##### Table of Contents

---

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 period ending: September 30, 2007



| ̈ | 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)

Securities registered pursuant to
Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Units consisting of one share of
Common Stock, par value $.0001 per share, and two Warrants

Common Stock, $.0001 par value per share

Warrants to purchase shares of Common Stock



---

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  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of
accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act.

Large Accelerated
Filer ̈Accelerated Filer ̈Non-Accelerated Filer  x

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

As of November 14, 2007 there were 15,220,817 shares
of Common Stock, $.0001 par value per share, outstanding.

CERTAIN DEFINITIONS

Unless the context indicates otherwise, the terms Avantair, the Company, we, our, and us
refer to Avantair, Inc. and, where appropriate, its subsidiary.

FORWARD-LOOKING STATEMENTS

We believe that some of the information in this document constitutes forward-looking statements. You can identify these statements by forward-looking
words such as may, expect, anticipate, contemplate, believe, estimate, intends, and continue or similar words. You should read statements that contain
these words carefully because they discuss future expectations; contain information which could impact future results of operations or financial condition; or state other forward-looking information.

We believe it is important to communicate our expectations to the Avantair stockholders. However, you should be aware that there are risks, uncertainties
and events that may cause actual results to differ materially from our expectations, including among other things: negative cash flow and losses; reliance on a limited number of suppliers; continued compliance with government regulations and changes
in government regulations; legislation or regulatory environments, requirements or changes affecting the businesses in which Avantair is engaged; actions by competitors; Avantairs dependence on its key management personnel; fluctuations in
fuel costs; and general economic conditions.

You are cautioned not to place undue reliance on these forward-looking statements.



---



---

##### Table of Contents

Table of Contents



|        |  |                                                                                                                     |  |     
|------- |  | ------------------------------------------------------------------------------------------------------------------- |  | ----
|        |  |                                                                                                                     |  | Page
|PART I  |  | FINANCIAL INFORMATION                                                                                               |  |     
|        |  |                                                                                                                    
|ITEM 1: |  | Financial Statements                                                                                                |  |     
|        |  |                                                                                                                    
|        |  | Condensed Consolidated Balance Sheets at September 30, 2007 (unaudited) and June 30, 2007                           |  | 2   
|        |  |                                                                                                                    
|        |  | Condensed Consolidated Statements of Operations for the three months ended September 30, 2007 and 2006 (unaudited)  |  | 4   
|        |  |                                                                                                                    
|        |  | Condensed Consolidated Statement of Stockholders Deficit for the three months ended September 30, 2007 (unaudited) |  | 5   
|        |  |                                                                                                                    
|        |  | Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2007 and 2006 (unaudited)   |  | 6   
|        |  |                                                                                                                    
|        |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                    |  | 8   
|        |  |                                                                                                                    
|ITEM 2: |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                               |  | 12  
|        |  |                                                                                                                    
|ITEM 3: |  | Quantitative and Qualitative Disclosures about Market Risk                                                          |  | 20  
|        |  |                                                                                                                    
|ITEM 4: |  | Controls and Procedures                                                                                             |  | 21  
|        |  |                                                                                                                    
|PART II |  | OTHER INFORMATION                                                                                                   |  |     
|        |  |                                                                                                                    
|ITEM 5: |  | Other Information                                                                                                   |  | 22  
|        |  |                                                                                                                    
|ITEM 6: |  | Exhibits                                                                                                            |  | 22  
|        |  |                                                                                                                    
|        |  | Signatures                                                                                                          |  |     



1



---

##### Table of Contents

PART I  FINANCIAL INFORMATION



|Item 1. | Financial Statements.
|------- | ---------------------

AVANTAIR, INC. AND SUBSIDIARIES

(Formerly Ardent Acquisition Corporation)

Condensed Consolidated Balance Sheets



|                                                                                                                                                      |  |                   |             |               |   |            
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | ------------- | - | -----------
|                                                                                                                                                      |  | September 30,2007 |             | June 30, 2007
|                                                                                                                                                      |  | (unaudited)       |             |              
|ASSETS                                                                                                                                                |  |                   |             |               |   |            
|CURRENT ASSETS                                                                                                                                        |  |                   |             |               |   |            
|Cash and cash equivalents                                                                                                                             |  | $                 | 3,195,079   |               | $ | 12,577,468 
|Accounts receivable, net of allowance for doubtful accounts of $436,933 at September 30, 2007 and $460,377 at June 30,
2007                           |  |                   | 4,952,997   |               |   | 5,087,491  
|Inventory                                                                                                                                             |  |                   | 550,501     |               |   | 579,517    
|Current portion of aircraft costs related to fractional sales                                                                                         |  |                   | 37,060,561  |               |   | 31,895,085 
|Current portion of notes receivable                                                                                                                   |  |                   | 1,046,221   |               |   | 1,015,163  
|Prepaid expenses and other current assets                                                                                                             |  |                   | 520,567     |               |   | 378,394    
|                                                                                                                                                      |  |                   |             |               |   |            
|Total current assets                                                                                                                                  |  |                   | 47,325,926  |               |   | 51,533,118 
|                                                                                                                                                      |  |                   |             |               |   |            
|AIRCRAFT COSTS RELATED TO FRACTIONAL SHARE SALES- net of current portion                                                                              |  |                   | 78,491,914  |               |   | 74,870,704 
|                                                                                                                                                      |  |                   |             |               |   |            
|                                                                                                                                                      |  |                  
|PROPERTY AND EQUIPMENT, at cost, net of accumulated depreciation and amortization of $6,415,745 at September 30, 2007 and
$5,654,306 at June 30, 2007 |  |                   | 15,670,623  |               |   | 15,380,698 
|                                                                                                                                                      |  |                   |             |               |   |            
|                                                                                                                                                      |  |                  
|OTHER ASSETS                                                                                                                                          |  |                   |             |               |   |            
|Cashrestricted                                                                                                                                       |  |                   | 2,565,205   |               |   | 2,942,983  
|Deposits                                                                                                                                              |  |                   | 11,968,761  |               |   | 9,904,054  
|Deferred maintenance agreement                                                                                                                        |  |                   | 2,495,137   |               |   | 2,691,539  
|Notes receivable- net of current portion                                                                                                              |  |                   | 1,082,905   |               |   | 1,327,552  
|Goodwill                                                                                                                                              |  |                   | 1,141,159   |               |   | 1,141,159  
|Other assets                                                                                                                                          |  |                   | 749,813     |               |   | 698,453    
|                                                                                                                                                      |  |                   |             |               |   |            
|Total other assets                                                                                                                                    |  |                   | 20,002,980  |               |   | 18,705,740 
|                                                                                                                                                      |  |                   |             |               |   |            
|Total assets                                                                                                                                          |  | $                 | 161,491,443 |               | $ | 160,490,260
|                                                                                                                                                      |  |                   |             |               |   |            

See Notes to Condensed Consolidated Financial Statements.



