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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549

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FORM 10-Q

|(Mark One)                                    |                                                                                         
|--------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|for the three months ended September 30, 2002
|OR                                           
|o                                             | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period from
 to           

Commission File Number 000-23657

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AstroPower, Inc.(Exact name of registrant as specified in its charter)

|Delaware(State or other jurisdiction
of incorporation or organization)        |  | 51-0315869(IRS Employer Identification Number)
|----------------------------------------------------------------------------- |  | ----------------------------------------------
|300 Executive Drive,
Newark, Delaware(Address of principal executive offices) |  | 19702-3316(Zip Code)                          
|302-366-0400(Registrant's telephone number, including area code)             

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Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or such shorter period that the Registrant was required to file such report(s), and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

(Registrant
became subject to filing requirements on February 12, 1998)

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AstroPower, Inc.  FORM 10-Q FOR THE THREE MONTHS ENDED September 30, 2002    TABLE OF CONTENTS

|                              |  |                                                                                       |                                                                                                                                       |         | Page No.
|----------------------------- |  | ------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | ------- | --------
|PART I: FINANCIAL INFORMATION
|ITEM 1.                       |  | FINANCIAL STATEMENTS                                                                  |                                                                                                                                       |        
|                              |  |                                                                                      | Consolidated Balance SheetsSeptember 30, 2002 (unaudited) and December 31, 2001                                                      |         | 2, 3    
|                              |  |                                                                                      | Consolidated Statements of Income and Comprehensive Income (unaudited)Three months and nine months ended September 30, 2002 and 2001 |         | 4, 5    
|                              |  |                                                                                      | Consolidated Statements of Cash Flows (unaudited)Nine months ended September 30, 2002 and 2001                                       |         | 6       
|                              |  |                                                                                      | Notes to Consolidated Financial Statements (unaudited)                                                                                |         | 7 - 9   
|ITEM 2.                       |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |                                                                                                                                       | 10 - 14
|ITEM 3.                       |  | QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK                            |                                                                                                                                       | 14     
|ITEM 4.                       |  | CONTROLS AND PROCEDURES                                                               |                                                                                                                                       | 15     
|                              |  |                                                                                       |                                                                                                                                       |         |         
|PART II: OTHER INFORMATION   
|ITEM 6.                       |  | EXHIBITS AND REPORTS ON FORM 8-K                                                      |                                                                                                                                       | 15     
|                              |  | SIGNATURES                                                                            |                                                                                                                                       | 16     
|                              |  | CERTIFICATIONS                                                                        |                                                                                                                                       | 17-18  

Cautionary Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements that are made pursuant to the Safe Harbor
provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks, uncertainties and assumptions as described from time to time in registration statements,
annual reports, and other periodic reports and filings which we file with the Securities and Exchange Commission. All statements, other than statements of historical facts, which address our
expectations of sources of capital or which express our expectation for the future with respect to financial performance or operating strategies can be identified as forward-looking statements. As a
result, there can be no assurance that our future results will not be materially different from those described herein as "believed", "anticipated", "estimated" or "expected", which reflect our
current views with respect to future events. We caution readers that these forward-looking statements speak only as of the date hereof. We hereby expressly disclaim any obligation or undertaking to
release publicly any updates or revisions to any such statements to reflect any changes in our expectations or any change in events, conditions or circumstances on which such statement is
based.

1

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ASTROPOWER, INC.    CONSOLIDATED BALANCE SHEETS

|                                   |                           | Sept. 30,
2002       |            | Dec. 31,
2001
|---------------------------------- | ------------------------- | -------------------- | ---------- | -------------
|
|ASSETS                             |                           |                      |            |              
|CURRENT ASSETS:                    |                           |                      |            |              
|Cash and cash equivalents          |                           | $                    | 31,367,641 |              
|Accounts receivable:               |                           |                      |            |              
|                                   | Trade, net                |                      |            | 38,313,457   
|                                   | Value-added tax and other |                      |            | 1,121,285    
|Inventories                        |                           |                      | 44,070,386 |              
|Prepaid expenses                   |                           |                      | 1,368,418  |              
|Deferred tax asset                 |                           |                      | 4,205,624  |              
|                                   |                           |                      |            |              
|                                   |                           | Total current assets |            |              
|Investment in affiliates           |                           |                      | 2,374,220  |              
|Deferred tax asset                 |                           |                      | 1,144,224  |              
|Property, plant and equipment, net |                           |                      | 51,781,855 |              
|Goodwill                           |                           |                      | 16,637,355 |              
|                                   |                           |                      |            |              
|                                   |                           | Total assets         |            | $            
|                                   |                           |                      |            |              

See
accompanying notes to consolidated financial statements

2

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ASTROPOWER, INC.

