**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**







**FORM
      10-Q**




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




**For
      the quarterly period ended: September 30, 2008**




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




**For
      the transition period from** **** **to** **** ****




**Commission
      File Number 000-51115**







**Avantair,
      Inc.**


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









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




**4311
      General Howard Drive**


**Clearwater,
      Florida 33762**


**(Address
      of principal executive offices) (Zip code)**





**(727)
      539- 0071**


**(Registrant’s
      Telephone Number, Including Area Code)**









Indicate
      by check mark whether the registrant: (1) has filed all reports
      required to be filed by Section 13 or 15(d) of the Securities Exchange Act
      of 1934 during the preceding 12 months (or for such shorter period that the
      registrant was required to file such reports), and (2) has been subject to
      such filing requirements for the past 90 days.  Yes þ No o





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





Large
      Accelerated Filer o Accelerated
      Filer o


Non-Accelerated
      Filer o Smaller Reporting Company þ





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




As
      of
      November 13, 2008, there were 15,297,621 shares of the Company’s common stock,
      $.0001 par value per share, outstanding.









**CERTAIN
      DEFINITIONS**





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





**SPECIAL
      NOTE REGARDING FORWARD-LOOKING STATEMENTS**




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




*(1)*
            *our
                inability to generate sufficient net revenue in the
                future;*





*(2)*
            *our
                inability to fund our operations and capital
                expenditures;*





*(3)*
            *our
                inability to acquire additional inventory of
                aircraft;*





*(4)*
            *the
                loss of key personnel;*





*(5)*
            *our
                inability to effectively manage our
                growth;*





*(6)*
            *our
                inability to generate sufficient cash flows to meet our debt service
                obligations;*





*(7)*
            *competitive
                conditions in the fractional aircraft
                industry;*





*(8)*
            *extensive
                government regulation;*





*(9)*
            *the
                failure or disruption of our computer, communications or other technology
                systems;*





*(10)*
            *increases
                in fuel costs;*





*(11)*
            *changing
                economic conditions; and*





*(12)*
            *our
                failure to attract and retain qualified pilots and other operations
                personnel.*




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









**Table
      of Contents**


**Page****PART
                  I** **FINANCIAL INFORMATION**Item 1.
              Financial
                  StatementsCondensed
                  Consolidated Balance Sheets
              
              2Condensed
                  Consolidated Statements of Operations
              
              4Condensed
                  Consolidated Statements of Changes in Stockholders’
Deficit
              
              5Condensed
                  Consolidated Statements of Cash Flows
              
              6Notes
                  to Condensed Consolidated Financial Statements
              
              8Item 2.
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              
              16Item 3
              Quantitative
                  and Qualitative Disclosures about Market Risk
              
              20Item 4T.
              Controls
                  and Procedures
              
              20**PART
                  II** **OTHER INFORMATION**
              
              22Item 1.
              Legal
                  Proceedings.
              
              22Item 1A.
              Risk
                  Factors.
              
              22Item 2.
              Unregistered
                  Sales of Equity Securities and Use of Proceeds.
              
              22Item 4.
              Submission
                  of Matters to a Vote of Security Holders.
              
              22Item 6.
              Exhibits
              
              22Signatures











**PART
      I - FINANCIAL INFORMATION**




**Item
      1. Financial Statements.**




**AVANTAIR,
      INC. AND SUBSIDIARIES**


**Condensed
      Consolidated Balance Sheets**


**September 30,**
              
              **June 30,****2008**
              
              **2008**(Unaudited)
              
              (Note 2)**ASSETS****CURRENT
                  ASSETS**Cash
                  and cash equivalents
              
              $
              8,217,851
              
              $
              19,149,777Accounts
                  receivable, net of allowance for doubtful accounts of $213,487
                  at
                  September 30, 2008 and June 30, 2008
              
              
              10,599,869
              
              
              5,692,809Inventory
              
              
              198,060
              
              
              252,407Current
                  portion of aircraft costs related to fractional share
                  sales
              
              
              40,377,987
              
              
              40,417,203Current
                  portion of notes receivable
              
              
              1,498,103
              
              
              832,107Prepaid
                  expenses and other current assets
              
              
              2,026,430
              
              
              2,173,992Total
                  current assets
              
              
              62,918,300
              
              
              68,518,295AIRCRAFT
                        COSTS RELATED TO FRACTIONAL SHARE SALES - net of current
                        portion
              
              
              81,904,559
              
              
              92,383,071PROPERTY
                  AND EQUIPMENT, at cost, net of accumulated depreciation and amortization
                  of $10,329,062 at September 30, 2008 and $8,989,277 at June 30,
                  2008
              
