**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**







**FORM
      10-Q**





**x**
            **Quarterly
                Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
                of 1934**




**For
      the quarterly period ended: March 31, 2008**




** ̈**
            **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 000-51115**









**Avantair,
      Inc.**


**(Exact
      Name of registrant as specified in its charter)**







**Delaware**
            
            **20-1635240****(State
                of Incorporation)**
            
            **(I.R.S.
                Employer I.D. Number)**




**4311
                General Howard Drive**
              **Clearwater,
                Florida**
            
            **33762****(Address
                of principal executive offices)**
            
            **(Zip
                Code)**




**(727)
      539- 0071**


**(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 for such shorter period that the
      registrant was required to file such reports), and (2) has been subject to
      such filing requirements for the past
      90 days.  Yes þ No o





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, a non-accelerated filer, or a smaller reporting company.
      See
      the definitions of “large accelerated filer,” “accelerated filer” and “smaller
      reporting company” in Rule 12b-2 of the Exchange Act.





Large
      Accelerated Filer o Accelerated
      Filer o


Non-Accelerated
      Filer þ Smaller
      Reporting Company o





Indicate
      by check mark whether the registrant is a shell company (as defined in
      Rule 12b-2 of the Exchange Act).  Yes o No þ





As
      of May
      14, 2008, there were 15,220,817 shares of the Company’s common stock, $.0001 par
      value per share, outstanding.











**CERTAIN
      DEFINITIONS**





Unless
      the context indicates otherwise, the terms “Avantair”, “the Company”, “Ardent”,
“we”, “our”, and “us” refer to Avantair, Inc. and, where appropriate, its
      subsidiary, or its predecessor, Ardent Acquisition Corporation.





**SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**




*This
      Quarterly Report on Form 10-Q contains forward-looking statements relating
      to
      future events and the future performance of the Company, including, without
      limitation, statements regarding the Company’s expectations, beliefs, intentions
      or future strategies that are signified by the words “expects,” anticipates,”
“intends,” “believes,” or similar language. Our actual results could differ
      materially from the information contained in these forward-looking statements
      as
      a result of various factors, including, but not limited to, the factors outlined
      in our Annual Report on Form 10-K, particularly under the heading “Risk
      Factors,” and the factors outlined below:*


*(1)*
              *our
                  inability to generate sufficient net revenue in the
                  future;*
 *(2)*
              *our
                  inability to fund our operations and capital
                  expenditures;*
 *(3)*
              *our
                  inability to acquire additional inventory of
                  aircraft;*
 *(4)*
              *the
                  loss of key personnel;*
 *(5)*
              *our
                  inability to effectively manage our
                  growth;*
 *(6)*
              *our
                  inability to generate sufficient cash flows to meet our debt service
                  obligations;*
 *(7)*
              *competitive
                  conditions in the fractional aircraft
                  industry;*
 *(8)*
              *extensive
                  government regulation;*
 *(9)*
              *the
                  failure or disruption of our computer, communications or other
                  technology
                  systems;*
 *(10)*
              *increases
                  in fuel costs;*
 *(11)*
              *changing
                  economic conditions; and*
 *(12)*
              *our
                  failure to attract and retain qualified pilots and other operations
                  personnel.*


*The
      risks described above and in our Annual Report on Form 10-K are not the only
      risks facing our Company. Additional risks and uncertainties not currently
      known
      to us or that we currently deem to be immaterial also may materially adversely
      affect our business, financial condition or operating results. We do not
      undertake, and expressly disclaim, any obligation to update this forward-looking
      information, except as required by applicable law.*








**Table
        of Contents**


**Page****PART I**
              **FINANCIAL
                  INFORMATION**Item 1.
              Financial
                  StatementsCondensed
                  Consolidated Balance Sheets
              2Condensed
                  Consolidated Statements of Operations
              4Condensed
                  Consolidated Statements of Changes in Stockholders’
Deficit
              5Condensed
                  Consolidated Statements of Cash Flows
              6Notes
                  to Condensed Consolidated Financial Statements
              8Item
                  2.
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              14Item
                  3
              Quantitative
                  and Qualitative Disclosures about Market Risk
              20Item
                  4T.
              Controls
                  and Procedures
              20**PART
                  II**
              **OTHER
                  INFORMATION**
              21Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              21Item
                  6.
              Exhibits
              22Signatures


**PART
      I - FINANCIAL INFORMATION**





**Item
      1. Financial Statements.**




**AVANTAIR,
      INC. AND SUBSIDIARIES**


**(Formerly
      Ardent Acquisition Corporation)**


**Condensed
      Consolidated Balance Sheets** ****




**ASSETS**March
                  31,
              
              June
                  30,2008
              
              2007(unaudited)
              
              (Notes
                  2 and 6)**CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              4,437,644
              
              $
              12,577,468Accounts
                  receivable, net of allowance for doubtful accounts of$199,979
                  at March 31, 2008 and $460,377 at June 30, 2007
              
              
              5,594,532
              
              
              5,087,491Inventory
              
              
              609,622
              
              
              579,517Current
                  portion of aircraft costs related to fractional sales
              
              
              38,436,412
              
              
              31,895,085Current
                  portion of notes receivable
              
              
              820,351
              
              
              1,015,163Prepaid
                  expenses and other current assets
              
              
              1,809,197
              
              
              378,394Total
                  current assets
              
              
              51,707,758
              
              
              51,533,118**AIRCRAFT
                  COSTS RELATED TO FRACTIONAL SHARE SALES - net of current
                  portion**
              
              
              92,867,381
              
              
              74,870,704**PROPERTY
                  AND EQUIPMENT**,
                  at cost, net of accumulateddepreciation
                  and amortization of $7,894,364 at March 31, 2008and
                  $5,654,306 at June 30, 2007
              
              
              24,672,578
              
              
              15,380,698**OTHER
                  ASSETS**Cash
                  - restricted
              
              
              2,817,829
              
              
              2,942,983Deposits
              
              
              12,465,110
              
              
              9,904,054Deferred
                  maintenance agreement
              
              
              2,513,040
              
              
              2,691,539Notes
                  receivable- net of current portion
              
              
              447,807
              
              
              1,327,552Goodwill
              
              
              1,141,159
              
              
              1,141,159Other
                  assets
              
              
              1,200,359
              
              
              698,453Total
                  other assets
              
              
              20,585,304
              
              
              18,705,740Total
                  assets
              
              $
              189,833,021
              
              $
              160,490,260








*See
      Notes to Condensed Consolidated Financial Statements.*




2


**AVANTAIR,
      INC. AND SUBSIDIARIES**


**(Formerly
      Ardent Acquisition Corporation)**


**Condensed
      Consolidated Balance Sheets**


**LIABILITIES
                    AND STOCKHOLDERS’ DEFICIT**March
                    31,
                
                June
                    30,2008
                
                2007(unaudited)
                
                (Notes
                    2 and 6)**CURRENT
                    LIABILITIES**Accounts
                    payable
                
                $
                10,548,973
                
                $
                5,765,189Accrued
                    liabilities
                
                
                2,597,749
                
                
                3,141,061Customer
                    deposits
                
                
                765,193
                
                
                612,500Current
                    portion of deferred revenue related to fractional aircraft share
                    sales
                
                
                45,718,190
                
                
                38,058,547Current
                    portion of notes payable
                
                
                11,336,172
                
                
                4,412,288Unearned
                    management fee and charter card revenues
                
                
                12,113,121
                
                
                7,950,636Total
                    current liabilities
                
                
                83,079,398
                
                
                59,940,221Notes
                    payable, net of current portion
                
                
                22,060,099
                
                
                18,560,570Deferred
                    revenue related to fractional aircraft share sales, net of current
                    portion
                
                
                95,980,696
                
                
                92,186,334Other
                    liabilities
                
                
                2,350,388
                
                
                1,762,159Total
                    long-term liabilities
                
                
                120,391,183
                
                
                112,509,063Total
                    liabilities
                
                
                203,470,581
                
                
                172,449,284**COMMITMENTS
                    AND CONTINGENCIES**Preferred
                    stock series A convertible, $.0001 par value, authorized 300,000
                    shares;
                  152,000
                    shares issued and outstanding
                
                
                14,417,247
                
                
                -**STOCKHOLDERS’
                    DEFICIT**Preferred
                    stock, $.0001 par value, authorized 700,000 shares; none
                    issued
                
                
                -
                
                
                -Common
                    stock, Class A, $.0001 par value, 75,000,000 shares authorized,
                  15,220,817
                    shares issued and outstanding
                
                
                1,522
                
                
                1,522Additional
                    paid-in capital
                
                
                45,574,614
                
                
                46,124,857Accumulated
                    deficit
                
                
                (73,630,943
                )
                
                (58,085,403
                )Total
                    stockholders’ deficit
                
                
                (28,054,807
                )
                
                (11,959,024
                )Total
                    liabilities and stockholders’ deficit
                
                $
                189,833,021
                
                $
                160,490,260





*See
      Notes to Condensed Consolidated Financial Statements.*




3




**AVANTAIR,
      INC. AND SUBSIDIARIES**


**(Formerly
      Ardent Acquisition Corporation)**


**Condensed
      Consolidated Statements of Operations**


**(Unaudited)**


Three
                  Months Ended March 31,
              
              Nine
                  Months Ended March 31,2008
              
              2007
              
              2008
              
              2007**Revenues**Fractional
                  aircraft sold
              
              $
              11,183,245
              
              $
              7,372,979
              
              $
              31,633,495
              
              $
              21,917,085Maintenance
                  and management fees
              
              
              14,998,644
              
              
              10,069,343
              
              
              42,121,457
              
              
              27,316,678Charter
                  card and demonstration revenue
              
              
              2,814,706
              
              
              2,005,996
              
              
              7,756,892
              
              
              4,463,234FBO
                  and other revenues
              
              
              948,814
              
              
              424,873
              
              
              2,718,330
              
              
              853,833Total
                  revenue
              
              
              29,945,409
              
              
              19,873,191
              
              
              84,230,174
              
              
              54,550,830**Operating
                  expenses**Cost
                  of fractional aircraft shares sold
              
