Dynamics Technology, Inc. to Sign Merger Agreement with Applied Signal Technology, Inc.

Transaction strengthens signal processing capabilities to support critical Department of Defense, Intelligence Community and Department of Homeland Security missions

ARLINGTON, VA , May 24, 2005 – Dynamics Technology, Inc. (DTI) and Applied Signal Technology, Inc. (NASDAQ: APSG) today announced that they have entered into a definitive agreement and plan of merger valued at $30 million. APSG is the market leader in advanced digital signal processing products, systems and services for signal intelligence. DTI is an innovation leader in signal processing using advanced airborne, space-based, terrestrial and undersea sensor technologies. The combined company will be a premier provider of signal processing products and services in support of intelligence, surveillance and reconnaissance for global security, employing over 650 people in nine offices throughout the United States.

“Dynamics Technology has a rich technology development pipeline and is a respected provider of signal processing products and services,” said APSG CEO, Gary Yancey. Mr. Yancey noted that the acquisition is a diversification move for APSG, expanding their capabilities in multi-INT signal processing, while diversifying the company’s customer base. “This acquisition will help us increase our support of DOD and intelligence community missions, and provide entry to emerging homeland defense missions, with practical technology and advanced systems solutions.”

William B. Van Vleet, President and CEO of Dynamics Technology, said he sees this acquisition as the next step in the company’s evolution. “This merger increases the value to our customers by ensuring sustained access to key technology innovation and enhancing our ability to deliver integrated hardware and software products. APSG has the mature engineering design, development, production and support services to successfully transition our advanced technologies to the user.”

APSG will create a new business unit, the Sensor Signal Processing Group (SSPG), which will consist of three customer-focused divisions: Marine Systems, National Security Systems, and Homeland Defense. SSPG will provide advanced sensor and signal processing products for synthetic aperture sonar and radar solutions; neutron imaging systems for non-invasive inspection; integrated bio-defense decision support systems; knowledge discovery and management; and port and coastal surveillance for the Department of Defense (DoD), Intelligence Community (IC), Department of Homeland Security (DHS), Defense Advanced Research Projects Agency (DARPA), and industry primes.

The proposed acquisition has been approved by the board of directors of both companies. Subject to an affirmative vote by DTI shareholders and normal regulatory approvals, the transaction is expected to close on or around July 1, 2005.

About Applied Signal Technology, Inc.
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 our website at www.appsig.com.

About Dynamics Technology, Inc.
Dynamics Technology, Inc. (DTI) is a diversified, employee-owned science and technology company providing integrated sensor and signal processing products and services for marine, intelligence and homeland security missions. DTI employs over 100 people at offices in Southern California and the metropolitan Washington D.C. area. For further information on DTI visit our web site at www.dynatec.com.