              
              24,856,859
              
              
              25,663,264**OTHER
                  ASSETS**Cash
                  - restricted
              
              
              2,834,890
              
              
              2,826,290Deposits
                  on aircraft
              
              
              9,607,773
              
              
              8,679,277Deferred
                  maintenance agreement on aircraft engines
              
              
              2,027,203
              
              
              2,228,509Notes
                  receivable-net of current portion
              
              
              258,207
              
              
              1,008,223Goodwill
              
              
              1,141,159
              
              
              1,141,159Other
                  assets
              
              
              1,980,461
              
              
              2,029,367Total
                  other assets
              
              
              17,849,693
              
              
              17,912,825Total
                  assets
              
              $
              187,529,411
              
              $
              204,477,455




*See
      Notes to Condensed Consolidated Financial Statements.*




2




**AVANTAIR,
      INC. AND SUBSIDIARIES**


**Condensed
      Consolidated Balance Sheets**


**September 30,**
              
              **June 30,****2008**
              
              **2008**(Unaudited)
              
              (Note 2)**LIABILITIES
                  AND STOCKHOLDERS' DEFICIT****CURRENT
                  LIABILITIES**Accounts
                  payable
              
              $
              5,274,440
              
              $
              4,718,355Accrued
                  liabilities
              
              
              3,566,068
              
              
              5,528,472Customer
                  deposits
              
              
              506,481
              
              
              1,905,682Short-term
                  notes payable
              
              
              10,810,705
              
              
              15,775,260Current
                  portion of long-term notes payable
              
              
              7,165,558
              
              
              6,648,093Current
                  portion of deferred revenue related to fractional aircraft share
                  sales
              
              
              48,789,487
              
              
              47,778,900Unearned
                  management fee and charter card revenues
              
              
              15,956,963
              
              
              16,316,044Total
                  current liabilities
              
              
              92,069,702
              
              
              98,670,806Long-term
                  notes payable, net of current portion
              
              
              21,734,489
              
              
              23,856,322Deferred
                  revenue related to fractional aircraft share sales, net of current
                  portion
              
              
              91,948,781
              
              
              96,525,785Other
                  liabilities
              
              
              2,682,462
              
              
              2,636,730Total
                  long-term liabilities
              
              
              116,365,732
              
              
              123,018,837Total
                  liabilities
              
              
              208,435,434
              
              
              221,689,643**COMMITMENTS
                  AND CONTINGENCIES**Series
                  A convertible preferred stock $.0001 par value, authorized 300,000
                  shares;
                  152,000 shares issued and outstanding
              
              
              14,461,743
              
              
              14,439,358**STOCKHOLDERS'
                  DEFICIT**Perferred
                  stock, $.0001 par value, authorized 700,000 shares; none
                  issued
              
              
              -
              
              
              -Common
                  stock, Class A, $.0001 par value, 75,000,000 shares authorized,
                  15,297,621
                  shares issued and outstanding at September 30, 2008 and 15,286,792
                  shares
                  issued and outstanding at June 30, 2008
              
              
              1,530
              
              
              1,529Additional
                  paid-in capital
              
              
              44,933,905
              
              
              45,314,393Accumulated
                  deficit
              
              
              (80,303,201
              )
              
              (76,967,468
              )Total
                  stockholders' deficit
              
              
              (35,367,766
              )
              
              (31,651,546
              )Total
                  liabilities and stockholders' deficit
              
              $
              187,529,411
              
              $
              204,477,455




*See
      Notes to Condensed Consolidated Financial Statements.*




3




**AVANTAIR,
      INC. AND SUBSIDIARIES**


**Condensed
      Consolidated Statements of Operations**


**Three
      Months Ended September 30, 2008 and 2007**


**(Unaudited)**




**2008**
              
              **2007****Revenues**Fractional
                  aircraft sold
              
              $
              12,493,716
              
              $
              9,803,793Maintenance
                  and management fees
              
              
              17,077,139
              
              
              12,974,596Charter
                  card and demonstration revenue
              
              
              2,366,224
              
              
              2,103,382FBO
                  and other revenues
              
              
              739,382
              
              
              772,728**Total
                  revenue**
              
              
              32,676,461
              
              
              25,654,499**Operating
                  expenses**Cost
                  of fractional aircraft shares sold
              
              
              10,605,023
              
              
              8,047,427Cost
                  of flight operations
              
              
              11,810,384
              
              
              12,097,515Cost
                  of fuel
              
              
              4,512,406
              
              
              3,691,420General
                  and administrative expenses
              
              
              5,660,787
              
              
              4,533,056Selling
                  expenses
              
              
              907,751
              
              
              1,023,856Depreciation
                  and amortization
              
              
              1,082,265
              
              
              761,439**Total
                  operating expenses**
              
              
              34,578,616
              
              
              30,154,713**Loss
                  from operations**
              
              
              (1,902,155
              )
              
