<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 September 30, 2001

                                      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)

              Solar Park
           Newark, Delaware                                   19716-2000
(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 _____
                                    ---
    (Registrant became subject to filing requirements on February 12, 1998)

The number of shares outstanding of the Registrant's common stock, $0.01 par
value, as of November 12, 2001, was 14,369,929.
<PAGE>

                               AstroPower, Inc.

            FORM 10-Q FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                        Page No.
                                                                                                                        --------
<S>                                                                                                                     <C>
                                         PART I: FINANCIAL INFORMATION
                                         -----------------------------

ITEM 1.        FINANCIAL STATEMENTS

               .       Consolidated Balance Sheets -
                       September 30, 2001 (unaudited) and December 31, 2000.......................................       1 - 2

               .       Consolidated Statements of Income and Comprehensive Income (unaudited) -Three
                       months and nine months ended September 30, 2001 and 2000...................................       3 - 4

               .       Consolidated Statements of Cash Flows (unaudited) -
                       Nine months ended September 30, 2001 and 2000..............................................           5

               .       Notes to Consolidated Financial Statements (unaudited).....................................       6 - 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..................................................................................          11

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

ITEM 6.        EXHIBITS AND REPORTS ON FORM 8-K....................................................................         12

               SIGNATURES..........................................................................................         13
</TABLE>

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.
<PAGE>

                               ASTROPOWER, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                    September 30        December 31
                                       ASSETS                                           2001               2000
      -------------------------------------------------------------------------    --------------     --------------
                                                                                    (unaudited)
<S>                                                                                <C>                <C>
      CURRENT ASSETS:
      Cash and cash equivalents................................................    $   60,488,324         24,538,022
      Accounts receivable:
           Trade, net..........................................................        19,437,248         15,753,018
           Other...............................................................         1,582,749            127,348
      Inventories..............................................................        24,946,274         12,307,866
      Prepaid assets...........................................................         1,930,395            558,143
      Deferred tax asset.......................................................         7,801,849          6,351,355
                                                                                   --------------     --------------
                                                                                      116,186,839         59,635,752

      INVESTMENT IN JOINT VENTURES.............................................           477,598            718,224
      OTHER INVESTMENTS........................................................         2,075,163                  -
      GOODWILL AND OTHER INTANGIBLES ..........................................        16,866,502                  -

      PROPERTY AND EQUIPMENT...................................................        37,711,337         23,613,649
           Less accumulated depreciation and amortization......................        (7,487,651)        (5,996,002)
                                                                                   --------------     --------------
                                                                                       30,223,686         17,617,647
                                                                                   --------------     --------------
                Total assets...................................................    $  165,829,788         77,971,623
                                                                                   ==============     ==============
</TABLE>

          See accompanying notes to consolidated financial statements

                                       1
<PAGE>

                               ASTROPOWER, INC.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                                     September 30        December 31
                                                                                         2001               2000
                                                                                    ---------------     -------------
                                                                                      (unaudited)
         <S>                                                                        <C>                 <C>
                       LIABILITIES AND STOCKHOLDERS' EQUITY
        ------------------------------------------------------------------

        CURRENT LIABILITIES:
        Accounts payable..................................................          $     9,570,911         6,210,020
        Accrued payroll and payroll taxes.................................                1,094,893         1,001,405
        Accrued expenses..................................................                1,860,372           316,917
        Short term borrowings.............................................                4,119,325                 -
                                                                                    ---------------     -------------
                  Total current liabilities...............................               16,645,501         7,528,342

        OTHER LIABILITIES:
        Deferred tax liability............................................                2,158,169         2,158,169
        Long term borrowings..............................................                1,915,249                 -
        Other.............................................................                  984,820           175,000
                                                                                    ---------------     -------------
                  Total liabilities.......................................               21,703,739         9,861,511
                                                                                    ---------------     -------------

