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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 FISCAL 2004 FOURTH QUARTER AND YEAR-END RESULTS

FY 2004 Highlights Versus FY 2003

• Revenue increased 95% to $129.5 million from $66.5 million
• Operating income improved to $8.7 million from $1.8 million
• Net income rose to $5.1 million, or $0.68 per diluted share, from $955,000, or $0.22 per diluted share

Culver City, CA— February 8, 2005— Prospect Medical Holdings, Inc. (PMHX.PK),("Prospect Medical"), a managed care management company serving 10 affiliated Independent Physician Associations ("IPAs") in Southern California, today announced financial results for its fiscal 2004 fourth quarter and year ended September 30, 2004 (see attached tables).

Revenues for fiscal 2004 increased 95% to $129.5 million from $66.5 million last year, due primarily to the acquisition (affiliation) of four IPAs and a 23% increase in enrollees to approximately 198,000 since September 30, 2003. Approximately 97% and 95% of revenues in 2004 and 2003, respectively, were generated from capitation payments made each month by HMOs to the Company¹s affiliated IPAs. Operating income increased to $8.7 million from $1.8 million last year, reflecting higher total revenues and lower total operating expenses as a percentage of total revenues. Net income rose to $5.1 million, or $0.68 per diluted share on approximately 7.5 million weighted average common and common equivalent diluted shares outstanding ("shares outstanding"), from net income of $955,000, or $0.22 per diluted share, on approximately 4.3 million shares outstanding.

Dr. Jack Terner, Chairman and Chief Executive Officer of Prospect Medical, commented, "We continue to execute on our acquisition-based growth strategy. Operating income and net income rose at significantly faster rates than total revenues, and general and administrative expenses declined as a percentage of total revenue, from approximately 27% to approximately 19%. This reflects the economies of scale we were able to generate through the consolidation of our four acquisitions in fiscal 2004."

Revenues for the fiscal 2004 fourth quarter increased to $35 million from $16.4 million in the same period last year. Operating income rose to $1.7 million from $616,000 in the comparable prior year period. Net income for the fourth quarter of fiscal 2004 increased to $908,000, or $0.11 per diluted share on approximately 8.4 million diluted shares outstanding, from net income of $337,000, or $0.08 per diluted share, on approximately 4.3 million diluted shares outstanding. Each of these increases was primarily attributable to the acquisitions and administrative savings described above.

Dr. Jack Terner, Chairman and Chief Executive Officer of Prospect Medical, commented, "It is important to note that fiscal 2004 third quarter net income of $1.6 million (up 466% from the prior year period) and fiscal 2004 nine-month net income of $4.2 million (up 583% from the prior year period) are unchanged, as are basic earnings per share for these periods. Prospect Medical remains on plan both operationally and as it relates to obtaining a national listing. Regarding the latter, the filing of the updated Form 10 is an important step in this process."

The increase in shares outstanding for the fiscal 2004 three and twelve 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.

Dr. Terner concluded, "We continue to focus on acquisitions in southern California, a market that we believe has rationalized and presents significant consolidation opportunities. We are pursuing this strategy in a disciplined fashion to help ensure the profitable growth of the Company and promote the highest standards in patient care. We look forward to our future with confidence."

FORM 10 FILING UPDATE

On January 28, 2005, Prospect Medical filed an Amended 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 http://www.prospectmedicalholdings.com/docs/prospect10A2.htm and at http://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 Company¹s 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 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

Prospect Medical Holdings, Inc.
Condensed Consolidated Balance Sheets