<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 June 30, 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 _____
                                         -------
     (Registrant became subject to filing requirements on February 12, 1998)

<PAGE>

                                AstroPower, Inc.
               FORM 10-Q FOR THE THREE MONTHS ENDED June 30, 2002

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                            Page No.
                                                                                                            --------

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

ITEM 1.  FINANCIAL STATEMENTS
<S>                                                                                                         <C>
         .   Consolidated Balance Sheets -
             June 30, 2002 (unaudited) and December 31, 2001 .........................................      1, 2

         .   Consolidated Statements of Income and Comprehensive Income (unaudited) -
             Three months and six months ended June 30, 2002 and 2001 ................................      3, 4

         .   Consolidated Statements of Cash Flows (unaudited) -
             Six months ended June 30, 2002 and 2001 .................................................         5

         .   Notes to Consolidated Financial Statements (unaudited) ..................................     6 - 8

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS .........................................................    9 - 13

ITEM 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT
         MARKET RISK .................................................................................        14

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

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS .........................................        15

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.............................................................        15

         SIGNATURES ..................................................................................        16
</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>
                                                                                June 30,            Dec. 31
                                 ASSETS                                           2002               2001
-------------------------------------------------------------------------    ----------------    --------------
<S>                                                                          <C>                 <C>
CURRENT ASSETS:
Cash and cash equivalents ...............................................       $ 39,947,669        53,850,869
Accounts receivable:
     Trade, net .........................................................         33,886,586        22,498,368
     Value-added tax and other ..........................................          1,389,400         1,699,530
Inventories .............................................................         38,318,882        27,916,150
Prepaid expenses ........................................................          3,304,818         1,063,661
Deferred tax asset ......................................................          4,204,132         4,204,132
                                                                             ----------------    --------------
         Total current assets ...........................................        121,051,487       111,232,710

INVESTMENT IN AFFILIATES ................................................          2,365,648         2,557,723

DEFERRED TAX ASSET ......................................................          1,229,341         1,361,513

PROPERTY AND EQUIPMENT, net of accumulated depreciation
     and amortization of $9,572,724 and $8,075,793 as of June 30,
     2002 and 2001, respectively ........................................         45,923,048        36,610,206

GOODWILL ................................................................         18,332,614        16,374,783
                                                                             ----------------    --------------

         Total assets ...................................................       $188,902,138       168,136,935
                                                                             ================    ==============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        1

<PAGE>

                                ASTROPOWER, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                               June 30,          Dec. 31
                                                                                 2002              2001
                                                                            ---------------    ------------
                                                                             (unaudited)
                 LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------------------------------------------
<S>                                                                          <C>                 <C>
CURRENT LIABILITIES:
Notes payable to banks .................................................      $ 11,877,844        5,214,050
Current installments of long-term debt .................................           887,022          630,059
Accounts payable .......................................................        16,611,536       10,164,979
Accrued payroll and payroll taxes ......................................         1,949,491        1,783,721
Accrued expenses .......................................................           774,548        1,396,116
                                                                            ---------------    ------------
          Total current liabilities ....................................        32,100,441       19,188,925

OTHER LIABILITIES:
Long-term debt, excluding current installments .........................         1,304,308        1,315,650
Other ..................................................................         1,363,168          972,454
                                                                            ---------------    ------------
          Total liabilities ............................................        34,767,917       21,477,029
                                                                            ---------------    ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
Common stock ...........................................................           217,760          216,029
Additional paid-in capital .............................................       142,371,047      140,102,158
Retained earnings ......................................................         9,063,985        6,700,605
Accumulated comprehensive income .......................................         2,481,429         (358,886)
                                                                            ---------------    ------------
           Total stockholders' equity ..................................       154,134,221      146,659,906
                                                                            ---------------    ------------
                      Total liabilities and stockholders' equity .......      $188,902,138      168,136,935
                                                                            ===============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        2

<PAGE>

                                ASTROPOWER, INC.

