<PAGE>


                                 UNITED STATES
                    SECURITIES AND EXCHANGE COMMISSION
                          Washington, D.C. 20549

                                FORM 10-Q

        [X]    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                   THE SECURITIES EXCHANGE ACT OF 1934

                    For the Quarter Ended August 31, 1996

                                    OR

        [ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                   THE SECURITIES EXCHANGE ACT OF 1934

                     Commission File Number: 1-10583
                                             -------

                          ATC GROUP SERVICES INC.
                          -----------------------
          (Exact name of Registrant as specified in its charter)


         Delaware                               46-0399408
 ------------------------               ----------------------------
   (State or other                            (I.R.S. Employer
      jurisdiction of                        Identification No.)
     incorporation or
      organization)
                                                
  104 East 25th Street,                         
        10th Floor
   New York, New York                              10010
 -----------------------                ----------------------------
  (Address of principal                         (Zip Code)            
    executive offices)

   Registrant's telephone number, including area code:  (212) 353-8280
                                                        --------------

                         ATC ENVIRONMENTAL INC.
                         ----------------------
(Former name, former address and former fiscal year if changed since last
report)

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


The number of shares outstanding of the Registrant's Common Stock as of
October 11, 1996 was 7,793,518.

PAGE
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1996

                                                                   Page
PART I - FINANCIAL INFORMATION:                                        
                                                                       
  Item 1 - Financial Statements:
                                                                   
     Consolidated Balance Sheets                                   
       February 29, 1996 and August 31, 1996 (Unaudited)           F-3
                                                                   
     Consolidated Statements of Operations                         
       Three months and six months ended August 31, 1995 and 1996  F-4
      (Unaudited)
                                                                   
     Consolidated Statements of Stockholders' Equity               
       Six months ended August 31, 1995 and 1996 (Unaudited)       F-5
                                                                   
     Consolidated Statements of Cash Flows                         
       Six months ended August 31, 1995 and 1996 (Unaudited)       F-6
                                                                   
     Notes to Consolidated Financial Statements                    
       Three months and six months ended August 31, 1996           F-7
      (Unaudited)
                                                                   
  Item 2 - Management's Discussion and Analysis of Financial       F-13
  Condition and Results of Operations
                                                                   
PART II - OTHER INFORMATION:

  Items 1-6                                                        F-18
                                                                   
  Signatures                                                       F-20
                                                                   
  Exhibit 11 - Computation of Earnings Per Share                   
                        Three months and six months ended August   F-21
  31, 1995 and 1996 (Unaudited)
                                                                   
  Exhibit 27 - Financial Data Schedule                             
                        August 31, 1996 (Unaudited)                F-22
                                                                   
PAGE
<PAGE>
                                                                       
ATC GROUP SERVICES INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
FEBRUARY 29, 1996 AND AUGUST 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
                                                           February 29,   August 31,
                                                              1996           1996
                                                           -----------    -----------
                                                                          (Unaudited)
<S>                                                        <C>            <C>
ASSETS
------
CURRENT ASSETS:                                               
  Cash and cash equivalents ............................   $13,469,443     $3,437,326
  Trade accounts receivable, less allowance for                 
    doubtful accounts ($383,220 at February 29, 1996       
    and $1,141,778 at August 31, 1996)..................    14,161,774     31,943,417
  Costs in excess of billings on uncompleted contracts..     2,333,835      8,633,371
  Prepaid expenses and other current assets.............       906,289      3,758,623
  Deferred income taxes.................................       440,600        440,600
                                                           -----------    -----------
    Total current assets................................    31,311,941     48,213,337
                                                              
PROPERTY AND EQUIPMENT, Net (Note C)....................     3,606,755      3,801,711

GOODWILL, net of accumulated amortization (Note B)           
  ($453,646 at February 29, 1996 and $881,686 at        
  August 31, 1996)......................................    11,375,399     34,910,069
COVENANTS NOT TO COMPETE, net of accumulated                  
  amortization (Note B) ($258,099 at February 29, 1996   
  and $334,854 at August 31, 1996)......................       274,401        732,646
OTHER ASSETS............................................       116,104        842,657
                                                           -----------    -----------
                                                           $46,684,600    $88,500,420
                                                           ===========    ===========
                                                             
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
  Short-term debt.......................................    $1,122,552     $1,055,000
  Current maturities of long-term debt..................       354,858      1,471,072
  Accounts payable......................................     2,231,175      7,627,323
  Income taxes payable..................................        42,500        676,551
  Accrued compensation..................................     1,421,330      3,217,446
  Accrued payment obligations - ATC aquisition (Note B).             -      4,423,761
  Other accrued expenses (Note B).......................     1,162,210      4,336,892
                                                           -----------    -----------
    Total current liabilities...........................     6,334,625     22,808,045

LONG-TERM DEBT, less current maturities (Note A)........       361,944     22,229,413
OTHER LIABILITIES.......................................       598,817        337,549
DEFERRED INCOME TAXES...................................       196,800        196,800
                                                           -----------    -----------
    Total liabilities...................................     7,492,186     45,571,807
                                                           -----------    -----------
COMMITMENTS AND CONTINGENCIES (Notes B and E)

STOCKHOLDERS' EQUITY (Note D):                                
  Common stock, par value $.01 per share; authorized            
   20,000,000 shares; issued and outstanding 7,796,577
   shares at February 29, 1996 and 7,787,237 shares at
   August 31, 1996.....................................         77,966         77,872
  Additional paid-in capital...........................     29,030,189     28,974,005
  Notes receivable - common stock......................        (45,000)            -  
  Retained earnings....................................     10,129,259     13,876,736
                                                           -----------    -----------
  Total stockholders' equity...........................     39,192,414     42,928,613
                                                           -----------    -----------
                                                           $46,684,600    $88,500,420
                                                           ===========    ===========
</TABLE>

See notes to consolidated financial statements.


                                F-3
PAGE
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS AND SIX MONTHS ENDED AUGUST 31, 1995 AND 1996 (Unaudited)
<TABLE>
<CAPTION>
                                                                Three Months Ended           Six Months Ended
                                                                  August 31, 1996             August 31, 1996
                                                           --------------------------    --------------------------
                                                              1995           1996           1995           1996
                                                           -----------    -----------    -----------    -----------
<S>                                                        <C>            <C>            <C>            <C>
REVENUES...............................................    $11,649,478    $33,922,028    $22,464,431    $50,568,011
                                                               
REIMBURSABLE COSTS.....................................      1,364,001      5,077,483      2,248,867      7,699,061
                                                           -----------    -----------    -----------    -----------
NET REVENUES...........................................     10,285,477     28,844,545     20,215,564     42,868,950

COST OF NET REVENUES...................................      4,756,061     16,314,731      9,416,606     23,057,124
                                                           -----------    -----------    -----------    -----------
     Gross profit......................................      5,529,416     12,529,814     10,798,958     19,811,826
                                                               
OPERATING EXPENSES:
  Selling..............................................        384,564        750,818        714,193      1,293,400
  General and administrative...........................      2,986,647      7,660,199      6,352,611     11,578,214
  Provision for bad debts..............................         71,815        208,666        119,215        341,301
                                                           -----------    -----------    -----------    -----------
                                                             3,443,026      8,619,683      7,186,019     13,212,915
                                                           -----------    -----------    -----------    -----------
     Operating income..................................      2,086,390      3,910,131      3,612,939      6,598,911
                                                           -----------    -----------    -----------    -----------
                                                               
NONOPERATING EXPENSE (INCOME):
  Interest expense.....................................        139,959        512,773        249,467        570,099
  Interest income......................................         (3,801)       (65,412)       (47,573)      (195,447)
  Other................................................         28,615        (22,723)        26,800        (33,537)
                                                           -----------    -----------    -----------    -----------
                                                               164,773        424,638        228,694        341,115
                                                           -----------    -----------    -----------    -----------

     Income before income taxes........................      1,921,617      3,485,493      3,384,245      6,257,796

INCOME TAX EXPENSE (Note B)............................        402,500      1,384,000        970,000      2,438,000
                                                           -----------    -----------    -----------    -----------
                                                               
NET INCOME.............................................    $ 1,519,117    $ 2,101,493      2,414,245      3,819,796
                                                           ===========    ===========    ===========    ===========

EARNINGS PER COMMON SHARE AND
  DILUTIVE COMMON EQUIVALENT SHARE:
     Primary (Note D) (1)..............................    $       .23    $       .25    $       .38     $      .45
                                                           ===========    ===========    ===========    ===========
     Fully diluted (Note D) (1)........................    $       .23    $       .25    $       .38     $      .44
                                                           ===========    ===========    ===========    ===========
                                                               
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
     Primary...........................................      6,542,002      8,576,018      6,332,657      8,578,831
                                                           ===========    ===========    ===========    ===========
     Fully diluted.....................................      6,542,002      8,576,018      6,332,657      8,628,179
                                                           ===========    ===========    ===========    ===========
</TABLE>  

  (1) Includes a one-time tax benefit of $.05 per share related to the merger
      of Aurora Environmental Inc. for the three months and six months ended
      August 31, 1995. (Note B)

See notes to consolidated financial statements.


