APPLIED SIGNAL TECHNOLOGY, INC.
ANNOUNCES CLOSING OF ACQUISITION OF
DYNAMICS TECHNOLOGY, INC.

SUNNYVALE, CA, July 5, 2005 – Applied Signal Technology, Inc. (NASDAQ: APSG), announced today that it has completed the acquisition of Dynamics Technology, Inc. (“DTI”), a privately-held company headquartered in Torrance, California with offices in Anaheim, California and Arlington, Virginia.

Applied Signal Technology announced a definitive agreement to acquire DTI on May 24, 2005.  Under the terms of the agreement, Applied Signal paid approximately $30 million in cash subject to an adjustment based upon DTI’s closing balance sheet. The acquisition is being treated as a purchase transaction. Applied Signal will maintain DTI’s offices in Torrance and Anaheim, California, and Arlington Virginia, gaining approximately 110 employees.

DTI is a provider of advanced sensor and signal processing products for advanced space-based, airborne, terrestrial and undersea sensor technologies. The combined company will be a provider of signal processing products and services in support of intelligence, surveillance and reconnaissance for global security.

About Applied Signal Technology
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.