Part I. Financial Information

Item 1: Financial Statements


APPLIED SIGNAL TECHNOLOGY, INC.
BALANCE SHEETS

(In thousands except share data)


Assets                                        January 27, 1995     October 31, 1994
                                                  (unaudited)           (Note)
                                                 ___________        ___________
Current assets:
   Cash and cash equivalents                      $    ---           $  1,192
   Short term investments                            1,000              2,500 
   Accounts receivable:                                             
      Billed:                                        8,458             10,916
      Unbilled:                                     15,699             14,048  
                                                   _______            _______

  Total accounts receivable                         24,157             24,964
  Refundable income taxes                              179                179
  Inventory                                          5,405              2,714
  Prepaid and other current assets                   1,474              1,131
                                                   _______            _______

          Total current assets                      32,215             32,680

Property and equipment, at cost:

    Machinery and equipment                         16,318             15,591
    Furniture and fixtures                           2,807              2,743
    Leasehold improvements                             823                722
    Construction in process                            603                272
                                                   _______            _______
                                                    20,551             19,328
  
  Accumulated depreciation and amortization        (11,103)           (10,355)
                                                   _______            _______

  Net property and equipment                         9,448              8,973

Long-term investments                                5,500              5,500

Other assets                                           162                163
                                                   _______            _______
  
  Total assets                                    $ 47,325           $ 47,316
                                                   _______            _______
                                                   _______            _______


Liabilities and Shareholders' Equity

Current liabilities:
  Bank line of credit                             $    999           $    ---
  Accounts payable                                   3,662              4,757
  Accrued payroll and related benefits               3,210              4,041
  Other accrued liabilities                            204                293
  Income taxes payable                               1,788              1,704
                                                   _______            _______

          Total current liabilities                  9,863             10,792


Deferred income taxes                                  715                715
Commitments
Shareholders' equity:
  Preferred stock, no par value: 2,000,000 shares
  authorized; none issued and outstanding              ---                ---

  Common stock, no par value: 2,000,000 shares
  authorized; issued and outstanding -- 7,412,466
  at Jan. 27, 1995 and 7,399,003 at Oct. 31, 1994   18,574             18,656

  Retained earnings                                 18,173             17,153
                                                   _______            _______

Total shareholder's equity                          36,747             35,809
                                                   _______            _______

     Total liabilities and shareholder's equity   $ 47,325           $ 47,316
                                                   _______            _______
                                                   _______            _______

Note: The balance sheet at October 31, 1994 has been derived from the audited financial statement at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

See notes to financial statements.


APPLIED SIGNAL TECHNOLOGY, INC.
STATEMENTS OF INCOME
(UNAUDITED)

(In thousands except per share data)


                                                     Three Months Ended
                                                _____________     ____________

                                                Jan. 27, 1995     Jan 28, 1994
                                                _____________     ____________

Revenues from contracts                           $ 13,821          $ 13,779
Operating expenses:
  Contract costs                                     8,459             8,865
  Research and development                           1,813             1,858
  General and administrative                         1,983             2,208
                                                  ________          ________ 

          Total operating expenses                  12,255            12,931
                                                  ________          ________

Operating income                                     1,566               848
Interest income/(expense), net                         134                83
                                                  ________          ________

Income before provision for income taxes             1,700               931
Provision for income taxes                             680               372
                                                  ________          ________

Net income                                        $  1,020          $    559
                                                  ________          ________
                                                  ________          ________

Net income per common share                       $   0.13          $   0.07

Number of shares used in calculating
net income per common share                          7,651             7,815

See notes to financial statements.


APPLIED SIGNAL TECHNOLOGY, INC.
STATEMENTS OF CASH FLOWS
Increase (decrease) in cash
(UNAUDITED)

(In thousands)


                                                          Three Months Ended
                                                     _____________     ____________
          
                                                     Jan. 27, 1995     Jan 28, 1994
                                                     _____________     ____________

Operating Activities:
Net income                                             $  1,020          $   559
Adjustments to reconcile net income to  
net cash provided by (used in)      
operating activities:  
  Depreciation and amortization                             748              651
  Accounts receivable                                       807              745
  Inventory, prepaids, and other current assets          (3,034)            (376)
  Other assets                                                1               (2)
  Accounts payable and accrued expenses                  (1,928)          (1,173)
                                                       ________         ________

     Net cash provided by (used in) operating
     activities                                          (2,386)             404


Investing Activities:
Purchase of investments                                     ---               (8)
Maturity of investments                                   1,500                8
Additions to property and equipment                      (1,223)          (1,039)
                                                       ________         ________

     Net cash provided by (used in) investing 
     activities                                             277           (1,039)


Financing Activities:
Increase in bank line of credit                             999              ---
Issuance of common stock                                    533              425
Repurchase of common stock                                 (615)             ---
                                                       ________         ________

     Net cash provided by financing activities              917              425
                                                       ________         ________

Net increase (decrease) in cash and cash equivalents     (1,192)            (210)
                                                       ________         ________

Cash and cash equivalents, beginning of period            1,192              553
                                                       ________         ________

Cash and cash equivalents, end of period               $      0         $    343
                                                       ________         ________
                                                       ________         ________
Supplemental disclosures of cash flow information:
  Interest paid                                        $      5         $      8

See notes to financial statements.