                                F-4
PAGE
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
SIX MONTHS ENDED AUGUST 31, 1995 AND 1996 (Unaudited)
<TABLE>
<CAPTION>
                                                                                         1995                           
                                                ----------------------------------------------------------------------------------
<S>                                             <C>            <C>           <C>           <C>           <C>           <C>
                                                                                             Notes 
                                                                             Additional    Receivable
                                                   Common        Stock        Paid-in       -Common       Retailed
                                                   Shares        Amount       Capital        Stock        Earnings       Total
                                                ------------   ----------   -----------   ------------   -----------   -----------
BALANCE, February 28, 1995.....................    5,738,018   $   57,380   $ 7,484,453   $   (15,000)   $ 6,286,361   $13,813,194

  Sale of common stock at $1.83 to $2.13 per
    share, upon exercise of stock options and
    warrants...................................       33,000          330        60,309             -            -          60,639
  Net issuance of common stock and adjustments
    in connection with the merger of Aurora
    Environmental Inc. into ATC (Note B).......       83,452          835        61,719       (30,000)           -          32,554
  Continuing registration costs applied against
    additional paid-in captial.................            -            -       (88,827)            -            -         (88,827)
  Other capital transactions...................        2,920           29        22,471             -            -          22,500
  Net income...................................            -            -             -             -      2,414,245     2,414,245
                                                ------------   -----------  ------------  ------------   -----------   -----------
BALANCE, August 31, 1995.......................    5,857,390   $    58,574  $  7,540,125  $    (45,000)  $ 8,700,606   $16,254,305
                                                ============   ===========  ============  ============   ===========   ===========
</TABLE>
<TABLE>
<CAPTION>
                                                                                         1996                           
                                                ----------------------------------------------------------------------------------
<S>                                             <C>            <C>           <C>           <C>           <C>           <C>
                                                                                             Notes 
                                                                             Additional    Receivable
                                                   Common        Stock        Paid-in       -Common       Retailed
                                                   Shares        Amount       Capital        Stock        Earnings       Total
                                                ------------   ----------   -----------   ------------   -----------   -----------
BALANCE, February 28, 1996.....................    7,796,577   $   77,966   $29,030,189   $    (45,000)  $10,129,259   $39,192,414

  Sale of common stock at $2.50 to $10.00 per
    share, upon exercise of stock options and
    warrants...................................        2,980           29        24,376              -           -          24,405
  Stock received as consideration for sale of 
    assets.....................................      (12,320)        (123)      (51,990)             -       (72,319)     (124,432)
  Continuing registration costs applied against
    additional paid-in captial.................            -            -       (28,570)             -           -         (28,570)
  Other capital transactions...................            -            -             -         45,000           -          45,000
  Net income...................................            -            -             -              -     3,819,796     3,819,796
                                                ------------   -----------  ------------  ------------   -----------   -----------
BALANCE, August 31, 1996.......................    7,787,237   $    77,872  $ 28,974,005  $          -   $13,876,736   $42,928,613
                                                ============   ===========  ============  ============   ===========   ===========
</TABLE>

See notes to consolidated financial statements.

                                F-5
PAGE
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED AUGUST 31, 1995 AND 1996 (Unaudited)
<TABLE>
<CAPTION>
                                                                 Six Months Ended
                                                                    August 31,
                                                           --------------------------
                                                              1995           1996
                                                           -----------    -----------
<S>                                                        <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:                                    
  Net income...........................................    $ 2,414,245     $3,819,796
  Adjustments to reconcile net income to net cash from                     
   operating activities:
    Depreciation and leasehold amortization............        348,763        405,074
    Amorization of goodwill and covenants..............        194,037        524,795
    Provision for bad debts............................        119,215        341,301
    Other..............................................       (562,161)       (85,292)
    Changes in operating assets and liabilities, net of                      
     amounts acquired in acquisitions:
      Accounts receivable and cost in excess of
        billings on uncompleted contracts..............     (3,489,439)    (4,042,124)
      Prepaid expenses and other assets................       (453,753)      (847,080)
      Accounts payable and other liabilities...........       (170,130)    (6,808,932)
      Income taxes payable.............................       (128,250)       634,069
                                                           -----------    -----------
        Net cash flows from operating activities.......     (1,727,473)    (6,058,393)
                                                           -----------    ----------- 
                                                                         
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchase of American Testing and Engineering Corp.,
    net of cash acquired...............................              -     (8,965,952)
  Purchase of 3D Information Services, Inc
    net of cash acquired...............................              -     (2,926,681)
  Purchase of BSE Management, Inc. ....................       (207,990)             -
  Purchase of Con-Test, Inc. ..........................       (135,344)             -
  Purchase of R.E. Blattert and Associates.............        (38,146)             -
  Purchase of property and equipment...................       (507,287)      (783,686)
  Other................................................         (7,669)        16,477
                                                           -----------    -----------
        Net cash flows from investing activities.......       (896,436)   (12,659,842)
                                                           -----------    ----------- 

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of long-term debt and notes   
   payable.............................................      2,175,000     20,923,572
  Proceeds from issuance of common stock, net of       
   expenses ...........................................        123,193         24,405
  Principal payments on long-term debt and notes
   payable, including capital lease obligations........       (499,159)   (12,233,289)
  Payments for continuing registration costs...........        (88,827)       (28,570)
                                                           -----------    -----------
        Net cash flows from financing activities.......      1,710,207      8,686,118    
                                                           -----------    -----------
                                                                          
        Net change in cash and cash equivalents........       (913,702)   (10,032,117)
                                                                         
CASH AND CASH EQUIVALENTS, Beginning of period.........      1,377,862     13,469,443
                                                           -----------    ----------- 
CASH AND CASH EQUIVALENTS, End of period...............    $   464,160    $ 3,437,326
                                                           ===========    ===========
                                                        
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Cash payments for:                                                       
    Interest...........................................    $   248,556    $   527,314
                                                           ===========    ===========
    Income taxes.......................................    $ 1,448,250    $ 1,803,931
                                                           ===========    ===========
</TABLE>

See notes to consolidated financial statements.

                                F-6
PAGE
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS AND SIX MONTHS ENDED AUGUST 31, 1996 (Unaudited)

A.  GENERAL

      Name  Change  -  Effective October 8, 1996, the  Company  received
shareholder  approval  to change its name to "ATC Group  Services  Inc."
from  it  former name, ATC Environmental Inc.  The change  was  made  to
reflect   the   Company's  expanded  operations  which  extends   beyond
environmental   consulting  and  now  includes  information   technology
consulting services.

     Principles of Consolidation - The consolidated financial statements
include  the  accounts of ATC Group Services Inc. and  its  wholly-owned
subsidiaries ("ATC" or the "Company").

     In   the   opinion  of  the  Company,  the  accompanying  unaudited
consolidated  financial  statements contain all adjustments  (consisting
only  of normal recurring accruals) necessary to present fairly, in  all
material respects, the financial position, the results of operations and
the  cash  flows  for  the periods presented herein.  These  results  of
operations are not necessarily indicative of the results to be  expected
for the full year due to certain seasonality factors and the effects and
timing of large service projects.

     Certain  information and footnote disclosures normally included  in
financial  statements  prepared in accordance  with  generally  accepted
accounting  principles  have  been omitted.  These  condensed  financial
statements should be read in conjunction with the consolidated financial
statements  and the notes included in the Company's financial statements
for  the fiscal year ended February 29, 1996, which are included in  the
Company's Annual Report on Form 10-K.