CONSOLIDATED BALANCE SHEETS

|                                               |                            | Sept. 30,
2002                             |             | Dec. 31,
2001 |            
|---------------------------------------------- | -------------------------- | ------------------------------------------ | ----------- | ------------- | -----------
|
|LIABILITIES AND STOCKHOLDERS' EQUITY           |                            |                                            |             |               |            
|CURRENT LIABILITIES:                           |                            |                                            |             |               |            
|Notes payable to banks                         |                            | $                                          | 13,114,654  |               | 5,214,050  
|Current installments of long-term debt         |                            |                                            | 491,176     |               | 630,059    
|Accounts payable                               |                            |                                            | 16,535,197  |               | 10,164,979 
|Accrued payroll and payroll taxes              |                            |                                            | 2,071,256   |               | 1,783,721  
|Accrued expenses                               |                            |                                            | 1,680,756   |               | 1,396,116  
|                                               |                            |                                            |             |               |            
|                                               | Total current liabilities  |                                            |             | 33,893,039    |            
|OTHER LIABILITIES:                             |                            |                                            |             |               |            
|Long-term debt, excluding current installments |                            |                                            | 2,755,020   |               | 1,315,650  
|Other                                          |                            |                                            | 718,230     |               | 972,454    
|                                               | Total liabilities          |                                            |             | 37,366,289    |            
|COMMITMENTS AND CONTINGENCIES                  |                            |                                            |             |               |            
|STOCKHOLDERS' EQUITY:                          |                            |                                            |             |               |            
|Common stock                                   |                            |                                            | 218,451     |               | 216,029    
|Additional paid-in capital                     |                            |                                            | 142,722,154 |               | 140,102,158
|Retained earnings                              |                            |                                            | 9,897,810   |               | 6,700,605  
|Accumulated comprehensive income (loss)        |                            |                                            | 2,179,759   |               | (358,886   
|                                               |                            |                                            |             |               |            
|                                               | Total stockholders' equity |                                            |             | 155,018,174   |            
|                                               |                            |                                            |             |               |            
|                                               |                            | Total liabilities and stockholders' equity |             | $             | 192,384,463
|                                               |                            |                                            |             |               |            

See
accompanying notes to consolidated financial statements.

3

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ASTROPOWER, INC.    CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

|                                 |                                              | Three Months Ended Sept. 30, |          
|-------------------------------- | -------------------------------------------- | ---------------------------- | ---------
|
|
|REVENUES:                        |                                              |                              |          
|                                 | Product sales                                |                              | $        
|                                 | Research contracts                           |                              |          
|                                 |                                              |                              |          
|                                 |                                              | Total revenues               |          
|COST OF REVENUES:                |                                              |                              |          
|                                 | Product sales                                |                              |          
|                                 | Research contracts                           |                              |          
|                                 |                                              |                              |          
|                                 |                                              | Total cost of revenues       |          
|                                 |                                              |                              |          
|                                 |                                              | Gross profit                 |          
|OPERATING EXPENSES:              |                                              |                              |          
|                                 | Product development expenses                 |                              |          
|                                 | General and administrative expenses          |                              |          
|                                 | Selling expenses                             |                              |          
|                                 | Litigation settlement and related legal fees |                              |          
|                                 |                                              |                              |          
|                                 |                                              | Income from operations       |          
|OTHER INCOME (EXPENSE):          |                                              |                              |          
|                                 | Interest expense                             |                              |          
|                                 | Interest income                              |                              |          
|                                 | Other, net                                   |                              |          
|                                 |                                              |                              |          
|                                 |                                              | Total other income           |          
|                                 |                                              |                              |          
|INCOME BEFORE INCOME TAX EXPENSE |                                              |                              | 1,042,283
|INCOME TAX EXPENSE               |                                              |                              | 208,456  
|                                 |                                              |                              |          
|NET INCOME                       |                                              | $                            | 833,827  
|                                 |                                              |                              |          
|COMPREHENSIVE INCOME (EXPENSE):  |                                              |                              |          
|                                 | Net income                                   |                              | $        
|                                 | Foreign currency translation adjustments     |                              |          
|                                 |                                              |                              |          
|COMPREHENSIVE INCOME             |                                              | $                            | 533,456  
|                                 |                                              |                              |          
|NET INCOME DATA:                 |                                              |                              |          
|                                 | Net income per sharebasic                   |                              | $        
|                                 |                                              |                              |          
|                                 | Net income per sharediluted                 |                              | $        
|                                 |                                              |                              |          
|                                 | Weighted average shares outstandingbasic    |                              |          
|                                 |                                              |                              |          
|                                 | Weighted average shares outstandingdiluted  |                              |          
|                                 |                                              |                              |          

See
accompanying notes to consolidated financial statements.

