Part I. Financial Information

Item 1: Financial Statements


APPLIED SIGNAL TECHNOLOGY, INC.
BALANCE SHEETS

(In thousands except share data)


Assets                                        April 28, 1995     October 31, 1994
                                                  (unaudited)           (Note)
                                                 ___________        ___________
Current assets:
   Cash and cash equivalents                      $    500           $  1,192
   Short term investments                            1,900              2,500 
   Accounts receivable:                                             
      Billed:                                        8,143             10,916
      Unbilled:                                     11,961             14,048  
                                                   _______            _______

  Total accounts receivable                         20,104             24,964
  Refundable income taxes                              107                179
  Inventory                                          8,561              2,714
  Prepaid and other current assets                   1,393              1,131
                                                   _______            _______

          Total current assets                      32,565             32,680

Property and equipment, at cost:

    Machinery and equipment                         17,084             15,591
    Furniture and fixtures                           2,841              2,743
    Leasehold improvements                           1,000                722
    Construction in process                            930                272
                                                   _______            _______
                                                    21,855             19,328
  
  Accumulated depreciation and amortization        (11,873)           (10,355)
                                                   _______            _______

  Net property and equipment                         9,982              8,973

Long-term investments                                4,100              5,500

Other assets                                           172                163
                                                   _______            _______
  
  Total assets                                    $ 46,819           $ 47,316
                                                   _______            _______
                                                   _______            _______


Liabilities and Shareholders' Equity

Current liabilities:
  Accounts payable                                   2,928              4,757
  Accrued payroll and related benefits               4,311              4,041
  Other accrued liabilities                            197                293
  Income taxes payable                               1,964              1,704
                                                   _______            _______

          Total current liabilities                  9,400             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: 20,000,000 shares
  authorized; issued and outstanding -- 7,349,633
  at Apr. 28, 1995 and 7,399,003 at Oct. 31, 1994   18,261             18,656

  Retained earnings                                 18,443             17,153
                                                   _______            _______

Total shareholder's equity                          36,704             35,809
                                                   _______            _______

     Total liabilities and shareholder's equity   $ 46,819           $ 47,316
                                                   _______            _______
                                                   _______            _______

Note: The balance sheet at October 31, 1994 has been derived from the audited financial statements 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          Six Months Ended
                                       __________  ___________     ___________  ___________

                                         Apr. 28,    Apr. 29,       Apr. 28,      Apr. 29, 
                                           1995        1994           1995          1994
                                       __________  ___________     ___________  ___________

Revenues from contracts                  $ 13,030    $ 14,968        $ 26,851     $ 28,747
Operating expenses:
  Contract costs                            8,964      10,165          17,423       19,031
  Research and development                  1,660       1,988           3,473        3,846
  General and administrative                2,015       2,308           3,998        4,516
                                         ________    ________        ________     ________

          Total operating expenses         12,639      14,461          24,894       27,393
                                         ________    ________        ________     ________

Operating income                              391         507           1,957        1,354
Interest income/(expense), net                 59         100             193          184
                                         ________    ________        ________     ________

Income before provision for 
income taxes                                  450         607           2,150        1,538
Provision for income taxes                    180         228             860          600
                                         ________    ________        ________     ________

Net income                               $    270    $    379         $ 1,290      $   938
                                         ________    ________        ________     ________
                                         ________    ________        ________     ________

Net income per common share              $   0.04    $   0.05         $  0.17      $  0.12

Number of shares used in calculating
net income per common share                 7,577       7,858           7,614        7,837

See notes to financial statements.


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

(In thousands)


                                                            Six Months Ended
                                                     _____________     _____________
          
                                                     Apr. 28, 1995     Apr. 29, 1994
                                                     _____________     _____________

Operating Activities:
Net income                                             $  1,290          $   938
Adjustments to reconcile net income to  
net cash provided by (used in)      
operating activities:  
  Depreciation and amortization                           1,518            1,339
  Accounts receivable                                     4,860            3,574
  Inventory, prepaids, and other current assets          (6,037)          (1,024)
  Other assets                                               (9)              52
  Accounts payable and accrued expenses                  (1,392)            (158)
                                                       ________         ________

     Net cash provided by operating
     activities                                             230            4,721


Investing Activities:
Purchase of investments                                     ---           (1,600)
Maturity of investments                                   2,000            1,600
Additions to property and equipment                      (2,527)          (2,347)
                                                       ________         ________

     Net cash used in investing 
     activities                                            (527)          (2,347)


Financing Activities:
Issuance of common stock                                    585              471
Repurchase of common stock                                 (980)            (385)
                                                       ________         ________

     Net cash provided by (used in) financing              (395)              86
     activities                                        ________         ________

Net increase (decrease) in cash and cash equivalents       (692)           2,460
                                                       
Cash and cash equivalents, beginning of period            1,192              553
                                                       ________         ________

Cash and cash equivalents, end of period               $    500         $  3,013
                                                       ________         ________
                                                       ________         ________
Supplemental disclosures of cash flow information:
  Interest paid                                        $     28         $     14

See notes to financial statements.