2



---

##### Table of Contents

AVANTAIR, INC. AND SUBSIDIARIES

(Formerly Ardent Acquisition Corporation)

Condensed Consolidated Balance
Sheets



|                                                                                                                |  |                   |             |   |               |   |             |  
|--------------------------------------------------------------------------------------------------------------- |  | ----------------- | ----------- | - | ------------- | - | ----------- | -
|                                                                                                                |  | September 30,2007 |             |   | June 30, 2007 |  
|                                                                                                                |  | (unaudited)       |             |   |               |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                           |  |                   |             |   |               |   |             |  
|CURRENT LIABILITIES                                                                                             |  |                   |             |   |               |   |             |  
|Accounts payable                                                                                                |  | $                 | 8,791,178   |   |               | $ | 5,765,189   |  
|Accrued liabilities                                                                                             |  |                   | 2,214,394   |   |               |   | 3,141,061   |  
|Customer deposits                                                                                               |  |                   | 936,750     |   |               |   | 612,500     |  
|Current portion of deferred revenue related to fractional aircraft share sales                                  |  |                   | 40,752,424  |   |               |   | 38,058,547  |  
|Current portion of notes payable                                                                                |  |                   | 4,830,719   |   |               |   | 4,412,288   |  
|Unearned management fee and charter card revenues                                                               |  |                   | 7,666,760   |   |               |   | 7,950,636   |  
|                                                                                                                |  |                   |             |   |               |   |             |  
|Total current liabilities                                                                                       |  |                   | 65,192,225  |   |               |   | 59,940,221  |  
|                                                                                                                |  |                   |             |   |               |   |             |  
|Notes payable, net of current portion                                                                           |  |                   | 17,480,297  |   |               |   | 18,560,570  |  
|Deferred revenue related to fractional aircraft share sales, net of current portion                             |  |                   | 93,866,165  |   |               |   | 92,186,334  |  
|Other liabilities                                                                                               |  |                   | 1,847,269   |   |               |   | 1,762,159   |  
|                                                                                                                |  |                   |             |   |               |   |             |  
|Total long-term liabilities                                                                                     |  |                   | 113,193,731 |   |               |   | 112,509,063 |  
|                                                                                                                |  |                   |             |   |               |   |             |  
|Total liabilities                                                                                               |  |                   | 178,385,956 |   |               |   | 172,449,284 |  
|                                                                                                                |  |                   |             |   |               |   |             |  
|COMMITMENTS AND CONTINGENCIES                                                                                   |  |                   |             |   |               |   |             |  
|                                                                                                                |  |                  
|STOCKHOLDERS DEFICIT                                                                                           |  |                   |             |   |               |   |             |  
|Preferred stock, $.0001 par value, Authorized 1,000,000 shares; none issued                                     |  |                   |            |   |               |   |            |  
|Common stock, Class A, $.0001 par value, 75,000,000 shares authorized, 15,220,817 shares issued and outstanding |  |                   | 1,522       |   |               |   | 1,522       |  
|Common stock, Class B, non-voting, $10 par value, 1,250 shares authorized, none issued                          |  |                   |            |   |               |   |            |  
|Additional paid-in capital                                                                                      |  |                   | 45,982,066  |   |               |   | 46,124,857  |  
|Accumulated deficit                                                                                             |  |                   | (60,991,225 | ) |               |   | (56,198,527 | )
|Treasury stock, at cost                                                                                         |  |                   | (1,886,876  | ) |               |   | (1,886,876  | )
|                                                                                                                |  |                   |             |   |               |   |             |  
|Total stockholders deficit                                                                                     |  |                   | (16,894,513 | ) |               |   | (11,959,024 | )
|                                                                                                                |  |                   |             |   |               |   |             |  
|Total liabilities and stockholders deficit                                                                     |  | $                 | 161,491,443 |   |               | $ | 160,490,260 |  
|                                                                                                                |  |                   |             |   |               |   |             |  

See Notes to Condensed Consolidated Financial Statements.



3



---

##### Table of Contents

AVANTAIR, INC. AND SUBSIDIARIES

(Formerly Ardent Acquisition Corporation)

Condensed Consolidated Statements of Operations

(Unaudited)