4

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ASTROPOWER, INC.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

|                                     |                                              | Nine Months Ended Sept. 30, |          
|------------------------------------ | -------------------------------------------- | --------------------------- | ---------
|
|
|REVENUES:                            |                                              |                             |          
|                                     | Product sales                                |                             | $        
|                                     | Research contracts                           |                             |          
|                                     |                                              |                             |          
|                                     |                                              | Total revenues              |          
|COST OF REVENUES:                    |                                              |                             |          
|                                     | Product sales                                |                             |          
|                                     | Research contracts                           |                             |          
|                                     |                                              |                             |          
|                                     |                                              | Total cost of revenues      |          
|                                     |                                              |                             |          
|                                     |                                              | Gross profit                |          
|OPERATING EXPENSES:                  |                                              |                             |          
|                                     | Product development expenses                 |                             |          
|                                     | General and administrative expenses          |                             |          
|                                     | Selling expenses                             |                             |          
|                                     | Litigation settlement and related legal fees |                             |          
|                                     |                                              |                             |          
|                                     |                                              | Income from operations      |          
|OTHER INCOME (EXPENSE):              |                                              |                             |          
|                                     | Interest expense                             |                             |          
|                                     | Interest income                              |                             |          
|                                     | Other, net                                   |                             |          
|                                     |                                              |                             |          
|                                     |                                              | Total other income          |          
|                                     |                                              |                             |          
|INCOME BEFORE INCOME TAX AND EXPENSE |                                              |                             | 4,488,767
|INCOME TAX EXPENSE                   |                                              |                             | 1,291,562
|                                     |                                              |                             |          
|NET INCOME                           |                                              | $                           | 3,197,205
|                                     |                                              |                             |          
|COMPREHENSIVE INCOME:                |                                              |                             |          
|                                     | Net income                                   |                             | $        
|                                     | Foreign currency translation adjustments     |                             |          
|                                     |                                              |                             |          
|COMPREHENSIVE INCOME                 |                                              | $                           | 5,737,506
|                                     |                                              |                             |          
|NET INCOME DATA:                     |                                              |                             |          
|                                     | Net income per sharebasic                   |                             | $        
|                                     |                                              |                             |          
|                                     | Net income per sharediluted                 |                             | $        
|                                     |                                              |                             |          
|                                     | Weighted average shares outstandingbasic    |                             |          
|                                     |                                              |                             |          
|                                     | Weighted average shares outstandingdiluted  |                             |          
|                                     |                                              |                             |          

See
accompanying notes to consolidated financial statements.

5

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ASTROPOWER, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                     |                                                                               | Nine Months Ended Sept. 30,             |                                      
|---------------------------------------------------- | ----------------------------------------------------------------------------- | --------------------------------------- | -------------------------------------
|
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                |                                                                               |                                         |                                      
|                                                     | Net income                                                                    |                                         | $                                    
|                                                     | Adjustments to reconcile net income to net cash used in operating activities: |                                         |                                      
|                                                     |                                                                               | Deferred income taxes                   |                                      
|                                                     |                                                                               | Depreciation and amortization           |                                      
|                                                     |                                                                               | Equity in (income) losses of affiliates |                                      
|                                                     |                                                                               | Amortization of unearned compensation   |                                      
|                                                     |                                                                               | Changes in working capital items:       |                                      
|                                                     |                                                                               |                                         | Accounts receivable                  
|                                                     |                                                                               |                                         | Inventories                          
|                                                     |                                                                               |                                         | Prepaid expenses                     
|                                                     |                                                                               |                                         | Accounts payable and accrued expenses
|                                                     |                                                                               |                                         | Accrued payroll and payroll taxes    
|                                                     |                                                                               |                                         | Other                                
|                                                     |                                                                               |                                         |                                      
|                                                     | Net cash used in operating activities                                         |                                         |                                      
|                                                     |                                                                               |                                         |                                      
|CASH FLOWS FROM INVESTING ACTIVITIES:                |                                                                               |                                         |                                      
|                                                     | Acquisition, net of cash acquired                                             |                                         |                                      
|                                                     | Capital expenditures                                                          |                                         |                                      
|                                                     | Investments in affiliates                                                     |                                         |                                      
|                                                     | Distribution from affiliate                                                   |                                         |                                      
|                                                     |                                                                               |                                         |                                      
|                                                     | Net cash used in investing activities                                         |                                         |                                      
|                                                     |                                                                               |                                         |                                      
|CASH FLOWS FROM FINANCING ACTIVITIES:                |                                                                               |                                         |                                      
|                                                     | Net borrowings from lines of credit                                           |                                         |                                      
|                                                     | Repayment of borrowings                                                       |                                         |                                      
|                                                     | Proceeds from exercise of common stock options                                |                                         |                                      
|                                                     | Net proceeds from common stock offering                                       |                                         |                                      
|                                                     |                                                                               |                                         |                                      
|                                                     | Net cash provided by financing activities                                     |                                         |                                      
|                                                     |                                                                               |                                         |                                      
|EFFECTS ON EXCHANGE RATES ON CASH                    |                                                                               |                                         | 183,476                              
|NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS |                                                                               |                                         | (22,483,228                          
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD     |                                                                               |                                         | 53,850,869                           
|                                                     |                                                                               |                                         |                                      
|CASH AND CASH EQUIVALENTS AT END OF PERIOD           |                                                                               | $                                       | 31,367,641                           
|                                                     |                                                                               |                                         |                                      

See
accompanying notes to consolidated financial statements.

