For more information, please contact either listing below:

Prospect Medical Holdings, Inc.
Linda Hodges,
Executive Vice President
(310) 337.4170
linda.hodges@prospectmedical.com

Investor Relations Counsel:
The Equity Group Inc.
Devin Sullivan
(212) 836-9608
dsullivan@equityny.com

FOR IMMEDIATE RELEASE

PROSPECT MEDICAL HOLDINGS REPORTS THIRD QUARTER FINANCIAL RESULTS

Q3 FY 2004 Highlights Versus Q3 FY 2003

Culver City, CA— August 13, 2004— Prospect Medical Holdings, Inc. (PMHX.PK), ("Prospect Medical") a managed care management company serving 12 affiliated Independent Physician Associations ("IPAs") in Southern California, today announced financial results for its fiscal 2004 third quarter and nine months ended June 30, 2004 (see attached tables).

NET INCOME UP 466% ON 110% INCREASE IN REVENUES

Revenues for the third quarter of fiscal 2004 increased to $36.9 million from $17.6 million in the same period last year, due primarily to the acquisition (affiliation) of four IPAs since June 30, 2003 and a 93% increase in enrollees, to approximately 215,000. Revenues are generated through the Company's affiliated IPAs under their contracts with HMOs. Pre-tax income rose to $2.6 million from $481,000 in the third quarter of fiscal 2003. Net income increased to $1.6 million, or $0.22 per diluted share on approximately 7.1 million weighted average common and common equivalent diluted shares outstanding ("shares outstanding"), from net income of $280,000, or $0.06 per diluted share, on approximately 4.3 million shares outstanding.

Revenues for the fiscal 2004 nine-month period increased to $97.5 million from $52.1 million in the same period last year, due primarily to the reasons stated above. Pre-tax income rose to $7.0 million from $1.1 million in the comparable prior year period. Net income for the first nine months of fiscal 2004 increased to $4.2 million, or $0.71 per diluted share on approximately 5.9 million weighted average common and common equivalent diluted shares outstanding ("shares outstanding"), from net income of $618,000, or $0.14 per diluted share, on approximately 4.3 million shares outstanding.

The increase in shares outstanding for the fiscal 2004 three and nine month periods was due primarily to the inclusion of shares issued in conjunction with the successful completion of private placement transactions on March 31, 2004. The private placement transactions generated gross proceeds of approximately $12.5 million, which Prospect Medical used primarily for acquisitions.

ACQUISITION STRATEGY

Dr. Jack Terner, Chairman and Chief Executive Officer of Prospect Medical, commented, "We continue to execute on our acquisition-based growth strategy. By leveraging higher revenues, we are able to reduce costs and increase profitability. In this regard, general and administrative expenses in the third quarter of fiscal 2004 declined as a percentage of revenue to 17.2% from 26.2% in the prior year period."

Dr. Terner concluded, "By serving as a bridge between HMOs and physicians, Prospect Medical allows insurers and practitioners to focus on their core competencies; as a result, we believe this helps to promote high quality patient care. Our focus is on the Southern California market, where approximately 54% of HMO patients are serviced through IPAs. We believe that the IPA market has rationalized over the last several years and is now ripe for consolidation. In pursuing our growth plan, we will continue to follow a disciplined and deliberate acquisition strategy, employ our robust IT infrastructure, and apply proven business and risk management principles. We look forward to our future with confidence."

FORM 10 FILING UPDATE

As previously announced, on May 27, 2004 Prospect Medical filed a Form 10 Registration Statement with the Securities and Exchange Commission (“SEC”) to register its common stock under the Securities Exchange Act of 1934 and to seek a listing of its common stock on the American Stock Exchange (“AMEX”). A copy of the Form 10 filing is available at www.prospectmedicalholdings.com and at www.sec.gov. The Form 10 will not become effective until the SEC completes its review of the filing and any amendments to the Form 10 that the Company expects to file. In addition, the Form 10 will not become effective until the AMEX certifies to the SEC that it has accepted the Company’s common stock for listing on that exchange. There is no assurance that the Company will be able to have an AMEX listing approved.

ABOUT THE COMPANY

Prospect Medical Holdings, Inc. is a health care management services organization that provides management services primarily to affiliated independent physician associations ("IPAs"). IPAs are professional corporations that contract with independent physicians and other health care providers to create a medical panel of primary care and specialist physicians, and other health care service providers, capable of providing the full range of medical services to individuals enrolled in health maintenance organization ("HMO") managed care health plans.

This press release contains forward-looking statements. Additional written or oral forward-looking statements may be made by the Company from time to time, in filings with the Securities and Exchange Commission or otherwise. Statements contained herein that are not historical facts are forward-looking statements. Investors are cautioned that forward-looking statements, including the statements regarding anticipated or expected results and the future introduction of new products, involve risks and uncertainties which may affect the Company's business and prospects, including those outlined in the Company's Form 10 and subsequently filed reports. Any forward-looking statements contained in this press release represent our estimates only as of the date hereof, or as of such earlier dates as are indicated, and should not be relied upon as representing our estimates as of any subsequent date. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, even if our estimates change.

Prospect Medical Holdings, Inc.
Condensed Consolidated Income Statements (Unaudited)

PROSPECT MEDICAL HOLDINGS, INC.
Condensed Consolidated Balance Sheets