              
              9,404,328
              
              
              6,969,076
              
              
              26,373,438
              
              
              17,753,561Cost
                  of flight operations
              
              
              13,322,523
              
              
              11,079,365
              
              
              38,809,119
              
              
              27,026,276Cost
                  of fuel
              
              
              4,767,280
              
              
              2,795,756
              
              
              12,373,941
              
              
              7,399,575General
                  and administrative expenses
              
              
              5,499,457
              
              
              4,032,745
              
              
              14,852,400
              
              
              14,164,081Depreciation
                  and amortization
              
              
              1,132,865
              
              
              303,102
              
              
              2,878,978
              
              
              669,201Selling
                  expenses
              
              
              978,999
              
              
              1,047,521
              
              
              3,392,324
              
              
              2,905,751Total
                  operating expenses
              
              
              35,105,452
              
              
              26,227,565
              
              
              98,680,200
              
              
              69,918,445Loss
                  from operations
              
              
              (5,160,043
              )
              
              (6,354,374
              )
              
              (14,450,026
              )
              
              (15,367,615
              )**Other
                  income (expenses)**Interest
                  income
              
              
              83,316
              
              
              117,740
              
              
              418,169
              
              
              271,836Gain
                  on sale of assets
              
              
              341,370
              
              
              -
              
              
              341,370Interest
                  expense
              
              
              (705,222
              )
              
              (1,212,318
              )
              
              (1,855,053
              )
              
              (2,726,651
              )Total
                  other expenses
              
              
              (280,536
              )
              
              (1,094,578
              )
              
              (1,095,514
              )
              
              (2,454,815
              )Net
                  loss
              
              
              (5,440,579
              )
              
              (7,448,952
              )
              
              (15,545,540
              )
              
              (17,822,430
              )Preferred
                  stock dividend
              
              
              (345,905
              )
              
              -
              
              
              (503,506
              )
              
              -Accretion
                  of convertible preferred stock
              
              
              (22,077
              )
              
              -
              
              
              (32,353
              )
              
              -Net
                  loss attributed to common stockholders
              
              $
              (5,808,561
              )
              $
              (7,448,952
              )
              $
              (16,081,399
              )
              $
              (17,822,430
              )Loss
                  per common share:Basic
                  and diluted
              
              $
              (0.36
              )
              $
              (0.72
              )
              $
              (1.02
              )
              $
              (2.31
              )Weighted-average
                  common shares outstanding:Basic
                  and diluted
              
              
              15,220,817
              
              
              10,288,909
              
              
              15,220,817
              
              
              7,700,505






*See
      Notes to Condensed Consolidated Financial Statements.*





4


**AVANTAIR,
      INC. AND SUBSIDIARIES**


**(Formerly
      Ardent Acquisition Corporation)**


**Condensed
      Consolidated Statements of Changes in Stockholders’ Deficit** ****


**For
      the nine months ended March 31, 2008**


**(Unaudited)**


Class
                          A
                      
                      Additional
                      
                      
                      
                      
                      
                      TotalCommon
                          Stock
                      
                      Paid-In
                      
                      Accumulated
                      
                      Treasury
                      
                      Stockholders'Shares
                      
                      Amount
                      
                      Capital
                      
                      Deficit
                      
                      Stock
                      
                      DeficitBalance,
                          June 30, 2007, aspreviously
                          reported
                      
                      
                      15,220,817
                      
                      $
                      1,522
                      
                      $
                      46,124,857
                      
                      $
                      (56,198,527
                      )
                      $
                      (1,886,876
                      )
                      $
                      (11,959,024
                      )Restatement
                          for retirementof
                          treasury stock
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (1,886,876
                      )
                      
                      1,886,876
                      
                      
                      -Balance,
                          June 30, 2007, asrestated
                      
                      
                      15,220,817
                      
                      
                      1,522
                      
                      
                      46,124,857
                      
                      
                      (58,085,403
                      )
                      
                      -
                      
                      
                      (11,959,024
                      )Expenses
                          associated withregistration
                          of shares soldin
                          private placement
                      
                      
                      
                      
                      
                      
                      
                      
                      (360,321
                      )
                      
                      
                      
                      
                      
                      
                      
                      (360,321
                      )Accretion
                          of expensesassociated
                          with issuance ofPreferred
                          Stock
                      
                      
                      
                      
                      
                      
                      
                      
                      (32,353
                      )
                      
                      
                      
                      
                      
                      
                      
                      (32,353
                      )Share-based
                          compensation
                      
                      
                      
                      
                      
                      
                      
                      
                      345,937
                      
                      
                      
                      
                      
                      
                      
                      
                      345,937Accrued
                          dividend on seriesA
                          convertible preferredstock,
                          $1.18 per share and$.65
                          per share
                      
                      
                      
                      
                      
                      
                      
                      
                      (503,506
                      )
                      
                      
                      
                      
                      
                      
                      
                      (503,506
                      )Net
                          loss
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      (15,545,540
                      )
                      
                      
                      
                      
                      (15,545,540
                      )Balance,
                          March 31, 2008
                      
                      
                      15,220,817
                      
                      $
                      1,522
                      
                      $
                      45,574,614
                      
                      $
                      (73,630,943
                      )
                      $
                      -
                      
                      $
                      (28,054,807
                      )






*See
      Notes to Condensed Consolidated Financial Statements.*




5


**AVANTAIR,
      INC. AND SUBSIDIARIES**


**(Formerly
      Ardent Acquisition Corporation)**


**Condensed
      Consolidated Statements of Cash Flows** ****


**(Unaudited)**


**Nine
                  Months Ended**March
                  31,
              
              March
                  31,2008
              
              2007**OPERATING
                  ACTIVITIES:**Net
                  loss
              
              $
              (15,545,540
              )
              $
              (17,822,430
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
                  and amortization
              
              
              2,878,978
              
              
              864,172Gain
                  on sale of assets
              
              
              (341,370
              )
              
              -Fair
                  value of warrants issued to officer
              
              
              -
              
              
              156,000Fair
                  value of stock options issued
              
              
              -
              
              
              10,807Share-based
                  compensation
              
              
              345,937
              
              
              2,542,400Decrease
                  in allowance for doubtful accounts
              
              
              (260,398
              )
              
              -Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (246,643
              )
              
              (2,590,909
              )Inventory
              
              
              (30,105
              )
              
              (49,146
              )Prepaid
                  expenses and other current assets
              
              
              (1,430,803
              )
              
              (362,213
              )Aircraft
                  costs related to fractional share sales
              
              
              (24,538,004
              )
              
              (29,128,933
              )Restricted
                  cash
              
              
              125,154
              
              
              (1,632,710
              )Deposits
              
              
              (2,561,056
              )
              
              2,842,704Deferred
                  maintenance agreement
              
              
              178,499
              
              
              465,456Unearned
                  management fee and charter card revenue
              
              
              4,066,885
              
              
              5,760,222Notes
                  receivable
              
              
              1,074,557
              
              
              1,891,816Other
                  assets
              
              
              (501,906
              )
              
              (245,360
              )Accounts
                  payable
              
              
              4,783,784
              
              
              1,276,004Accrued
                  liabilities
              
              
              (543,312
              )
              
              (262,998
              )Deferred
                  revenue related to fractional aircraft share sales
              
              
              11,454,005
              
              
              19,467,791Deferred
                  gain on sale and leaseback of asset
              
              
              -
              
              
              (150,592
              )Customer
                  deposits
              
              
              152,693
              
              
              (220,939
              )Other
                  liabilities
              
              
              588,229
              
              
              221,927Net
                  cash used in operating activities
              
              
              (20,350,416
              )
              
              (16,966,931
              )**INVESTING
                  ACTIVITIES:**Proceeds
                  from sale of property and equipment
              
              
              -
              
              
              4,200,000Capital
                  expenditures
              
              
              (3,455,906
              )
              
              (4,140,923
              )Net
                  cash (used in) provided by investing activities
              
              
              (3,455,906
              )
              
              59,077






*See
      Notes to Condensed Consolidated Financial Statements.*




6




**AVANTAIR,
      INC. AND SUBSIDIARIES**


**(Formerly
      Ardent Acquisition Corporation)**


**Condensed
      Consolidated Statements of Cash Flows**


**(Unaudited)**




**Nine
                  Months Ended**March
                  31,
              
              March
                  31,2008
              
              2007**FINANCING
                  ACTIVITIES:**Borrowings
                  under long-term notes payable
              
              $
              2,200,000
              
              $
              13,545,617Borrowings
                  under line of credit
              
              
              -
              
              
              7,581,365Borrowings
                  under floor plan agreement
              
              
              15,415,137
              
              
              -Borrowings
                  under short-term notes payable
              
              
              291,110Principal
                  payments on long-term notes payable
              
              
              (5,580,066
              )
              
              (12,559,318
              )Principal
                  payments on floor plan agreement
              
              
              (10,135,582
              )
              
              -Principal
                  payments on line of credit
              
              
              -
              
              
              (22,848,144
              )Principal
                  payments on short-term notes payable
              
              
              (45,168
              )
              
              -Proceeds
                  from issuance of stock
              
              
              -
              
              
              43,893,971Proceeds
                  from issuance of preferred stock-net
              
              
              13,881,388
              
              
              -Cost
                  of registration of private placement shares
              
              
              (360,321
              )
              
              -Cost
                  of treasury shares
              
              
              -
              
              
              (1,353,922
              )Net
                  cash provided by financing activities
              
              
              15,666,498
              
              
              28,259,569Net
                  (decrease) increase in cash and cash equivalents
              
              
              (8,139,824
              )
              
              11,351,715Cash
                  and cash equivalents, beginning of the period
              
              
              12,577,468
              
              
              2,175,734Cash
                  and cash equivalents, end of the period
              
              $
              4,437,644
              
              $
              13,527,449**SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:**Interest
                  paid (net of amounts capitalized)
              