        COMMITMENTS AND CONTINGENCIES
        STOCKHOLDERS' EQUITY:
        Common stock......................................................                  143,293           117,390
        Additional paid-in capital........................................              138,881,419        64,848,641
        Unearned compensation.............................................                        -           (49,668)
        Retained earnings.................................................                4,827,500         3,193,749
        Cumulative translation adjustment.................................                  273,837                 -
                                                                                    ---------------     -------------
                  Total stockholders' equity..............................              144,126,049        68,110,112
                                                                                    ---------------     -------------
                         Total liabilities and stockholders' equity.......          $   165,829,788        77,971,623
                                                                                    ================    =============
</TABLE>

          See accompanying notes to consolidated financial statements

                                       2
<PAGE>

                               ASTROPOWER, INC.

          CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


<TABLE>
<CAPTION>
                                                                                   Three Months Ended September 30
                                                                                -------------------------------------
                                                                                              (unaudited)
                                                                                     2001                 2000
                                                                                ---------------      ----------------
        <S>                                                                     <C>                  <C>
        REVENUES:
              Product sales................................................     $    17,823,241            12,554,703
              Research contracts...........................................             587,922               848,400
                                                                                ---------------      ----------------
                        Total revenues.....................................          18,411,163            13,403,103
        COST OF REVENUES:
              Product sales................................................          12,788,923             8,770,817
              Research contracts...........................................             403,149               636,685
                                                                                ---------------      ----------------
                        Total cost of revenues.............................          13,192,072             9,407,502
                                                                                ---------------      ----------------
                        Gross profit.......................................           5,219,091             3,995,601
        OPERATING EXPENSES:
              Product development expenses.................................           1,408,658               920,333
              General and administrative expenses..........................           1,222,992             1,287,111
              Selling expenses.............................................           1,296,669             1,090,479
              Litigation settlement related legal fees.....................              24,954               283,622
                                                                                ---------------      ----------------
                        Income from operations.............................           1,265,818               414,056
        OTHER INCOME (EXPENSE):
              Interest expense.............................................             (17,986)                 (310)
              Equity in income (loss) of joint ventures....................             (26,884)               10,211
              Interest income..............................................             852,532               384,245
                                                                                ---------------      ----------------
                        Total other income.................................             807,662               373,724
                                                                                ---------------      ----------------
        INCOME BEFORE INCOME TAXES.........................................           2,073,480               787,780
        INCOME TAXES.......................................................             576,375               157,983
                                                                                ---------------      ----------------
        NET INCOME.........................................................     $     1,497,105               629,797
                                                                                ===============      ================
        OTHER COMPREHENSIVE INCOME, net of tax:
              Cumulative translation adjustment............................             197,162                   --
                                                                                ---------------      ----------------
        COMPREHENSIVE INCOME...............................................     $     1,694,267               629,797
                                                                                ===============      ================

        NET INCOME DATA:
              Net income per share - basic.................................     $          0.11                  0.05
                                                                                ===============      ================
              Net income per share - diluted...............................     $          0.10                  0.05
                                                                                ===============      ================
              Weighted average shares outstanding - basic..................          14,165,031            11,570,946
                                                                                ===============      ================
              Weighted average shares outstanding - diluted................          15,567,801            13,043,871
                                                                                ===============      ================
</TABLE>

          See accompanying notes to consolidated financial statements

                                       3
<PAGE>

                               ASTROPOWER, INC.

          CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                                  Nine Months Ended September 30
                                                                              --------------------------------------
                                                                                           (unaudited)