           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                            Three Months Ended June 30
                                                           ----------------------------
                                                                   (unaudited)

                                                               2002            2001
                                                           ------------    ------------
<S>                                                        <C>             <C>
REVENUES:
      Product sales ....................................   $ 20,101,830      15,294,686
      Research contracts ...............................        336,509         771,113
                                                           ------------    ------------
                Total revenues .........................     20,438,339      16,065,799

COST OF REVENUES:
      Product sales ....................................     14,424,738      10,609,107
      Research contracts ...............................        266,561         563,926
                                                           ------------    ------------
                Total cost of revenues .................     14,691,299      11,173,033
                                                           ------------    ------------
                Gross profit ...........................      5,747,040       4,892,766
OPERATING EXPENSES:
      Product development expenses .....................      1,497,671       1,196,535
      General and administrative expenses ..............      1,836,895       1,209,012
      Selling expenses .................................      2,163,371       1,030,516
      Litigation settlement related legal fees .........              -           8,704
                                                           ------------    ------------
                Income from operations .................        249,103       1,447,999
OTHER INCOME (EXPENSE):
      Interest expense .................................       (120,816)              -
      Interest income ..................................        347,145         948,017
      Other, net .......................................         54,163         (31,629)
                                                           ------------    ------------
                Total other income .....................        280,492         916,388
                                                           ------------    ------------
INCOME BEFORE INCOME TAXES .............................        529,595       2,364,387
INCOME TAX EXPENSE .....................................        164,175         709,320
                                                           ------------    ------------
NET INCOME .............................................   $    365,420       1,655,067
                                                           ============    ============

COMPREHENSIVE INCOME:
      Net income .......................................   $    365,420       1,655,067
      Foreign currency translation adjustments .........      3,215,336               -
                                                           ------------    ------------
COMPREHENSIVE INCOME ...................................   $  3,580,756       1,655,067
                                                           ============    ============

NET INCOME DATA:
      Net income per share - basic .....................   $       0.02            0.08
                                                           ============    ============
      Net income per share - diluted ...................   $       0.02            0.07
                                                           ============    ============
      Weighted average shares outstanding - basic ......     21,757,319      21,101,879
                                                           ============    ============
      Weighted average shares outstanding - diluted ....     23,634,781      23,351,085
                                                           ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        3

<PAGE>

                                ASTROPOWER, INC.

           CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

<TABLE>
<CAPTION>
                                                                             Six Months Ended June 30
                                                                        ------------------------------------
                                                                                    (unaudited)

                                                                             2002                2001
                                                                        ----------------    ----------------
<S>                                                                      <C>                 <C>
REVENUES:
      Product sales .................................................      $ 40,454,794          28,875,921
      Research contracts ............................................           678,980           1,495,319
                                                                        ----------------    ----------------
                Total revenues ......................................        41,133,774          30,371,240

COST OF REVENUES:
      Product sales .................................................        27,831,895          20,057,590
      Research contracts ............................................           519,900           1,087,295
                                                                        ----------------    ----------------
                Total cost of revenues ..............................        28,351,795          21,144,885
                                                                        ----------------    ----------------
                Gross profit ........................................        12,781,979           9,226,355
OPERATING EXPENSES:
      Product development expenses ..................................         2,914,415           2,321,220
      General and administrative expenses ...........................         3,250,886           2,370,465
      Selling expenses ..............................................         3,801,259           1,872,986
      Litigation settlement and related legal fees ..................                 -           3,782,945
                                                                        ----------------    ----------------
                Income from operations ..............................         2,815,419          (1,121,261)
OTHER INCOME (EXPENSE):
      Interest expense ..............................................          (214,284)             (8,668)
      Interest income ...............................................           817,292           1,368,855
      Other, net ....................................................            28,060             (43,709)
                                                                        ----------------    ----------------
                Total other income ..................................           631,068           1,316,478
                                                                        ----------------    ----------------
INCOME BEFORE INCOME TAXES ..........................................         3,446,487             195,217
INCOME TAX EXPENSE ..................................................         1,083,106              58,570
                                                                        ----------------    ----------------
NET INCOME ..........................................................      $  2,363,381             136,647
                                                                        ================    ================

COMPREHENSIVE INCOME:
    Net income ......................................................      $  2,363,381             136,647
    Foreign currency translation adjustments ........................         2,840,315                   -
                                                                        ----------------    ----------------
COMPREHENSIVE INCOME ................................................      $  5,203,696             136,647
                                                                        ================    ================

NET INCOME DATA:
      Net income per share - basic ..................................      $       0.11                0.01
                                                                        ================    ================
      Net income per share - diluted ................................      $       0.10                0.01
                                                                        ================    ================
      Weighted average shares outstanding - basic ...................        21,693,836          19,658,781
                                                                        ================    ================
      Weighted average shares outstanding - diluted .................        23,619,193          21,830,616
                                                                        ================    ================
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        4

