<PAGE>


                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

(Mark one)

      X    QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
   -------
EXCHANGE ACT OF 1934
                   for the three months ended March 31, 2002

                                       OR

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

Delaware                                              51-0315869
(State or other jurisdiction                          (IRS Employer
of incorporation or organization)                     Identification
                                                      Number)

300 Executive Drive
 Newark, Delaware                                      19702-3316
(Address of principal executive offices)              (Zip Code)

                                  302-366-0400
              (Registrant's telephone number, including area code)

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     X        NO
                                 -------        -------

The number of shares outstanding of the Registrant's common stock, $0.01 par
value, as of May 8, 2002, was 14,508,051.

<PAGE>

                                AstroPower, Inc.
               FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 2002

                                TABLE OF CONTENTS

                                                                        Page No.
                                                                        --------

                          PART I: FINANCIAL INFORMATION
                          -----------------------------

ITEM 1. FINANCIAL STATEMENTS

        .  Consolidated Balance Sheets
           March 31, 2002 (unaudited) and December 31, 2001 .................1-2

        .  Consolidated Statements of Income and Comprehensive Income
           (unaudited) - Three months ended
           March 31, 2002 and 2001 ............................................3

        .  Consolidated Statements of Cash Flows (unaudited) -
           Three months ended March 31, 2002 and 2001 .........................4

        .  Notes to Consolidated Financial Statements (unaudited) ...........5-7

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS ................................8-11

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK ...........12


                           PART II: OTHER INFORMATION
                           --------------------------

SIGNATURES ...................................................................13


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, including Management's
Discussion and Analysis of Financial Condition and Results of Operations, 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 of this report. 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.

<PAGE>


                                ASTROPOWER, INC.

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                           ASSETS                                    March 31, 2002           December 31, 2001
-------------------------------------------------------------     ----------------------    ----------------------
                                                                       (unaudited)
<S>                                                                <C>                      <C>
CURRENT ASSETS:
Cash and cash equivalents ....................................      $    45,538,162               53,850,869
Accounts receivable:
     Trade, net ..............................................           28,297,744               22,498,368
     Value-added tax and other ...............................              746,945                1,699,530
Inventories ..................................................           31,080,857               27,916,150
Prepaid assets ...............................................            1,900,297                1,063,661
Deferred tax asset ...........................................            4,204,132                4,204,132
                                                                    ----------------           --------------
          Total current assets ...............................          111,768,137              111,232,710

INVESTMENT IN AFFILIATES .....................................            2,551,811                2,557,723

DEFERRED TAX ASSET ...........................................            1,069,912                1,361,513

GOODWILL .....................................................           16,080,073               16,374,783

PROPERTY AND EQUIPMENT .......................................           50,619,377               44,685,999
     Less accumulated depreciation and amortization ..........           (8,770,417)              (8,075,793)
                                                                    ----------------          ---------------
                                                                         41,848,960               36,610,206
                                                                    ----------------          ---------------
          Total assets .......................................      $   173,318,893              168,136,935
                                                                    ================          ===============
</TABLE>

                                       1

         (See accompanying notes to consolidated financial statements)


<PAGE>

                                ASTROPOWER, INC.

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                      March 31, 2002           December 31, 2001
                                                                   ----------------------    ----------------------
            LIABILITIES AND STOCKHOLDERS' EQUITY                        (unaudited)
--------------------------------------------------------------
<S>                                                                <C>                       <C>
CURRENT LIABILITIES:
Notes payable to banks ......................................       $      7,136,804               5,214,050
Current installments of long-term debt ......................                629,072                 630,059
Accounts payable ............................................             10,538,636              10,164,979
Accrued payroll and payroll taxes ...........................              1,991,535               1,783,721
Accrued expenses ............................................                982,900               1,396,116
                                                                    -----------------        ----------------
     Total current liabilities ..............................             21,278,947              19,188,925

OTHER LIABILITIES:
Long-term debt, excluding current installments ..............              1,206,965               1,315,650
Other .......................................................              1,144,654                 972,454
                                                                    -----------------        ----------------
     Total liabilities ......................................             23,630,566              21,477,029


COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Common stock ................................................                144,777                 144,019
Additional paid-in capital ..................................            141,578,893             140,174,168
Retained earnings ...........................................              8,698,564               6,700,605
Accumulated comprehensive income ............................               (733,907)               (358,886)
                                                                    -----------------        ----------------
     Total stockholders' equity .............................            149,688,327             146,659,906
                                                                    -----------------        ----------------
          Total liabilities and stockholders' equity ........       $    173,318,893             168,136,935
                                                                    =================        ================
</TABLE>

                                       2

         (See accompanying notes to consolidated financial statements)


<PAGE>

                                ASTROPOWER, INC.