6

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AstroPower, Inc.  Notes to Consolidated Financial Statements  September 30, 2002  (unaudited)

(1)    General

The accompanying consolidated financial statements for the three-month and nine-month periods ended September 30, 2002 and 2001 have been
prepared by AstroPower, Inc. (Company) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished herein reflects all adjustments
(consisting only of normal recurring accruals) which are, in the opinion of management, necessary to present fairly the financial position, operating results and cash flows of the Company as of and
for the respective periods. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the
United States of America have been omitted pursuant to such rules and regulations. However, management of the Company believes that the disclosures herein are adequate to make the information
presented not misleading. The accompanying financial statements should be read in conjunction with the financial statements contained in the Company's Annual Report Form 10-K for
the year ended December 31, 2001. The results of operations for interim periods may not be indicative of the results that may be expected for the entire year.

(2)    Litigation Settlement

In April 2001, the Company reached an agreement in principle with the U.S. Department of Justice to settle a civil action against the Company filed in
October 2000, in the U.S. District Court for the District of Delaware seeking to recover damages and penalties with respect to the submission of invoices and Incurred Cost Submissions in
connection with contracts with the U.S. Department of Defense and U.S. Department of Energy. A Release and Settlement Agreement dated June 29, 2001 was executed and the previously agreed to
settlement payment of $3.5 million was made on July 9, 2001. On July 13, 2001, a Joint Stipulation of Dismissal was filed with the District Court stipulating that the action be
dismissed with prejudice.

(3)    Inventories

A
summary of inventories is as follows:

|                |  | September 30, 2002 |            | December 31, 2001
|--------------- |  | ------------------ | ---------- | -----------------
|
|Raw materials   |  | $                  | 37,032,181 |                  
|Work-in-process |  |                    | 1,473,742  |                  
|Finished goods  |  |                    | 5,564,463  |                  
|                |  |                    |            |                  
|                |  | $                  | 44,070,386 |                  
|                |  |                    |            |                  

(4)    Debt

On March 7, 2001, the Company increased its available revolving line of credit with a financial institution from $3 million to $6 million,
which was fully utilized as of September 30, 2002. The facility bears interest at the financial institution's National Commercial Rate minus 0.25% (4.75% as of September 30, 2002), is
payable on demand and is secured by accounts receivable. The Company is required to maintain a minimum working capital ratio, a minimum level of tangible net worth and a minimum total debt to net
worth ratio; with which the Company is in compliance at September 30, 2002.

7

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Also,
with the September 2001 acquisition of Atersa (note 5), the Company assumed obligations under existing term loans. Such Atersa obligations amounted to
$3.2 million as of September 30, 2002. Additionally with the acquisition, the Company assumed lines of credit. These Atersa lines of credit outstanding amounted to $7.1 million as
of September 30, 2002.

(5)    Acquisition

On September 11, 2001, the Company acquired all the outstanding stock of Aplicaciones Tecnicas de la Energia, S.A., commonly known as Atersa, a privately
held company based in Valencia, Spain for $22.2 million. As part of the transaction, the Company also acquired Atersa's 50% equity stake in AstraSolar, a Spanish solar cell manufacturing joint
venture between the Company and Atersa. Atersa is a leading manufacturer of solar electric power modules and balance-of-system components, as well as a provider of system
design and integration services. Atersa also designs and builds a full range of module manufacturing equipment. The acquisition of Atersa is expected to provide further geographical reach to the
Company. Results of operations related to the acquisition are included in the consolidated financial statements from September 11, 2001.

Under
the terms of the agreement, the Company acquired Atersa and Atersa's 50% stake in AstraSolar for $22.2 million in a stock and cash transaction. Atersa shareholders directly
received approximately $12.8 million of the total consideration in cash. $1.5 million of direct acquisition costs were incurred by the Company. Also, certain shareholders received in
aggregate, 183,984 restricted shares of the Company's common stock (valued at $7.9 million). The value of the common stock was determined based on the average market price of the Company's
stock over the five-day period before and after the terms of the acquisition were agreed to and announced. Based on the final allocation of the purchase price, goodwill is
$16.6 million.