<PAGE>

                                ASTROPOWER, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                 Six Months Ended June 30
                                                                                          ------------------------------------
                                                                                                      (unaudited)

                                                                                              2002                   2001
                                                                                          --------------        --------------
<S>                                                                                       <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income ....................................................................        $    2,363,381               136,647
   Adjustments to reconcile net income to net cash used in operating activities:--
         Deferred income taxes ...................................................             1,079,929                58,570
         Depreciation and amortization ...........................................             1,447,510               852,173
         Equity in (income) losses of affiliates .................................                (8,953)               49,668
         Amortization of unearned compensation                                                         -                43,709
         Changes in working capital items: .......................................
            Accounts receivable ..................................................           (13,271,725)             (955,725)
            Inventories ..........................................................            (9,894,387)           (4,901,673)
            Prepaid expenses .....................................................            (2,242,221)             (680,260)
            Accounts payable and accrued expenses ................................             8,221,917             4,495,277
            Accrued payroll and payroll taxes ....................................               135,070               185,814
            Other ................................................................               161,433                16,070
                                                                                          --------------        --------------
   Net cash used in operating activities .........................................        $  (12,008,046)             (699,730)
                                                                                          --------------        --------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Capital expenditures ..........................................................            (9,943,910)           (3,306,661)
   Investments in affiliates .....................................................               (38,299)           (2,011,750)
   Distribution from affiliate ...................................................               240,000                     -
                                                                                          --------------        --------------
   Net cash used in investing activities .........................................            (9,742,209)           (5,318,411)
                                                                                          --------------        --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net borrowings from lines of credit ...........................................             6,552,698                     -
   Repayment of borrowings .......................................................              (128,605)                    -
   Proceeds from exercise of common stock options ................................             1,417,825             1,806,722
   Net proceeds from common stock offering .......................................                     -            62,128,495
                                                                                          --------------        --------------
   Net cash provided by financing activities .....................................             7,841,918            63,935,217
                                                                                          --------------        --------------

EFFECTS ON EXCHANGE RATES ON CASH ................................................                 5,137                     -

NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS .............................           (13,903,200)           57,917,076
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD .................................            53,850,869            24,538,022
                                                                                          --------------        --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .......................................        $   39,947,669            82,455,098
                                                                                          ==============        ==============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        5

<PAGE>

                                AstroPower, Inc.

                   Notes to Consolidated Financial Statements
                                  June 30, 2002
                                   (unaudited)

(1)  General

The accompanying consolidated financial statements for the three-month and
six-month periods ended June 30, 2002 and 2001 have been prepared by AstroPower,
Inc. (Company) without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The information furnished herein reflects
all adjustments (consisting only of normal recurring accruals) which are, in the
opinion of management, necessary to present fairly the financial position 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:

                                     June 30, 2002          December 31, 2001
                                      (unaudited)
                                  ------------------     ----------------------
        Raw materials             $       33,070,961                 24,511,998
        Work-in-process                    1,764,912                  1,406,590
        Finished goods                     3,483,009                  1,997,562
                                  ------------------     ----------------------
                                  $       38,318,882                 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, which was fully
utilized as of June 30, 2002. The facility bears interest at the financial
institution's National Commercial Rate minus 0.25% (4.75% as of June 30, 2002),
is payable on demand and is secured by accounts receivable. The Company is
required to maintain a minimum working capital ratio, a minimum level of
tangible net worth and a minimum total debt to net worth ratio; with which the
Company is in compliance at June 30, 2002.

Also, with the September 2001 acquisition of Atersa (note 5), the Company
assumed obligations under existing term loans. Such Atersa obligations amounted
to $1.9 million as of June 30, 2002. Additionally with the acquisition, the
Company assumed lines of credit. These Atersa lines of credit outstanding
amounted to $5.9 million as of June 30, 2002.