      Nature  of  Business  - ATC is a national business  services  firm
providing   technical  and  project  management  services  relating   to
environmental consulting (the "environmental consulting and engineering"
segment)   and   information   technology   consulting   services   (the
"information    technology   consulting"   segment).    The    Company's
environmental  consulting and engineering segment provides environmental
and   geotechnical   engineering  services,  architectural   engineering
services,  construction materials testing and analytical  testing.   The
Company's  information technology consulting segment  provides  analysis
and design services and system programming services to assist clients in
building new or modifying existing computer systems.  This business unit
also provides support to clients in maintaining computer systems.

      Credit  Facility - On August 24, 1996 the Company entered  into  a
$20,000,000  bridge  credit  facility  with  The  Chase  Manhattan  Bank
(formally Chemical Bank) and Atlantic Bank of New York.  Under the terms
of  the credit agreement, the Company may borrow up to the amount of the
facility,  with  interest payable monthly at 1.75%  above  the  adjusted
Eurodollar rate (for an effective interest rate of 7.1875% at August 31,
1996).   The agreement contains certain restrictive covenants which  are
consistent for this type of facility, including restrictions on dividend
payments.   Pursuant  to  an amendment, the facility  was  increased  to
$23,000,000 and amounts borrowed are due January 13, 1997.  The  Company
is  currently  negotiating and anticipates entering into a  longer  term
agreement  with  the  banks prior to the maturity  date  of  the  credit
agreement.   As a result of the Company's intent and ability  to  secure
long  term  financing,  the amounts borrowed  under  the  bridge  credit
facility  have  been  classified as long term debt in  the  accompanying
consolidated balance sheet.

      Statement of Financial Accounting Standards No. 121 - On March  1,
1996,  the  Company adopted Statement of Financial Accounting  Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets to
be  Disposed Of."  The  adoption of SFAS No. 121 has not had a  material
effect on the Company's financial statements.

      Earnings  Per Share Data - Earnings per common share and  dilutive
common equivalent share have been computed by using the weighted average
number  of  shares outstanding during each period. Outstanding  dilutive
stock  warrants and options are included in the computation of  weighted
average number of shares.

     Reclassifications - Certain reclassifications have been made to the
prior  period's  financial statements to conform to  the  current  years
presentation.
                                F-7
PAGE
<PAGE>
B.  BUSINESS ACQUISITIONS AND MERGER

     Business  Acquisitions  -  The  following  acquisitions  have  been
accounted   for  as  purchases.  The  acquired  company's   assets   and
liabilities are included in the accompanying consolidated balance sheets
at fair value at the date of purchase. The acquired company's operations
subsequent   to  the  acquisition  are  included  in  the   accompanying
consolidated statements of operations.
     
Fiscal 1997
      American Testing and Engineering Corporation - On May 24, 1996 ATC
purchased  certain  assets and assumed certain liabilities  of  American
Testing  and  Engineering Corporation ("ATEC"), a national environmental
consulting  firm. ATEC provides environmental engineering and consulting
services  through a large network of branch and regional  offices.   The
purchase price was comprised of the following consideration:

     Amounts paid to seller and a majority owner:
        Cash............................................  $ 9,000,000
        Payment obligations, for property and facility
          rentals and non-compete consideration.........    6,001,000
     Liabilities assumed:
        Current liabilities.............................   15,731,076
        Bank debt.......................................   10,750,000
     Direct expenses related to acquisition.............      139,438
                                                          -----------
                                                          $41,621,514
                                                          ===========

      The  payment  obligations  to seller/majority  owner  are  payable
monthly or quarterly and are included in other accrued expenses  in  the
accompanying consolidated balance sheet at August 31,1996.

      The Company is contingently liable to ATEC for additional purchase
consideration  up  to  $10,750,000 if certain  net  revenue  levels  are
achieved  and  certain other conditions are met.   The  maximum  amounts
payable, if fully earned, would be paid as follows: $3,883,333 in fiscal
1998,  $3,873,333  in  fiscal  1999,  $1,293,334  in  fiscal  2000   and
$1,700,000 in fiscal 2002.

     The initial purchase price allocation is summarized as follows:


     Accounts receivable and unbilled work in process,
      net of allowances.................................  $18,957,768
     Other current assets...............................    2,023,996
     Other assets.......................................      548,301
     Covenant not to compete............................      430,000
     Goodwill...........................................   19,661,449
                                                          -----------
                                                          $41,621,514
                                                          ===========

      The  Company  may set-off against certain payment obligations  the
amount  of any uncollected accounts receivable and work in process,  net
of recorded allowances, not collected within one year.

      3D  Information  Services, Inc. - On May 28, 1996,  ATC  purchased
certain  assets  and  assumed  certain  liabilities  of  3D  Information
Services,  Inc. ("3D"), a New Jersey based information services  company
providing  technical information consulting services in  all  phases  of
information  system design, development, maintenance and  management  in
client server and mainframe based environments.  The purchase price  was
comprised of the following consideration:

     Amounts paid to seller:
        Cash............................................   $3,000,000
        Note payable....................................    2,500,000
     Assumed liabilities................................      175,724
     Direct expenses related to acquisition.............       23,149
                                                           ----------      
                                                           $5,698,873
                                                           ==========
                                
                                F-8
PAGE
<PAGE>
     The initial purchase price allocation is summarized as follows:

     Accounts receivable................................   $1,163,981
     Work in process....................................      279,047
     Property and equipment.............................       77,381
     Other current assets...............................       77,560
     Covenant not to compete............................      100,000
     Goodwill...........................................    4,000,904
                                                           ----------
                                                           $5,698,873
                                                           ==========

Fiscal 1996
     Hill  Businesses - In November 1995, ATC purchased  certain  assets
and assumed certain liabilities of Kaselaan & D'Angelo Associates, Inc.,
Hill Environmental, Inc. (formerly the environmental division of Gibbs &
Hill, Inc.) and Particle Diagnostics, Inc., wholly owned subsidiaries of
Hill International, Inc. (collectively the "Hill Businesses").

     The   Hill   Businesses   provide  environmental   consulting   and
engineering services, including asbestos management, industrial  hygiene
and   indoor   air  quality  consulting,  environmental   auditing   and
permitting,  environmental regulatory compliance, water  and  wastewater
engineering,  solid waste landfill management and analytical  laboratory
services.    The   purchase  price  was  comprised  of   the   following
consideration:

     
     Amounts paid to seller:
        Cash............................................   $2,517,949
        Letter of credit, net of imputed interest.......      700,000
        Note payable at 8.75% interest..................      300,000
     Liabilities assumed................................      414,544
     Direct expenses related to acquisition.............      263,475
                                                           ----------
                                                           $4,195,968
                                                           ==========
     
      In  addition,  the Company issued to certain selling shareholders,
50,000 stock options to purchase restricted common stock at $13.875  per
share as consideration for non compete agreements.
     
     The initial purchase price allocation is summarized as follows:

     Costs in excess of billings on uncompleted contracts,
      net  of unrealizable amounts......................   $  620,000
     Property and equipment.............................      175,000
     Covenants not to compete...........................       37,500
     Other assets.......................................       30,572
     Goodwill...........................................    3,332,896
                                                           ----------
                                                           $4,195,968
                                                           ==========

      The Company is contingently liable to reimburse up to $150,000  of
certain  facility  lease costs if incurred by Hill  International,  Inc.
Hill  International, Inc. has requested reimbursement of the full amount
of  the  facility  lease costs, however, the Company  is  disputing  the
reimbursement based on its counter-claims.

      Applied  Geosciences  Inc.  - Effective  February  29,  1996,  ATC
purchased  certain  assets and assumed certain  liabilities  of  Applied
Geosciences,  Inc. ("AGI"), a California based environmental  consulting
company  having  offices in San Diego, Tustin and San Jose,  California.
The purchase price was comprised of the following consideration:

     Cash to seller.....................................     $147,546
     Cash to secured creditors of seller................      441,514
     Liabilities assumed................................      225,538
     Direct expenses related to acquisition.............       31,246
                                                             --------
                                                             $845,844
                                                             ========
                                F-9
PAGE
<PAGE>
      In  addition, AGI will receive contingent consideration of  up  to
$190,000   subject  to  actual  collections  of  the   purchased   trade
receivables  in  excess  of  a  minimum  amount  established  under  the
agreement.  At August 31, 1996, no contingent amounts had been earned.