(6)    Recent Accounting Pronouncements

In July 2001, the FASB issued Statement No. 141, "Business Combinations", and Statement No. 142, "Goodwill and Other Intangible Assets".
Statement No. 141 requires that the purchase method of accounting be used for all business combinations initiated after June 30, 2001 as well as all purchase method business combinations
completed after June 30, 2001. Statement No. 141 also specifies criteria intangible assets acquired in a purchase method business combination must meet to be recognized and reported
apart from goodwill. Statement No. 142 will require that goodwill and intangible assets with indefinite useful lives no longer be amortized, but instead tested for impairment at least annually
in accordance with the provisions of Statement No. 142. Statement No. 142 also requires that intangible assets with definite useful lives be amortized over their respective estimated
useful lives to their estimated residual values, and reviewed for impairment in accordance with Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of.

Effective
July 1, 2001, the Company adopted Statement No. 141 and the transition provisions of Statement No. 142 relating to non-amortization of goodwill
associated with the acquisition of Atersa described in Note 5. Effective January 1, 2002 the Company fully adopted Statement No. 142. The Company performed its transitional test
for goodwill impairment prior to June 30, 2002, as required by this statement. No goodwill impairment loss was recognized. Additionally, goodwill will be evaluated annually or sooner, if events
or circumstances indicate that goodwill might be impaired.

In
August 2001, the FASB issued Statement No. 143, "Accounting for Asset Retirement Obligations". Statement No. 143 addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Statement No. 143 requires recognition of a liability at fair
value and an increase to the carrying value of the related asset for any retirement obligation. This amount would then be amortized over the life of the

8

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asset. The liability would be adjusted at the end of each period to reflect the passage of time and changes in the estimated future cash flows. This statement is effective January 1, 2003.
Management does not expect adoption of this statement to have a material impact on our financial condition or results of operations.

In
August 2001, the FASB issued Statement No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Statement No. 144 incorporated the
disposal of a business segment into the framework of Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
The statement also excludes goodwill that was included in Statement No. 121 scope and provided refinement to cash flow estimations for defining any applicable impairment. This statement was
adopted January 1, 2002 and did not have a material impact on our financial condition or results of operations.

In
July 2002, the FASB issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This standard addresses the accounting and reporting
for costs of exit activities (including restructuring) and for the disposal of long-lived assets. The standard changes some of the criteria for recognizing a liability for these
activities. It is effective beginning in 2003 with the liability recognition criteria under the standard applied prospectively. Management does not expect adoption of this statement to have a material
impact on our financial condition or results of operations.

(7)    Stock Split

On May 8, 2002, the Company announced a three-for-two stock split effected in the form of a dividend to shareholders of record
May 20, 2002, distributed on May 31, 2002. All prior period common stock, additional paid-in capital, share and per share information have been restated in the accompanying
consolidated financial statements to give effect to the stock split.

9

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ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Critical Accounting Policies and Estimates

General

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance
with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses. On an on-going basis, we evaluate our estimates, including those related to revenue, accounts receivable, inventories and income taxes. We base
our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We
believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

Revenue from product sales is recognized when products are shipped. Revenue related to the Company's fixed price, cost-plus, cost-sharing
research contracts and other agreements are recognized at the time costs benefiting the contracts are incurred, which approximates the percentage of completion
method. Provisions for estimated losses are made in the period in which losses are determined. Accounts receivable includes unbilled accounts receivable consisting of material, labor and overhead
which were $2,861,926 at September 30, 2002 and $1,942,000 at December 31, 2001.

We
maintain allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The allowance for doubtful accounts is based on
review of the overall condition of accounts receivable balances and review of significant past due accounts. If the financial condition of our customers were to deteriorate, resulting in an impairment
of their ability to make payments, additional allowances may be required.

Inventory

We value our inventories at the lower of cost or market. Cost is determined by using the weighted average method.

Income Taxes

We account for income taxes in accordance with Statement No. 109, "Accounting for Income Taxes" which requires that deferred tax assets and liabilities be
recognized for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Statement No. 109 also requires that deferred tax assets be reduced by a
valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized. We review the recoverability of any tax assets recorded on the balance sheet
and provide any necessary allowances as required.

Overview

We develop, manufacture, market and sell a range of solar electric power generation products, including solar cells, modules, panels and our
SunChoice pre-packaged systems for the global marketplace. Through our Spanish subsidiary, Atersa, acquired on September 11, 2001, we provide solar electric power
modules, balance-of-system components and provide system design and integration services. Atersa also designs and builds a full range of module manufacturing equipment.