|                                                                                                                    |  |                    |            |   |                   |   |            |  
|------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ---------- | - | ----------------- | - | ---------- | -
|                                                                                                                    |  | Three Months Ended |           
|                                                                                                                    |  | September 30,2007  |            |   | September 30,2006 |  
|Revenues                                                                                                            |  |                    |            |   |                   |   |            |  
|Fractional aircraft sold                                                                                            |  | $                  | 9,803,793  |   |                   | $ | 7,492,808  |  
|Maintenance and management fees                                                                                     |  |                    | 12,974,596 |   |                   |   | 8,029,078  |  
|Charter card revenue                                                                                                |  |                    | 1,401,082  |   |                   |   | 391,520    |  
|Demonstration fees and other revenues                                                                               |  |                    | 1,475,028  |   |                   |   | 863,311    |  
|                                                                                                                    |  |                    |            |   |                   |   |            |  
|Total revenue                                                                                                       |  |                    | 25,654,499 |   |                   |   | 16,776,717 |  
|                                                                                                                    |  |                    |            |   |                   |   |            |  
|Operating Expenses                                                                                                  |  |                    |            |   |                   |   |            |  
|Cost of fractional aircraft shares sold                                                                             |  |                    | 8,047,427  |   |                   |   | 4,363,266  |  
|Cost of flight operations                                                                                           |  |                    | 15,788,935 |   |                   |   | 9,852,506  |  
|Write-off of aircraft deposit                                                                                       |  |                    |           |   |                   |   | 300,000    |  
|General and administrative expenses (including share-based compensation expense of $115,355 in 2007 and $0 in 2006) |  |                    | 4,533,056  |   |                   |   | 4,261,952  |  
|Depreciation and amortization                                                                                       |  |                    | 761,439    |   |                   |   | 188,109    |  
|Selling expenses                                                                                                    |  |                    | 1,023,856  |   |                   |   | 824,357    |  
|                                                                                                                    |  |                    |            |   |                   |   |            |  
|Total operating expenses                                                                                            |  |                    | 30,154,713 |   |                   |   | 19,790,190 |  
|                                                                                                                    |  |                    |            |   |                   |   |            |  
|Loss from operations before interest                                                                                |  |                    | (4,500,214 | ) |                   |   | (3,013,473 | )
|                                                                                                                    |  |                    |            |   |                   |   |            |  
|Other income (expenses)                                                                                             |  |                    |            |   |                   |   |            |  
|Interest income                                                                                                     |  |                    | 192,722    |   |                   |   | 79,248     |  
|Interest expense                                                                                                    |  |                    | (485,206   | ) |                   |   | (844,132   | )
|                                                                                                                    |  |                    |            |   |                   |   |            |  
|Total other expenses                                                                                                |  |                    | (292,484   | ) |                   |   | (764,884   | )
|                                                                                                                    |  |                    |            |   |                   |   |            |  
|Net loss                                                                                                            |  | $                  | (4,792,698 | ) |                   | $ | (3,778,357 | )
|                                                                                                                    |  |                    |            |   |                   |   |            |  
|Loss per common share:                                                                                              |  |                    |            |   |                   |   |            |  
|Basic and Diluted                                                                                                   |  | $                  | (0.31      | ) |                   | $ | (1.15      | )
|                                                                                                                    |  |                    |            |   |                   |   |            |  
|Weighted-average common shares outstanding:                                                                         |  |                    |            |   |                   |   |            |  
|Basic and diluted                                                                                                   |  |                    | 15,220,817 |   |                   |   | 3,288,590  |  
|                                                                                                                    |  |                    |            |   |                   |   |            |  

See Notes to Condensed Consolidated Financial Statements.



4



---

##### Table of Contents

AVANTAIR, INC. AND SUBSIDIARIES

(Formerly Ardent Acquisition Corporation)

Condensed Consolidated Statements of Changes in Stockholders Deficit

For the three months ended September 30, 2007

(Unaudited)



|                                                |  |                     |  |                     |       |                |   |        |                    |   |  |               |            |   |                           |   |             |   |  |   |            |   |  |   |             |  
|----------------------------------------------- |  | ------------------- |  | ------------------- | ----- | -------------- | - | ------ | ------------------ | - |  | ------------- | ---------- | - | ------------------------- | - | ----------- | - |  | - | ---------- | - |  | - | ----------- | -
|                                                |  | Class ACommon Stock |  | Class BCommon Stock |       | Paid-InCapital |   |        | AccumulatedDeficit |   |  | TreasuryStock |            |   | TotalStockholdersDeficit |  
|                                                |  | Shares              |  | Amount              |       | Shares         |   | Amount |                    |   |  |              
|Balance, June 30, 2007                          |  | 15,220,817          |  | $                   | 1,522 |                |  |        | $                  |  |  | $             | 46,124,857 |   |                           | $ | (56,198,527 | ) |  | $ | (1,886,876 | ) |  | $ | (11,959,024 | )
|Expenses associated with registration of shares |  |                     |  |                     |       |                |   |        |                    |   |  |               | (258,146   | ) |                           |   |             |   |  |   |            |   |  |   | (258,146    | )
|Stock based compensation                        |  |                     |  |                     |       |                |   |        |                    |   |  |               | 115,355    |   |                           |   |             |   |  |   |            |   |  |   | 115,355     |  
|Net loss                                        |  |                     |  |                     |       |                |   |        |                    |   |  |               |            |   |                           |   | (4,792,698  | ) |  |   |            |   |  |   | (4,792,698  | )
|                                                |  |                     |  |                     |       |                |   |        |                    |   |  |               |            |   |                           |   |             |   |  |   |            |   |  |   |             |  
|Balance, September 30, 2007                     |  | 15,220,817          |  | $                   | 1,522 |                |  |        | $                  |  |  | $             | 45,982,066 |   |                           | $ | (60,991,225 | ) |  | $ | (1,886,876 | ) |  | $ | (16,894,513 | )
|                                                |  |                     |  |                     |       |                |   |        |                    |   |  |               |            |   |                           |   |             |   |  |   |            |   |  |   |             |  

See Notes to Condensed Consolidated Financial Statements.



5



---

##### Table of Contents

AVANTAIR, INC. AND SUBSIDIARIES

(Formerly Ardent Acquisition Corporation)

Condensed Consolidated Statements of Cash Flows

(Unaudited)



|                                                                                          |  |                    |            |   |                   |   |            |  
|----------------------------------------------------------------------------------------- |  | ------------------ | ---------- | - | ----------------- | - | ---------- | -
|                                                                                          |  | Three Months Ended |           
|                                                                                          |  | September 30,2007  |            |   | September 30,2006 |  
|OPERATING ACTIVITIES:                                                                     |  |                    |            |   |                   |   |            |  
|Net loss                                                                                  |  | $                  | (4,792,698 | ) |                   | $ | (3,778,357 | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                    |            |   |                   |   |            |  
|Depreciation and amortization                                                             |  |                    | 761,439    |   |                   |   | 188,109    |  
|Stock-based compensation                                                                  |  |                    | 115,355    |   |                   |   |           |  
|Changes in operating assets and liabilities:                                              |  |                    |            |   |                   |   |            |  
|Accounts receivable                                                                       |  |                    | 134,494    |   |                   |   | (2,266,454 | )
|Inventory                                                                                 |  |                    | 29,016     |   |                   |   | (3,492,665 | )
|Prepaid expenses and other current assets                                                 |  |                    | (142,173   | ) |                   |   | (229,864   | )
|Aircraft costs related to fractional share sales                                          |  |                    | (8,786,686 | ) |                   |   | (996,881   | )
|Restricted cash                                                                           |  |                    | 377,778    |   |                   |   |           |  
|Deposits                                                                                  |  |                    | (2,064,707 | ) |                   |   | 1,061,501  |  
|Deferred maintenance agreement                                                            |  |                    | 196,402    |   |                   |   | 169,297    |  
|Unearned management fee and charter card revenue                                          |  |                    | (283,876   | ) |                   |   | (863,378   | )
|Notes receivable                                                                          |  |                    | 213,589    |   |                   |   | 415,904    |  
|Other assets                                                                              |  |                    | (51,360    | ) |                   |   |           |  
|Accounts payable                                                                          |  |                    | 3,025,989  |   |                   |   | 3,847,381  |  
|Accrued liabilities                                                                       |  |                    | (926,667   | ) |                   |   |           |  
|Deferred revenue related to fractional aircraft share sales                               |  |                    | 4,373,708  |   |                   |   | 2,828,042  |  
|Customer deposits                                                                         |  |                    | 324,250    |   |                   |   | 3,473,000  |  
|Other liabilities                                                                         |  |                    | 85,110     |   |                   |   | (41,271    | )
|                                                                                          |  |                    |            |   |                   |   |            |  
|Net cash (used in) provided by operating activities                                       |  |                    | (7,411,037 | ) |                   |   | 314,364    |  
|                                                                                          |  |                    |            |   |                   |   |            |  
|INVESTING ACTIVITIES:                                                                     |  |                    |            |   |                   |   |            |  
|Proceeds from sale of property and equipment                                              |  |                    |           |   |                   |   | 4,200,000  |  
|Capital expenditures                                                                      |  |                    | (1,051,364 | ) |                   |   | (232,822   | )
|                                                                                          |  |                    |            |   |                   |   |            |  
|Net cash (used in) provided by investing activities                                       |  |                    | (1,051,364 | ) |                   |   | 3,967,178  |  
|                                                                                          |  |                    |            |   |                   |   |            |  