                                       6

<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 ($18.3 million at June 30, 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 No. 141
requires that the purchase method of accounting be used for all business
combinations initiated after June 30, 2001 as well as all purchase method
business combinations completed after June 30, 2001. Statement No. 141 also
specifies criteria intangible assets acquired in a purchase method business
combination must meet to be recognized and reported apart from goodwill.
Statement No. 142 will require that goodwill and intangible assets with
indefinite useful lives no longer be amortized, but instead tested for
impairment at least annually in accordance with the provisions of Statement No.
142. Statement No. 142 also requires that intangible assets with definite useful
lives be amortized over their respective estimated useful lives to their
estimated residual values, and reviewed for impairment in accordance with SFAS
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of.

Effective July 1, 2001, the Company adopted SFAS No. 141 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, 2002
the Company fully adopted SFAS No. 142. The Company performed its transitional
test for goodwill impairment prior to June 30, 2002, as required by this
statement. No goodwill impairment loss was recognized. Additionally goodwill
will be evaluated annually or sooner, if events or circumstances indicate that
goodwill might be impaired.

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

In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This standard addresses the accounting and
reporting for costs of exit activities (including restructuring) and for the
disposal

                                        7

<PAGE>

of long-lived assets. The standard changes some of the criteria for recognizing
a liability for these activities. It is effective beginning in 2003 with the
liability recognition criteria under the standard applied prospectively. The
Company is in the process of analyzing the potential impact of this statement
on future transactions.

(7)  Stock Split

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

                                        8

<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, accounts receivable, inventories and income taxes. We base
our estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.

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

Revenue Recognition

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

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,

                                        9

<PAGE>

Inc.

We currently generate product revenues from the sale of solar cells, modules,
pre-packaged systems and system design and integration services. While the
predominant source of our product revenues to date has been recycled wafer
products, we are continuing a significant expansion of our Silicon-Film
manufacturing capacity. We recognize product sales revenue upon shipment.
Product sales represented 98.4% of total revenues for the three months ended
June 30, 2002 and 98.6% of total revenues for the six months ended June 30,
2002. Solar cell prices and manufacturing costs vary depending upon supply and
demand in the market for solar cells and modules, order size, yields, the costs
of raw materials, particularly reclaimed silicon wafers recycled from the
semiconductor industry, and other factors.

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

For the three and six months ended June 30, 2002, 71.6% and 78.8%, respectively
of our product revenues were generated by sales to customers located outside of
the United States. We believe that international sales will continue to account
for a significant portion of our product sales for the foreseeable future.
Currently, sales from our US operations are denominated in U.S. dollars, and
sales from our Spanish operations are generally denominated in Euros.
Historically, transactions denominated in foreign currency have not had a
significant impact on our results of operations.

Solar cells that we manufacture are sold to original equipment manufacturers
that assemble the solar cells into modules. In addition, we assemble and sell
modules to distributors and value-added resellers. We also sell our
SunChoice(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.

Due to our historical manufacturing constraints, we have traditionally carried
low quantities of finished goods inventory. During the second quarter of 2002,
our customer product allocation process was affected by difficulties in
forecasting demand, principally in the German market. As a result, we were
unable to sell finished goods of approximately $2 million in the three month
period ended June 30, 2002, as the configurations and certifications for this
product limited its ability to be immediately sold in other markets.
Additionally, we experienced some disruptions to our module manufacturing lines
in the quarter as a result of changes in customer product allocation. As our
busines grows and becomes more complex, we beleive that slightly higher levels
of finished goods inventory are desirable to allow for more efficient scheduling
for our module factories. We believe that the additional finished goods
inventory accumulated during the second quarter of 2002 represents an
appropriate level, and do not anticipate significant increases or reductions
from this level for the balance of the year.

                                       10

<PAGE>

Results of Operations

Three Months Ended June 30, 2002 and 2001

Revenues - Our total revenues were $20.4 million for the three months ended June
30, 2002, an increase of $4.4 million or 27.2% from 2001. Product sales were
$20.1 million for the three months ended June 30, 2002, an increase of $4.8
million or 31.4% from 2001. Our increase in product sales was due to ongoing
strong demand for our products and expansion of manufacturing capacity,
including incremental revenues from our Spanish subsidiary Atersa, acquired in
September 2001. The incremental revenues from Atersa for the three months ended
June 30, 2002 amounted to less than 10% of consolidated revenues. Contract
revenues were $337,000 for the three months ended June 30, 2002, a decrease of
$435,000 or 56.4% from 2001. During 2001, the Company became ineligible for
Small Business Innovative Research (SBIR) contracts due to the company exceeding
the limit of 500 employees.

