Part I. Financial Information

Item 1: Financial Statements


APPLIED SIGNAL TECHNOLOGY, INC.
BALANCE SHEETS

(In thousands except share data)


Assets                                         February 2, 1996    October 31, 1995
                                                (unaudited)           (Note)
                                                 ___________        ___________
Current assets:
   Cash                                           $    ---           $    369
   Accounts receivable: 
      Billed:                                       11,409             12,768
      Unbilled:                                     15,329             16,796
                                                   _______            _______

  Total accounts receivable                         26,738             29,564
  Refundable Income Taxes                              107                107
  Inventory                                          5,524              3,474
  Prepaid and other current assets                   1,927              1,990
                                                   _______            _______

          Total current assets                      34,296             35,504

Property and equipment, at cost:

    Machinery and equipment                         20,288             19,504
    Furniture and fixtures                           3,090              2,903
    Leasehold improvements                           2,828              1,589
    Construction in process                            598                751
                                                   _______            _______
                                                    26,744             24,747
  
  Accumulated depreciation and amortization        (14,369)           (13,492)
                                                   _______            _______

  Net property and equipment                        12,375             11,255

Long-term investments                                2,122              2,095

Other assets                                           117                176
                                                   _______            _______
  
  Total assets                                    $ 48,910           $ 49,030
                                                   _______            _______
                                                   _______            _______


Liabilities and Shareholders' Equity

Current liabilities:
  Accounts payable                                   2,602              3,921
  Bank line of credit                                1,300                ---
  Accrued payroll and related benefits               3,628              3,691
  Other accrued liabilities                          1,496              1,547
  Income taxes payable                               1,421              2,077
                                                   _______            _______

          Total current liabilities                 10,447             11,236


Deferred income taxes                                  847                847
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--7,691,410
  at February 2, 1996 and 7,532,643 at 
  Oct. 31, 1995                                     19,387             18,895

  Retained earnings                                 18,207             18,057

  Net unrealized gain/(loss) on securities              22                 (5)
                                                   _______            _______
Total shareholders' equity                          37,616             36,947
                                                   _______            _______

     Total liabilities and shareholders' equity   $ 48,910           $ 49,030
                                                   _______            _______
                                                   _______            _______

Note: The balance sheet at October 31, 1995 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
                                         Feb. 2, 1996          Jan. 27, 1995
                                       _______________        _______________

Revenues from contracts                   $  15,798              $ 13,821
Operating expenses:
  Contract costs                             10,815                 8,459
  Research and development                    1,912                 1,813
  General and administrative                  2,840                 1,983
                                           ________              ________

          Total operating expenses           15,567                12,255
                                           ________              ________

Operating income                                231                 1,566
Interest income/(expense), net                   19                   134
                                           ________              ________

Income before provision for 
income taxes                                    250                1,700
Provision for income taxes                      100                  680
                                           ________             ________
   
Net income                                 $    150             $  1,020
                                           ________             ________
                                           ________             ________
 
Net income per common share                $   0.02            $    0.13

Number of shares used in calculating
net income per common share                   7,782                7,651
                                           ________             ________
                                           ________             ________
See notes to financial statements.


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

(In thousands)


                                                          Three Months Ended
                                                     _____________     _____________
          
                                                      Feb. 3, 1996      Jan. 27, 1995
                                                     _____________     _____________

Operating Activities:
Net income                                             $    150          $ 1,020
Adjustments to reconcile net income to  
net cash provided by (used in)      
operating activities:  
  Depreciation and amortization                             877              748
  Accounts receivable                                     2,826              807
  Inventory, prepaids, and other current assets          (1,987)          (3,034)
  Other assets                                               59                1
  Accounts payable and accrued expenses                  (2,089)          (1,928)
                                                       ________         ________

     Net cash used in operating
     activities                                            (164)          (2,386)


Investing Activities:
Maturity of investments                                     ---            1,500
Additions to property and equipment                      (1,997)          (1,223)
                                                       ________         ________

     Net cash provided by (used in) investing 
     activities                                          (1,997)             277


Financing Activities:
Increase in bank line of credit                           1,300              999
Issuance of common stock                                    493              533
Repurchase of common stock                                   (1)            (615)
                                                       ________         ________

     Net cash provided by financing                       1,792              917
     activities                                        ________         ________

Net decrease in cash and cash equivalents                  (369)          (1,192)

Cash and cash equivalents, beginning of period              369            1,192
                                                       ________         ________

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

See notes to financial statements.