6



---

##### Table of Contents

AVANTAIR, INC. AND SUBSIDIARIES

(Formerly Ardent Acquisition Corporation)

Condensed Consolidated Statements
of Cash Flows

(Unaudited)



|                                                     |  |                    |            |   |                   |   |            |  
|---------------------------------------------------- |  | ------------------ | ---------- | - | ----------------- | - | ---------- | -
|                                                     |  | Three Months Ended |           
|                                                     |  | September 30,2007  |            |   | September 30,2006 |  
|FINANCING ACTIVITIES:                                |  |                    |            |   |                   |   |            |  
|Borrowings under long-term notes payable             |  |                    | 2,200,000  |   |                   |   | 3,350,000  |  
|Principal payments on long-term notes payable        |  |                    | (2,861,842 | ) |                   |   | (376,560   | )
|Principal payments on line of credit                 |  |                    |           |   |                   |   | (3,780,000 | )
|Cost of stock registration                           |  |                    | (258,146   | ) |                   |   |           |  
|Advances to stockholder                              |  |                    |           |   |                   |   | (110,780   | )
|                                                     |  |                    |            |   |                   |   |            |  
|Net cash used in financing activities                |  |                    | (919,988   | ) |                   |   | (917,340   | )
|                                                     |  |                    |            |   |                   |   |            |  
|Net (decrease) increase in cash and cash equivalents |  |                    | (9,382,389 | ) |                   |   | 3,364,202  |  
|Cash and cash equivalents, beginning of the period   |  |                    | 12,577,468 |   |                   |   | 2,175,734  |  
|                                                     |  |                    |            |   |                   |   |            |  
|Cash and cash equivalents, end of the period         |  | $                  | 3,195,079  |   |                   | $ | 5,539,936  |  
|                                                     |  |                    |            |   |                   |   |            |  
|SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:    |  |                    |            |   |                   |   |            |  
|Interest paid (net of amounts capitalized)           |  | $                  | 201,568    |   |                   | $ | 660,446    |  
|                                                     |  |                    |            |   |                   |   |            |  

See Notes to Condensed Consolidated Financial Statements.



7



---

##### Table of Contents

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,
Ardent 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. Subsequent to the Reverse Merger, Old Avantairs
business activities were the activities of Avantair. The stockholders and management of Old Avantair own a substantial portion of the equity of Avantair.

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 both Clearwater, Florida and Camarillo, California.

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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 full year or any interim period. The
June 30, 2007 condensed consolidated balance sheet has been derived from the audited condensed consolidated financial statements included in the Companys Annual report on form 10K 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 for the fiscal year ended June 30, 2007.

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 $60,991,225 and a working capital deficiency of $17,866,299 as of September 30, 2007. 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



---

##### Table of Contents

However, there can be no assurance that the Company will be able 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 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 and combined 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 fair value of each element and, as a result, has adopted the provisions of the 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, if the sales of the fractional shares cannot be separated from the underlying maintenance agreement, the
revenue is recognized ratably over the life of the maintenance agreement. The sales of the fractional shares of the aircraft are recognized as income over a five-year period. 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 any other factor 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 $3,000 per hour 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



---

##### Table of Contents

Charter Card revenues. The Company sells access to its aircraft fleet for a 15 or 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.

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 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) 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 $42,000 for the three months ended September 30, 2007. The Company issued 214,000 shares of
restricted common stock in May 2007. One-third (1/3) of the awarded 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 $4.90. The compensation expense from restricted stock was approximately $73,000 for the three months ended September 30, 2007.

There were no stock options granted during the three months ended September 30, 2007.

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 years presented. The total number of potentially dilutive securities excluded from the calculation of diluted loss per share for the three months ended September 30, 2007 was 14,510,000 which were
comprised of 14,146,000 warrants to purchase one share of the Companys common stock, 214,000



10



---

##### Table of Contents

shares of restricted stock and 150,000 outstanding options. There were no potentially dilutive securities outstanding during the three months ended
September 30, 2006. Per share amounts for the three month period ended September 30, 2006 have been restated to reflect the recapitalization of the Company stock on October 2, 2006.

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.

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 Commitment

As of September 30, 2007, the Company has agreed to purchase 46 additional Avanti II P-180
aircraft from Piaggio America and 20 aircraft from another manufacturer for a total commitment of $324,534,705 to be delivered through fiscal 2011 and 2012. In October 2007, the Company submitted an order to purchase an additional 22 aircraft from
Piaggio America. The agreement is awaiting approval from each respective Board of Directors. The agreement includes a standard price for each aircraft, subject to a price escalation based on the Consumer Price Index, with scheduled deliveries of
aircraft in 2011 and 2012.

On October 3, 2007, the Company entered into a floor plan agreement with a company which may be used to
purchase the next twelve (12) scheduled aircraft from Piaggio America. The company will only fund the contract purchase price for one aircraft at a time.