              $
              1,344,997
              
              $
              2,189,198**SUPPLEMENTAL
                  DISCLOSURE OF NON-CASH FINANCING ACTIVITIES**Accretion
                  of series A convertible preferred stock
              
              $
              32,353
              
              $
              -Aircraft
                  purchased under capital lease obligation
              
              $
              4,828,642
              
              $
              4,392,163Aircraft
                  purchased under long-term notes payable
              
              $
              3,906,900
              
              $
              -Dividends
                  payable on series A convertible preferred stock
              
              $
              531,478
              
              $
              -Charter
                  card issued as partial consideration of aircraft purchase
              
              $
              95,600
              
              $
              -Aircraft
                  sold through settlement of note payable
              
              $
              457,560
              
              $
              -Issuance
                  of share in connection with acquisition
              
              $
              -
              
              $
              20Reclassification
                  of stockholder advances to treasury stock
              
              $
              -
              
              $
              533,986Deferred
                  gain on sale and leaseback of asset
              
              $
              -
              
              $
              860,714Conversion
                  of short-term borrowings to long-term notes payable
              
              $
              -
              
              $
              7,050,300







*See
      Notes to Condensed Consolidated Financial Statements.*




7




**AVANTAIR,
      INC. AND SUBSIDIARIES**


**(Formerly
      Ardent Acquisition Corporation)**


**Notes
      to Condensed Consolidated Financial Statements** ****


**(Unaudited)**





**NOTE
      1 - BUSINESS OPERATIONS**




*General*




Avantair,
      Inc. (formerly known as Ardent Acquisition Corporation) (“Avantair” or the
“Company”), was organized on September 14, 2004 as a blank check company
      whose objective was to acquire an operating business.





On
      October 2, 2006, the Company signed a definitive stock purchase agreement
      with Avantair Inc. (“Old Avantair”). The agreement, as amended on
      December 15, 2006, provided for Avantair to issue 6,684,822 shares of
      common stock to the stockholders of Old Avantair in exchange for all of the
      issued and outstanding shares of Old Avantair (the “Share Exchange” or “Reverse
      Merger”). On February 22, 2007, the stockholders of Avantair voted in favor
      of the Reverse Merger. On
      February 22, 2007, upon the closing of the reverse acquisition of Ardent
      Acquisition Corp., the Company received approximately $36.3 million. For further
      details on this reverse acquisition, refer to the audited
      consolidated financial statements and the notes thereto included in the
      Company’s Annual Report on Form 10-K/A for the fiscal year ended June 30,
      2007 .




The
      Company is engaged in the sale and management of fractional ownership of
      professionally piloted aircraft for personal and business use. The Company
      operates a fixed flight based operation in Camarillo, California, as well as
      aircraft maintenance and concierge services to customers from hangars and office
      locations in Clearwater, Florida.




**NOTE
      2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**





*Interim
      Reporting*




The
      accompanying unaudited interim condensed consolidated financial statements
      were
      prepared in accordance with accounting principles generally accepted in the
      United States of America and the interim condensed financial statement rules
      and
      regulations of the Securities and Exchange Commission (“SEC”). In the opinion of
      management, these statements included all adjustments (consisting only of normal
      recurring adjustments) necessary for a fair presentation of the condensed
      consolidated financial statements. The interim condensed operating results
      are
      not necessarily indicative of the results for a ful1 year or any interim period.
      The June 30, 2007 consolidated balance sheet has been derived from the audited
      consolidated financial statements included in the Company’s Annual Report on
      Form 10-K/A for the fiscal year ended June 30, 2007.





Certain
      information and footnote disclosures normally included in the financial
      statements prepared in accordance with accounting principles generally accepted
      in the United States of America have been condensed or omitted pursuant to
      such
      rules and regulations relating to interim financial statements. These condensed
      consolidated financial statements should be read in conjunction with the
      Company’s Annual Report on Form 10-K/A for the fiscal year ended June 30,
      2007.





*Basis
      of Presentation*





All
      material intercompany accounts and transactions have been eliminated in the
      consolidated financial statements.




The
      accompanying condensed consolidated financial statements have been prepared
      assuming that the Company will continue as a going concern. This basis of
      accounting contemplates the recovery of the Company’s assets and the
      satisfaction of its liabilities in the normal course of business. The Company
      has suffered recurring losses resulting in an accumulated deficit of $74 million
      and a working capital deficiency of $31 million as of March 31, 2008. Successful
      transition to profitable operations is dependent upon obtaining a level of
      sales
      adequate to support the Company’s cost structure and an uninterrupted delivery
      of aircraft. Management intends to continue to finance the operations of the
      Company through future cash flows from operations and future financings and
      borrowings.




8




As
      discussed in Note 5, on November 14, 2007 and December 5, 2007, the Company
      completed the sale of 152,000 shares of its Series A convertible preferred
      stock
      and raised approximately $14 million in net proceeds which has provided the
      Company additional cash to continue its operations. However, there can be no
      assurance that the Company will be able to continue to obtain such financing
      or
      internally generate cash flows from operations, which may impact the Company’s
      ability to continue as a going concern. The accompanying condensed consolidated
      balance sheets do not include any adjustments to reflect the possible future
      effects on the recoverability and classification of assets or the amounts and
      classification of liabilities that may result from the potential inability
      of
      the Company to continue as a going concern.





*Use
      of Estimates*




The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America requires management to make
      certain estimates and assumptions that affect the amounts reported in the
      consolidated and combined financial statements and accompanying notes. The
      Company is subject to uncertainties such as the impact of future events,
      economic, environmental and political factors and changes in the Company’s
      business environment; therefore, actual results could differ from these
      estimates. Accordingly, the accounting estimates used in the preparation of
      the
      Company’s financial statements will change as new events occur, as more
      experience is acquired, as additional information is obtained and as the
      Company’s operating environment changes. Changes in estimates are made when
      circumstances warrant. Such changes in estimates and refinements in estimation
      methodologies are reflected in reported results of operations; if material,
      the
      effects of changes in estimates are disclosed in the notes to the consolidated
      financial statements. Significant estimates and assumptions by management
      affect: the proper recording of revenue arrangements with multiple deliverables,
      the allowance for doubtful accounts, the carrying value of long-lived assets,
      the amortization period of long-lived assets, the provision for income taxes
      and
      related deferred tax accounts, certain accrued expenses and contingencies.





*Revenue
      Recognition*




The
      Company sells fractional shares of aircraft and the related maintenance and
      management services that accompany aircraft ownership. The minimum share size
      sold in an aircraft by the Company is a 1/16th share, which equates to 50 flight
      hours per year. The purchase agreement grants the customer ownership rights
      in a
      specified aircraft and allows them the right to use any program aircraft
      operated by the Company for a specified number of hours each year. When a
      customer purchases a fractional share, they are also required to enter into
      a
      five-year management agreement with the Company. Under the terms of the
      management agreement, the Company agrees to manage, operate and maintain the
      aircraft on behalf of the customer in exchange for a fixed monthly fee, which
      varies depending on the size of the share purchased.




*Fractional
      Aircraft Shares*




The
      Company does not have vendor specific objective evidence to determine the
      individual fair values of a fractional share of aircraft and the related
      management and maintenance agreement and, as a result, has adopted the
      provisions of Emerging Issues Task Force (“EITF”) Issue No. 00-21 “Accounting
      for Revenue Arrangements with Multiple Deliverables” (“EITF 00-21”) to account
      for the sale of fractional shares of aircraft. Accordingly, as the sales of
      the
      fractional shares cannot be separated from the underlying maintenance agreement,
      fractional aircraft sales revenue is recognized ratably over the five-year
      term
      of the management and maintenance agreement. The period in which revenue is
      recognized will be evaluated on a periodic basis. Factors that will impact
      management’s assessment of the most appropriate period of revenue recognition
      will include, but not be limited to, customer turnover, terms and conditions
      of
      the related fractional share sale, maintenance arrangements as well as other
      factors that could impact revenue.





*Management
      and Maintenance Agreement*




Revenue
      earned in connection with the management and maintenance agreements is
      recognized ratably over the term of the agreement or five years. At times a
      customer will prepay its management and maintenance fee for a period of one
      year
      or longer. This is recorded as unearned revenue and amortized into revenue
      on a
      monthly basis in accordance with the schedule provided for within each
      agreement.





*Demonstration
      and Charter Card Revenues*




*Demonstration
      revenues.* The
      Company charges prospective new aircraft share owners on an hourly basis for
      each hour the prospective share owners are flown to demonstrate the quality
      and
      capabilities of the aircraft. The Company recognizes revenue related to these
      demonstration flights when the flight is completed.




9




*Charter
      Card revenues.* The
      Company sells access to its aircraft fleet for a 25 hour per year time card
      for
      flight time without the requirement to purchase an ownership share in an
      aircraft. The card holder pays the Company the entire amount in advance of
      access to the aircraft fleet. The Company defers the entire amount paid and
      recognizes revenue as aircraft are flown on an incremental basis. In prior
      years
      the Company sold a 15 hour time card which was discontinued on December 31,
      2007.





*Aircraft
      Costs Related To Fractional Sales*




The
      Company reflects aircraft costs related to the sale of fractional aircraft
      shares. As a result of the adoption of EITF 00-21 the Company recognizes the
      sales of the fractional shares of aircraft as income over the five-year period.
      The aircraft costs related to sales of fractional shares consist of the cost
      of
      the aircraft and are recorded as an asset and recognized as the cost of aircraft
      shares sold over the five-year period.





*Maintenance
      Policy*




The
      Company uses the direct method of accounting for scheduled non-refurbishment
      maintenance checks. The refurbishment portion of the maintenance check is
      capitalized since the interior of the aircraft is substantially refurbished
      and
      the life of the aircraft is extended. The cost of refurbishment is amortized
      over a three-year period. The direct method of accounting for overhaul costs
      is
      also used and these costs are expensed as incurred.




