ATC Healthcare Announces Second Quarter 2006 Results of Operations; Sales grow 5% over the first quarter

ATC Healthcare, Inc. (AMEX:AHN - News), a national
leader in medical staffing, today reported results for its second
quarter of fiscal year end 2006, which ended August 31, 2005.

   Three Month Results

   Revenues for the second quarter ended August 31, 2005 were $17.9
million compared to $17.5 million (net of discontinued operations) for
the quarter ended August 31, 2004. Service costs were 76.5% of total
revenues in the second quarter of fiscal year end 2006 as compared to
78.4% for the second quarter of fiscal year 2005. Income from
operations for the quarter ended August 31, 2005 equaled $178 thousand
versus a loss of $(758) thousand for the quarter ended August 31,
2004. Net loss for the quarter ended August 31, 2005 was $(494)
thousand or $(.02) per basic and diluted share versus a net loss of
$(248) thousand including income from discontinued operations of $227
thousand or a loss of $(.01) per basic and diluted share for the
quarter ended August 31, 2004.

   Six Month Results

   ATC reported revenues of $34.9 million (net of discontinued
operations) for the first six months of fiscal 2006, as compared to
revenue of $36.3 million (net of discontinued operations) for the
first six months of fiscal 2005. Service costs were 77.0% of total
revenues for the first six months of fiscal 2006 as compared to 76.7%
for the first six months of fiscal 2005. Loss from operations was
$(107) thousand for the six months ended August 31, 2005 as compared
to $(658) thousand for the same period last year. The Company recorded
a net loss of $(1.8) million including a loss from discontinued
operations of $(577) thousand (or $(.07) per basic and diluted share
for the first six months of fiscal 2006 versus net loss of $(286)
thousand including income from discontinued operations of $472
thousand or $(.01) per basic and diluted share for the first six
months of fiscal 2005.

   "We continue to see growth quarter over quarter and are optimistic
that this can continue for the rest of the year. During the second
quarter we completed the restructure of our balance sheet by
converting over $8.1 million in debt to preferred stock. In addition,
we are pleased with the growth in our government division and recent
announcements about a $4 million award in New Jersey and participating
in a contract with the Department of Health and Human Services that
could bring $10 million in sales annually. Finally, we've begun to see
the release of escrow funds from the sale of our AllCare Division",
stated David Savitsky, Chief Executive Officer.

   In conjunction with this release, management will host a
teleconference Thursday, October 20, 2005 at 2 pm Eastern Time. The
dial in number for the call Domestic code 1-800-946-0741 Code 4216868.
There will be a 48 hour replay. The replay number is 888-203-1112 Code
4216868.

   About ATC Healthcare, Inc.

   ATC is a national leader in medical staffing personnel to
hospitals, nursing homes, clinics, and other health care facilities
with 52 locations in 31 states. ATC provides supplemental staffing,
outsourcing and human resources solutions to hospitals, nursing homes,
medical and research facilities and industry. Drawing from a pool of
over 15,000 healthcare professionals spanning more than 50
specialties, the Company supplies both clinical and non-clinical
personnel for short-term, long-term, and "traveling" contract
assignments. To learn more about the company's services, visit their
web site at www.atchealthcare.com.

   This press release contains forward-looking statements. Actual
results could differ materially from those projected in the
forward-looking statements. Additional information concerning factors
that could cause actual results to differ materially from those in the
forward-looking statements is contained in ATC Healthcare, Inc. Annual
Report on Form 10-K/A for the year ended February 28, 2005 as filed
with the Securities and Exchange Commission on September 26, 2005.
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ATC HEALTHCARE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)


                     For the Three Months         For the Six Months
                            Ended      (unaudited)      Ended

                     August 31,  August 31,     August 31,  August 31,
                        2005       2004           2005        2004
REVENUES: 
 Service revenues      $17,932    $17,571       $34,942     $36,254
-------------------------------------------------------------------

COSTS AND EXPENSES:
 Service costs         $13,691    $13,825        26,911      27,819
 General and
  administrative 
  expenses               3,936      4,340         7,853       8,761
 Depreciation and
  amortization             127        164           285         332
-------------------------------------------------------------------
   Total operating
    expenses            17,754     18,329        35,049      36,912
-------------------------------------------------------------------

INCOME (LOSS) FROM 
 OPERATIONS                178       (758)         (107)       (658)
-------------------------------------------------------------------

INTEREST AND OTHER 
 EXPENSES (INCOME):
 Interest expense, net     710        555         1,241       1,101
 Other expense (income),
  net                      (63)      (689)          (87)       (701)
-------------------------------------------------------------------
  Total interest and
   other expenses
   (income)                647       (134)        1,154         400
-------------------------------------------------------------------

LOSS FROM CONTINUING
 OPERATIONS BEFORE 
 INCOME TAXES             (469)      (624)       (1,261)     (1,058)

INCOME TAX PROVISION 
 (BENEFIT)                  25       (149)           50        (300)
-------------------------------------------------------------------

LOSS FROM CONTINUING
 OPERATIONS               (494)      (475)       (1,311)       (758)
-------------------------------------------------------------------

DISCONTINUED OPERATIONS:
(LOSS) INCOME FROM
 DISCONTINUED OPERATIONS
NET OF TAX PROVISION FOR 
 THE THREE MONTHS OF $0
 IN 2005 AND $176 in  
 2004 AND FOR THE SIX 
 MONTHS OF $0 AND $352
 RESPECTIVELY               --        227          (577)        472
-------------------------------------------------------------------

NET LOSS                  (494)      (248)       (1,888)       (286)
-------------------------------------------------------------------

Dividends accreted to
 Preferred Shareholders     17         17            34          34
-------------------------------------------------------------------

NET LOSS ATTRIBUTABLE 
 TO COMMON SHAREHOLDERS   (511)      (265)      $(1,922)    $  (320)
===================================================================

(LOSS) INCOME EARNINGS 
 PER SHARE:

(LOSS) FROM CONTINUING
 OPERATIONS:
(LOSS) PER COMMON 
 SHARE - BASIC         $  (.02)   $  (.02)      $  (.05)    $  (.03)
                       ============================================
(LOSS) PER COMMON 
 SHARE - DILUTED       $  (.02)   $  (.02)      $  (.05)    $  (.03)
                       ============================================

(LOSS) INCOME FROM
 DISCONTINUED OPERATIONS:
(LOSS) INCOME PER 
 COMMON SHARE-BASIC    $  (.00)   $   .01       $  (.02)    $   .02
                       ============================================
(LOSS) INCOME PER 
 COMMON SHARE-DILUTED  $  (.00)   $   .01       $  (.02)    $   .02
                       ============================================

NET LOSS
(LOSS) PER COMMON 
SHARE-BASIC            $  (.02)   $  (.01)      $  (.07)    $  (.01)
                       ============================================
(LOSS) PER COMMON 
 SHARE-DILUTED         $  (.02)   $  (.01)      $  (.07)    $  (.01)
                       ============================================

WEIGHTED AVERAGE COMMON
 SHARES OUTSTANDING
 Basic                  29,674     24,925        28,585      24,918
===================================================================
 Diluted                29,674     24,925        28,585      24,918
===================================================================
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