and a significant portion of
its cash flows from operations may be dedicated to interest and
principal payments on such notes. There are other factors that could
cause the Company's actual results to vary from its forward-looking
statements, including without limitation those set forth under the
heading "Risk Factors" in the Company's Annual Report on Form 10-K for
the year ended December 31, 2008 and the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended April 4, 2009, each as filed with
the Securities and Exchange Commission.

In addition, the statements in this press release represent the
Company's expectations and beliefs as of the date of this press release.
The Company anticipates that subsequent events and developments may
cause these expectations and beliefs to change. However, while the
Company may elect to update these forward-looking statements at some
point in the future, it specifically disclaims any obligation to do so.
These forward-looking statements should not be relied upon as
representing the Company's expectations or beliefs as of any date
subsequent to the date of this press release.

For further information regarding Aspect Medical Systems, Inc., visit
the Aspect Medical Systems, Inc. website at www.aspectmedical.com...

FINANCIAL TABLES FOLLOW...

ASPECT MEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per Share Amounts and Percentages)
                                                 Three Months Ended                    Six Months Ended
                                                 July 4, 2009       June 28, 2008      July 4, 2009       June 28, 2008
                                                 (Unaudited)        (Unaudited)        (Unaudited)        (Unaudited)
Revenue                                          $    24,893        $    25,185        $    50,193        $    49,613
Costs of revenue                                      6,186              6,353              12,123             12,839
Gross profit                                          18,707             18,832             38,070             36,774
% of revenue                                          75.1   %           74.8   %           75.8   %           74.1   %
Operating expenses:
Research and development                              3,658              3,934              7,673              7,873
Sales and marketing                                   10,176             11,672             21,004             21,874
General and administrative                            4,240              4,172              8,821              8,114
Total operating expenses                              18,074             19,778             37,498             37,861
Income (loss) from operations                         633                (946   )           572                (1,087 )
Other income (expense):
Interest income                                       330                1,103              780                2,381
Interest expense                                      (445   )           (928   )           (912   )           (1,876 )
Other income                                          10                 3,940              3,079              3,940
Income before income taxes                            528                3,169              3,519              3,358
Income tax provision                                  221                1,270              1,358              1,694
Net income                                       $    307           $    1,899         $    2,161         $    1,664
Net income per share:
Basic                                            $    0.02          $    0.11          $    0.12          $    0.10
Diluted                                          $    0.02          $    0.10(A )      $    0.12          $    0.10
Shares used in computing net income per share:
Basic                                                 17,414             17,217             17,395             17,183
Diluted                                               17,414             23,754             17,395             17,409

(A) Includes adjustment of net income for the after tax effect of
interest and amortization expense related to the convertible notes as
the note conversion is dilutive in the respective period