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 September 30, 2007, 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.



11



---

##### Table of Contents

NOTE 4  BRIDGE LOAN

In August 2007, the Company and CNM, Inc. (CNM) executed a new note agreement which converted an outstanding note obligation of approximately $7,000,000 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. 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.

NOTE 5  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 $258,146 were charged to paid-in capital.

NOTE 6  SUBSEQUENT EVENTS

On October 10, 2007, the Company entered into a five year lease agreement with a
purchase option for one Piaggio Avanti P-180 aircraft. Upon expiration of the term, the Company will purchase the aircraft from the lessor for an amount agreed to within the lease agreement.

In October 2007, the Company entered into a financing arrangement for the purchase of one used aircraft under a note payable with a financial
institution. The total consideration paid for the aircraft will be recorded in the second quarter of fiscal 2008.

On October 13, 2007, the
Companys board of directors approved an agreement with Piaggio America, Inc. to purchase additional aircraft to be delivered in the years 2011 and 2012 for a total commitment of $148.5 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 112,000 shares of its newly-created Series A Convertible Preferred Stock to the Investors for an aggregate purchase price of $11.2 million. 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), however 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 cash
amount of this preferred financing.



|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 September 30, 2007, Avantair operates 39 aircraft with 66 additional aircraft
on order. Avantair operates aircraft maintenance, concierge and other services to customers from hangars and office locations in Clearwater, Florida and Camarillo, California. Avantair also operates fixed flight based operations in Camarillo,
California. Avantair, Inc. was incorporated July 11, 2003 in the State of Nevada.

Avantair recorded goodwill of $1,141,159
representing the cost in excess of the fair value of net assets acquired of Skyline.



12



---

##### Table of Contents

Under Statement of Financial Accounting Standard (SFAS) No. 142, Goodwill and Other Intangible Assets, goodwill is not amortized
for financial reporting purposes but is reviewed annually for impairment. Goodwill is being amortized by Avantair for tax reporting purposes over 15 years. The Companys goodwill impairment test, used to identify potential impairment, compared
the fair value of reporting unit (the Company) with its carrying amount, including goodwill (the Companys book value). In accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets, the Company
reviews long-lived assets to be held-and-used for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the carrying amount of an asset exceeds its estimated future
undiscounted cash flows the asset is considered to be impaired. Impairment losses are measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset.

In preparing its impairment analysis for the year ended June 30, 2007, the Company derives fair value based on two approaches:



| |  |  | Market prices. The Company had entered into negotiations in April 2006 for a transaction with Ardent Acquisition Corporation which placed the fair value of the
Company at approximately $59 million (11 million shares x $5.40 per share based on the quoted market price of Ardents common stock during April 2006). The $59 million fair value of the Company was in excess of the Companys book value of
approximately $(36) million at June 30, 2006. At September 30, 2007, the quoted market for Avantairs common stock was $4.88 a share with 15,220,817 shares outstanding giving the Company a total market capitalization of approximately
$74.3 million.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Cash flow projections. Certain key assumptions used in preparing the cash flow projections, included:
| | - |  | -----------------------------------------------------------------------------------------------------



| |  |  | The overall basis for managements cash flow assumptions and conclusions are based on the fact that the Companys revenue is contractual and therefore
management can predict future management fee revenues with some certainty. The model is based on the premise that for every plane sold the Company will increase management fees by an agreed upon amount per plane. When the Company gets to a certain
aircraft fleet size, the management fee income will then exceed all fixed and variable costs.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company has an agreement from its aircraft manufacturer which provides for the delivery of 15 planes in the next 12 months and management believes it will fully
sell the fractional shares with respect to those planes prior to or contemporaneous with the receipt of the planes which would produce a cash flow improvement.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

As a result of the analyses, no impairment charges were required for long-lived assets during the period ended June 30, 2007.

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

Critical Accounting Policies

Avantairs
discussion and analysis of its financial condition and results of operations for the purposes of this document are based upon its combined and consolidated financial statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP).

Avantairs significant accounting policies are presented in
Note 2 to its consolidated financial statements, and the following summaries should be read in conjunction with the financial statements and the related notes included elsewhere in this report. While all accounting policies affect the financial
statements, certain policies may be viewed as critical. Critical accounting policies are those that are both most important to the portrayal of the financial statements and results of operations and that require Avantairs managements
most subjective or complex judgments and estimates. Avantairs management believes the policies that fall within this category are the policies related to revenue recognition, aircraft costs related to fractional sales, use of estimates,
capital assets, impairment of long-lived assets, income taxes and loss per share.



13



---

##### Table of Contents

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 the use of 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 fair value of each element and, as a result, has adopted the
provisions of the 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, if the sales of the fractional shares cannot be separated from the underlying maintenance agreement, the revenue is recognized ratably over the life of the maintenance agreement. The sales of the fractional shares of the aircraft are
recognized as income over a five-year period. 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 any other factor 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 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.

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 cost of aircraft shares
sold over the five-year period.

Demonstration and Charter Card Revenues

Demonstration revenues. The Company charges prospective new aircraft share owners $3,000 per hour 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.

Charter Card revenues. The Company sells access to its aircraft fleet for a 15 to 25 hour 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.

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



14



---

##### Table of Contents

in the notes to the consolidated and combined 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.

Long-lived Assets

In accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets, (SFAS No. 144) the Company reviews long-lived assets to be held-and-used for impairment
whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. If the carrying amount of an asset exceeds its estimated future undiscounted cash flows the asset is considered to be impaired.
Impairment losses are measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. As a result of
the analyses, no impairment charges were required for long-lived assets during the three month period ended September 30, 2007.

Income Taxes

Income taxes are accounted for under the asset and liability method in accordance with 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.

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 anti-dilutive due to the losses incurred by the Company, they have been excluded from the Companys computation of net loss per share for all years presented. The total number of potentially dilutive securities excluded from the
calculation of diluted loss per share for the three months ended September 30, 2007 was 14,510,000 which 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. There were no potentially dilutive securities outstanding during the three months ended September 30, 2006. Per share amounts for the three month period ended September 30, 2006 have been restated to reflect
the recapitalization discussed above.

Recently Issued Pronouncements

In September 2006, the 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 Financial Accounting Standards Board (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



15



---

##### Table of Contents

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.