     The initial purchase price allocation is summarized as follows:

     Accounts receivable, net...........................     $474,973
     Property and equipment.............................      115,060
     Covenants not to compete...........................       30,000
     Goodwill...........................................      225,811
                                                             --------
                                                             $845,844
                                                             ========

      Merger  of Aurora Environmental Inc. - ATC and its parent,  Aurora
Environmental Inc. ("Aurora") were merged pursuant to an agreement  (the
"Merger  Agreement")  approved by a majority  of  shareholders  of  each
company  on  June  29,  1995, with ATC being the surviving  corporation.
Under  the Merger Agreement, ATC exchanged .545 of a share of ATC Common
Stock  for each of Aurora's 6,131,104 shares of stock outstanding. ATC's
common  shares held by Aurora of 3,258,000 were canceled. Actual  common
shares  outstanding  increased by 83,356 shares.  The  merger  has  been
accounted for in a manner similar to a pooling of interests. Under  this
method  of  accounting, recorded assets and liabilities of  Aurora  were
combined  with  those of ATC and the results of operations  of  ATC  and
Aurora  were  combined  as of the effective  date  of  the  merger.   In
addition,  the intercompany balance between ATC and Aurora was forgiven.
As  a  result  of  the merger, ATC utilized Aurora's net operating  loss
carryforward to reduce its taxable income and accordingly recorded a one-
time reduction in income tax expense of approximately $350,000 ($.05 per
share) in the second quarter of fiscal 1996.

      Pro  Forma  Financial  Information  (Unaudited)  -  The  following
unaudited pro forma information sets forth the results of operations  of
ATC  as  if  the  merger  of  Aurora and  ATC's  purchase  of  the  Hill
Businesses, ATEC and 3D had occurred on March 1, 1995.

<TABLE>
<CAPTION>
                                                                               PRO FORMA
                                                     ------------------------------------------------------------
                                                            Three Months Ended            Six Months Ended
                                                               August 31,                     August 31,
                                                          1995           1996             1995           1996
                                                     -------------   -------------   ------------   -------------
<S>                                                  <C>             <C>             <C>             <C>
Revenues.........................................    $  39,004,497   $  33,922,028   $ 76,490,759   $  72,043,995
Net income.......................................    $   3,145,877   $   2,101,493   $  5,503,902   $   4,944,968
Earnings per share (fully diluted)...............    $         .47   $         .25   $        .82   $         .57
Weighted average shares (fully diluted)..........        6,734,515       8,576,018      6,729,340       8,628,179

</TABLE>

      Reductions of pro forma revenue, net income and earnings per share
from  1995 to 1996 are attributable to declining revenue levels  of  the
Hill Businesses and ATEC in the periods preceding their purchase by  ATC
and  the  increased weighted average shares resulting  from  the  common
stock offering.


C.  PROPERTY AND EQUIPMENT

     Property and equipment is comprised of the following:
<TABLE>
<CAPTION>

                                                        February 29,    August 31,
                                                           1996            1996
                                                        ----------      ----------
     <S>                                                <C>             <C>
     Office equipment...............................    $2,645,325      $2,890,102
     Laboratory and field.equiptment................     3,528,410       3,481,444
     Transportation equipment.......................       267,304         264,755
     Leasehold improvements.........................       633,595         743,099
                                                        ----------      ----------
                                                         7,074,634       7,379,400
    Less accumulated depreciation...................    (3,467,879)     (3,577,689)
                                                        ----------      ----------
                                                        $3,606,755      $3,801,711
                                                        ==========      ==========
</TABLE>                                                               
                                                                       
                                F-10
PAGES
<PAGE>
D.  COMMON STOCK OFFERING

      On  October  10, 1995, the Company filed a Registration  Statement
with  the  Securities and Exchange Commission for the sale of  1,800,000
shares  of  Common Stock of which 1,700,000 were sold by ATC, while  the
remaining were sold by an officer/director of ATC.  On October 30, 1995,
the  Company  sold an additional 270,000 shares to cover over-allotments
under the same terms and conditions as the public offering.

E.  CONTINGENCIES

     First Fidelity Bank, N.A., et al v. Hill International, Inc. et al,
Superior  Court  of New Jersey, Law Division, Burlington County,  Docket
No.  Bur-L-03400-95, filed December 19, 1995.  On December 19,  1995,  a
second  amended complaint was filed in the above-entitled  action  which
joined  the  Company  as a defendant and included a  count  against  the
Company   seeking  recovery  of  certain  assets  purchased  from   Hill
International,  Inc. ("Hill") on the grounds that plaintiff  banks  hold
security  interests in the assets and that Hill is in default under  the
security  agreement  creating  such  alleged  security  interests.   The
plaintiffs  in  this  action are First Fidelity Bank,  N.A.  and  United
Jersey  Bank,  N.A. The primary defendants are Hill and certain  of  its
subsidiaries,  and  Irvin  Richter, David Richter,  Janice  Richter  and
William  Doyle.  Irvin  Richter  and  David  Richter  are  officers  and
stockholders  of Hill.  In April 1996, the Company filed  a  cross-claim
against  Hill,  Irvin  Richter  and David  Richter  alleging  breach  of
contract,   fraud,  among  other  allegations  and  seeking  unspecified
damages,  including punitive damages and equitable relief.   In  August,
1996,  Hill and the Richters filed an answer denying ATC's cross claims,
a  cross-claim  against  ATC  and a third party  claim  against  certain
members of ATC's management.  The cross claim and third party claim seek
unspecified damages, including punitive damages, for defamation,  breach
of  the Richters' non-competition agreements and securities fraud.   The
defamation  claim  is  based  on plaintiff banks'  allegation  of  fraud
against Hill and the Richters in their amended complaint, which Hill and
the  Richters allege was based on defamatory statements made by  ATC  in
settlement  discussions  with the plaintiff  banks.   The  Company  both
denies  that  it  made  defamatory  statements  and  asserts  that   the
defamation allegations fail to state a legally valid claim.  The  breach
of contract and securities claims are based on allegations that ATC made
representations  concerning  a  registration  rights  agreement  to   be
provided   in  connection  with  options  issued  to  the  Richters   as
consideration for their non-competition agreements.  The Company  denies
that  an  agreement concerning registration rights was ever reached  and
asserts  that the Richters forfeited any such rights in any  case  as  a
result  of  their  conduct in connection with the asset purchase.  These
related  cases  are  in their early stages with discovery  yet  to  take
place.   In the Company's opinion, the outcome of this matter  will  not
have  a significant effect on the Company's financial position or future
results  of  operations, although no assurances can  be  given  in  this
regard.


     Commonwealth of Massachusetts v. TLT Construction Corp. et al, Civ.
Action   No.   96-02281   F,  Superior  Court   of   Middlesex   County,
Massachusetts.   This  is  an  action brought  by  the  Commonwealth  of
Massachusetts  in  April  1996,  against  the  architects  and   general
contractor  on  a  renovation and construction project  on  the  Suffolk
County  Courthouse in Massachusetts.  The basis of the lawsuit  is  that
one or more damp-proofing products specified by the architect defendants
and  installed  by  the  contractor  defendant  made  employees  in  the
courthouse  ill because of the off-gassing of harmful vapors.   Dennison
Environmental Services Inc., ("Dennison") an ATC subsidiary, was  joined
on  August  13,  1996,  as a third party defendant by  TLT  Construction
Corporation, the general contractor, because Dennison performed some air
quality  testing  of the air in the courthouse for the  Commonwealth  of
Massachusetts  during the construction process.  The contractor  alleges
that  it  acted in reliance on these tests in continuing to install  the
material  after the test report was given to it by the state.   Dennison
has  just  recently been served and has not yet answered the  complaint.
At  this point, ATC considers the case to be totally without merit,  and
ATC  intends to vigorously defend the action.  The Company currently has
in force a professional  liability insurance  policy covering this claim
in the amount of $10,000,000 with a deductable of $250,000.  Notice   of
claim  has been made regarding this action and the insurer has agreed to
assume the defense.   These related cases are in their early stages with
discovery    yet to take place.  In the Company's opinion, the outcome of
this matter will not have a significant effect on the Company's financial
position  or  future results of operations, although no assurances can be
given in this regard.

      State  of New York Department of Taxation and Finance- The Company
has  received  a notice of audit from the New York State  Department  of
Taxation  and Finance for the three fiscal years 1993, 1994,  and  1995.
The  State  has  made  a routine request for information  to  which  the
Company has responded.
                                F-11
PAGES
<PAGE>
F.  INDUSTRY SEGMENT DATA

      The Company provides services through its environmental consulting
and  engineering  segment  and  its  information  technology  consulting
segment.   Prior year segment data is not presented as the Company  only
operated in the environmental and engineering segment.