10

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Solar cells are the core component inside every solar electric power system. Our products provide an environmentally friendly, reliable energy solution at the point of use and are sold for both
off-grid and on-grid applications. In off-grid applications, our products provide the primary source of electric power for rural homes and villages and supply power
for equipment in the telecommunications and transportation industries. In on-grid applications, our products provide a renewable source of alternative
or supplemental electric power and provide reliable back-up power in the event of a utility outage. In addition to our solar power generation product offerings, we sell wholesale solar
electric power under long-term purchase agreements through a joint venture with GPU International, Inc.

We
currently generate product revenues from the sale of solar cells, modules, pre-packaged systems and system design and integration services. While the predominant source of
our product revenues to date has been recycled wafer products, we are continuing a significant expansion of our Silicon-Film manufacturing capacity. We recognize product sales revenue upon
shipment. Product sales represented 98% of total revenues for the three and nine months ended September 30, 2002. Solar cell prices and manufacturing costs vary depending upon supply and demand
in the market for solar cells and modules, order size, yields, the costs of raw materials, particularly reclaimed silicon wafers recycled from the semiconductor industry, and other factors.

We
also generate revenue from contracts with various federal government agencies to conduct research on advanced Silicon-Film products and optoelectronic devices. Generally,
these contracts last from six months to three years. We recognize research contract revenue at the time costs benefiting the contracts are incurred, which approximates the percentage of completion
method. Substantially all of our revenues from government contracts are subject to audit under various federal statutes.

For
the three and nine months ended September 30, 2002, 62% and 73%, respectively of our product revenues were generated by sales to customers located outside of the United
States. We believe that international sales will continue to account for a significant portion of our product sales for the foreseeable future. Currently, sales from our US operations are denominated
in U.S. dollars, and sales from our Spanish operations are generally denominated in Euros. Historically, transactions denominated in foreign currency have not had a significant impact on our results
of operations.

Solar
cells that we manufacture are sold to original equipment manufacturers that assemble the solar cells into modules. In addition, we assemble and sell modules to distributors and
value-added resellers. We also sell our SunChoice residential rooftop systems. The sale of modules and systems results in substantially more revenue to us per watt than the sale of solar
cells due to the incremental value of the additional materials, labor and overhead. Accordingly, our product sales are affected not just by changes in total solar cells produced, but by changes in the
sales mix among solar cells, modules and systems. The gross margin percentage for modules and systems are generally less than those of solar cells. As a result, changes in the product sales mix may
also affect total product gross margin.

Results of Operations

Three Months Ended September 30, 2002 and 2001

RevenuesOur total revenues were $23.0 million for the three months ended September 30,
2002, an increase of $4.6 million or 25.0% from 2001. Product sales were $22.5 million for the three months ended September 30, 2002, an increase of $4.7 million or 26.5%
from 2001. Our increase in product sales was due to demand for our products, expansion of manufacturing capacity, including incremental revenues from our Spanish subsidiary Atersa, acquired in
September 2001. During the third quarter of 2002, weakness in the German photovoltaic market caused our shipments into Germany to decline from the similar period in 2001. This reduced demand
from Germany was offset by growth of shipments into other geographical areas, principally Asia, Africa and North America.

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The incremental revenue from Atersa for the three months ended September 30, 2002 amounted to approximately 12% of consolidated revenues. Contract revenues were $470,000 for the three months
ended September 30, 2002, a decrease of $118,000 or 20.1% from 2001. During 2001, the Company became ineligible for Small Business Innovative Research (SBIR) contracts due to the company
exceeding the limit of 500 employees.

Gross profitOur gross profit was $6.7 million for the three months ended September 30, 2002, an increase of
$1.5 million or 28.0% from 2001. Product gross profit for the three months ended September 30, 2002 was $6.6 million, an increase of $1.5 million or 30.6% from 2001. Our
product gross margin was 29.2% for the three months ended September 30, 2002. In the similar 2001 period, the product gross margin was 28.2%. Product gross margin was positively affected by
increased manufacturing volumes, offset somewhat by the effects of product mix. Our gross profit on research contracts for the three months ended September 30, 2002 was $105,000, a decrease of
$79,000 or 42.7% from the 2001 period, as a result of exceeding the SBIR limit.

Product development costsOur product development costs for the three months ended September 30, 2002 were
$1.6 million, up $196,000 or 13.9% from 2001, as a result of increased levels of development efforts related to new products.

General and administrative expensesOur general and administrative expenses for the three months ended September 30,
2002 were $1.8 million, an increase of $607,000 or 49.7% from the similar 2001 period. The increase is primarily a result of higher levels of salaries due to additions to personnel, rents,
professional fees and insurance expenses.

Selling expensesOur selling expenses for the three months ended September 30, 2002 were $2.4 million, an
increase of $1.1 million or 88.6% from 2001. The increase is due to higher salary costs as a result of additions to the sales and marketing staff, increased rent expense, higher travel
expenditures, and higher printing and advertising expenses; a large portion of which are related to our SunChoice program, and in particular, the expansion of our program with Home Depot.