*Income
      Taxes*




Income
      taxes are accounted for under the asset and liability method in accordance
      with
      Statement of Financial Accounting Standard ("SFAS") No. 109, “Accounting
      for Income Taxes” (“SFAS 109”). Deferred tax assets and liabilities are
      recognized for the future tax consequences attributable to differences between
      the financial statement carrying amounts of existing assets and liabilities
      and
      their respective tax bases and operating loss and tax credit carryforwards.
      Deferred tax assets and liabilities are measured using enacted tax rates
      expected to apply to taxable income in the years in which those temporary
      differences are expected to be recovered or settled. The effect on deferred
      tax
      assets and liabilities of a change in tax rates is recognized in income in
      the
      period that includes the enactment date. A valuation allowance is established
      to
      reduce deferred tax assets to the amounts expected to be realized.





*Share-Based
      Compensation*




The
      Company accounts for share-based compensation to employees and directors in
      accordance with SFAS 123(R) “Share-Based Payment” (SFAS 123(R)), which requires
      the recognition of compensation expense for employee stock options and other
      share-based payments. Under SFAS 123(R), expense related to employee stock
      options and other share-based payments is recognized over the relevant service
      period based on the fair value of each stock option grant. The cost for stock
      option compensation was approximately $36,000 and $115,000 for the three months
      and nine months ended March 31, 2008, respectively. There was no stock option
      compensation for the three months ended March 31, 2007 and $2,542,300 for the
      nine months ended March 31, 2007. The Company issued 15,000 shares of restricted
      common stock to certain members of its Board of Directors in March 2008 and
      214,000 shares of restricted common stock to employees in May 2007. One-third
      (1/3) of the 15,000 shares awarded in March 2008 will vest on each date of
      the
      next three annual shareholders meetings at which directors are elected and
      so
      long as the recipient remains a member of the Board of Directors. One-third
      (1/3) of the 214,000 shares awarded in May 2007 shares will vest on the first
      anniversary date of grant and then one-twelfth (1/12) on the date three months
      after the first anniversary date of the grant and on such date every three
      months thereafter, such that 100% of the shares will be vested on the third
      anniversary date so long as employment with the Company is continuous.
      Compensation expense related to this restricted stock is recognized ratably
      over
      the three years based on the fair value of the shares at date of grant, which
      was $3.95 and $4.90 at March 5, 2008 and May 17, 2007, respectively. The
      compensation expense from restricted stock was approximately $80,000 and
      $232,000 for the three and nine months ended March 31, 2008, respectively.
      There
      were no stock options granted during the three and nine months ended March
      31,
      2008 respectively. At the time of the Reverse Merger on February 22, 2007,
      the Company issued 200,000 fully vested warrants to the Company’s former Chief
      Financial Officer. During the three months ended March 31, 2007, the Company
      recognized the $156,000 as a compensation charge for the value of the warrants
      based upon the difference between the market trading price at the date of grant
      and the $.01 purchase price per warrant. The Company did not issue warrants
      during the nine months ended March 31, 2008.





10




*Accounting
      for Derivative Instruments*





The
      Company accounts for derivative instruments in accordance with SFAS
      No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as
      amended, ("SFAS No. 133") which establishes accounting and reporting standards
      for derivative instruments and hedging activities, including certain derivative
      instruments imbedded in other financial instruments or contracts. The Company
      also considers the Emerging Issues Task Force (“EITF”) 00-19, “Accounting for
      Derivative Financial Instruments Indexed to and Potentially Settled in, a
      Company’s Own Stock” (“EITF 00-19”), which provides criteria for determining
      whether freestanding contracts that are settled in a company’s own stock,
      including common stock warrants, should be designated as either an equity
      instrument, an asset or as a liability under SFAS No. 133. The Company
      evaluates the conversion feature embedded in its Series A Convertible Preferred
      Stock (see Note 5) at each reporting period based on the criteria of SFAS No.
      133 and EITF 00-19 to determine whether the conversion feature would be required
      to be bifurcated from the Preferred Stock and accounted for separately as a
      derivative.  Based on management’s evaluation, the embedded conversion
      feature did not require bifurcation and derivative accounting as of March 31,
      2008.





*Loss
      Per Share*




Basic
      loss per share is computed by dividing loss available to common stockholders
      by
      the weighted average common shares outstanding for the period. Diluted earnings
      per share reflects the potential dilution that could occur if securities or
      other contracts to issue common stock were exercised or converted into common
      stock or resulted in the issuance of common stock that then shared in the
      earnings of the entity. Since the effect of outstanding options and warrants
      is
      antidilutive due to the losses incurred by the Company, they have been excluded
      from the Company’s computation of net loss per share for all periods presented.
      A total of 14,510,000 of potentially dilutive securities were excluded from
      the
      calculation of diluted loss per share for the three and nine months ended March
      31, 2008 and were comprised of 14,146,000 warrants to purchase one share of
      the
      Company’s common stock, 214,000 shares of restricted stock and 150,000
      outstanding options. A total of 12,646,744 potentially dilutive securities
      outstanding were excluded from the calculation of diluted loss per share for
      the
      three and nine months ended March 31, 2007. Per share amounts for the three
      and
      nine months ended March 31, 2007 have been restated to reflect the
      recapitalization of the Company stock on October 2, 2006.





*Reclassifications*





Certain
      balances for the three and nine months ended March 31, 2007 were reclassified
      to
      conform with classifications adopted in the current year.





*Recently
      Issued Pronouncements*




In
      September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS
      No. 157, “Fair Value Measurements” (“SFAS No. 157”). This statement
      establishes a single authoritative definition of fair value, sets out a
      framework for measuring fair value, and requires additional disclosures about
      fair-value measurements. SFAS No. 157 defines fair value as the price that
      would be received to sell an asset or paid to transfer a liability in an orderly
      transaction between market participants at the measurement date. For the
      Company, SFAS No. 157 is effective for the fiscal year beginning July 1,
      2008. Management is currently evaluating this standard to determine its impact,
      if any, on its consolidated financial statements.




In
      February 2007, the FASB issued Statement of Financial Accounting Standards
      No. 159, “The Fair Value Option for Financial Assets and Financial
      Liabilities - Including an Amendment of FASB Statement No. 115” (“SFAS
      No. 159”). This standard permits an entity to measure financial instruments
      and certain other items at estimated fair value. Most of the provisions of
      SFAS
      No. 159 are elective; however, the amendment to FASB No. 115,
“Accounting for Certain Investments in Debt and Equity Securities,” applies to
      all entities that own trading and available-for-sale securities. The fair value
      option created by SFAS No. 159 permits an entity to measure eligible items
      at fair value as of specified election dates. The fair value option (a) may
      generally be applied instrument by instrument, (b) is irrevocable unless a
      new election date occurs, and (c) must be applied to the entire instrument
      and not to only a portion of the instrument. SFAS No. 159 is effective as of
      the
      beginning of the first fiscal year that begins after November 15, 2007.
      Management is currently evaluating the impact of SFAS No. 159, if any, on its
      consolidated financial statements.




11




**NOTE
      3 - COMMITMENTS AND CONTINGENCIES**




*Lease
      Commitments*





The
      Company conducts a major part of its operations from leased facilities, which
      include airplane hangars and administrative offices. The 15 year hangar lease
      in
      Clearwater, Florida expiring in 2020 is classified as an operating lease. The
      lease provides for rent allocation credits for the first three years. These
      credits have been netted in rental expense on a straight line basis over the
      term of the lease. The Company also has a 15 year lease for its fixed based
      operation in Camarillo, California expiring in 2021, which is classified as
      an
      operating lease.





*Purchase
      Commitments*





Avantair’s
      primary growth strategy is to increase the number of available aircraft and
      fractional share owners. Avantair presently sources all of its aircraft from
      Piaggio America, Inc. and has contractual commitments to purchase 62 additional
      aircraft through 2013 at wholesale pricing for an aggregate of approximately
      $352 million. In addition, the Company has also entered into an agreement with
      Embraer to buy 20 additional aircraft for a total purchase price of
      approximately $54.0 million. The total combined aircraft commitment of Piaggio
      America and Embraer is $406 million to be delivered through fiscal 2013. The
      cost of these aircraft is expected to be funded by pre-selling the fractional
      shares of each plane prior to such plane’s delivery or by Avantair raising
      additional capital to acquire aircraft if they have not been pre-sold. From
      time
      to time, the Company may lease aircraft that require purchase commitments.
      Please see “ *Financing
      Commitments”* below *.*





*Financing
      Commitments*





In
      February 2005, the Company entered into financing arrangements for the purchase
      of three aircraft under various notes payable with Wells Fargo Equipment
      Finance, Inc. In January 2008, the Company sold one of these aircraft and repaid
      the outstanding balance on the related note payable. The notes outstanding
      at
      March 31, 2008 in the amount of $3,580,240 are payable in monthly installments
      ranging from $10,644 to $38,480 with interest ranging from 5.96% to
      6.12% per annum, through 2012. The notes are collateralized by the
      aircraft.





On April
      24, 2006, Avantair financed an aircraft maintenance program contract with Jet
      Support Services, Inc. (“JSSI”) in the amount of $3.4 million. The promissory
      note provides for seven monthly installments of $145,867 and 53 monthly
      installments of $45,867, respectively, including interest at 7% per year. As
      discussed in Note 7, on April 15, 2008, the Company
      entered into a payment arrangement with JSSI by means of a $5.6 million
      promissory note. The note matures on April 1, 2011 and bears interest at
      the rate of 10% per annum, with 35 monthly payments of principal and
      interest in an amount of $185,127 beginning on June 2, 2008. The note
      covers the balance of the preexisting $3.4 million promissory note as well
      as
      other costs and fees to be paid by the Company under service agreements with
      JSSI.




