Part I. Financial Information

Item 1: Financial Statements


APPLIED SIGNAL TECHNOLOGY, INC.
BALANCE SHEETS

(In thousands except share data)


Assets                                          July 28, 1995     October 31, 1994
                                                  (unaudited)           (Note)
                                                 ___________        ___________
Current assets:
   Cash and cash equivalents                      $    ---           $  1,192
   Short term investments                            2,385              2,500 
   Accounts receivable:                                             
      Billed:                                        9,598             10,916
      Unbilled:                                     11,557             14,048  
                                                   _______            _______

  Total accounts receivable                         21,155             24,964
  Refundable income taxes                              107                179
  Inventory                                          9,722              2,714
  Prepaid and other current assets                   1,269              1,131
                                                   _______            _______

          Total current assets                      34,638             32,680

Property and equipment, at cost:

    Machinery and equipment                         18,160             15,591
    Furniture and fixtures                           2,858              2,743
    Leasehold improvements                           1,441                722
    Construction in process                            881                272
                                                   _______            _______
                                                    23,340             19,328
  
  Accumulated depreciation and amortization        (12,666)           (10,355)
                                                   _______            _______

  Net property and equipment                        10,674              8,973

Long-term investments                                3,577              5,500

Other assets                                           172                163
                                                   _______            _______
  
  Total assets                                    $ 49,061           $ 47,316
                                                   _______            _______
                                                   _______            _______


Liabilities and Shareholders' Equity

Current liabilities:
  Accounts payable                                   2,945              4,757
  Accrued payroll and related benefits               2,942              4,041
  Other accrued liabilities                          1,621                293
  Income taxes payable                               1,163              1,704
  Bank line of credit                                3,460                ---
                                                   _______            _______

          Total current liabilities                 12,311             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   18,832             18,656

  Retained earnings                                 17,203             17,153
                                                   _______            _______

Total shareholder's equity                          36,035             35,809
                                                   _______            _______

     Total liabilities and shareholder's equity   $ 49,061           $ 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          Nine Months Ended
                                       __________  ___________     ___________  ___________

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

Revenues from contracts                  $ 14,330    $ 13,207        $ 41,181     $ 41,954
Operating expenses:
  Contract costs                           11,274       8,286          28,697       27,317
  Research and development                  2,399       1,884           5,872        5,730
  General and administrative                2,651       2,204           6,649        6,720
                                         ________    ________        ________     ________

          Total operating expenses         16,324      12,374          41,218       39,767
                                         ________    ________        ________     ________

Operating income                           (1,994)        833             (37)       2,187
Interest income/(expense), net                 (9)         97             184          281
                                         ________    ________        ________     ________

Income before provision for 
income taxes                               (2,003)        930             147        2,468
Provision for income taxes                   (801)        363              59          963
                                         ________    ________        ________     ________

Net income                               $ (1,202)   $    567        $     88     $  1,505
                                         ________    ________        ________     ________
                                         ________    ________        ________     ________

Net income per common share              $  (0.17)   $   0.07         $  0.01      $  0.19

Number of shares used in calculating
net income per common share                 7,194       7,624           7,616        7,788

See notes to financial statements.


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

(In thousands)


                                                            Nine Months Ended
                                                     _____________     _____________
          
                                                     Jul. 28, 1995     Jul. 29, 1994
                                                     _____________     _____________

Operating Activities:
Net income                                             $     88          $ 1,505
Adjustments to reconcile net income to  
net cash provided by (used in)      
operating activities:  
  Depreciation and amortization                           2,311            2,093
  Accounts receivable                                     3,809            6,947
  Inventory, prepaids, and other current assets          (7,074)          (2,847)
  Other assets                                               (9)             (63)
  Accounts payable and accrued expenses                  (2,121)          (1,588)
                                                       ________         ________

     Net cash provided by (used in) operating
     activities                                          (2,996)            6,047


Investing Activities:
Purchase of investments                                     ---           (3,100)
Maturity of investments                                   2,000            2,100
Additions to property and equipment                      (4,012)          (3,237)
                                                       ________         ________

     Net cash used in investing 
     activities                                          (2,012)          (4,237)


Financing Activities:
Borrowings under bank line of credit                      3,640              ---
Issuance of common stock                                  1,163              943
Repurchase of common stock                                 (987)          (1,187)
                                                       ________         ________

     Net cash provided by (used in) financing             3,816             (244)
     activities                                        ________         ________

Net increase (decrease) in cash and cash equivalents     (1,192)           1,566
                                                       
Cash and cash equivalents, beginning of period            1,192              553
                                                       ________         ________

Cash and cash equivalents, end of period               $    ---         $  2,119
                                                       ________         ________
                                                       ________         ________
Supplemental disclosures of cash flow information:
  Interest paid                                        $    106         $     99

Unrealized loss on available-for-sale
  securities - net of cast                             $     38         $      --

See notes to financial statements.