Interest incomeOur interest income for the three months ended September 30, 2002 was $284,000, as compared with
$853,000 in the 2001 period. The decrease in interest income is attributable to lower average cash balances as well as lower interest rates.

Income taxesThe income tax expense for the three months ended September 30, 2002 was $208,000, representing an
effective rate of 20.0%, as compared with income tax expense of $576,000 in 2001, representing an effective rate of 27.8%. Our effective tax rate is lower than the statutory rates, principally as a
result of research and experimentation tax credits and the benefit of a Foreign Sales Corporation, and is influenced by the relationship of such credits to pre-tax income.

Results of Operations

Nine Months Ended September 30, 2002 and 2001

RevenuesOur total revenues were $64.1 million for the nine months ended September 30,
2002, an increase of $15.4 million or 31.5% from 2001. Product sales were $63.0 million for the nine months ended September 30, 2002, an increase of $16.3 million or 34.9%
from 2001. Our increase in product sales was due to demand for our products, expansion of manufacturing capacity, including incremental revenues from our Spanish subsidiary Atersa, acquired in
September 2001. The incremental revenue from Atersa for the nine months ended September 30, 2002 amounted to less than 10% of consolidated revenues. Contract revenues were
$1.1 million for the nine months ended September 30, 2002, a decrease of $935,000 or 44.9% from 2001. During 2001, the Company became ineligible for Small Business Innovative Research
(SBIR) contracts due to the company exceeding the limit of 500 employees.

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Gross profitOur gross profit was $19.5 million for the nine months ended September 30, 2002, an increase of
$5.0 million or 34.7% from 2001. Product gross profit for 2002 was $19.2 million, an increase of $5.4 million or 38.6% from 2001. Our product gross margin was 30.5% for the nine
months ended September 30, 2002. In the similar 2001 period, the product gross margin was 29.6%. Our gross profit on research contracts for the nine months ended September 30, 2002 was
$265,000, a decrease of $328,000 or 55.4% from the 2001 period, due to a reduction in revenues caused by exceeding the SBIR limit.

Product development costsOur product development costs for the nine months ended September 30, 2002 were
$4.5 million, up $790,000 or 21.2% from 2001, as a result of increased levels of development efforts related to new products.

General and administrative expensesOur general and administrative expenses for the nine months ended September 30,
2002 were $5.1 million, an increase of $1.5 million or 41.4% from the similar 2001 period. The increase is primarily a result of higher levels of salaries due to additions to personnel,
rents, relocation expenses related to new hires, professional fees and insurance expenses.

Selling expensesOur selling expenses for the nine months ended September 30, 2002 were $6.2 million, an
increase of $3.1 million or 97.1% from 2001. The increase is due to higher salary costs as a result of additions to the sales and marketing staff, increased rent expense, higher travel
expenditures, and higher printing and advertising expenses; a large portion of which are related to our SunChoice program, and in particular, the expansion of our program with Home Depot.

Interest expenseOur interest expense for the three months ended September 30, 2002 was $214,000 as compared with
$27,000 in the 2002 period. Interest expense has increased primarily due to borrowings of Atersa, our Spanish subsidiary acquired in 2001, as well as additional domestic borrowings.

Interest incomeOur interest income for the nine months ended September 30, 2002 was $1.1 million, as compared
with $2.2 million in the 2001 period. The decrease in interest income is attributable to lower average cash balances and lower interest rates.

Income taxesThe income tax expense for the nine months ended September 30, 2002 was $1.3 million, representing
an effective rate of 28.8%, as compared with income tax expense of $635,000 in 2001, representing an effective rate of 28.0%. Our effective tax rate is lower than the statutory rates, principally as a
result of research and experimentation tax credits and the benefit of a Foreign Sales Corporation and is influenced by the relationship of such credits to pre-tax income.

Net IncomeOur net income for the nine months ended September 30, 2002 was $3.2 million as compared with net
income of $1.6 million for the similar prior year period. The increase in net income is primarily the result of a non-recurring pre-tax charge of $3.8 million in
2001 related to our litigation settlement with the U.S. government.

Liquidity and Capital Resources

At September 30, 2002, we had cash and cash equivalents of $31.4 million, as compared with $53.9 million at December 31, 2001. The
decrease in the cash balance is primarily due to capital
expenditures, as part of our ongoing expansion of our manufacturing capacity, and changes in net working capital activities (principally an increase in accounts receivable and inventories) during the
year. Cash flow from operations for the nine months ended September 30, 2002 was negative in the amount of $16.4 million, principally as a result of an increase in accounts receivable
and inventories. The Company has taken action to reduce the level of accounts receivable so as to improve cash flow from operations, although the prior softness in the German market has put upward
pressure on accounts receivable.