Results of Operations

Three Months Ended September 30, 2007 Compared with Three Months Ended September 30, 2006

Revenues for the first three months ended September 30, 2007 were $25.7 million, an increase of 52.9% from $16.8 million for the same
period last year. This increase was the result of a 30.8% increase in the revenue generated from the sale of fractional aircraft shares to $9.8 million for the first quarter ended September 30, 2007 from $7.5 million for the same period last
year, an increase of 61.6% in maintenance and management fees to $13.0 million for the first quarter ended September 30, 2007 from $8.0 million for the same period last year, an increase of 257.9% in charter card revenue to $1.4 million in the
first quarter ended September 30, 2007 from $0.4 million in the same period last year and an increase of 70.9% in demonstration and other revenue to $1.5 million for the first quarter ended September 30, 2007 from $0.9 million for the same
period last year. Revenue from the sale of fractional aircraft shares increased due to a 44.3% increase in the number of fractional shares sold to 552 through September 30, 2007 from 382.5 fractional shares sold through September 30, 2006.
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 revenue increased $1.0 million primarily due to an increase in hours flown, from 103.8 hours in the first three months of fiscal 2007 to 366.6 hours in the first three months of fiscal 2008.

Demonstration and other revenue increased primarily due to (i) an increase in demonstration sales to $0.7 million in fiscal 2008 from $0.6 in
fiscal 2007 due to an increase in the number of demonstration flights; (ii) an increase in remarketing fees of $0.17 million, and (iii) an increase in fuel revenue of $0.3 million.

Operating expenses for the first three months of fiscal 2008 were 52.4% higher than the same period last year, with total expenses of $30.2 million
compared to $19.8 million. The cost of fractional aircraft shares sold increased to $8.1 million for the first quarter of fiscal 2008 from $4.4 million for the same period last year, due to an increase of 44.3%in the number of fractional
shares sold to 552 fractional shares sold through September 30, 2007 from 382.5 fractional shares sold through September 30, 2006. The cost of flight operations increased 60.3% to $15.8 million for fiscal 2008 from $9.9 million for fiscal
2007, primarily due to:



| |  |  | an increase of $2.1 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 $1.5 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 $1.7 million in pilot expenses , including salaries and related pilot expenses, hotel expenses, pilot airfare and living expenses;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | an increase of $0.5 million in chartering expenses; and
| | - |  | -------------------------------------------------------



| |  |  | an increase of $0.2 million in aircraft leasing expenses.
| | - |  | ---------------------------------------------------------

General and administrative expenses increased to $4.4 million for the three months ended September 30, 2007 from $4.3 million for the same period last year, primarily due to an increase in expenses related to
fixed-based operations and public company costs partially offset by a reduction of legal and accounting expenses.

Selling expenses
increased to $1.0 million for the three months ended September 30, 2007 from $0.8 million for the same period last year primarily due to an increase in commission, salary and bonus expense.

Loss from operations was $4.5 million for the first three months ended September 30, 2007, an increase of 49.3% from $3.0 million for the first
three months ended September 30, 2006 for the reasons set forth above.



16



---

##### Table of Contents

Total other income and expense was ($0.3) million for the first three months ended September 30,
2007 compared to $(0.8) million for the same period last year, primarily due to an increase in depreciation and amortization expense to $0.7 million for the first three months ended September 30, 2007 from $0.1 million for the same period last
year. The increase was due to assets 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.

Net loss increased to $4.8 million for the first three months ended September 30, 2007 compared to $3.8 million for the same
period last year. The primary reason for the increase in the net loss is the loss from operations and the increase in total other expense discussed above.

Liquidity and Capital Resources

Avantairs primary sources of liquidity have been cash provided by operations and cash
provided from its debt facility with CNM, Inc. The balance outstanding under the debt facility was paid down to $7.1 million at June 30, 2007. In August 2007, this balance was converted to a promissory note payable over 36 months with interest
at 10% per year after which the debt facility was terminated. Principal uses of cash are costs of operations and capital expenditures, additional deposits on fractional aircraft, the purchase of core aircraft and leasehold improvements. Cash
generated by the business has not been sufficient to provide working capital to meet Avantairs present requirements.

At
September 30, 2007 and June 30, 2007, Avantair had a working capital deficit of $17.9 and $8.4 million, respectively, and an accumulated deficit of $60.9 million and $56.2 million, respectively. In addition, it borrowed $7.6 million from
CNM, Inc. on October 2, 2006 to finance its business in the near term. The $7.6 million note from CNM, Inc. was repaid in March 2007. Avantair has continued to sustain operating losses during the period through the closing of the Reverse Merger
of Ardent on February 22, 2007, at which time Avantair gained access to Ardents capital resources. As of February 22, 2007, Ardents trust fund contained approximately $36.3 million, including interest. Following the closing,
these amounts have been used as follows:



| |  |  | approximately $19.0 million of the funds deposited in the trust account was paid to CNM, Inc. to satisfy Avantairs obligations under its Loan Agreement, dated
October 2, 2006, and Revolving Credit Agreement, dated May 31, 2005, with CNM, Inc. which amount Ardent has agreed to pay on the condition that the acquisition is consummated;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Approximately $0.4 million to the Ardent stockholders who elected to exercise their conversion rights and receive their pro rata portion of the funds deposited in
the trust account; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the remaining funds in the trust account after the distributions listed above will be released to Avantair to be used to fund transaction expenses, for future
aircraft deposits, potential acquisitions and for working capital purposes.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

With its borrowings, recent equity financing
and anticipated access to Ardents capital, Avantair anticipates that its existing resources combined with revenues will enable it to maintain its current and planned operations for the next twelve months. However, changes in its plans or other
events affecting its operating expenses, such as acquisition opportunities, may cause Avantair to expend its existing resources sooner than expected.

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 a single manufacturer and has contractual
commitments to purchase these aircraft at wholesale pricing for an aggregate of approximately $269.5 million to this manufacturer through 2011 for the delivery of 46 additional aircraft. In October, 2007, the Company submitted an order to purchase
an additional 22 aircraft from Piaggio America. The agreement is awaiting approval from their respective Board of Directors. In addition, it has also entered into an agreement with another manufacturer to buy 20 additional aircraft for a total
purchase price of $55.0 million. Other than the fixed price of each aircraft, those costs related to such growth will be variable, and the primary variable expenses will be increased pilot salary and expense, maintenance expense and fuel expense.
All of such expenses are expected to be covered by the sale of fractional shares and management fees. 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. While Avantair intends to pursue potential acquisition opportunities it has not entered into any material commitment to consummate any acquisition and it would be premature to estimate any potential costs related
to any such acquisition.