           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                             Three Months Ended March 31
                                                                                    (unaudited)
                                                                   ------------------------------------------------

REVENUES:                                                                  2002                      2001
                                                                   ----------------------    ----------------------
<S>                                                            <C>                                  <C>
     Product sales ..........................................  $         20,352,964                 13,581,236
     Research contracts .....................................               342,471                    724,207
                                                                   -----------------         ------------------
          Total revenues ....................................            20,695,435                 14,305,443

COST OF REVENUES:
     Product sales ..........................................            13,407,157                  9,448,483
     Research contracts .....................................               253,339                    523,369
                                                                   -----------------         ------------------
          Total cost of revenues ............................            13,660,496                  9,971,852
                                                                   -----------------         ------------------
          Gross profit ......................................             7,034,939                  4,333,591
OPERATING EXPENSES:
     Product development expenses ...........................             1,416,744                  1,124,686
     General and administrative expenses ....................             1,413,992                  1,161,453
     Selling expenses .......................................             1,637,888                    842,470
     Litigation settlement and legal fees ...................                     -                  3,774,242
                                                                   -----------------         ------------------
          Income (loss) from operations .....................             2,566,315                 (2,569,260)
OTHER INCOME (EXPENSE):
     Interest expense .......................................               (93,468)                    (8,626)
     Interest income ........................................               470,147                    420,838
     Other expense ..........................................               (26,104)                   (12,123)
                                                                   -----------------         ------------------
          Total other income ................................               350,575                    400,089
                                                                   -----------------         ------------------
INCOME (LOSS) BEFORE INCOME TAXES ...........................             2,916,890                 (2,169,171)
INCOME TAX EXPENSE (BENEFIT) ................................               918,931                   (650,750)
                                                                   -----------------         ------------------
NET INCOME (LOSS) ...........................................  $          1,997,959                 (1,518,421)
                                                                   =================         ==================

COMPREHENSIVE INCOME (EXPENSE):
     Net income .............................................             1,997,959                          -
     Cumulative translation  adjustments ....................              (375,021)                         -
                                                                   -----------------         ------------------
COMPREHENSIVE INCOME ........................................  $          1,622,938                          -
                                                                   =================         ==================

NET INCOME (LOSS) DATA (1):
     Net income (loss) per share - basic ....................  $               0.09                      (0.08)
                                                                   =================         ==================
     Net income (loss) per share - diluted ..................  $               0.08                      (0.08)
                                                                   =================         ==================
     Weighted average shares outstanding - basic ............            21,630,354                 18,031,487
                                                                   =================         ==================
     Weighted average shares outstanding - diluted ..........            23,589,301                 18,031,487
                                                                   =================         ==================
</TABLE>
(1)  Reflects a three-for-two stock option to shareholders of record May 20,
     2002, to be distributed on May 31, 2002

                                        3

         (See accompanying notes to consolidated financial statements)

<PAGE>

                                ASTROPOWER, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>

                                                                                              Three Months Ended March 31
                                                                                         ---------------------------------------
                                                                                                     (unaudited)

                                                                                               2002                 2001
                                                                                         -----------------    ------------------
<S>                                                                                      <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ..............................................................     $        1,997,959          (1,518,421)
Adjustments to reconcile net income (loss) to net cash used in operating
activities:
     Deferred income taxes .....................................................                852,601            (650,750)
     Depreciation and amortization .............................................                699,163             422,916
     Equity in (income)losses of affiliates ....................................                 (1,261)             12,123
     Amortization of unearned compensation .....................................                      -              24,506
     Changes in working capital items:
          Accounts receivable ..................................................             (5,002,396)            715,160
          Inventories ..........................................................             (3,192,532)         (1,995,996)
          Prepaid expenses .....................................................               (836,686)           (147,664)
          Accounts payable and accrued expenses ................................                 79,922           2,491,950
          Accrued payroll and payroll taxes ....................................                210,427             284,697
          Other ................................................................                204,520               9,421
                                                                                         ---------------      --------------
     Net cash used in operating activities .....................................             (4,988,283)           (352,058)