<TABLE>
<CAPTION>
                                                     Environmental   Information     Adjustments &  
Industry Segment Data                                & Engineering   Technology      Elimination's   Total 
                                                     -------------   -------------   -------------   -------------
Quarter Ended August 31, 1996
-----------------------------
<S>                                                  <C>             <C>             <C>             <C>
Revenues.........................................    $  31,401,790   $   2,520,238   $          -    $  33,922,028
Operating Income.................................        3,752,618         157,513              -        3,910,131
Depreciation and amortization...................           206,175             171              -          206,346
Capital expenditures.............................          354,251               -              -          354,251


Six Months Ended August 31, 1996
--------------------------------
<S>                                                  <C>             <C>             <C>             <C>
Revenues.........................................    $  47,899,812   $   2,668,199   $          -    $  50,568,011
Operating Income.................................        6,422,882         176,029              -        6,598,911
Depreciation and amortization...................           400,941           4,133              -          405,074
Capital expenditures.............................          737,367          46,319              -          783,686

Identifiable assets as of August 31, 1996            $  84,596,463   $   5,903,957   $  (2,000,000)  $  88,500,420
-----------------------------------------
</TABLE>


                                F-12
PAGES
<PAGE>

ATC GROUP SERVICES INC. AND SUBSIDIARIES

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

Recent Developments

FY 1997
      Acquisition of American Testing and Engineering Corporation  -  On
May   24,  1996,  ATC  purchased  certain  assets  and  assumed  certain
liabilities of American Testing and Engineering Corporation ("ATEC"),  a
national  environmental  consulting firm.  ATEC  provides  environmental
consulting   and   engineering  services  including  risk   assessments,
compliance  audits, environmental remediation consulting,  geotechnical,
materials testing, industrial hygiene and analytical services through  a
large  network  of  branch and regional offices.   For  its  year  ended
December  31, 1995, ATEC had revenues of $85,020,000 and a net  loss  of
($1,820,000).

     The  acquisition has been accounted for as a purchase.  The  assets
acquired   include  certain  tangible  assets  consisting  of   accounts
receivable,  work  in process and customer and certain  other  deposits.
Additionally,  ATC executed an agreement to lease substantially  all  of
ATEC's  equipment and executed several sublease agreements for  premises
leased by ATEC.  ATC also obtained non-competition agreements with ATEC,
a non-acquired subsidiary, and the majority shareholder of ATEC.

      The  purchase price consideration consisted of $9,000,000 of  cash
paid at closing and property and facility lease payments and non-compete
payment  obligations  of  $6,001,000  payable  during  the  first   year
following  the purchase.  The Company also assumed liability for  ATEC's
bank  debt, approximately $10,750,000, its accounts payable, and certain
other recorded liabilities.  The Company is contingently liable to  ATEC
for  additional purchase consideration up to $10,750,000 if certain  net
revenue  levels are achieved and certain other conditions are met.   The
maximum  amounts  payable, if fully earned, would be  paid  as  follows;
$3,883,333  in  fiscal 1998, $3,873,333 in fiscal  1999,  $1,293,334  in
fiscal 2000 and $1,700,000 in fiscal 2002.

      Acquisition of 3D Information Services, Inc. - Effective  May  28,
1996,  ATC  purchased  certain  assets  and  assumed  certain  specified
liabilities of 3D Information Services, Inc. ("3D"), a New Jersey  based
information  services  company  providing technical  information  system
consulting  services  in  all  phases  of  information  system   design,
development,  maintenance and management in client server and  mainframe
based  environments.   Its  clients  include  major  companies  in   the
telecommunications,  financial services and  pharmaceutical  industries.
3D  reported  revenues and net income of approximately  $10,360,000  and
$85,000 respectively, for its year ended December 31, 1995.

      The  acquisition  has been accounted for as  a  purchase.   Assets
purchased  include  customer  contract  rights,  customer  lists,  order
backlog,  customer  records,  employee  contracts  and  tangible  assets
including  accounts  receivable, unbilled work  in  process,  field  and
office  supplies,  and  equipment.   Consideration  paid  consisted   of
$3,000,000 of cash at closing and a note payable for $2,500,000  payable
in  three  annual  payments  plus interest.  In  addition,  ATC  assumed
certain liabilities of approximately $175,724.  ATC also entered into  a
three year non-compete agreement with the majority stockholder.

FY 1996
     Acquisition of Hill International Inc. Environmental Subsidiaries -
On  November 10, 1995, ATC purchased certain assets and assumed  certain
liabilities of the subsidiary companies at Hill International, Inc. that
provided environmental consulting and engineering services (collectively
the  "Hill  Businesses").  These services include  asbestos  management,
industrial  hygiene  and  indoor air quality  consulting,  environmental
auditing and permitting, environmental regulatory compliance, water  and
wastewater  engineering, solid waste and landfill management,  hazardous
waste management and analytical laboratory services.

      Acquisition of Applied Geosciences, Inc. - Effective February  29,
1996,  ATC  purchased certain assets and assumed certain liabilities  of
Applied Geosciences, Inc. ("AGI").  AGI's services include environmental
and  hazardous waste site assessments, remediation design,  air  quality
management,   asbestos  services,  litigation  support  and  engineering
geology through its offices located in Southern California.

                                F-13
PAGES
<PAGE>
Common Stock Offering

     Effective October 1995, the Company sold 1,970,000 shares of common
stock  at an offering price of $12.00 per share and received $21,554,461
net of underwriting and other related expenses.

Merger of Aurora into ATC

     Effective  June 29, 1995, ATC and its parent, Aurora  Environmental
Inc.  ("Aurora"), were merged pursuant to an agreement approved  by  the
majority  of  shareholders of each company, with ATC  as  the  surviving
corporation  (the "Aurora Merger"). Prior to the Aurora  Merger,  Aurora
was a holding company which owned approximately 57% of ATC's outstanding
Common  Stock and had substantially no other assets. In connection  with
the  merger, each outstanding share of Aurora Common stock was exchanged
for  .545 shares of ATC Common Stock. ATC issued 3,341,356 shares of ATC
Common  Stock in exchange for 6,131,104 shares of Aurora's common stock,
and  issued  options  and  warrants entitling  the  holders  thereof  to
purchase  up  to  604,950 shares of ATC Common Stock  upon  exercise  in
replacement  of previously outstanding options and warrants to  purchase
Aurora's  common  stock. ATC common shares held by Aurora  of  3,258,000
were  canceled.  Actual common shares outstanding  increased  by  83,356
shares.  As  a  result of the Aurora Merger, ATC utilized  Aurora's  net
operating  loss  carried  forward  to  reduce  its  taxable  income  and
accordingly  recorded  a one-time reduction in  income  tax  expense  of
approximately $350,000 ($.05 per share) in the second quarter of  fiscal
1996.

Results of Operations

Three  Months  Ended August  31, 1996 Compared with Three  Months  Ended
August 31, 1995
     Revenues  in the three months ended August 31, 1996 increased  191%
to  $33,922,028,  compared with $11,649,478 in the  three  months  ended
August  31,  1995.  This  increase was  primarily  attributable  to  the
acquisition of ATEC and 3D in May 1996 and from the acquisitions of  the
Hill Businesses and AGI completed during the second half of fiscal 1996.

     Revenues  in  the  three months ended August 31,  1996  from  ATC's
branch  offices having comparable operations in the three  months  ended
August 31, 1995 decreased 1.6% to $11,020,010, compared with $11,201,153
in the three months ended August 31, 1995.  Revenues attributable to the
acquisitions of certain assets of the Hill Businesses, AGI, ATEC and  3D
totaled  $22,902,018, or 67.5% of revenues, for the three  months  ended
August  31,  1996.  Revenues from branch operations sold or discontinued
prior  to  the  second  quarter of fiscal 1997 contributed  revenues  of
$448,325 in the three months ended August 31, 1995.

      Reimbursable  costs represent direct project  expenses  billed  to
environmental  and engineering segment clients.  For  the  three  months
ended  August 31, 1996, reimbursable costs increased 272% to  $5,077,483
compared  with  $1,364,001, in the three months ended August  31,  1995.
Reimbursable costs as a percentage of revenues increased to 15.0% in the
three  months  ended August 31, 1996 compared with 11.7%  in  the  three
months  ended August 31, 1995.  ATEC's traditional consulting  services,
consisting  of  drilling,  materials testing and  engineering  services,
utilize  higher amounts of outside services and direct project  expenses
compared  to  those  consulting services being  provided  prior  to  the
acquisition.  For its year ended December 31, 1995,  ATEC's reimbursable
costs were approximately 21% of revenues, compared to ATC's fiscal  1996
reimbursable costs which were approximately 11% of  revenues.