17



---

##### Table of Contents

Avantair may seek additional funding through equity or debt financing transactions or strategic
relationships. However, the uncertainty as to its future profitability may make it difficult for Avantair to secure additional financing on acceptable terms, if it is able to secure additional financing at all. Insufficient funds may require
Avantair to delay, scale back or eliminate some or all of its activities.

As of September 30, 2007, cash and cash equivalents
amounted to approximately $3.2 million and total assets of $161.5 million. The cash and cash equivalent balance decreased $9.4 million from June 30, 2007 while total assets increased $1.0 million. The decrease in cash and cash equivalents
occurred primarily to fund the Companys operating losses and to fund $1.0 million of leasehold improvements at our Clearwater, Florida and Camarillo, California facilities. The increase in total assets were a result of the Company taking
possession of three aircraft during the quarter and fractionalizing only thirty four and a half shares (34.5) out of forty eight (48) available shares relating to these 3 aircraft.

Net cash used in operating activities was $7.4 million for the quarter ended September 30, 2007 compared to cash provided by operating activities of
$0.3 million for the same period last year. The increase in working capital used in the business is primarily attributable to the three planes delivered to the Company during the period ended September 30, 2007 since a portion of such planes
were not fully fractionalized upon the Company taking possession. For the period ended September 30, 2006, the Company did not take possession of any aircraft.

Net cash used in investing activities was $1.0 million for the quarter ended September 30, 2007 compared to cash provided by investing activities of $4.0 million for the same period last year. The cash provided
by investing activities during the quarter ended September 30, 2006 resulted from the sale of property and equipment, while the cash used in investing activities for the quarter ended September 30, 2007 resulted from capital expenditures
on leasehold improvements at its Florida and California facilities.

Net cash used in financing activities for the quarters ended
September 30, 2007 and 2006 primarily relates to the repayment of debt of .9 million dollars in each of the quarters ending September 30, 2007 and 2006.

Financing Arrangements

Upon the closing of the acquisition of Ardent on February 22, 2007,
Avantair gained access to Ardents capital resources. As of February 23, 2007, Ardents trust fund distributed to Avantair approximately $36.3 million, including interest. Following the closing, uses of these amounts are described
above in the Liquidity and Capital Resources section.

On October 2, 2006, Avantair entered into stock purchase agreements
with various investors, whereby it sold 3,237,410 shares of its Class A common stock for an aggregate purchase price of $9.0 million. The proceeds of the equity financing were used for working capital purposes and to pay a $2.1 million balance
due an Avantair supplier for certain aircraft. In connection with the stock purchase agreements, Avantair entered into a Loan Agreement, a Security Agreement and a Secured Promissory Note with CNM, Inc., a former stockholder of Avantair. Under these
documents, CNM, Inc. loaned Avantair the sum of $7.6 million, the proceeds of which were used to reduce the balance due an Avantair supplier for certain aircraft. The loan was collateralized by all of Avantairs assets. The loan accrued
interest at a rate of 15.0% per year on any unpaid principal until it was paid in full on February 23, 2007.

In addition,
pursuant to the Loan Agreement, Avantair paid CNM, Inc. approximately $19 million to reduce the balance on its outstanding debt facility with CNM, Inc. to $7.1 million and to repay the promissory note of $7.6 million to CNM, Inc.

In August 2007, the Company and CNM executed a new note agreement which converted an outstanding note obligation of approximately $7.0 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 $2.9 million which was included as part of this new note agreement. 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.

The Company has financing arrangements for the purchase of three aircraft under various notes payable with Wells Fargo Equipment Finance,
Inc. The notes in the amount of $4,260,666 are payable in monthly installments ranging from $4,550 to $38,480 with interest ranging from 5.96% to 6.12% per annum, through 2012. The notes are collateralized by the aircraft and are personally
guaranteed by a stockholder of the Company.



18



---

##### Table of Contents

On October 3, 2007, the company entered into a floor plan finance agreement with a company which will
provide the company with funds to acquire the next twelve scheduled aircraft from Piaggio America. The company will only fund the contract purchase price for one aircraft at a time. For the funding of any aircraft, the company agrees to pay the
lender a monthly transaction fee in the amount of $75,000 after the aircraft delivery. On the closing date title shall transfer directly from Piaggio America to Avantair, Inc.

Avantair also has financed an aircraft maintenance program contract with Jet Support Services, Inc. in the amount of $3.3 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.

Avantair has entered into a sale and leaseback agreement, dated August 11, 2006, with JMMS, LLC. Under the sale and leaseback agreement, Avantair sold 100% of its interest in a core aircraft for $4.2 million and leased back 68.8% of
the aircraft for a five year term. The proceeds of the sale and leaseback arrangement were used to pay down the debt facility with CNM, Inc.

Cash Earnings before interest, taxes, depreciation and amortization (Non-GAAP)

Since the Company may be required to issue
2,000,000 additional shares of its common stock to current shareholders if it achieves certain specified Cash Earnings targets as defined in the stock purchase agreement that was entered into on February 22, 2007 between Ardent Acquisition
Corp. and Avantair, the Company is presenting Cash Earnings for the periods ended September 30, 2007 and 2006. Cash Earnings was defined in that agreement as the income/loss from operations before deductions for interest, depreciation and
amortization. In addition, for purposes of this calculation, the income earned on plane sales is recorded in the period that the sale takes place. Income from charter card revenue is recognized in the period that the card is sold. The schedule below
was not prepared in accordance with accounting principles generally accepted in the United States of America and is for presentation purposes only. We believe this information provides useful data for purposes of financial analysis. Avantair uses
this non-GAAP measure internally to assess its periodic financial operating performance and to plan for future periods. However, these non-GAAP measures are neither stated in accordance with, nor are they a substitute for GAAP measures.