ASPECT MEDICAL SYSTEMS, INC.
CONSOLIDATED REVENUE DATA
(In Thousands, Except Unit Amounts and Percentages)
                      Three Months Ended                            Six Months Ended
                      July 4,           June 28,          %         July 4,           June 28,          %
                      2009              2008              Change    2009              2008              Change
                      (Unaudited)       (Unaudited)                 (Unaudited)       (Unaudited)
REVENUE
WORLDWIDE
Sensors               $     21,532      $     21,395      1   %     $     43,113      $     42,031      3   %
Monitors                    1,963             1,944       1   %           3,861             4,041       (4  %)
Modules                     695               986         (30 %)          1,708             1,967       (13 %)
Other Equipment             703               860         (18 %)          1,511             1,574       (4  %)
Equipment                   3,361             3,790       (11 %)          7,080             7,582       (7  %)
Total Worldwide       $     24,893      $     25,185      (1  %)    $     50,193      $     49,613      1   %
DOMESTIC
Sensors               $     15,481      $     16,053      (4  %)    $     31,432      $     31,868      (1  %)
Monitors                    966               535         81  %           1,508             1,169       29  %
Modules                     211               341         (38 %)          334               564         (41 %)
Other Equipment             335               418         (20 %)          814               809         1   %
Equipment                   1,512             1,294       17  %           2,656             2,542       4   %
Total Domestic        $     16,993      $     17,347      (2  %)    $     34,088      $     34,410      (1  %)
INTERNATIONAL
Sensors               $     6,051       $     5,342       13  %     $     11,681      $     10,163      15  %
Monitors                    997               1,409       (29 %)          2,353             2,872       (18 %)
Modules                     484               645         (25 %)          1,374             1,403       (2  %)
Other Equipment             368               442         (17 %)          697               765         (9  %)
Equipment                   1,849             2,496       (26 %)          4,424             5,040       (12 %)
Total International   $     7,900       $     7,838       1   %     $     16,105      $     15,203      6   %
UNITS
WORLDWIDE
Sensors                     1,608,000         1,575,000   2   %           3,206,000         3,061,000   5   %
Monitors                    743               669         11  %           1,475             1,387       6   %
Modules (a)                 1,195             1,224       (2  %)          2,557             2,784       (8  %)
Installed Base (b)                                                        60,633            51,273      18  %
DOMESTIC
Sensors                     959,000           979,000     (2  %)          1,930,000         1,940,000   (1  %)
Monitors                    374               155         141 %           579               335         73  %
Modules (a)                 215               319         (33 %)          340               524         (35 %)
Installed Base (b)                                                        32,838            29,401      12  %
INTERNATIONAL
Sensors                     649,000           596,000     9   %           1,276,000         1,121,000   14  %
Monitors                    369               514         (28 %)          896               1,052       (15 %)
Modules (a)                 980               905         8   %           2,217             2,260       (2  %)
Installed Base (b)                                                        27,795            21,872      27  %
(a) Represents module shipments to OEM customers
(b) Includes end-user module placements by OEM customers

ASPECT MEDICAL SYSTEMS, INC.
UNAUDITED RECONCILIATION OF GAAP to NON-GAAP FINANCIAL MEASURES
(In Thousands, Except Per Share Amounts and Percentages)
                                               Three Months Ended             Six Months Ended
                                               July 4,        June 28,        July 4,        June 28,
                                               2009           2008            2009           2008
GAAP costs of revenue                          $  6,186       $  6,353        $  12,123      $  12,839
Stock-based compensation expense                  (108   )       (124   )        (218   )       (243   )
Non-GAAP costs of revenue                      $  6,078       $  6,229        $  11,905      $  12,596
GAAP gross profit margin                       $  18,707      $  18,832       $  38,070      $  36,774
Stock-based compensation expense                  108            124             218            243
Non-GAAP gross profit margin                   $  18,815      $  18,956       $  38,288      $  37,017
GAAP profit margin percent                        75.1   %       74.8   %        75.8   %       74.1   %
Stock-based compensation expense                  0.5    %       0.5    %        0.5    %       0.5    %
Non-GAAP profit margin percent                    75.6   %       75.3   %        76.3   %       74.6   %
GAAP research and development expenses         $  3,658       $  3,934        $  7,673       $  7,873
Stock-based compensation expense                  (397   )       (487   )        (806   )       (956   )
Non-GAAP research and development expenses     $  3,261       $  3,447        $  6,867       $  6,917
GAAP sales and marketing expenses              $  10,176      $  11,672       $  21,004      $  21,874
Stock-based compensation expense                  (452   )       (669   )        (932   )       (1,345 )
Non-GAAP sales and marketing expenses          $  9,724       $  11,003       $  20,072      $  20,529
GAAP general and administrative expenses       $  4,240       $  4,172        $  8,821       $  8,114
Stock-based compensation expense                  (559   )       (650   )        (1,078 )       (1,328 )
Non-GAAP general and administrative expenses   $  3,681       $  3,522        $  7,743       $  6,786
GAAP total operating expenses                  $  18,074      $  19,778       $  37,498      $  37,861
Stock-based compensation expense                  (1,408 )       (1,806 )        (2,816 )       (3,629 )
Non-GAAP total operating expenses              $  16,666      $  17,972       $  34,682      $  34,232
GAAP income (loss) from operations             $  633         $  (946   )     $  572         $  (1,087 )
Stock-based compensation expense                  1,516          1,930           3,034          3,872
Non-GAAP income from operations                $  2,149       $  984          $  3,606       $  2,785
GAAP operating margin                             2.5    %       (3.8   %)       1.1    %       (2.2   %)
Stock-based compensation expense                  6.1    %       7.7    %        6.1    %       7.8    %
Non-GAAP operating margin                         8.6    %       3.9    %        7.2    %       5.6    %
GAAP income before income tax                  $  528         $  3,169        $  3,519       $  3,358
Stock-based compensation expense                  1,516          1,930           3,034          3,872
Non-GAAP income before income tax              $  2,044       $  5,099        $  6,553       $  7,230