     Gross  profit  in the three months ended August 31, 1996  increased
127%  to $12,529,814, compared with $5,529,416 in the three months ended
August  31, 1995. Gross profit as a percentage of net revenue  decreased
to  43.4% in the three months ended August 31, 1996, compared with 53.8%
in  the three months ended August 31, 1995.  The gross profit percentage
decrease   is  due  to  lower  margins  earned  on  certain  of   ATEC's
environmental  services, the costs incurred to complete a  large  fixed-
price  contract which could not be billed to the client, and the  impact
of  lower  net  revenues in certain regions where  costs  could  not  be
reduced  proportionately.  In addition, the gross profit percentage  for
the prior year was higher than normal due to the profitability level  of
certain large projects.

                                F-14
PAGES
<PAGE>
     Operating  expenses  in  the three months  ended  August  31,  1996
increased  150%  to $8,619,683, compared with $3,443,026  in  the  three
months  ended  August  31,  1995.  Operating  expenses  decreased  as  a
percentage of net revenues to 29.9% in the three months ended August 31,
1996, compared with 33.5% in the three months ended August 31, 1995. The
decrease  in  operating expenses as a percentage of net revenue  is  the
result   of  the  additional  net  revenue  from  the  ATEC  and   other
acquisitions without corresponding increases in fixed and administrative
costs.   Employee  costs  increased  120%  to  $3,517,889, or  12.2%  of
net  revenues,  in the three months ended August 31, 1996 compared  with
 $1,601,014,  or  15.6%  of  net  revenues,  in the three  months  ended
August 31,  1995.  These  increases in  total cost were due to employees
hired  in  connection   with  the  expansion  of ATC's operations. Other
increases in operating expenses resulted from  higher   facility   costs
and  administrative  expenses  resulting from the growth  in  operations
and increased employee levels. Additionally, in  the  three months ended
August  31, 1996, amortization of goodwill and intangibles increased  to
$362,091,  compared with $98,658 in the three months  ended  August  31,
1995  reflecting  the  additional goodwill amortization  resulting  from
acquisitions.

     Operating  income  in  the  three  months  ended  August  31,  1996
increased  87%  to  $3,910,131, compared with $2,086,390  in  the  three
months ended August 31, 1995. Operating income decreased as a percentage
of  net  revenues  to 13.6% in the three months ended August  31,  1996,
compared with 20.3% in the three months ended August 31, 1995.

     Nonoperating  expense  in the three months ended  August  31,  1996
increased  to $424,638 compared with $164,773 in the three months  ended
August  31,  1995. The increase is primarily attributable  to  increased
interest expense due to increased bank debt borrowed in connection  with
the ATEC and 3D acquisitions.

     Income  tax expense in the three months ended August 31,  1996  was
$1,384,000, compared with $402,500 in the three months ended August  31,
1995. The income tax expense for the prior year quarter ended August 31,
1995  reflects a one-time benefit of $350,000 resulting from the  merger
of  Aurora  into ATC which allowed ATC to utilize Aurora's net operating
loss carryforward as offsets to future taxable income.  During the three
months  ended August 31, 1996 and 1995, after adjusting for the one-time
tax  benefit,  the Company's effective tax rates were 39.7%  and  39.2%,
respectively.

     As  a result of the foregoing, net income in the three months ended
August  31, 1996 increased 38.3% to $2,101,493, or $.25 per share  on  a
fully  diluted basis, compared with $1,519,117 or $.23 per  share  on  a
fully  diluted  basis,  in  the  three months  ended  August  31,  1995.
Excluding the impact of the one-time tax benefit of $350,000, net income
and  fully  diluted  earning per share for the three months ended August
31, 1995 would have been $1,169,117 and $.18, respectively.   The  fully
diluted   weighted  average  number  of  shares   outstanding  increased
2,034,016 shares to 8,576,018  shares primarily  due  to  an increase in
shares issued from the Common Stock Offering  and from  shares,  options
and  warrants outstanding as a result  of  the  Aurora merger  effective
June 29, 1995. Net income decreased as a percentage  of  net revenues to
7.3% in the three months ended August 31, 1996, compared  with  11.4% in
the three months ended August 31, 1995 after adjusting for  the one-time
tax benefit.


Six  Months Ended August  31, 1996 Compared with Six Months Ended August
31, 1995
     Revenues in the six months ended August 31, 1996 increased 125%  to
$50,568,011,  compared with $22,464,431 in the six months  ended  August
31, 1995. This increase was primarily attributable to the acquisition of
ATEC  and 3D in May 1996 and from the positive acquisitions of the  Hill
Businesses and AGI during the second half of fiscal 1996.

     Revenues in the six months ended August 31, 1996 from ATC's  branch
offices having comparable operations in the six months ended August  31,
1995 increased 4.5% to $22,546,783, compared with $21,580,851 in the six
months ended August 31, 1995.  Revenues attributable to the acquisitions
of  certain  assets  of the Hill Businesses, AGI, ATEC  and  3D  totaled
$27,993,740, or 55.4% of revenues, for the six months ended  August  31,
1996.   Revenues from branch operations sold or discontinued contributed
only  $27,488  for  the  six months ended August 31,  1996  compared  to
$883,580 for the six months ended August 31, 1995.

     Gross profit in the six months ended August 31, 1996 increased  83%
to $19,811,826, compared with $10,798,958 in the six months ended August
31, 1995. Gross profit as a percentage of net revenue decreased to 46.2%
in  the six months ended August 31, 1996, compared with 53.4% in the six
months  ended August 31, 1995. The gross profit percentage  decrease  is
due to lower margins earned on certain of ATEC's environmental services,
the  final  project  costs  incurred  to  complete  a  large fixed-price
contract  which  could  not  be  billed to the client, and the impact of
lower net revenues in certain  regions  where costs could not be reduced
proportionately.  In addition, the gross profit percentage for the prior
year was higher than normal  due  to  the profitability level of certain
large  projects.
     
                                F-15
PAGES
<PAGE>
     Operating  expenses  in  the  six  months  ended  August  31,  1996
increased 84% to $13,212,915, compared with $7,186,019 in the six months
ended  August 31, 1995. Operating expenses decreased as a percentage  of
net  revenues to 30.8% in the six months ended August 31, 1996, compared
with  35.5%  in  the six months ended August 31, 1995. The  decrease  in
operating expenses as a percentage of net revenue is the result of   the
additional  net  revenue  from the ATEC and other  acquisitions  without
corresponding  increases  in fixed and administrative  costs.   Employee
costs increased  58%  to $5,736,029, or 13.4%  of net revenues,  in  the
six months  ended August  31, 1996  compared  with $3,630,992, or 18% of
net revenues, in the six months ended  August 31,  1995. These increases
in  total  cost  were due to employees hired  in  connection   with  the
expansion of ATC's operations. Other  increases  in operating   expenses
resulted  from   higher   facility   costs  and administrative  expenses
resulting from the growth in  operations  and increased employee levels.
Additionally, in the six months ended August 31, 1996,  amortization  of
goodwill  and  intangibles increased to $524,795, compared with $194,037
in  the  six  months ended August 31, 1995 reflecting   the   additional
goodwill  amortization   resulting   from acquisitions.

     Operating  income in the six months ended August 31, 1996 increased
83%  to  $6,598,911, compared with $3,612,939 in the  six  months  ended
August  31,  1995.  Operating income decreased as a  percentage  of  net
revenues to 15.4% in the six months ended August 31, 1996, compared with
17.9% in the six months ended August 31, 1995.

     Nonoperating  expense  in  the six months  ended  August  31,  1996
increased  to  $341,115 compared with $228,694 in the six  months  ended
August  31,  1995.  The  increase in nonoperating expense  is  primarily
attributable  to increased interest expense due to increased  bank  debt
outstanding  since  May  1996 when the ATEC  and  3D  acquisitions  were
completed,  offset in part by higher interest income earned  during  the
first  three months of fiscal 1997 on the net offering proceeds invested
in short term investments prior to the acquisitions.

     Income  tax  expense in the six months ended August  31,  1996  was
$2,438,000,  compared with $970,000 in the six months ended  August  31,
1995.  The income tax expense for the six months ended August  31,  1995
reflects  a  one-time benefit of $350,000 resulting from the  merger  of
Aurora into ATC which allowed ATC to utilize Aurora's net operating loss
carryforward as offsets to future taxable income.  During the six months
ended  August  31, 1996 and 1995, after adjusting for the  one-time  tax
benefit, the Company's effective tax rates were 39%.