Gross profit - Our gross profit was $5.7 million for the three months ended June
30, 2002, an increase of $854,000 or 17.5% from 2001. Product gross profit for
the three months ended June 30, 2002 was $5.7 million, an increase of $1.0
million or 21.1% from 2001. Our product gross margin was 28.2% for the three
months ended June 30, 2002. In the similar 2001 period, the product gross margin
was 30.6%. Our product gross margin declined due to lower product pricing as
well as slightly higher product manufacturing costs. Our gross profit on
research contracts for the three months ended June 30, 2002 was $70,000, a
decrease of $137,000 or 66.2% from the 2001 period.

Product development costs - Our product development costs for the three months
ended June 30, 2002 were $1.5 million, up $301,000 or 25.2% from 2001, as a
result of increased levels of development efforts related to new products.

General and administrative expenses - Our general and administrative expenses
for the three months ended June 30, 2002 were $1.8 million, an increase of
$628,000 or 51.9% from the similar 2001 period. The increase is primarily a
result of higher levels of salaries due to additions to personnel, rents,
relocation costs, professional fees and insurance expenses.

Selling expenses - Our selling expenses for the three months ended June 30, 2002
were $2.2 million, an increase of $1.1 million or 109.9% from 2001. The increase
is due to higher salary costs as a result of additions to the sales and
marketing staff, increased rent expense, higher travel expenditures, and higher
printing and advertising expenses; a large portion of which are related to our
SunChoice program, and more specifically, the Home Depot expansion.

Interest expense - Our interest expense for the three months ended June 30, 2002
was $121,000, as compared with $-0- in the 2001 period. Interest expense has
increased primarily due to borrowings of Atersa, our Spanish subsidiary acquired
in 2001, as well as increased borrowings domestically.

Interest income - Our interest income for the three months ended June 30, 2002
was $347,000, as compared with $948,000 in the 2001 period. The decrease in
interest income is attributable to lower average cash balances as well as lower
interest rates.

Income taxes - The income tax expense for the three months ended June 30, 2002
was $164,000, representing an effective rate of 31.0%, as compared with income
tax expense of $709,000 in 2001, representing an effective rate of 30.0%. The
increase in income tax is primarily due to the tax benefit related to the prior
year $3.5 million settlement with the U.S. government. 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.

                                       11

<PAGE>

Results of Operations

Six Months Ended June 30, 2002 and 2001

Revenues - Our total revenues were $41.1 million for the six months ended June
30, 2002, an increase of $10.8 million or 35.4% from 2001. Product sales were
$40.5 million for the six months ended June 30, 2002, an increase of $11.6
million or 40.1% from 2001. Our increase in product sales was due to ongoing
strong demand for our products and expansion of manufacturing capacity,
including incremental revenues from our Spanish subsidiary Atersa, acquired in
September 2001. The incremental revenues from Atersa for the six months ended
June 30, 2002 amounted to less than 10% of consolidated revenues. Contract
revenues were $679,000 for the six months ended June 30, 2002, a decrease of
$816,000 or 54.6% from 2001. During 2001, the Company became ineligible for
Small Business Innovative Research (SBIR) contracts due to the company exceeding
the limit of 500 employees.

Gross profit - Our gross profit was $12.8 million for the six months ended June
30, 2002, an increase of $3.6 million or 38.5% from 2001. Product gross profit
for 2002 was $12.7 million, an increase of $3.8 million or 44.2% from 2001. Our
product gross margin was 31.4% for the six months ended June 30, 2002. In the
similar 2001 period, the product gross margin was 30.5%. Our gross profit on
research contracts for the six months ended June 30, 2002 was $159,000, a
decrease of $249,000 or 61.0% from the 2001 period.

Product development costs - Our product development costs for the six months
ended June 30, 2002 were $2.9 million, up $600,000 or 25.6% 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 six months ended June 30, 2002 were $3.3 million, an increase of
$880,000 or 37.1% from the similar 2001 period. The increase is primarily a
result of higher levels of salaries due to additions to personnel, rents,
relocation expenses, professional fees and insurance expenses.

Selling expenses - Our selling expenses for the six months ended June 30, 2002
were $3.8 million, an increase of $1.9 million or 103.0% from 2001. The increase
is due to higher salary costs as a result of additions to the sales and
marketing staff, increased rent expense, higher travel expenditures, and higher
printing and advertising expenses; a large portion of which are related to our
SunChoice program, and more specifically, the Home Depot expansion.