                                                                                    2001                  2000
                                                                              ----------------     -----------------
       <S>                                                                    <C>                  <C>
       REVENUES:
             Product sales............................................        $     46,699,162            33,263,756
             Research contracts.......................................               2,083,242             2,453,418
                                                                              ----------------     -----------------
                       Total revenues.................................              48,782,404            35,717,174
       COST OF REVENUES:
             Product sales............................................              32,846,513            23,054,263
             Research contracts.......................................               1,490,444             1,789,916
                                                                              ----------------     -----------------
                       Total cost of revenues.........................              34,336,957            24,844,179
                                                                              ----------------     -----------------
                       Gross profit...................................              14,445,447            10,872,995
       OPERATING EXPENSES:
             Product development expenses.............................               3,729,878             2,263,505
             General and administrative expenses......................               3,593,457             3,140,863
             Selling expenses.........................................               3,169,655             2,444,038
             Litigation settlement and related legal fees.............               3,807,900               326,188
                                                                              ----------------     -----------------
                       Income from operations.........................                 144,557             2,698,401
       OTHER INCOME (EXPENSE):
             Interest expense.........................................                 (26,653)              (13,967)
             Equity in loss of joint ventures.........................                 (70,594)             (100,459)
             Interest income..........................................               2,221,387             1,069,319
                                                                              ----------------     -----------------
                       Total other income.............................               2,124,140               954,893
                                                                              ----------------     -----------------
       INCOME BEFORE INCOME TAXES.....................................               2,268,697             3,653,294
       INCOME TAXES...................................................                 634,946               954,123
                                                                              ----------------     -----------------
       NET INCOME.....................................................        $      1,633,751             2,699,171
                                                                              ================     =================
       OTHER COMPREHENSIVE INCOME, net of tax:
             Cumulative translation adjustment........................                 197,162                    --
                                                                              ----------------     -----------------
       COMPREHENSIVE INCOME...........................................        $      1,830,913             2,699,171
                                                                              ================     =================

       NET INCOME DATA:
             Net income per share - basic.............................        $           0.12                  0.24
                                                                              ================     =================
             Net income per share - diluted...........................        $           0.11                  0.21
                                                                              =================    =================
             Weighted average shares outstanding - basic..............              13,458,913            11,443,598
                                                                              =================    =================
             Weighted average shares outstanding - diluted............              14,890,533            12,870,475
                                                                              =================    =================
</TABLE>

          See accompanying notes to consolidated financial statements

                                       4
<PAGE>

                               ASTROPOWER, INC.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                         Nine Months Ended September 30
                                                                                      -------------------------------------
                                                                                                   (unaudited)

                                                                                            2001                 2000
                                                                                      ----------------     ----------------
<S>                                                                                   <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income..................................................................    $      1,633,751            2,699,171
      Adjustments to reconcile net income to net cash (used in) / provided by
        operating activities:
           Deferred income taxes..................................................             634,945              475,517
           Depreciation and amortization..........................................           1,378,496              970,906
           Amortization of unearned compensation..................................              49,668               73,519
           Equity in loss of joint ventures.......................................              70,594               88,096
           Changes in working capital items:
                Accounts receivable...............................................             550,488            2,042,703
                Inventories.......................................................          (7,137,321)          (3,686,710)
                Prepaid assets....................................................          (1,346,884)              21,968
                Accounts payable and accrued expenses.............................          (1,284,923)           1,433,290
                Accrued payroll and payroll taxes.................................              93,488             (350,886)
                Other.............................................................              20,112               14,536
                                                                                      ----------------     ----------------
      Net cash (used in) provided by operating activities........................          (5,337,586)           3,784,110
                                                                                      ----------------     ----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Acquisition, net of cash acquired...........................................         (13,922,768)                   -
      Capital expenditures........................................................          (7,879,220)          (5,485,561)
      Investments in joint venture................................................                   -             (247,552)
      Other investments...........................................................          (2,011,750)                   -
                                                                                      ----------------     ----------------
      Net cash used in investing activities.......................................         (23,813,738)          (5,733,113)
                                                                                      ----------------     ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from borrowings....................................................             923,464                    -
      Proceeds from exercise of common stock options..............................           2,042,281            2,791,163
      Net proceeds from common stock offering.....................................          62,121,245                    -
                                                                                      ----------------     ----------------
      Net cash provided by financing activities...................................          65,086,990            2,791,163
                                                                                      ----------------     ----------------

EFFECTS OF EXCHANGE RATE CHANGES ON CASH..........................................              14,636                    -
NET INCREASE IN CASH AND CASH EQUIVALENTS.........................................          35,950,302              840,160
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD..................................          24,538,022           25,338,239
                                                                                      ----------------     ----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD........................................    $     60,488,324           26,178,399
                                                                                      ================     ================
</TABLE>

          See accompanying notes to consolidated financial statements

                                       5
<PAGE>

                               AstroPower, Inc.