     As  a  result of the foregoing, net income in the six months  ended
August  31,  1996 increased 58% to $3,819,796, or $ .44 per share  on  a
fully  diluted basis, compared with $2,414,245 or $.38 per  share  on  a
fully  diluted basis, in the six months ended August 31, 1995. Excluding
the impact of the one-time tax benefit of $350,000, net income and fully
diluted  earnings  per  share  for  the six months ended August 31, 1995
would have been $2,064,245 and $.33, respectively.   The  fully  diluted
weighted average number of shares outstanding increased 2,295,522 shares
to 8,628,179 shares primarily due  to  an increase in shares issued from
the  Common  Stock  Offering  and  from  shares,  options  and  warrants
outstanding as a result  of  the  Aurora merger effective June 29, 1995.
Net income decreased as a percentage  of net revenues to 8.9% in the six
months ended August 31,  1996,  compared  with  10.2%  in the six months
ended August 31, 1995 after adjusting  for the one-time tax benefit.

Liquidity and Capital Resources

     At  August 31, 1996, working capital was $25,405,292 compared  with
working  capital  of  $24,977,316 at February 29, 1996,  a  decrease  of
$427,976.  This decrease in working capital is primarily a result of the
acquisitions  of  ATEC  and 3D and the assumed  acquisition  liabilities
including  accounts  payable and other current  liabilities  and  future
payment obligations, cash paid to the sellers, offset by increases  from
purchased   accounts  receivable,  unbilled  receivables   and   prepaid
expenses.  As a result of the Company's recent acquisitions of ATEC  and
3D,  the Company's tangible net worth decreased to $7,285,898 at  August
31, 1996 from $27,542,614 at February 29, 1996 primarily as a result  of
goodwill  and  non-compete amounts recognized in connection  with  these
transactions.

     During the six months ended August 31, 1996, net cash flows used in
operating  activities were $6,058,393, primarily due to the decrease  in
accounts  payable  and  other  liabilities,  representing  payments   of
property   facility  rentals,  non-compete  consideration  and   assumed
liabilities  of ATEC and other acquisitions, and an increase  in  billed
and  unbilled  receivables. Net cash flows used in investing  activities
were  $12,659,842, resulting from the acquisitions of ATEC  and  3D  and
purchases  of  property  and  equipment.  Net  cash  flows  provided  by
financing   activities  were  $8,686,118,  primarily  representing   the
proceeds  of the bridge credit facility, less payments made on long-term
debt and notes payable assumed from ATEC.

                                F-16
PAGES
<PAGE>
     During the six months ended August 31, 1995, net cash flows used by
operating  activities were $1,727,423.  Net cash flows used in investing
activities were $896,436 consisting of additional acquisition  costs  in
connection  with  the  Con-Test  and  R.E.  Blattert  acquisitions  plus
contingent  purchase  obligations  related  to  the acquisition  of  BSE
Management Inc. and the  purchase of property and equipment. Also during
this  period, net cash flows  from financing activities were $1,710,207,
primarily from proceeds from increased bank debt less principal payments
on  long-term debt and notes payable of $499,159.

     In October 1995 the Company sold 1,970,000 shares in a common stock
offering.  The  Company utilized a portion of the net  proceeds  of  the
offering to repay outstanding bank debt under its credit facilities.

     In May 1996, the Company entered into a bridge credit facility with
The  Chase  Manhattan Bank (formerly Chemical Bank)  and  Atlantic  Bank
which  provided $20,000,000 of funds, of which $14,025,000 was  used  in
May  1996 in connection with the Company's acquisition of ATEC  and  3D.
The  bridge  credit  facility  has been  increased  to  $23,000,000  and
borrowings  under the agreement are due January 13, 1997,  however,  the
Company expects to complete a longer term agreement with the banks prior
to  the maturity date of the bridge facility. The Company may also  seek
to  obtain additional public or private debt or equity financing in  the
future  in order to reduce certain existing bank debt and provide  funds
for  future acquisitions, however, no assurance can be given as  to  the
Company's ability to obtain funds on acceptable terms and conditions.

     Management  believes  that as a result of  cash  on  hand,  current
working  capital,  the  expected increase in available  funds  upon  the
completion of the long-term bank credit facility, and anticipated  funds
generated internally from operations will be sufficient to finance ATC's
operations,  to  make  payments as they  come  due  on  ATC's  completed
acquisitions  and  to  meet  ATC's short-term  and  long-term  liquidity
requirements.

                                F-17
PAGES
<PAGE>
                       PART II - OTHER INFORMATION

Item 1.   Legal Proceedings:
           First Fidelity Bank, N.A., et al v. Hill International,  Inc.
     et  al,  Superior  Court  of New Jersey, Law  Division,  Burlington
     County,  Docket No. Bur-L-03400-95, filed December  19,  1995.   On
     December  19,  1995, a second amended complaint was  filed  in  the
     above-entitled action which joined the Company as a  defendant  and
     included  a  count against the Company seeking recovery of  certain
     assets  purchased  from Hill International, Inc.  ("Hill")  on  the
     grounds that plaintiff banks hold security interests in the  assets
     and  that  Hill is in default under the security agreement creating
     such alleged security interests. The plaintiffs in this action  are
     First  Fidelity Bank, N.A. and United Jersey Bank, N.A. The primary
     defendants  are  Hill  and certain of its subsidiaries,  and  Irvin
     Richter,  David  Richter, Janice Richter and William  Doyle.  Irvin
     Richter  and David Richter are officers and stockholders  of  Hill.
     In  April 1996, the Company filed a cross-claim against Hill, Irvin
     Richter and David Richter alleging breach of contract, fraud, among
     other   allegations  and  seeking  unspecified  damages,  including
     punitive  damages and equitable relief.  In August, 1996, Hill  and
     the  Richters filed an answer denying ATC's cross claims, a  cross-
     claim  against ATC and a third party claim against certain  members
     of  ATC's  management.  The cross claim and third party claim  seek
     unspecified  damages, including punitive damages,  for  defamation,
     breach  of  the Richters' non-competition agreements and securities
     fraud.    The  defamation  claim  is  based  on  plaintiff   banks'
     allegation of fraud against Hill and the Richters in their  amended
     complaint,  which  Hill  and  the  Richters  allege  was  based  on
     defamatory  statements made by ATC in settlement  discussions  with
     the  plaintiff  banks.   The  Company  both  denies  that  it  made
     defamatory  statements and asserts that the defamation  allegations
     fail  to  state a legally valid claim.  The breach of contract  and
     securities   claims  are  based  on  allegations  that   ATC   made
     representations  concerning a registration rights agreement  to  be
     provided  in  connection with options issued  to  the  Richters  as
     consideration  for their non-competition agreements.   The  Company
     denies  that an agreement concerning registration rights  was  ever
     reached and asserts that the Richters forfeited any such rights  in
     any  case as a result of their conduct in connection with the asset
     purchase.  These  related  cases are in  their  early  stages  with
     discovery yet to take place.  In the Company's opinion, the outcome
     of  this matter will not have a significant effect on the Company's
     financial  position  or future results of operations,  although  no
     assurances can be given in this regard.
     
     
          Commonwealth of Massachusetts v. TLT Construction Corp. et al,
     Civ.  Action  No.  96-02281 F, Superior Court of Middlesex  County,
     Massachusetts.   This is an action brought by the  Commonwealth  of
     Massachusetts  in  April 1996, against the architects  and  general
     contractor on a renovation and construction project on the  Suffolk
     County  Courthouse in Massachusetts.  The basis of the  lawsuit  is
     that  one or more damp-proofing products specified by the architect
     defendants and installed by the contractor defendant made employees
     in the courthouse ill because of the off-gassing of harmful vapors.
     Dennison   Environmental  Services  Inc.,   ("Dennison")   an   ATC
     subsidiary,  was  joined  on August 13,  1996,  as  a  third  party
     defendant  by TLT Construction Corporation, the general contractor,
     because Dennison performed some air quality testing of the  air  in
     the  courthouse  for the Commonwealth of Massachusetts  during  the
     construction  process.  The contractor alleges  that  it  acted  in
     reliance on these tests in continuing to install the material after
     the  test  report was given to it by the state.  Dennison has  just
     recently  been  served and has not yet answered the complaint.   At
     this point, ATC considers the case to be totally without merit, and
     ATC intends to vigorously defend the action.  The Company currently
     has in force a  professional liability  insurance  policy  covering
     this claim in the amount of $10,000,000 with a deductable $250,000.
     Notice  of  claim   has  been  made regarding this action  and  the
     insurer has  agreed to assume the defense.  These related cases are
     in  their  early  stages  with discovery yet to take place.  In the
     Company's   opinion,  the  outcome  of this matter will not have  a
     significant effect  on  the Company's financial position or  future
     results of operations, although no assurances can be given in  this
     regard.