Interest expense - Our interest expense for the three months ended June 30, 2002
was $214,000 as compared with $9,000 in the 2002 period. Interest expense has
increased primarily due to borrowings of Atersa, our Spanish subsidiary acquired
in 2002, as well as additional domestic borrowings.

Interest income - Our interest income for the six months ended June 30, 2002 was
$817,000, as compared with $1.4 million in the 2001 period. The decrease in
interest income is attributable to lower average cash balances and lower
interest rates.

Income taxes - The income tax expense for the six months ended June 30, 2002 was
$1.1 million, representing an effective rate of 31.4%, as compared with income
tax expense of $59,000 in 2001, representing an effective rate of 30.0%. The
increase in income tax is primarily due to the tax benefit related to the prior
year $3.5 million settlement with the U.S. government. 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 six months ended June 30, 2002 was $2.4
million as compared with net income of $137,000 for the similar prior year
period. The increase in net income is primarily the result of a non-recurring
pre-tax charge of $3.5 million related to our litigation settlement in 2001 with
the U.S. government.

                                       12

<PAGE>

Liquidity and Capital Resources

At June 30, 2002, we had cash of $39.9 million, as compared with $53.9 million
at December 31, 2001. The decrease in the cash balance is primarily due to
capital expenditures, as part of our ongoing expansion of our manufacturing
capacity, and changes in net working capital activities (principally an increase
in accounts receivable) during the quarter. Cash flow from operations for the
six months ended June 30, 2002 was negative in the amount of $12.0 million,
principally as a result of an increase in accounts receivable. The Company's
plans are to reduce the levels of accounts receivable so as to improve cash
flows from operations.

For the past several years, we have been constrained by manufacturing capacity
and, in response, have been adding equipment and factory space to increase
capacity. Historically, the photovoltaic industry has taken a number of years to
make its new capacity fully productive. Our experience in making our new
manufacturing equipment fully productive is approximately 9-18 months. At the
end of 2001, we had 65 megawatts of manufacturing equipment in place. In late
February 2002, we assumed occupancy of a new manufacturing and office facility.
The manufacturing area of this facility contains space to allow the construction
of an additional 125 megawatts over the next few years, which will bring our
total installed manufacturing equipment capacity to 190 megawatts.

Our sources of liquidity as of June 30, 2002 consist principally of cash of
$39.9 million and remaining available bank credit lines of $2.1 million. Any
borrowings under our bank facility will be secured by accounts receivable.
Borrowings outstanding under the bank credit lines as of June 30, 2002 were
$11.9 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 full range of module manufacturing
equipment.

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

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

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

                                       13

<PAGE>

ITEM 3.  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

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

                                       14

<PAGE>

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      The Company's Annual Meeting of Shareholders was held on May 08, 2002 for
the purpose of the following:

         1. To elect two directors to serve until the 2005 Annual Meeting of
            Shareholders.
         2. To amend our 1999 Stock Option Plan so as to increase the number of
            shares available under the Plan.
         3. To ratify the appointment of KPMG LLP as our independent accountants
            for the fiscal year 2002.

      Shareholders votes on these proposals follow:

Election of Directors:

      Name                   For                Against        Broker Non-Votes

Thomas J. Stiner          9,263,981             147,045               -
Clare E. Nordquist        9,269,048             140,278               -
                                                                      -

<TABLE>
<CAPTION>
                                           For         Against     Abstain    Broker Non-Votes
<S>                                      <C>           <C>         <C>        <C>
Proposal to amend 1999 Stock Option      5,171,373     694,164     71,236             -
Plan

Proposal to ratify appointment of        9,201,981     189,794     19,351             -
independent accountants
</TABLE>

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         Exhibits

         99.1 Certificate of Chief Executive Officer and Chief Financial
              Officer (annexed hereto)

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

                                       15

<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: August 14 2002           By: /s/           Allen M. Barnett
                                   ---------------------------------------------
                                                 Allen M. Barnett
                                        President and Chief Executive Officer

Date: August 14 2002           By: /s/           Thomas J. Stiner
                                   ---------------------------------------------
                                                 Thomas J. Stiner
                               Senior Vice President and Chief Financial Officer
                                          (Principal Financial Officer)

                                       16