In
      August
      2007, the Company and CNM, Inc. (“CNM”) executed a new note agreement which
      converted an outstanding note obligation of approximately $7 million into a
      term
      loan payable monthly over three years and bearing interest at 10% per
      annum. CNM also assumed a promissory note due to Wells Fargo Bank for $2,900,000
      which was included as part of this new note agreement. CNM, Inc paid off the
      $2,900,000 promissory note to Wells Fargo Bank on December 7, 2007. The Company
      accounted for this conversion in accordance with EITF Issue No. 98-14,
“Debtor’s Accounting for Changes in Line-of-Credit or Revolving-Debt
      Arrangements.” No adjustments to the financial statements were necessary as a
      result of such modification.




On
      October 3, 2007, the Company entered into a floor plan agreement with Midsouth
      Services, Inc. (“Midsouth”) which provides for up to approximately $5.1
      million of financing for aircraft to be acquired from Piaggio America, Inc.
      through April 2008.   On March 3, 2008, the Company entered into a second
      floor plan agreement with Midsouth that provides for up to $5.3 million of
      financing for aircraft to be acquired from Piaggio America, Inc. for the six
      month period commencing with the first delivery of aircraft under the plan.
      Each
      agreement requires a $75,000 monthly facility fee with payment of any
      outstanding borrowings due in full prior to taking delivery of additional
      aircraft.  Midsouth also agreed, at the option of the Company, to provide
      an additional loan in the amount of $5.3 million, with terms and conditions
      of
      the additional loan substantially similar to the terms of the March 2008 loan,
      upon expiration of the October 3, 2007 floor plan agreement. Borrowings
      outstanding under these arrangements at March 31, 2008 totaled approximately
      $5.3 million.




12




On
      October 10, 2007, the Company entered into a five year lease agreement for
      one
      Piaggio Avanti P-180 aircraft. The aircraft will be used as a core aircraft
      and
      not fractionalized. The obligation is accounted for as a capital lease with
      lease payments of $89,000 per month. Upon expiration of the term, the Company
      will be required to purchase the aircraft from the lessor for $2.3
      million.





On
      October 31, 2007, the Company entered into a financing arrangement for the
      purchase of one used aircraft at a total purchase price of approximately $4.5
      million (inclusive of the value of a charter card of 100 hours). Financing
      was
      obtained from a lending institution through a note payable of $3.9 million.
      This
      debt will be repaid monthly over 7 years at an interest rate of the LIBOR rate
      plus 4.0%.





On
      November 14 and December 5, 2007, the Company sold 152,000 shares of preferred
      stock. For further details on the “Preferred Stock Agreement”, see Note 5 below.





*Litigation*




From
      time
      to time the Company is party to various legal proceedings in the normal course
      of business involving principally commercial charter party disputes. It is
      expected that these claims would be covered by insurance if they involve
      liabilities that arise from collision, other casualty, death or personal
      injuries to crew, subject to customary deductibles. Those claims, even if
      lacking merit, could result in the expenditure of significant financial and
      managerial resources. At March 31, 2008, there were no legal proceedings which
      outside counsel anticipates would have a material adverse effect on the
      Company’s financial position, results of operations or cash flows.





**NOTE
      4 - REGISTRATION OF SHARES**





The
      Company's registration statement on Form S-1 to register 4,540,381 shares sold
      in connection with a private placement raising $9 million in proceeds and
      346,000 warrants and 346,000 shares underlying the warrants issued in connection
      with the reverse merger, went effective in October 2007. Costs associated with
      that registration statement in the amount of $360,321 were charged to paid-in
      capital.





**NOTE
      5 - SALE OF SERIES A CONVERTIBLE PREFERRED STOCK**





On
      November 14, 2007, the Company entered into a Preferred Stock Purchase Agreement
      (the “Preferred Stock Agreement”) with certain investors. Under the Preferred
      Stock Agreement, the Company agreed to issue 152,000 shares of its newly-created
      Series A Convertible Preferred Stock to the Investors for an aggregate purchase
      price of $15.2 million, which was received in two tranches of $11.2 million
      and
      $4 million on November 14, 2007 and December 5, 2007, respectively. The proceeds
      were used predominantly to fund business operations and to acquire fractional
      shares in two aircraft delivered on December 28, 2007. The Series A Convertible
      Preferred Stock will not be registered under the Securities Act of 1933, but
      the
      Investors will have registration rights (including an obligation by the Company
      to have a “shelf” registration statement declared effective with the Securities
      and Exchange Commission within nine months of the issuance of the shares of
      Series A Convertible Preferred Stock) with respect to shares of Common Stock
      issuable upon conversion of the shares of Series A Convertible Preferred Stock
      (“Conversion Shares”). The Investors will be subject to restrictions on the
      number of Conversion Shares they may sell in the open market within six months
      and one year of such issuance. The terms of the Series A Convertible Preferred
      Stock are set forth in a Certificate of Designations filed November 14, 2007
      with the State of Delaware. Pursuant to such Certificate of Designations, the
      shares of Series A Convertible Preferred Stock (a) will rank senior to all
      currently outstanding classes of stock of the Company with respect to
      liquidation and dividends, (b) will be entitled to receive a cash dividend
      at
      the annual rate of 9.0%, payable quarterly (with such rate being subject to
      increase up to a maximum of 12% if such dividends are not timely paid), (c)
      will
      be convertible into shares of the Company’s common stock at any time at the
      option of the Investors based on a conversion price of $5.15 per share (subject
      to adjustment), (d) may be redeemed by the Company following the seventh
      anniversary of the issuance of the shares of Series A Convertible Preferred
      Stock, (e) may be redeemed by the Company in connection with certain change
      of
      control or acquisition transactions, (f) will be redeemed by the Company
      following the ninth anniversary of the issuance of the shares of Series A
      Convertible Preferred Stock, upon receipt of the written consent of the holders
      of a majority of the then outstanding shares of Series A Convertible Preferred
      Stock (g) will vote on an as-converted basis with the Company’s Common Stock and
      (h) will have a separate vote over certain material transactions or changes
      which the Company may wish to effect. The Company paid its investment adviser
      5%
      of the cash raised on this preferred financing.




13




**NOTE
      6 - RESTATEMENT**





During
      fiscal 2007, the Company bought back shares of its Class A Common Stock and
      Class B Common Stock costing approximately $1.9 million. Those shares were
      retired and cancelled in connection with the reverse merger on February 22,
      2007. The accompanying condensed consolidated financial statements as of June
      30, 2007, have been restated to reflect this retirement of treasury stock.





**NOTE
      7 - SUBSEQUENT EVENTS**





Effective
      April 11, 2008, the Company’s former Chief Financial Officer departed the
      Company and resigned his position as a director of the Company. In connection
      with the former Chief Financial Officer’s departure, on April 14, 2008, the
      Company entered into a separation agreement pursuant to which the former Chief
      Financial Officer will receive (i) a payment equal to eight months salary
      ($183,333), (ii) reimbursement of premium payments for COBRA benefits until
      the earlier of a period of eight (8) months commencing April 14, 2008
      or at such time that the former Chief Financial Officer obtains employment
      providing health benefits and (iii) pursuant to an amendment to his
      previously issued restricted stock award, 33,334 shares of common stock. In
      addition, the former Chief Financial Officer has agreed not to transfer any
      shares of the Company’s common stock for a period of six (6) months
      commencing April 14, 2008. At the end of the six (6) month period, the
      former Chief Financial Officer’s unrestricted shares shall be freely tradable in
      the open market, subject to the Company’s “Right of First Refusal” and in
      compliance with applicable securities law. In addition, the former Chief
      Financial Officer has agreed to cooperate fully with the Company’s reasonable
      requests for assistance in transitioning his previous responsibilities for
      a
      period of eight (8) months commencing April 14, 2008.





The
      Company entered into a payment arrangement with JSSI by means of a $5.6 million
      promissory note, dated April 15, 2008. The note matures on April 1,
      2011 and bears interest at the rate of 10% per annum, with 35 monthly
      payments of principal and interest in an amount of $185,127 beginning on
      June 2, 2008. The note contains no pre-payment penalty and provides for
      acceleration of the balance of the note in the event of a default under the
      note
      or an engine maintenance contract the Company maintains with JSSI. The note
      covers the balance of the preexisting $3.4 million promissory note as well
      as
      other costs and fees to be paid by the Company under service agreements with
      JSSI. In connection with the parties entering into this payment arrangement
      and
      the $5.6 million promissory note, the parties terminated an airframe maintenance
      contract, but the parties are continuing their relationship pursuant to the
      existing engine maintenance contract. The Company will manage the airframe
      maintenance program on an internal basis.




**Item
      2. Management’s Discussion and Analysis of Financial Condition and Results of
      Operations** **.**





**Overview**




Avantair
      is engaged in the sale and management of fractional ownerships of professionally
      piloted aircraft for personal and business use. According to AvData, Avantair
      is
      the fifth largest company in the North American fractional aircraft industry.
      As
      of March 31, 2008, Avantair operated 47 aircraft with 82 additional aircraft
      on
      order. Avantair operates a fixed flight based operation (FBO) in Camarillo,
      California. The Company also provides aircraft maintenance, concierge and other
      services to customers and services to the Avantair fleet from hangars and office
      locations in Clearwater, Florida and Camarillo, California.




Avantair
      generates revenues primarily through the sale of fractional ownership shares
      of
      aircraft, by providing operations, maintenance and management services related
      to these aircraft, and from the sale of time cards providing 25 flight time
      hours per year of access to its aircraft fleet without the requirement of
      purchasing fractional ownership shares. The Company markets and sells fractional
      ownership interests at retail prices to individuals and businesses in ownership
      shares as low as a 1/16 th interest, prior to delivery of the aircraft. Under maintenance and management
      agreements with fractional owners, Avantair provides pilots, maintenance, fuel
      and hangar space for the aircraft.