                  Notes to Consolidated Financial Statements
                              September 30, 2001
                                  (unaudited)
(1)  General

     The accompanying consolidated financial statements for the three month and
     nine month periods ended September 30, 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 consolidated financial position and operating results of
     the Company as of and for the respective periods. Certain information and
     footnote disclosures normally included in annual consolidated 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 consolidated financial statements should be
     read in conjunction with the consolidated financial statements contained in
     the Company's Annual Report Form 10-K for the year ended December 31, 2000.
     The consolidated 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, 2001   December 31, 2000
                                  (unaudited)
                               ------------------   -----------------
          Raw materials        $       19,475,050          10,501,576
          Work-in-process               1,150,446             769,031
          Finished goods                4,320,778           1,037,259
                               ------------------    ----------------
                               $       24,946,274          12,307,866
                               ==================    ================

(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. The
     facility bears interest at the financial institution's National Commercial
     Rate minus 0.25% (6.00% as of September 30, 2001). 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. There were no borrowings against
     this facility at September 30, 2001.

     Also, with the acquisition of Atersa (note 5), the Company acquired
     additional loans and lines of credit. The maximum availability under the
     lines of credit amount to 1,303,000,000 Spanish pesetas.

(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 for the period September 11, 2001 through September
     30, 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 estimated
     goodwill to be $16,808,145.

                                       6
<PAGE>

     Proforma information that discloses the results of operations as though the
     business combination had been completed as of the beginning of the periods
     below follows:

<TABLE>
<CAPTION>
                        Three months    Nine months     Three months    Nine months
                       ended 9/30/01    ended 9/30/01   ended 9/30/00   ended 9/30/00
                       -------------   --------------   -------------   --------------
<S>                    <C>             <C>              <C>             <C>
          Revenue       $ 21,341,754     53,810,488      15,259,417       42,233,795
          Income from
            operations     1,104,936      1,496,201         576,494        4,703,462
          Net income       1,312,622      2,333,137         649,269        3,754,901
          EPS:
            - Basic     $       0.09           0.17            0.06             0.32
            - Diluted   $       0.08           0.16            0.05             0.29

</TABLE>

(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 is required to adopt the provisions of Statement 141
     immediately and Statement 142 effective January 1, 2002. Except that, any
     goodwill and any intangible asset determined to have an indefinite useful
     life that are acquired in a purchase business combination completed after
     June 30, 2001, but prior to the full adoption of Statement 142, will not be
     amortized, and will continue to be evaluated for impairment in accordance
     with the appropriate pre-Statement 142 accounting literature.

     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
     Impairement 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 Impairement 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
     impairement. This statement is effective January 1, 2002. Management does
     not expect adoption of this statement to have a material impact on our
     financial condition or results of operations.

                                       7
<PAGE>

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

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. 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
significant expansion of our Silicon-Film manufacturing capacity. We recognize
product sales revenue upon shipment. Product sales represented 96.8% and 95.7%
of total revenues for the three months and nine months ended September 30, 2001,
respectively. 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 and nine months ended September 30, 2001, 70% 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. Current sales have been primarily denominated in U.S.
dollars and foreign exchange rate fluctuations have not had an impact on our
results of operations. With the acquisition of Atersa, Atersa sales are
denominated in Spanish pesetas.

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 have also begun to sell
our SunChoice systems. The sale of modules and systems results in substantially
more revenue to us 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.

Our revenue growth is currently constrained by our manufacturing capacity and as
a result, we have been undertaking a significant expansion of our manufacturing
capacity. At the end of 2000, our manufacturing equipment capacity was 35
megawatts, and we expect to end 2001 at 65 megawatts. Up to 18 months are
required in order to achieve a production rate equivalent to the equipment
capacity.