ASPECT MEDICAL SYSTEMS, INC.
UNAUDITED RECONCILIATION OF GAAP to NON-GAAP FINANCIAL MEASURES
(CONT.)
(In Thousands, Except Per Share Amounts and Percentages)
                                                 Three Months Ended             Six Months Ended
                                                 July 4,       June 28,         July 4,       June 28,
                                                 2009          2008             2009          2008
GAAP income before taxes per diluted share       $  0.03       $  0.17 (A )     $  0.20       $  0.19
Stock-based compensation expense                    0.09          0.08             0.17          0.23
Non-GAAP income before taxes per diluted share   $  0.12       $  0.25 (A )     $  0.37       $  0.42
GAAP income tax expense                          $  221        $  1,270         $  1,358      $  1,694
Stock-based compensation expense                    454           380              794           977
Non-GAAP income tax expense                      $  675        $  1,650         $  2,152      $  2,671
GAAP effective income tax rate                      42    %       40      %        39    %       50    %
Stock-based compensation expense                    (9    %)      (8      %)       (6    %)      (13   %)
Non-GAAP effective income tax rate                  33    %       32      %        33    %       37    %
GAAP net income                                  $  307        $  1,899         $  2,161      $  1,664
Stock-based compensation expense                    1,062         1,550            2,240         2,895
Non-GAAP net income                              $  1,369      $  3,449         $  4,401      $  4,559
GAAP diluted earnings per share                  $  0.02       $  0.10 (A )     $  0.12       $  0.10
Stock-based compensation expense                    0.06          0.07             0.13          0.16
Non-GAAP diluted earnings per share              $  0.08       $  0.17 (A )     $  0.25       $  0.26

(A) Includes adjustment of net income for the after tax effect of
interest and amortization expense related to the convertible notes as
the note conversion is dilutive in the respective period

Guidance for Q3 2009 for net
income per fully-diluted share
GAAP net income per fully-diluted share        $ 0.01 - $0.03
Stock-based compensation expense               $ 0.05
Non-GAAP net income per fully-diluted share    $ 0.06 - $0.08

Guidance for Q4 2009 operating
margin
GAAP operating margin               7     % - 9%
Stock-based compensation expense    5     %
Non-GAAP operating margin           12    % - 14%

ASPECT MEDICAL SYSTEMS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
                                             July 4,          December 31,
                                             2009             2008
                                             (Unaudited)      (Unaudited)
ASSETS
Current assets:
Cash and investments (A)                     $      77,163    $      78,051
Accounts receivable, net                            13,337           13,193
Inventory, net                                      8,217            7,796
Deferred tax assets                                 4,729            4,729
Other current assets                                3,726            3,962
Total current assets                                107,172          107,731
Property and equipment, net                         7,888            8,319
Long-term investments (A)                           1,130            5,400
Deferred financing fees                             1,500            1,852
Long-term deferred tax assets                       11,134           12,090
Other assets                                        1,187            1,582
Total assets                                 $      130,011   $      136,974
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities     $      10,415    $      15,443
Other current liabilities                           191              307
Total current liabilities                           10,606           15,750
Other long-term liabilities                         116              194
Long-term debt                                      57,950           65,000
Stockholders' equity                                61,339           56,030
Total liabilities and stockholders' equity   $      130,011   $      136,974
(A) Investments with maturities beyond twelve months are
included in long-term investments.

SOURCE: Aspect Medical Systems, Inc.

Aspect Medical Systems, Inc. 
Neal Armstrong, VP, CFO, 617-559-7162 
or 
Emily Anderson, 617-559-7032 
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