14




Avantair
      presently sources all of its aircraft from a single manufacturer, Piaggio
      America, Inc. As of March 31, 2008, Avantair had contractual commitments to
      purchase 62 additional aircraft through 2013 at wholesale pricing for an
      aggregate of approximately $352 million from this manufacturer. The Company
      is
      able to defer aircraft deliveries to bring them in line with sales expectations
      based upon existing economic conditions. At March 31, 2008, the Company had
      26.5
      fractional aircraft shares available for sale. Therefore, in the fourth quarter
      of fiscal 2008, the Company deferred four aircraft deliveries until December
      2008, with the ability to defer these to a later date if necessary. Avantair
      has
      placed an order with another manufacturer for 20 very light jets, for an
      aggregate of approximately $54 million with delivery scheduled beginning in
      2009. In addition to the cost of acquiring aircraft, Avantair’s primary expenses
      have been related to fuel, aircraft repositioning (i.e., moving an aircraft
      to
      another location to accommodate a customer’s need), pilot training and
      demonstration flights for sales purposes, maintenance, charters and insurance.




In
      order
      to achieve profitable income from operations before depreciation and
      amortization, management currently estimates that the Company will need to
      have
      45 fully fractionalized aircraft. The Company believes this measure is useful
      to
      investors as it excludes non-cash expenses that do not directly relate to the
      operation of fractionalized aircraft. This measure is a supplement to generally
      accepted accounting principles (GAAP) used to prepare the Company’s financial
      statements and should not be viewed as a substitute for GAAP measures. In
      addition, the Company’s non-GAAP measure may not be comparable to non-GAAP
      measures of other companies. Income from operations according to GAAP would
      include depreciation and amortization expense, estimated to be approximately
      $365,000 per month at the time of fully fractionalizing the 45 th aircraft. At March 31, 2008, the Company had 40 fractionalized aircraft.
      Therefore, Avantair’s primary growth strategy is to continue to increase the
      number of available aircraft and fractional share owners. In order to fund
      necessary growth, the Company will continue to seek additional funds through
      equity financing, inventory financing, debt financing, asset sales or a
      combination thereof. These additional funds may be used to fund continuing
      losses from operations, deposits made on fractional aircraft, leasehold
      improvements, and to fund the purchase of core aircraft and aircraft which
      are
      to be fractionalized but which have not yet been pre-sold.





During
      fiscal 2008, the U.S. economy has continued to slow as a result of several
      factors, including high energy costs, a weakening dollar and the direct and
      indirect impact from turmoil in the credit markets. Companies such as Avantair
      are inherently dependent upon energy to operate and, therefore, have the
      potential to be significantly impacted by increases in fuel prices. Although
      fractional aircraft share owners are contractually obligated to pay fuel cost
      increases incurred on their flights, fuel expenses incurred for repositioning,
      demonstration and pilot training flights are borne entirely by the Company.
      In
      an effort to manage our fuel costs, we have implemented a cost reduction program
      and have entered into fuel discount programs with certain of our fuel suppliers
      as part of our overall cost reduction program. In addition, the Company is
      also
      negotiating better pricing with other suppliers, including maintenance and
      corporate services.




**Results
      of Operations**




*Three
      Months Ended March 31, 2008 Compared with Three Months Ended March 31,
      2007*




Revenues
      for the three months ended March 31, 2008 were $29.9 million, an increase of
      50%
      from $19.9 million for the same period last year. This increase was the result
      of a 51% increase in the revenue generated from the sale of fractional aircraft
      shares to $11.2 million for the third quarter ended March 31, 2008 from $7.4
      million for the same period last year, an increase of 50% in maintenance and
      management fees to $15.0 million for the third quarter ended March 31, 2008
      from
      $10.0 million for the same period last year, an increase of 36% in charter
      card
      revenue to $1.9 million in the third quarter ended March 31, 2008 from $1.4
      million in the same period last year and an increase of 80% in demonstration
      and
      other revenue to $1.8 million for the third quarter ended March 31, 2008 from
      $1.0 million for the same period last year. Revenue from the sale of fractional
      aircraft shares increased primarily due to a 36% increase in the number of
      fractional shares sold to 624.5 through March 31, 2008 from 458.0 fractional
      shares sold through March 31, 2007. The increase in revenue from maintenance
      and
      management fees increased primarily due to the increase in the number of
      fractional shares sold, as previously mentioned.




Charter
      card and demonstration revenue increased $0.8 million primarily due to a 38%
      increase in hours flown in the three months ended March 31, 2008 compared to
      hours flown in the three months of the same period last year, and an
      increase in demonstration revenue of $0.3 million.




FBO
      and
      other revenue increased primarily due to an increase in fuel sales by $0.4
      million in the three
      months ended March 31, 2008 and an increase
      in rent revenue of $0.1 million.




15




Operating
      expenses for the three months ended March 31, 2008 were 34% higher than the
      same
      period last year, with
      total expenses of $35.1 million compared to $26.2 million. The cost of
      fractional aircraft shares sold increased to $9.4 million for
      the
      three months ended March 31, 2008 from $7.0 million for the same period last
      year, due to an increase of 36 *%* in
      the number
      of
      fractional shares sold to 624.5 fractional shares sold through March 31, 2008
      from 458.0 fractional shares sold through March 31, 2007. The cost of flight
      operations, along with the cost of fuel, increased 30% to $18.1 million for
      the three
      months ended March 31, 2008 from $13.9 million for the
      third quarter
      ended March 31, 2007, primarily due to:





·
            an
                increase of $0.6 million in maintenance expenses, comprised primarily
                of
                an increase in parts expense and maintenance insurance coverage due
                to an
                increase in fleet size;





·
            an
                increase of $2.3 million in fuel prices and flight fees (which includes
                landing fees, airport fees and ground transportation fees) borne
                by
                Avantair for repositioning flights, demonstration flights and pilot
                training flights;





·
            an
                increase of $1.6 million in pilot expenses, including salaries and
                related
                pilot expenses, hotel expenses, pilot airfare and living expenses
                due to
                the increase in the fleet size which requires an increase of four
                pilots
                per aircraft; and





·
            a
                decrease of $0.4 million in chartering and other
                expenses.





General
      and administrative expenses increased to $5.5 million for the three months
      ended
      March 31, 2008 from $4.1 million
      for the same period last year, primarily due to an increase of $0.5 million
      in
      expenses related to fixed-based operations in Clearwater, Florida and Camarillo,
      California, an increase in legal, accounting and other costs related to being
      a
      public company of $0.4 million, and increases in other costs related to the
      increase in fleet size and customer base, including training, systems and
      personnel costs.




Depreciation
      and amortization expenses was $1.1 million for the three months ended March
      31,
      2008 compared to $0.3 million for the same period last year, primarily due
      to
      two aircraft
      being reclassified from available for sale to fixed assets during the fourth
      quarter of fiscal year 2007. Depreciation expense for the entire year on those
      assets was booked in the fourth quarter of fiscal year 2007 which was when
      management made the decision to retain the aircraft for internal use.




Selling
      expenses decreased to $0.9 million for the three months ended March 31, 2008
      from $1.0 million for the same period last year primarily due to a decrease in advertising expense.




Loss
      from
      operations was $5.2 million for the three months ended March 31, 2008, a
      decrease of 19% from $6.4 million for the three months ended March 31, 2007
      for
      the reasons set forth above.




Total
      other income and expense was ($0.3) million for the three months ended March
      31,
      2008 compared to $(1.1) million for the same period last year, primarily due
      to
      a $0.5 million reduction in interest expense resulting from repayment of
      indebtedness with the proceeds of the Company’s public offering of stock and due
      to the recognition of a $0.3 million gain on the sale on a non-fractionalized
      aircraft in January 2008 .




Net
      loss
      decreased to $5.4 million for the three months ended March 31, 2008 compared
      to
      $7.4 million for the same period last year .
      The
      primary reason for the decrease in the net loss is the decrease in the loss
      from
      operations .





*Nine
      Months Ended March 31, 2008 Compared with Nine Months Ended March 31,
      2007*




Revenues
      for the nine months ended March 31, 2008 were $84.2 million, an increase of
      54%
      from $54.6 million for the same period last year. This increase was the result
      of a 44% increase in the revenue generated from the sale of fractional aircraft
      shares to $31.6 million for the nine months ended March 31, 2008 from $21.9
      million for the same period last year, an increase of 54% in maintenance and
      management fees to $42.1 million for the nine months ended March 31, 2008 from
      $27.3 million for the same period last year, an increase of 125% in charter
      card
      revenue to $5.4 million in the nine months ended March 31, 2008 from $2.4
      million in the same period last year and an increase of 75% in demonstration
      and
      other revenue to $4.9 million for the nine months ended March 31, 2008 from
      $2.8
      million for the same period last year. Revenue from the sale of fractional
      aircraft shares increased due to a 36 % increase in the number of fractional
      shares sold to 624.5 through March 31, 2008 from 458.0 fractional shares sold
      through March 31, 2007. The increase in revenue from maintenance and management
      fees increased primarily due to the increase in the number of fractional shares
      sold, as previously mentioned.




16




Charter
      card and demonstration revenue increased $3.3 million primarily due to a 118%
      increase in hours flown in the nine months ended March 31, 2008 over hours
      flown
      in the nine months ended March 31, 2007.




FBO
      and
      other revenue increased primarily due to (i) an increase in fuel sales by $1.2
      million in the nine months ended March 31, 2008 ; (ii)
      an increase
      in remarketing revenue of $0.3 million; and (iii) an increase in rent and other
      revenues of $0.3 million.




Operating
      expenses for the nine months ended March 31, 2008 were 41% higher than the
      same
      period last year, with
      total expenses of $98.7 million compared to $69.9 million. The cost of
      fractional aircraft shares sold increased to $26.4 million for
      the
      nine months ended March 31, 2008 from $17.8 million for the same period last
      year, due to an increase of 36 *%* in
      the number
      of
      fractional shares sold to 624.5 fractional shares sold through March 31, 2008
      from 458.0 fractional shares sold through March 31, 2007. The cost of flight
      operations, together with the cost of fuel increased 49% to $51.2 million for
      the nine
      months ended March 31, 2008 from $34.4 million for the
      nine months
      ended March 31, 2007, primarily due to:





·
            an
                increase of $5.7 million in maintenance expenses, comprised primarily
                of
                an increase in parts expense and maintenance insurance coverage due
                to an
                increase in fleet size and the addition of engine reserves for engines
                not
                previously included in the insurance
                coverage;





·
            an
                increase of $5.8 million in fuel prices and flight fees (which includes
                landing fees, airport fees and ground transportation fees) borne
                by
                Avantair for repositioning flights, demonstration flights and pilot
                training flights;





·
            an
                increase of $5.6 million in pilot expenses , including salaries and
                related pilot expenses, hotel expenses, pilot airfare and living
                expenses
                due to the increase in the fleet size which requires an increase
                of four
                pilots per aircraft; and





·
            a
                decrease of $0.4 million in other aircraft
                expenses.




