Revenues for the first quarter of fiscal year 2002 were $16,231,000 representing a 25% decrease compared with revenues of $21,697,000 recorded during the first quarter of fiscal year 2001. The reduction in revenues recorded during the first quarter of fiscal year 2002 when compared to the first quarter of fiscal year 2001 is due, in part, to a reduction in labor required to satisfy the Company’s contractual commitments under its engineering development contracts and, in part, to approximately $2.5 million of additional revenues, generated during the first quarter of fiscal year 2001, from contract modifications.

Net income for the first quarter of fiscal year 2002 was $1,691,000 or $0.17 per diluted share compared to a net loss for the first quarter of fiscal year 2001 of $2,819,000 or $0.31 per share. The net income for the first quarter of fiscal year 2002 when compared to the net loss incurred during the first quarter of fiscal year 2001 is due, in part, to the lower operating cost structure that resulted from the fiscal year 2001 restructuring activities and, in part, to the absence of losses incurred by the Company’s former subsidiary corporations which discontinued operations during fiscal year 2001.

New orders received during first quarter of fiscal year 2002 were $13,162,000, up 7% compared to fiscal year 2001 first quarter orders of $12,318,000.

Regarding the first quarter operating results, Mr. Gary Yancey, President and Chief Executive Officer of the Company, commented, “The cost structure reductions in fiscal year 2001 had the goal of sizing the Company to be profitable beginning in the first quarter of fiscal year 2002. We are pleased that this goal was met. We anticipate profitability throughout the year with revenue growth and an attendant need to hire staff.”

Mr. Yancey went on to say; “We have observed minimal order activity related to the September 11th attack. We believe this is due to latency in the Defense Budget Appropriations process as well as the fact that the U.S. Government¹s primary emphasis at this time is supporting the war in Afghanistan. We still believe there will be a positive impact on our business as a result of the apparent increased defense spending oriented towards counter-terrorism. We have yet to understand the possible implications to our business of the recently appointed Homeland Security Office and the $38 billion budget proposed by President Bush for fiscal year 2003.

“We are also starting to receive some of the delayed orders that have been mentioned in prior press releases. We believe that a majority of these delayed orders will occur during the second and third quarters of fiscal year 2002.”

The Company will host a conference call on February 20, 2002 to discuss first quarter results. If you wish to participate in the conference call, please dial 1-800-255-2466 for domestic callers or 1-212-676-4900 for international callers on February 20, 2002 at 11:00 a.m. EST/8:00 a.m. PST. There is no pass code required. This call may be listened to simultaneously over the Internet through World Investor Links’ Vcall Website, located at www.vcall.com. A rebroadcast of the call will be available upon its completion and will remain available for a limited time.

Applied Signal Technology, Inc., designs, develops, manufactures and markets advanced digital signal processing equipment to collect and process a wide range of telecommunications signals for signal reconnaissance applications. For additional Company-related information, visit the Company’s website at www.appsig.com.