19



---

##### Table of Contents

|                                        |  |                                         |            |     |                               |   |            |                                         |  |   |                               |        |  |   |            |  
|--------------------------------------- |  | --------------------------------------- | ---------- | --- | ----------------------------- | - | ---------- | --------------------------------------- |  | - | ----------------------------- | ------ |  | - | ---------- | -
|                                        |  | GAAP Three MonthsEndedSeptember 30,2007 |            |     | Cash Earnings(as defined)2007 |   |            | GAAP Three MonthsEndedSeptember 30,2006 |  |   | Cash Earnings(as defined)2006 |       
|Revenues                                |  |                                         |            |     |                               |   |            |                                         |  |   |                               |        |  |   |            |  
|Fractional aircraft shares sold         |  | $                                       | 9,803,793  | (1) |                               | $ | 14,177,500 |                                         |  | $ | 7,492,808                     | (1)(4) |  | $ | 11,940,000 |  
|Maintenance and management fees         |  |                                         | 12,974,596 |     |                               |   | 12,974,596 |                                         |  |   | 8,029,078                     |        |  |   | 8,029,078  |  
|Charter card revenue                    |  |                                         | 1,401,082  | (2) |                               |   | 2,888,302  |                                         |  |   | 391,520                       | (2)    |  |   | 870,000    |  
|Demonstration fees and other revenue    |  |                                         | 1,475,028  |     |                               |   | 1,475,028  |                                         |  |   | 863,311                       |        |  |   | 863,311    |  
|                                        |  |                                         |            |     |                               |   |            |                                         |  |   |                               |        |  |   |            |  
|                                        |  |                                         | 25,654,499 |     |                               |   | 31,515,426 |                                         |  |   | 16,776,717                    |        |  |   | 21,702,389 |  
|                                        |  |                                         |            |     |                               |   |            |                                         |  |   |                               |        |  |   |            |  
|Operating expenses                      |  |                                         |            |     |                               |   |            |                                         |  |   |                               |        |  |   |            |  
|Cost of fractional aircraft shares sold |  |                                         | 8,047,427  | (1) |                               |   | 12,141,861 |                                         |  |   | 4,363,266                     | (1)(4) |  |   | 10,316,254 |  
|Cost of flight operations               |  |                                         | 15,788,935 |     |                               |   | 15,788,935 |                                         |  |   | 9,852,506                     |        |  |   | 9,852,506  |  
|Depreciation and amortization           |  |                                         | 761,439    |     |                               |   | 761,439    |                                         |  |   | 188,109                       |        |  |   | 188,109    |  
|Write-off of aircraft deposit           |  |                                         |           |     |                               |   |           |                                         |  |   | 300,000                       |        |  |   | 300,000    |  
|General and administrative expenses     |  |                                         | 4,533,056  | (3) |                               |   | 4,417,701  |                                         |  |   | 4,261,952                     |        |  |   | 4,261,952  |  
|Selling expenses                        |  |                                         | 1,023,856  |     |                               |   | 1,023,856  |                                         |  |   | 824,357                       |        |  |   | 824,357    |  
|                                        |  |                                         |            |     |                               |   |            |                                         |  |   |                               |        |  |   |            |  
|Total operating expenses                |  |                                         | 30,154,713 |     |                               |   | 34,133,792 |                                         |  |   | 19,790,190                    |        |  |   | 25,743,178 |  
|                                        |  |                                         |            |     |                               |   |            |                                         |  |   |                               |        |  |   |            |  
|Loss from operations                    |  | $                                       | (4,500,214 | )   |                               | $ | (2,618,366 | )                                       |  | $ | (3,013,473                    | )      |  | $ | (4,040,789 | )
|                                        |  |                                         |            |     |                               |   |            |                                         |  |   |                               |        |  |   |            |  
|Add depreciation and amortization       |  |                                         |            |     |                               |   | 761,439    |                                         |  |   |                               |        |  |   | 188,109    |  
|                                        |  |                                         |            |     |                               |   |            |                                         |  |   |                               |        |  |   |            |  
|Cash Earnings (as defined)              |  |                                         |            |     |                               | $ | (1,856,927 | )                                       |  |   |                               |        |  | $ | (3,852,680 | )
|                                        |  |                                         |            |     |                               |   |            |                                         |  |   |                               |        |  |   |            |  

---

|(1) | Sales and cost of sales are recorded in the period of sale
|--- | ----------------------------------------------------------

|(2) | Charter card revenue is recorded in the period the card is sold. The cost associated with providing the future service is not included.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------

|(3) | Stock compensation expense is eliminated.
|--- | -----------------------------------------

|(4) | Adjusted for non-recurring item.
|--- | --------------------------------



|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.



20



---

##### Table of Contents

Interest Rate Risk

Avantair is subject to market risk from exposure to changes in interest rates associated with its debt facility with Century Bank, a current liability, pursuant to which Avantair is obligated to pay 1.0% above prime.
At September 30, 2007, the liability of Avantair with exposure to interest rate risk was approximately $2.2 million.

Off-Balance
Sheet Arrangements

Avantair has no off-balance sheet obligations nor guarantees and has not historically used special purpose entities
for any transactions.



|Item 4. | 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 and our Chief 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, we concluded that 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 September 30, 2007. 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 June 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 the inappropriate level of knowledge, which contributed to errors and deficiencies in financial reporting and disclosures.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

Avantair has addressed the concerns stated in the auditors letter on internal controls and made appropriate
changes to remedy concerns over internal controls and reduce the possibility of a misstatement of Avantairs financial statements. The actions taken include the hiring of a Chief Financial Officer, 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.

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;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | utilized the services of a consulting company which assists the Company in accounting and disclosure of complex transactions; and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



21



---

##### Table of Contents

| |  |  | implemented a new back-office accounting software package which will further improve the accounting process and related internal controls.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------

During fiscal 2008, Avantair will:



| |  |  | 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 generally accepted accounting principles;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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 September 30, 2007. 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 the our internal control over financial reporting during the fiscal quarter ended September 30, 2007 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II  OTHER INFORMATION



|Item 5. | Other Information
|------- | -----------------

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 112,000 shares of its newly-created Series A
Convertible Preferred Stock to the Investors for an aggregate purchase price of $11.2 million. 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), however 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 cash amount of this preferred financing.



|Item 6. | Exhibits
|------- | --------

See exhibit index



22



---

##### Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

November 14, 2007



Avantair, Inc.By:

/s/ Steven SantoSteven SantoChief Executive Officer




23



---

##### Table of Contents

EXHIBIT INDEX



|              |  |                                                                                                                     
|------------- |  | --------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                         
|31.1          |  | Chief Executive Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
|              | 
|31.2          |  | Chief Financial Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934
|              | 
|32.1          |  | Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350                                            
|              | 
|32.2          |  | Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350                                            



24