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For
the past several years, we have been constrained by manufacturing capacity and, in response, have been adding equipment and factory space to increase capacity. Historically, the
photovoltaic industry has taken a number of years to make its new capacity fully productive. Our experience in making our new manufacturing equipment fully productive is approximately
9-18 months. At the end of 2001, we had 65 megawatts of manufacturing equipment in place. In late February 2002, we assumed occupancy of a new manufacturing and office
facility. The manufacturing area of this facility contains space to allow the construction of an additional 125 megawatts over the next few years, which will bring our total installed manufacturing
equipment capacity to 190 megawatts. Our capital expenditures for this expansion during the nine months ended September 30, 2002 were approximately $16.6 million. Financing activities
during this period consisted of bank borrowings of $8.4 million and proceeds from the exercise of stock options of $1.8 million.

Our
sources of liquidity as of September 30, 2002 consist principally of cash and cash equivalents of $31.4 million and remaining available bank credit lines of
$1 million. Any borrowings under our bank facility will be secured by accounts receivable. Borrowings outstanding under the bank credit lines as of September 30, 2002 were
$13.1 million. Our Board of Directors has authorized the guarantee of up to 8.2 million euros ($8.0 million at September 30, 2002) of Atersa's borrowings. To date no
guarantees have been issued.

On
September 11, 2001, the Company acquired all of the outstanding stock of Aplicaciones Tecnicas de la Energia, S.A., commonly known as Atersa, a privately held company based in
Valencia, Spain for $22.2 million. As part of the transaction, the Company also acquired Atersa's 50% equity stake in AstraSolar, a Spanish solar cell manufacturing joint venture between the
Company and Atersa. Atersa is a leading manufacturer of solar electric power modules and balance-of- system components, as well as a provider of system design and integration
services. Atersa also designs and builds a full range of module manufacturing equipment.

Under
the terms of the agreement, the Company acquired Atersa and Atersa's 50% stake in AstraSolar for $22.2 million in a stock and cash transaction. Atersa shareholders directly
received approximately $12.8 million of the total consideration in cash. $1.5 million of direct acquisition costs were incurred by the Company. Also, certain shareholders received in
aggregate, 183,984 restricted shares of the Company's common stock.

On
May 8, 2002, the Company announced a three-for-two stock split to shareholders of record on May 20, 2002. All prior period share and per share
information have been restated in the accompanying consolidated financial statements to give effect to the stock split.

We
expect that our available cash balance, together with projected cash generated from operations and the available bank credit lines, will be sufficient to fund our activities for at
least the next 24 months.

ITEM 3.    QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

We develop products in the United States and Spain and market our products in North America as well as in Europe, Asia, Africa and South America. As a result, our
financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Because a significant portion of our revenues are
currently denominated in U.S. dollars, a strengthening of the dollar could make our products less competitive in foreign markets. Our September 2001 acquisition of Atersa, whose revenues are
generally denominated in Euros, may mitigate a portion of this risk. Our interest income is sensitive to changes in the general level of U.S. interest rates, particularly since the majority of our
investments are in short-term instruments. Due to the short-term nature of our investments, we believe that there is not a material risk exposure.

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ITEM 4.    CONTROLS AND PROCEDURES

Within ninety days prior to the filing of this Report, the Company's Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design
and operation of the Company's disclosure controls and procedures which are designed to ensure that the Company records, processes, summarizes and reports in a timely and effective manner the
information required to be disclosed in reports filed with or submitted to the Securities and Exchange Commission. Based upon this evaluation, they concluded that, as of the date of the evaluation,
the Company's disclosure controls are effective. Since the date of this evaluation, there have been no significant changes in the Company's internal controls or in other factors that could
significantly affect those controls.

Part IIOther Information

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

|Exhibits |  |                                                          
|-------- |  | ---------------------------------------------------------
|99.1     |  | Certification of Chief Executive Officer (annexed hereto)
|99.2     |  | Certification of Chief Financial Officer (annexed hereto)

There
were no reports on Form 8-K filed during the quarter ended September 30, 2002

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.

|                        |  | ASTROPOWER, INC.
|----------------------- |  | ----------------
|Date: November 13, 2002 |  | By:             
|Date: November 13, 2002 |  | By:             

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CERTIFICATION

I,
Allen M. Barnett, certify that:





|                        |                                                                          
|----------------------- | -------------------------------------------------------------------------
|Date: November 13, 2002 | /s/ALLEN M. BARNETTAllen M. Barnett
President and Chief Executive Officer

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CERTIFICATION

I,
Thomas J. Stiner, certify that:





|Date: November 13, 2002 | /s/THOMAS J. STINERThomas J. Stiner
Senior Vice President and Chief Financial Officer
|----------------------- | -------------------------------------------------------------------------------------

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