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ...........................................................             (6,064,710)         (1,322,186)
Investments in affiliates ......................................................                  7,173                   -
                                                                                         ---------------      --------------
     Net cash used in investing activities .....................................             (6,057,537)         (1,322,186)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings from lines of credit ............................................              1,982,730                   -
Repayment of borrowings ........................................................                (85,912)                  -
Proceeds from exercise of common stock options .................................                844,483             707,896
Net proceeds from common stock offering ........................................                      -          62,410,505
                                                                                         ---------------      --------------
     Net cash provided by financing activities .................................              2,741,301          63,118,401
                                                                                         ---------------      --------------

EFFECTS OF EXCHANGE RATES ON CASH ..............................................                 (8,188)                  -
                                                                                         ---------------      --------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ...........................             (8,312,707)         61,444,157
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ...............................             53,850,869          24,538,022
                                                                                         ---------------      --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .....................................     $       45,538,162          85,982,179
                                                                                         ===============      ==============
</TABLE>

                                       4

         (See accompanying notes to consolidated financial statements)


<PAGE>

                                AstroPower, Inc.

                   Notes to Consolidated Financial Statements
                                 March 31, 2002
                                   (unaudited)

(1)  General

The accompanying consolidated financial statements for the three-month periods
ended March 31, 2001 and 2000 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 and operating
results 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:

                                      March 31, 2002          December 31, 2001
                                      --------------          -----------------
                                       (unaudited)

                Raw materials          $27,798,832             24,511,998
                Work-in-process          1,511,097              1,406,590
                Finished goods           1,770,928              1,997,562
                                       -----------             ----------
                                       $31,080,857             27,916,150
                                       ===========             ==========

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. $4.5 of this $6
million facility was outstanding as of March 31, 2002. The facility bears
interest at the financial institution's National Commercial Rate minus 0.25%
(4.75% as of March 31, 2002). Security for the facility is 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

Also, with the September 2001 acquisition of Atersa (note 5), the Company
assumed obligations under existing term loans, which amounted to $1.8 million as
of March 31, 2002. Additionally, the Company assumed obligations under existing
lines of credit, which amounted to $2.6 million as of March 31, 2002.

                                       5

<PAGE>

(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 preliminary allocation of
the purchase price, the Company has originally estimated goodwill, at the date
of acquisition to be $16.8 million ($16.1 million at March 31,2002 after the
effects of exchange rates).

(6) New Accounting Pronouncements

In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement 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 141 also specifies
criteria intangible assets acquired in a purchase method business combination
must meet to be recognized and reported apart from goodwill. Statement 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 142. Statement 142 will also require
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 SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of.

The Company adopted SFAS No. 141 effective July 1, 2001, and the transition
provisions of SFAS No. 142 relating to non-amortization of goodwill associated
with the acquisition of Atersa described in Note 5. Effective January 1, 2001
the Company fully adopted SFAS 142 and will perform its transitional test for
goodwill impairment by June 30, 2002 as required by this statement. 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 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 October 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.

(7) Subsequent Event

On May 8, 2002, the Company announced a three-for-two stock split to
shareholders of record May 20, 2002, to be distributed on May 31, 2002. All
share and per share information have been restated in the accompanying financial

                                       6

<PAGE>

statements to give effect to the stock split. Had the stock split not occurred,
basic and diluted net income per share would have been $0.14 and $0.13,
respectively, for the three months ended March 31, 2002.

                                       7

<PAGE>

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, bad debts, 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 and cost-sharing research
contracts 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 expended on contracts.

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 SFAS 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. SFAS 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(TM) 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. 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,
panels and pre-packaged systems. While the predominant source of our product
revenues to date has been recycled wafer products, we are continuing a

                                       8

<PAGE>

significant expansion of our Silicon-Film manufacturing capacity. We recognize
product sales revenue upon shipment. Product sales represented 98.3% of total
revenues for the three months ended March 31, 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 months ended March 31, 2002, 85% percent 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, foreign exchange
rate fluctuations 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(TM) 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.

