Applied Signal Technology, Inc. Awarded Phase II of
Technology Development and Demonstration Contract for Airborne SIGINT System

SUNNYVALE, California, January 27, 2009 – Applied Signal Technology, Inc. (AST) (NASDAQ: APSG), a leading provider of advanced intelligence, surveillance, and reconnaissance (ISR) solutions, has received a $1.4 million contract by the U.S. Army’s Communications, Electronics, Research, Development and Engineering Center (CERDEC) to begin the technology development and demonstration phase of an advanced reconfigurable signals intelligence (SIGINT) payload for ISR operations.

AST’s Reconfigurable SIGINT Payload (RSP) combines communications intelligence (COMINT) and electronic intelligence (ELINT) receivers into single or dual-use packages. The system operates across a wide bandwidth and provides tactical users with the capability to accurately identify and locate communications and non-communications emitters on the battlefield. While the full capability is still under development, the Phase I COMINT demonstration acted as a proof of concept and a validation of the system design. AST’s low size, weight, and power (SWAP) COMINT system, known as HYDRA, was integrated with a SentryHP unmanned aerial system (UAS) and flight tested at Eglin Air Force Base in November 2008. The HYDRA system focuses on the collection and geo-location of modern communication signals.

The second phase of the program will build upon the success of HYDRA, and will continue the development as well as additional flight and evaluation of the enhanced capabilities. Phase II will mainly focus on flight demonstrations of AST’s next-generation ELINT system, known as PEGASUS, aboard a surrogate platform. The flight tests will demonstrate the PEGASUS system’s collection and geo-location capabilities again non-communication type emitters, such as radars and weapon systems. The combination of HYDRA and PEGASUS will provide the SIGINT community with a full frequency and target spectrum collection and geo-location capability for both manned and unmanned platforms used in ISR operations.

“This award marks the next step in the development of low size, weight, and power airborne surveillance systems,” said Dr. Joseph Leonelli, Vice President of AST’s Intelligence and Electronic Warfare Systems Division. “RSP will enable tactical forces to detect, identify, and locate both airborne and ground-based targets faster and more accurately than ever before. AST is proud to be part of such an endeavor.”

AST has invested many years of research and development in the collection and exploitation of modern wireless communication signals. We offer a complete line of ISR products for ground-fixed, expeditionary, and airborne missions serving the national security market. For more information on our advanced SIGINT system solutions, visit http://www.appsig.com/business_areas/iews.htm.

About Applied Signal Technology, Inc.

Applied Signal Technology, Inc. is a leading provider of advanced intelligence, surveillance and reconnaissance (ISR) products, systems, and services that enhance global security. For further information about Applied Signal Technology, visit our website at www.appsig.com.