Item 2.                            Changes in Securities:
          Not Applicable

Item 3.                            Defaults Upon Senior Securities:
          Not Applicable

                                F-18
PAGES
<PAGE>
Item  4.                             Submission of Matters to a Vote  of
Security Holders:
           On  October 8, 1996, the Company held its annual  meeting  of
           shareholders at which time the following matters were voted
           upon by security holders:

          (1)  The following individuals were re-elected as directors by
               the votes indicated.


 Name                              Votes For   Votes Against
 ------------------------          ---------   ------------
 George Rubin                      6,473,687    28,886
 Morry F. Rubin                    6,473,487    29,086
 Richard L. Pruitt                 6,473,687    28,886
 Richard S. Greenberg, Esq.        6,473,687    28,886
 Julia S. Heckman                  6,473,487    29,806

          (2)  An amendment to the 1993 Incentive and Non-Qualified
               Stock Option Plan increasing the number of
               shares  covered   by  the   Plan   from    500,000  to
               1,000,000  shares  was  approved  by  a  vote   of
               3,867,590 in favor, 193,641 against, 36,687 abstaining
               and 2,404,655 unvoted.

          (3)  An amendment to the Company's Certificate of
               Incorporation to change the name of the Company to
               ATC Group  Services  Inc. was  approved by a vote  of
               6,278,417  in  favor,  34,445 against , 34,240
               abstaining and 155,471 unvoted.

Item 5.   Other Information:
          Not Applicable

Item 6.   Exhibits and Reports on Form 8-K:
          (a)  Exhibits:
               11 - Computation of Earnings Per Share -
                       Three  months and six months ended August 31,1995
                       and 1996 (Unaudited)

               27 - Financial Data Schedule
                      August 31, 1996 (Unaudited)

           (b) Reports on Form 8-K:
                      An amendment #1 to a Form 8- K  dated  May  24,
                      1996 - date of earliest event reported -  was
                      filed  August 6, 1996.   The  amendment
                      contained   the  required  financial information of
                      American Testing  and  Engineering  Corporation
                      ("ATEC")  and  proforma  financial data in
                      connection with the acquisition of ATEC and 3D
                      Information Services, Inc.


                                F-19
PAGES
<PAGE>
                               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.


                              ATC GROUP SERVICES INC.
                              
                              (Registrant)
                                      
                                      
  Dated:  October 15, 1996            /s/ Morry F. Rubin
  ------------------------            -------------------------------------
                                      Morry F. Rubin,
                                      President and Chief Executive Officer
                                      
  Dated:  October 15, 1996            /s/ Richard L. Pruitt
  ------------------------            -------------------------------------
                                      Richard L. Pruitt,
                                      Vice President and Principal
                                      Accounting Officer

                                F-20
PAGES
<PAGE>
ATC GROUP SERVICES INC. AND SUBSIDIARIES                    EXHIBIT 11

COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS AND SIX MONTHS ENDED AUGUST 31, 1995 and 1996 (Unaudited)
<TABLE>
<CAPTION>
                                                                Three Months Ended           Six Months Ended
                                                                  August 31, 1996             August 31, 1996
                                                           --------------------------    --------------------------
                                                               1995          1996            1995           1996
                                                           -----------    -----------    -----------    -----------
<S>                                                        <C>            <C>            <C>            <C>
Primary Earnings Per Share:
--------------------------
  Weighted averang numbe of shares of common stock
    outstanding........................................      5,797,818      7,785,761      5,768,058      7,787,174
  Additional shared assuming exercise of dilutive
    stock options and stock warrants...................        744,184        790,257        564,599        791,657
                                                           -----------    -----------    -----------    -----------
      Total average common and common equivalent shares
        outstanding....................................      6,542,002      8,576,018      6,332,657      8,578,831
                                                           ============   ===========    ===========    ===========

  Net Income...........................................    $ 1,519,117    $ 2,101,493    $ 2,414,245    $ 3,819,796
                                                           ============   ===========    ===========    ===========

  Earings per common and dilutive common equivalent
    share (1)..........................................    $       .23    $       .25    $       .38    $       .45
                                                           ============   ===========    ===========    ===========

Fully Diluted Earnings Per Share:
--------------------------------
  Weighted averang numbe of shares of common stock
    outstanding........................................      5,797,818      7,785,761      5,768,058      7,787,174
  Additional shared assuming exercise of dilutive
    stock options and stock warrants...................        744,184        790,257        564,599        841,005
                                                           -----------    -----------    -----------    -----------
      Total average common and common equivalent shares
        outstanding....................................      6,542,002      8,576,018      6,332,657      8,628,179
                                                           ============   ===========    ===========    ===========

  Net Income...........................................    $ 1,519,117    $ 2,101,493    $ 2,414,245    $ 3,819,796
                                                           ============   ===========    ===========    ===========

  Earings per common and dilutive common equivalent
    share (1)..........................................    $       .23    $       .25    $       .38    $       .45
                                                           ============   ===========    ===========    ===========

</TABLE>

      (1)  Includes a one-time tax benefit of $.05 per share related  to
           the merger of Aurora Environmental Inc. for the  three months
           and six months ended August 31, 1995 (Note B).


                                F-21
PAGE
<PAGE>
ATC ENVIRONMENTAL INC. AND SUBSIDIARIES                     EXHIBIT 27

FINANCIAL DATA SCHEDULE
AUGUST 31, 1996 (Unaudited)
<TABLE>
<CAPTION>
                                                                    As of
Item Number                Item Description                     August 31, 1996
-----------                ----------------                     ------------
<C>           <C>                                               <C>
5-02(1)       Cash and cash items..............................  $3,437,326
5-02(2)       Marketable securities and short-term investments.         N/A
5-02(3)a(1)   Notes and accounts receivable - trade............  33,085,195
5-02(4)       Allowances for doubtful accounts.................  (1,141,778)
5-02(6)       Inventory........................................         N/A
5-02(9)       Total current assets.............................  48,213,337
5-02(13)      Property, plant and equipment....................   7,379,400
5-02(14)      Accumulated depreciation.........................  (3,577,689)
5-02(18)      Total assets.....................................  88,500,420
5-02(21)      Total current liabilities........................  22,808,045
5-02(22)      Bonds mortgages and similar debt.................  22,229,413
5-02(28)      Preferred stock - mandatory redemption...........         N/A
5-02(29)      Preferred stock - no mandatory redemption........         N/A
5-02(30)      Common stock.....................................      77,872
5-02(31)      Other stockholders' equity.......................  42,850,741
5-02(32)      Total liabilities and stockholders' equity.......  88,500,420


                                                                 Six Months
                                                                    ended
                                                                August 31, 1996
                                                                ------------
5-03(b)1(a)   Net sales of tangible products...................         N/A
5-03(b)1      Total revenues................................... $50,568,011
5-03(b)2(a)   Cost of tangible goods sold......................         N/A
5-03(b)2      Total costs and expenses applicable to sales and
               revenues........................................  30,756,185
5-03(b)3      Other costs and expenses.........................  12,642,630
5-03(b)5      Provision for doubtful accounts and notes........     341,301
5-03(b)(8)    Interest and amortization of debt discount.......     570,099
5-03(b)(10)   Income before taxes and other items..............   6,257,796
5-03(b)(11)   Income tax expense...............................   2,438,000
5-03(b)(14)   Income continuing operations.....................   3,819,796
5-03(b)(15)   Discontinued operations..........................         N/A
5-03(b)(17)   Extraordinary items..............................         N/A
5-03(b)(18)   Cumulative effect - changes in accounting
               principles......................................         N/A
5-03(b)(19)   Net Income.......................................   3,819,796
5-03(b)(20)   Earning per share - primary......................      $  .45
5-03(b)(20)   Earnings per share - fully diluted ..............      $  .44
</TABLE>

                                F-22
PAGE
<PAGE>