                                       9

<PAGE>

Results of Operations

Three Months Ended March 31, 2002 and 2001

Revenues -- Our total revenues were $20.7 million for the three months ended
March 31, 2002, an increase of $6.4 million or 44.7% from 2001. Product sales
were $20.4 million for the three months ended March 31, 2002, an increase of
$6.8 million or 49.9% from 2001. Our increase in product sales was due to
ongoing strong demand for our products and expansion of manufacturing capacity.
Contract revenues were $342,000 for the three months ended March 31, 2002, a
decrease of $382,000 or 52.7% from 2001. The principle cause of this decrease
related to the fact that in the second half of 2001, we exceeded the employee
limit of 500 which is the maximum number of employees allowable to qualify for
Small Business Innovative Research (SBIR) contracts.

Gross profit -- Our gross profit was $7.0 million for the three months ended
March 31, 2002, an increase of $2.7 million or 62.3% from 2001. Product gross
profit for 2002 was $6.9 million, an increase of $2.8 million or 68.1% from
2001. Our product gross margin was 34.1% for the three months ended March 31,
2002. In the similar 2001 period, the product gross margin was 30.4%. The
increase in product gross margin was due to manufacturing cost efficiencies as
well as product mix. In the first quarter, our product mix is typically focused
on solar cell sales, which carry higher product margins than modules and
systems. In the 2002 period, our product mix was a bit more focused on solar
cell sales than has historically been the case. Our gross profit on research
contracts for the three months ended March 31, 2002 was $89,000, a decrease of
$112,000 or 55.6% from the 2001 period.

Product development costs -- Our product development costs for the three months
ended March 31, 2002 were $1.4 million, up $292,000 or 26.0% 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 March 31, 2002 were $1.4 million, an increase of
$250,000 or 21.5% from the similar 2001 period. The increase is primarily a
result of an increase in personnel, higher salaries, professional fees and
insurance expenses.

Selling expenses -- Our selling expenses for the three months ended March 31,
2002 were $1.6 million, an increase of $795,000 or 94.4% from 2001. The increase
is due to higher salary costs as a result of additions to the sales and
marketing staff, and higher travel expenditures. Such costs are attributable to
the continued expansion of our SunChoice(TM) program, particularly, our Home
Depot initiative which began in September 2001.

Interest expense -- Our interest expense for the three months ended March 31,
2002 was $93,000, as compared with $9,000 in the 2001 period. Interest expense
has increased primarily due to borrowings of Atersa, our Spanish subsidiary
acquired in 2001.

Interest income -- Our interest income for the three months ended March 31, 2002
was $470,000, as compared with $421,000 in the 2001 period. The increase in
interest income is attributable to higher average balances as a result of our
March 2001 public offering, which raised net proceeds of $62.5 million, offset
by lower rates of return.

Income taxes -- Income tax expense for the three months ended March 31, 2002 was
$919,000, as compared with income tax benefit of $651,000 in 2001, representing
an effective rate of 31.5%. Our effective tax rate is lower than the statutory
rates, principally as a result of research and experimentation tax credits and
the benefit related to foreign sales.

Liquidity and Capital Resources

At March 31, 2002, we had cash of $45.5 million, as compared with $53.9 million
at December 31, 2001. The decrease in the cash balance is primarily due to our
capital expenditures, as part of our ongoing expansion of our manufacturing
capacity, and changes in net working capital activities during the quarter.

For the past several years, we have been constrained by manufacturing capacity
and, in response, have been adding equipment to increase capacity. Historically,
the photovoltage 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, bringing our total installed manufacturing equipment
capacity to 190 megawatts.

Our sources of liquidity as of March 31, 2002 consist principally of cash of
$45.5 million and an available bank credit line of $4.3 million. Any borrowings
under our bank facility will be secured by account receivable. Borrowings
outstanding under the bank credit lines as of March 31, 2002 were $7.1 million.

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

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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 May 20, 2002, to be distributed on May 31, 2002. All
share and per share information have been restated in the accompanying financial
statements to give effect to the stock split. Had the stock split not occurred,
basic and diluted net income per share would have been $0.14 and $0.13,
respectively, for the three months ended March 31, 2002.

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.

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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 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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                                   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:  May 10, 2002                  By:  /s/        Allen M. Barnett
                                          --------------------------------------
                                                     Allen M. Barnett
                                           President and Chief Executive Officer

Date:  May 10, 2002                  By:  /s/        Thomas J. Stiner
                                          --------------------------------------
                                                     Thomas J. Stiner
                                              Senior Vice President and Chief
                                                     Financial Officer
                                               (Principal Financial Officer)

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