General
      and administrative expenses increased to $14.9 million for the nine months
      ended
      March 31, 2008 from $14.2 million
      for the same period last year, primarily due to an increase of $2.2 million
      in
      costs of fixed-based operations both in Clearwater, Florida and Camarillo,
      California, an increase of $0.7 million in legal, accounting and other costs
      related to being a public company, and $0.5 million of increases in other costs
      related to the increase in fleet size and customer base, including training,
      systems and personnel costs, partially offset by a decrease of $2.4 million
      in
      compensation expense related to stock awarded to certain executives.




Depreciation
      and amortization expenses were $2.9 million for the nine months ended March
      31,
      2008 compared to $0.7 million for the same period last year, primarily due
      to aircraft
      being reclassified from available for sale to fixed assets during the fourth
      quarter of fiscal year 2007. Depreciation expense for the entire year on those
      assets was booked in the fourth quarter of fiscal year 2007 which was when
      management decided to retain the aircraft for internal use.




Selling
      expenses increased to $3.4 million for the nine months ended March 31, 2008
      from
      $2.9 million for the same period last year primarily due to an increase in advertising expenses and sales salaries and
      selling bonus.




Loss
      from
      operations was $14.5 million for the nine months ended March 31, 2008, an
      increase of 6% from $15.4 million for the nine months ended March 31, 2007
      for
      the reasons set forth above.




Total
      other income and expense was ($1.1) million for the nine months ended March
      31,
      2008 compared to $(2.5) million for the same period last year, primarily due
      to
      a $0.9 million reduction in interest expense resulting from repayment of
      indebtedness with the proceeds of the Company’s public offering of stock and due
      to the recognition of a $0.3 million gain on the sale on a non-fractionalized
      aircraft in January 2008.




Net
      loss
      decreased to $15.5 million for the nine months ended March 31, 2008 compared
      to
      a net loss of $17.8 million for the same period last year .
      The
      primary reason for the decrease in the net loss is the decrease in the loss
      from
      operations discussed
      above.





**Liquidity
      and Capital Resources**




Avantair’s
      primary sources of liquidity have been cash provided by operations, cash raised
      from its equity offering with Ardent Acquisition Corp., cash provided from
      its
      debt facility with CNM,
      Inc., cash raised in the recent preferred stock offering, and other asset based
      borrowing (see
      Notes 4 and 5 to the Company’s condensed consolidated financial
      statements) .
      The
      Company uses its cash primarily to fund losses from operations, deposits made
      on
      fractional aircraft, leasehold improvements, and to fund the purchase of core
      aircraft and aircraft which are to be fractionalized but which have not yet
      been
      pre-sold. Cash
      generated from operations has not been sufficient to provide for all the working
      capital needed to meet Avantair’s present requirements. At
      March
      31, 2008 and June 30, 2007, Avantair had a working capital deficit of $31.4
      and
      $8.4 million, respectively, and
      an
      accumulated deficit of $73.6 million and $58.1 million, respectively. As
      of
      March 31, 2008, cash and cash equivalents amounted to approximately $4.4 million
      and total assets of $189.8 million. The cash and cash equivalent balance
      decreased $8.1 million from June 30, 2007 while total assets increased $29.3
      million. The decrease in cash and cash equivalents occurred primarily as a
      result of the Company taking possession of nine aircraft during the first three
      quarters of this fiscal year and selling 101.5 shares out of 144 available
      shares relating to these nine aircraft.




17




Net
      cash
      used in operating activities was $20.3 million for the nine months ended March
      31, 2008 compared to cash used in operating activities of $17.0 million for
      the
      same period last year. The decrease in working capital used in the business
      is
      primarily attributable to a decrease in cash due to the nine planes delivered
      to
      the Company during the nine months ended March 31, 2008 since a portion of
      such
      planes were not fully fractionalized upon the Company taking possession. At
      March 31, 2008, the Company held 28.5 unsold fractional aircraft shares. For
      the
      nine months ended March 31, 2007, the Company took possession of eight aircraft
      and at March 31, 2007 held 1⁄2 unsold fractional aircraft share.




Net
      cash
      used in investing activities was $3.5 million for the nine months ended March
      31, 2008 compared to cash provided by investing activities of $0.1 million
      for the
      same
      period last year. The cash provided by investing activities during the nine
      months ended March 31, 2007 resulted from the
      sale
      of property and equipment, while the cash used in investing activities for
      the
      nine months ended March 31, 2008 resulted from capital expenditures on leasehold
      improvements at its Florida and California facilities.




Net
      cash
      provided by financing activities for the nine months ended March 31, 2008
      results primarily from net proceeds from the issuance of a new class of
      convertible preferred stock of $13.5 million. On
      November 14, 2007, the Company entered into a Preferred Stock Purchase Agreement
      (the “Preferred Stock Agreement”) with certain investors. Under the Preferred
      Stock Agreement, the Company agreed to issue 152,000 shares of its newly-created
      Series A Convertible Preferred Stock to certain investors for an aggregate
      purchase price of $15.2 million. The transaction is discussed in greater detail
      in Note 5 to the condensed consolidated financial statements included elsewhere
      in this Form 10-Q. During
      the quarter ended March 31, 2008, the Company had additional borrowings under
      long-term notes payable of $2.2 million and borrowings under floor plan
      agreements of $15.4 million.





Avantair
      presently has contractual commitments to purchase, from Piaggio America, Inc.,
      62 additional aircraft through 2013 at wholesale pricing for an aggregate of
      approximately $352 million. The commitment (delivery schedule) for delivery
      of
      aircraft from Piaggio America is adjusted periodically during the year and
      we
      expect adjustments to continue to occur. The current schedule provides for
      delivery of 8 aircraft over the next 12 months, during which time the Company
      will pay the manufacturer $44.3 million, inclusive of deposits on future
      deliveries. In addition, the Company has also entered into an agreement with
      Embraer to buy 20 additional aircraft for a total purchase price of
      approximately $54.0 million. Although there are no deliveries of aircraft from
      this manufacturer scheduled during the next 12 months, the Company will pay
      this
      manufacturer $2 million in deposits during this period. The total combined
      aircraft commitment is $406 million to be delivered through fiscal 2013. The
      cost of these aircraft is expected to be funded by pre-selling the fractional
      shares of each plane prior to such plane’s delivery or, when necessary, by
      Avantair raising additional capital to acquire aircraft when they have not
      been
      pre-sold.





Avantair’s
      financing commitments as of March 31, 2008, are described below :





·
            *Wells
                Fargo Equipment Finance, Inc. Notes:*In
                February 2005, the Company entered into financing arrangements for
                the
                purchase of three aircraft under various notes payable with Wells
                Fargo
                Equipment Finance, Inc. In January 2008, the Company sold one of
                these
                aircraft and repaid the outstanding balance on the related note payable.
                The notes outstanding at March 31, 2008 in the amount of $3,580,240
                are
                payable in monthly installments ranging from $10,644 to $38,480 with
                interest ranging from 5.96% to 6.12% per annum, through
                2012.





·
            *Jet
                Support Services, Inc. Note:*On
                April 24, 2006, Avantair financed an aircraft maintenance program
                contract
                with Jet Support Services, Inc. (“JSSI”) in the amount of $3.4 million.
                The promissory note provided for seven monthly installments of $145,867
                and 53 monthly installments of $45,867, respectively including interest
                at
                7% per year. On April 15, 2008, theCompany
                entered into a payment arrangement with JSSI by means of a $5.6 million
                promissory note. The note matures on April 1, 2011 and bears interest
                at the rate of 10% per annum, with 35 monthly payments of principal
                and interest in an amount of $185,127 beginning on June 2, 2008. The
                note covers the balance of the preexisting $3.4 million promissory
                note as
                well as other costs and fees to be paid by the Company under service
                agreements with JSSI.




18




·
            *CNM,
                Inc. Note:*In
                August 2007, the Company and CNM, Inc. (“CNM”) executed a new note
                agreement which converted an outstanding note obligation of approximately
                $7 million into a term loan payable monthly over three years and
                bearing
                interest at 10% per annum. CNM also assumed a promissory note due to
                Wells Fargo Bank for $2,900,000 which was included as part of this
                new
                note agreement.





·
            *Midsouth
                Services, Inc. Financing:*On
                October 3, 2007, the Company entered into a floor plan agreement
                with
                Midsouth Services, Inc. (“Midsouth”) which provides for up to
                approximately $5.1 million of financing for aircraft to be acquired
                from
                Piaggio America, Inc. through April 2008.   On March 3, 2008, the
                Company entered into an second floor plan agreement with Midsouth
                that
                provides for up to $5.3 million of financing for aircraft to be acquired
                from Piaggio America, Inc. for the six month period commencing with
                the
                first delivery of aircraft under the plan. Each agreement requires
                a
                $75,000 monthly facility fee with payment of any outstanding borrowings
                due in full prior to taking delivery of additional aircraft. Midsouth
                also
                agreed, at the option of the Company, to provide an additional loan
                in the
                amount of $5.3 million, with terms and conditions of the additional
                loan
                substantially similar to the terms of the March 2008 loan, upon expiration
                of the October 3, 2007 floor plan agreement. Borrowings outstanding
                under
                these arrangements at March 31, 2008 totaled approximately $5.3
                million.





