Sunnyvale, CA. January 10, 2002 – Applied Signal Technology, Inc. (NASDAQ: APSG) announced today that it has received a contract award of $1 million for delivery of multi-channel digital receivers to a foreign customer. This order provides for the collection of tactical information and is a direct result of the war on terrorism.

Applied Signal Technology, Inc., provides advanced digital signal processing products, systems, and services to collect and process state-of-the-art telecommunications signals. For additional Company-related information, visit the Company’s website at www.appsig.com.

Except for historical information contained herein, matters discussed in this news release may contain forward-looking statements that involve risks and uncertainties. Statements as to beliefs concerning potential contract options, the Company’s ability to successfully complete the initial contract to position it to win future phases, whether or not the U.S. Government decides to procure subsequent phases, potential synergistic effects from working with other companies, and beliefs concerning contractual opportunities for further orders are forward-looking statements. These risks and uncertainties include whether these potential orders will be issued by the U. S. Government; whether the Company will be successful in obtaining contracts for these orders if they are forthcoming and when such orders may be forthcoming and awarded; whether the Company can successfully complete the initial contract and any options, if awarded; and other risks detailed from time to time in the Company’s SEC reports including its latest Form 10-K filed for the fiscal year ended October 31, 2001.