                                       8
<PAGE>

Results of Operations


Comparison of the Three Months Ended September 30, 2001 and 2000

Revenues - Our total revenues were $18.4 million for the three months ended
September 30, 2001, an increase of $5.0 million or 37.4% from 2000. Product
sales were $17.8 million for the three months ended September 30, 2001, an
increase of $5.3 million or 42.0% from 2000. Our increase in product sales was
due to higher production volumes, resulting from both manufacturing capacity
expansion and improvements in manufacturing productivity, as well as continued
strong demand for our products. Also, Atersa contributed $2.6 million to
consolidated revenues from the date of acquisition through September 30, 2001.
Research contract revenues were $588,000 for the three months ended September
30, 2001, a decrease of $260,000 or 30.7% from 2000. We have recently exceeded
the government's definition of a small business, which now excludes us from
Small Business Innovation Research (SBIR) contracts.

Gross profit - Our gross profit was $5.2 million for the three months ended
September 30, 2001, an increase of $1.2 million or 30.6% from 2000. Product
gross profit for 2001 was $5.0 million, an increase of $1.3 million or 33.0%
from 2000. Our product gross margin was 28.2% for the three months ended
September 30, 2001. In the similar 2000 period, the product gross margin was
30.1%. The decrease in product gross margins was due to purchase accounting
effects related to the acquisition of Atersa, and the related write-up of
inventories to fair value.  Our gross profit on research contracts for the three
months ended September 30, 2001 was $185,000, a decrease of $27,000 or 12.7%
from the 2000 period primarily due to the decrease in research contract
revenues.

Product development costs - Our product development costs for the three months
ended September 30, 2001 were $1.4 million, up $488,000 or 53.1% from 2000. The
increase is due to a higher level of development activity for our Silicon-Film
products and other products.

General and administrative expenses - Our general and administrative expenses
for the three months ended September 30, 2001 were $1.2 million, a decrease of
$64,000 or 5.0% from the similar 2000 period.

Selling expenses - Our selling expenses for the three months ended September 30,
2001 were $1.3 million, an increase of $206,000 or 18.9% from 2000. The increase
is principally due to costs associated with the Home Depot program, additional
staff and travel.

Professional fees related to overhead dispute - Our professional fees related to
our overhead dispute for the three months ended September 30, 2001 were $25,000,
a decrease of $259,000 from the similar 2000 period.

Interest income - Our interest income for the three months ended September 30,
2001 was $853,000, as compared with $384,000 in the 2000 period. The increase
was due to increased cash balances due to our March 2001 follow-on offering.

Income taxes - Income taxes for the three months ended September 30, 2001 were
$576,000, as compared with $158,000 in 2000. The effective tax rate for the 2001
period was 27.8%, as compared to 20% in the comparable 2000 period. 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.

                                       9
<PAGE>

Results of Operations


Comparison of the Nine Months Ended September 30, 2001 and 2000

Revenues - Our total revenues were $48.8 million for the nine months ended
September 30, 2001, an increase of $13.1 million or 36.6% from 2000. Product
sales were $46.7 million for the nine months ended September 30, 2001, an
increase of $13.4 million or 40.4% from 2000. Our increase in product sales was
due to higher production volumes, resulting from both manufacturing capacity
expansion and improvements in manufacturing productivity, as well as continued
strong demand for our products. Also, Atersa contributed $2.6 million to
consolidated revenues from the date of acquisition through September 30, 2001.
Research contract revenues were $2.1 million for the nine months ended September
30, 2001, a decrease of $370,000 or 15.1% from 2000. We have recently exceed the
government's definition of a small business, which now excludes us from SBIR
contracts.

Gross profit - Our gross profit was $14.4 million for the nine months ended
September 30, 2001, an increase of $3.6 million or 32.9% from 2000. Product
gross profit for 2001 was $13.9 million, an increase of $3.6 million or 35.7%
from 2000. Our product gross margin was 29.7% for the nine months ended
September 30, 2001. In the similar 2000 period, the product gross margin was
30.7%. The decrease in product gross margins was due to purchase accounting
effects related to the acquisition of Atersa, and the related write-up of
inventories to fair value.  Our gross profit on research contracts for the nine
months ended September 30, 2001 was $593,000, a decrease of $71,000 or 10.7%
from the 2000 period primarily due to the decrease in research contract
receiver.