·
            *Piaggio
                Lease Agreement:*On
                October 10, 2007, the Company entered into a five year lease agreement
                for
                one Piaggio Avanti P-180 aircraft. The aircraft will be used as a
                core
                aircraft and not fractionalized. The obligation is accounted for
                as a
                capital lease with lease payments of $89,000 per month. Upon expiration
                of
                the term, the Company will be required to purchase the aircraft from
                the
                lessor for $2.3 million.





·
            *Additional
                Financing Arrangement:*On
                October 31, 2007, the Company entered into a financing arrangement
                for the
                purchase of one used aircraft at a total purchase price of approximately
                $4.5 million (inclusive of the value of a charter card of 100 hours).
                Financing was obtained from a lending institution through a note
                payable
                of $3.9 million. This debt will be repaid monthly over 7 years at
                an
                interest rate of the LIBOR rate plus
                4.0%.





For
      additional information regarding these financing arrangements, see Notes 3
      and 7
      to the Company’s condensed consolidated financial statements.





On
      November 14 and December 5, 2007, the Company sold 152,000 shares of preferred
      stock for an aggregate purchase price of $15.2 million. These shares of
      preferred stock will be entitled to receive a cash dividend at the annual rate
      of 9.0%, payable quarterly with such rate being subject to increase up to a
      maximum of 12% if such dividends are not timely paid. For further details
      regarding the issuance of the preferred stock, see Note 5 to the Company’s
      condensed consolidated financial statements.




The
      Company has incurred recurring losses resulting in an accumulated deficit of
      $74
      million and a working capital deficiency of $31 million as of March 31, 2008.
      Successful transition to profitable operations is dependent upon obtaining
      a
      level of sales adequate to support the Company’s cost structure. The Company
      believes that it will need additional capital to continue operations and to
      pursue its business strategy in the next twelve to fifteen months. In order
      to
      meet these working capital needs, the Company is considering a combination
      of
      sources to obtain additional capital. The Company plans to work with commercial
      lenders to obtain inventory financing, which will likely require some level
      of
      security interest and guarantees. Equity and debt financing and asset sale
      alternatives are also being considered to supplement funds raised through
      inventory financing. In order to continue as a going concern, the Company must
      obtain additional capital under acceptable terms and conditions. The Company’s
      ability to obtain additional capital and the timing and cost of obtaining such
      capital will be affected by capital market economic conditions which are
      currently unstable. Accordingly, there can be no assurance that any such
      financings will be successfully completed.




19




**Off-Balance
      Sheet Arrangements**





Avantair
      has neither off-balance sheet obligations nor guarantees and has not
      historically used special purpose entities for any transactions.





**Item
      3. Quantitative and Qualitative Disclosures about Market
      Risk** **.**





*Quantitative
      and Qualitative Disclosures about Market Risk*




Avantair
      is exposed to various market risks, including changes in interest rates. Market
      risk is the potential loss arising from adverse changes in market rates and
      prices, such as interest rates and foreign currency exchange rates. Avantair
      does not enter into derivatives
      or other financial instruments for trading or speculative purposes. Avantair
      has
      also not entered into financial instruments to
      manage
      and reduce the impact of changes in interest rates and foreign currency exchange
      rates, although Avantair may enter into such transactions in the
      future.





*Interest
      Rate Risk*




Avantair
      is subject to market risk from exposure to changes in interest rates associated
      with its debt facility with Century Bank and its debt facility with Wachovia
      Bank. The current liability, pursuant to which Avantair is obligated to pay
      Century Bank, has an interest rate that is 1.0% above prime. The current
      liability, pursuant to which Avantair is obligated to pay Wachovia Bank, has
      an
      interest rate that is equal to the LIBOR rate plus 4.0%. At March 31, 2008,
      the
      liabilities of Avantair with exposure to interest rate risk were approximately
      $6.0 million.




**Item
      4T. Controls and Procedures** **.**





As
      of the
      end of the period covered by this report, we carried out an evaluation, under
      the supervision and with the participation of our management, including our
      Chief Executive Officer (principal executive officer) and our Chief Financial
      Officer (principal financial officer), of the effectiveness of the design and
      operation of the Company’s “disclosure controls and procedures” (as defined in
      Rule 13a-15(e) under the Securities Exchange Act). Based upon that evaluation,
      our Chief Executive Officer and our Chief Financial Officer concluded that,
      as
      of the end of the period covered by this report, our disclosure controls and
      procedures were not effective, based on the material weaknesses in our internal
      controls over financial reporting.





Management
      has made its evaluation of our disclosure controls and procedures as of March
      31, 2008. Avantair is aware of the existence of a material weakness in the
      design and operation of Avantair’s internal controls over financial reporting
      that could adversely affect its ability to record, process, and report financial
      information consistent with the assertions of management in the financial
      statements. A material weakness is defined as a deficiency,
      or a combination of deficiencies, in internal control over financial reporting,
      such that there is a reasonable possibility that a material misstatement of
      the
      company’s annual or interim financial statements will not be prevented or
      detected on a timely basis.





The
      material weakness first began with the independent audit of the fiscal years
      ended June 30, 2004, 2005 and 2006. The auditor’s letter on material weakness
      states the following:





·
            Avantair’s
                accounting files for fiscal 2004 were incomplete, which required
                significant modifications of accounting data for that
                period.





·
            Costs
                of fractional shares and revenue on certain contracts during the
                years
                ended June 30, 2006, 2005 and 2004 were not recognized properly due
                to
                errors made on the electronic worksheets for reporting this
                information.





·
            The
                accounting staff had an inappropriate level of knowledge, which
                contributed to errors and deficiencies in financial reporting and
                disclosures.




Avantair
      is addressing the concerns stated in the auditor’s letter on internal controls
      and making appropriate changes to remedy concerns over internal controls and
      reduce the possibility of a misstatement of Avantair’s financial statements. The actions
      taken to date include the hiring of a Chief Financial Officer, Vice President
      of
      Finance, Assistant Controller and a Director of Financial Transactions. In
      addition, Avantair
      has modified its business processes to include enhanced controls over its core
      processes, the more significant of which are described below. Avantair continues
      to educate the senior accounting staff on the requirements of Section 404 of
      the
      Sarbanes-Oxley Act.




20




During
      fiscal 2007, Avantair:





·
            designed
                a process to record the sale of fractional shares and implement a
                monthly
                and quarterly review of its calculation for recognizing revenue on
                fractional shares;





·
            implemented
                a new expenditure and authorization process and a cash receipts process
                that will improve accuracy of recording cash receipts and disbursements;
                and





·
            utilized
                the services of a consulting company which assists the Company in
                accounting and disclosure of complex
                transactions.





During
      fiscal 2008, Avantair intends to:





·
            hire
                additional accounting personnel with the appropriate level of knowledge
                to
                properly record transactions in the general ledger and prepare financial
                statements in accordance with accounting principles generally accepted
                in
                the United States of America;





·
            and
                has engaged consultants who are assisting the Company in implementation
                of
                a new back-office accounting software packagewhich will further improve theaccounting
                process and related internal
                controls.





Because
      Avantair has not completed its remediation plan, management has concluded that
      a
      material weakness in the operation of our disclosure controls and procedures
      continues to exist at March 31, 2008. Any failure to effectively address a
      material weakness or other control deficiency of Avantair or implement required
      new or improved controls, or difficulties encountered in their implementation,
      could disrupt Avantair’s ability to process key components of its results of
      operations and financial condition timely and accurately and cause Avantair
      to
      fail to meet its reporting obligations under rules of the Securities and
      Exchange Commission.





There
      has
      been no change in our internal control over financial reporting during the
      fiscal quarter ended March 31, 2008 that has materially affected, or is
      reasonably likely to materially affect, our internal control over financial
      reporting.




**PART
      II - OTHER INFORMATION**





**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders.**





The
      Company’s annual meeting of stockholders was held on March 5, 2008. Of the
      15,220,817 shares outstanding and entitled to vote at the meeting, 10,945,310
      shares were present at the meeting in person or by proxy. At the meeting the
      stockholders:




1.
          Voted on the election of seven directors - Barry J.
      Gordon, Arthur H. Goldberg, Steven Santo, John Waters, Stephanie A. Cuskley,
      A.
      Clinton Allen, and Robert J. Lepofsky - to serve until the next annual meeting
      of stockholders or until their successors are duly elected and qualified. The
      votes on all directors nominated were as follows:




**Nominee**
            
            **Votes
                For**
            
            **Votes
                Against/Withheld**Barry
                J. Gordon
            
            10,945,310
            
            -Arthur
                H. Goldberg
            
            10,945,310
            
            -Steven
                Santo
            
            10,945,310
            
            -John
                Waters
            
            9.244.685
            
            1,700,625Stephanie
                A. Cuskley
            
            10,943,660
            
            1,650A.
                Clinton Allen
            
            10,943,660
            
            1,650Robert
                J. Lepofsky
            
            10,945,310
            
            -




21




2.    
      Ratified the appointment of J.H. Cohn, LLP, an independent registered public
      accounting firm, as our independent auditors for the fiscal year ending June
      30,
      2008 with 10,945,310 votes for the ratification, no votes against the
      ratification, and no votes abstaining.





**Item
      6.**  **Exhibits** **.**





See
      exhibit index




22


**SIGNATURES**





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





May
      14,
      2008


Avantair,
                  IncBy:
              /s/
                  Steven SantoSteven
                  SantoChief
                  Executive Officer




23


**EXHIBIT
      INDEX**


**Exhibit
                  Number**
              
              **Description**10.1
              
              Separation
                Agreement
                and Release31.1
              
              Chief
                  Executive Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a)
                  of
                  the Securities Exchange Act of 193431.2
              
              Chief
                  Financial Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a)
                  of
                  the Securities Exchange Act of 193432.1
              
              Chief
                  Executive Officer Certification pursuant to 18 U.S.C. Section
                  135032.2
              
              Chief
                  Financial Officer Certification pursuant to 18 U.S.C. Section
                  1350




24