Product development costs - Our product development costs for the nine months
ended September 30, 2001 were $3.7 million, an increase of $1.5 million or 64.8%
from 2000. The increase is due to a higher level of development activity for our
Silicon-Film products and our other products.

General and administrative expenses - Our general and administrative expenses
for the nine months ended September 30, 2001 were $3.6 million, an increase of
$453,000 or 14.4% from the similar 2000 period. The increase is primarily due to
higher levels of salaries as a result of additional positions to support our
growth, professional fees and insurance expenses.

Selling expenses - Our selling expenses for the nine months ended September 30,
2001 were $3.2 million, an increase of $726,000 million or 29.7% from 2000. The
increase is due to higher salary costs and relocation costs as a result of
additions to the sales and marketing staff, increased advertising expenditures,
higher travel costs, and costs associated with the Home Depot program.

Professional fees related to overhead dispute - Our professional fees related to
our overhead dispute for the nine months ended September 30, 2001 were $308,000,
a decrease of $18,000 from the similar 2000 period. In addition, a non-recurring
pre-tax charge of $3.5 million related to our litigation settlement with the
U.S. government was recorded during the first quarter of 2001.

Interest income - Our interest income for the nine months ended September 30,
2001 was $2.2 million, as compared with $1.1 in the 2000 period. The increase
was due to increased cash balances due to our March 2001 follow-on offering.

Income taxes - Income taxes for the nine months ended September 30, 2001 were
$635,000, as compared with $954,000 in 2000. The effective tax rate for the 2001
period was 28.0% as compared with 26.1% in the 2000 period. 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.

Net income - Our net income for the nine months ended September 30, 2001 was
$1.6 million as compared with net income of $2.7 million for the similar prior
year period. The decrease in net income is primarily the result of a
non-recurring pre-tax charge of $3.5 million related to our litigation
settlement with the U.S. government.

                                       10
<PAGE>

Liquidity and Capital Resources

At September 30, 2001, we had cash of $60.5 million, as compared with $24.5
million at December 31, 2000. The increase in the cash balance primarily
occurred during the 2001 first quarter due to our public offering of 2,200,000
shares of Common Stock in March 2001 which raised net proceeds of $62.1 million,
offset by cash used for the acquisition of Atersa, capital expenditures, and
operating activities.

Our sources of liquidity as of September 30, 2001 consist principally of cash of
$60.5 million and an available bank credit line of $6 million. Any borrowings
under our bank facility will be secured by accounts receivable. There were no
borrowings outstanding under the bank credit line as of September 30, 2001.

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.

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 market our products in North
America as well as in the Europe, Asia Pacific and Africa regions. 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
all 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
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.

                                       11

<PAGE>

                               AstroPower, Inc.

            FORM 10-Q FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001

                          PART II: OTHER INFORMATION



ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K

          EXHIBITS              -       None

          REPORTS ON FORM 8-K

          The following reports on form 8-K were filed during the quarter ended
          September 30, 2001:

          Form 8-K dated August 1, 2001 with respect to the announcement of a
          signed agreement to acquire Aplicaciones Tecnicas de la Energia, S.A.
          (a/k/a Atersa).

          Form 8-K dated September 25, 2001 with respect to the closing of the
          Atersa acquisition which occurred on September 11, 2001.

                                       12
<PAGE>

                                  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 14, 2001        By: /s/          Allen M. Barnett
                                -----------------------------------------------

                                                 Allen M. Barnett
                                     President and Chief Executive Officer

Date:  November 14, 2001        By: /s/          Thomas J. Stiner
                                -----------------------------------------------
                                                 Thomas J. Stiner
                                             Senior Vice President and
                                              Chief Financial Officer
                                           (Principal Financial Officer)

                                       13