              (4,500,214
              )**Other
                  income (expenses)**Other
                  income
              
              
              1,200
              
              
              -Interest
                  income
              
              
              24,703
              
              
              192,722Interest
                  expense
              
              
              (1,459,481
              )
              
              (485,206
              )**Total
                  other expenses**
              
              
              (1,433,578
              )
              
              (292,484
              )**Net
                  loss**
              
              
              (3,335,733
              )
              
              (4,792,698
              )Preferred
                  stock dividend and accretion of expenses
              
              
              (391,513
              )
              
              -**Net
                  loss attributable to common stockholders**
              
              $
              (3,727,246
              )
              $
              (4,792,698
              )**Loss
                  per common share:**Basic
                  and diluted
              
              $
              (0.24
              )
              $
              (0.31
              )**Weighted-
                  average common shares outstanding:**Basic
                  and diluted
              
              
              15,287,694
              
              
              15,220,817




*See
      Notes to Condensed Consolidated Financial Statements.*




4




**AVANTAIR,
      INC. AND SUBSIDIARIES**


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


**Three
      Months Ended September 30, 2008**


**(Unaudited)**


Class A
              
              Class B
              
              Additional
              
              
              
              TotalCommon Stock
              
              Common Stock
              
              Paid-In
              
              Accumulated
              
              Stockholders'Shares
              
              Amount
              
              Shares
              
              Amount
              
              Capital
              
              Deficit
              
              DeficitBalance
                  at June 30, 2008
              
              
              15,286,792
              
              $
              1,529
              
              
              -
              
              $
              -
              
              $
              45,314,393
              
              $
              (76,967,468
              )
              $
              (31,651,546
              )Expenses
                  associated with registration of shares
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (84,682
              )
              
              
              
              
              (84,682
              )Stock-based
                  compensation
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              95,708
              
              
              
              
              
              95,708Dividend
                  on Series A convertible preferred stock and accretion of issuance
                  costs
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (391,513
              )
              
              
              
              
              (391,513
              )Issuance
                  of shares in connection with vested restricted stock
              
              
              10,829
              
              
              1
              
              
              
              
              
              
              
              
              (1
              )
              
              
              
              
              -Net
                  loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (3,335,733
              )
              
              (3,335,733
              )Balance
                  at September 30, 2008
              
              
              15,297,621
              
              $
              1,530
              
              
              -
              
              $
              -
              
              $
              44,933,905
              
              $
              (80,303,201
              )
              $
              (35,367,766
              )




*See
      Notes to Condensed Consolidated Financial Statements.*




5




**AVANTAIR,
      INC. AND SUBSIDIARIES**


**Condensed
      Consolidated Statements of Cash Flows**


**Three
      Months Ended September 30, 2008 and 2007**


**(Unaudited)**


**2008**
              
              **2007****OPERATING
                  ACTIVITIES:**Net
                  loss
              
              $
              (3,335,733
              )
              $
              (4,792,698
              )Adjustments
                  to reconcile net loss to net cash used in operating
                  activities:Depreciation
                  and amortization
              
              
              1,082,265
              
              
              761,439Stock-based
                  compensation
              
              
              95,708
              
              
              115,355Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (4,907,060
              )
              
              134,494Inventory
              
              
              54,347
              
              
              29,016Deposits
                  on aircraft
              
              
              (928,496
              )
              
              (2,064,707
              )Deferred
                  maintenance agreement on aircraft engines
              
              
              201,306
              
              
              196,402Prepaid
                  expenses and other current assets
              
              
              147,562
              
              
              (142,173
              )Notes
                  receivable
              
              
              84,020
              
              
              213,589Aircraft
                  costs related to fractional shares
              
              
              10,517,728
              
              
              (8,786,686
              )Other
                  assets
              
              
              48,906
              
              
              (51,360
              )Accounts
                  payable
              
              
              556,085
              
              
              3,025,989Accrued
                  liabilities
              
              
              (2,331,532
              )
              
              (926,667
              )Unearned
                  management fees and charter card revenue
              
              
              (359,081
              )
              
              (283,876
              )Cash-restricted
              
              
              (8,600
              )
              
              377,778Customer
                  deposits
              
              
              (1,399,201
              )
              
              324,250Other
                  liabilities
              
              
              45,732
              
              
              85,110Deferred
                  revenue related to fractional aircraft share sales
              
              
              (3,566,417
              )
              
              4,373,708Net
                  cash used in operating activities
              
              
              (4,002,461
              )
              
              (7,411,037
              )**INVESTING
                  ACTIVITIES:**Capital
                  expenditures
              
              
              (275,860
              )
              
              (1,051,364
              )Net
                  cash used in investing activities
              
              
              (275,860
              )
              
              (1,051,364
              )**FINANCING
                  ACTIVITIES:**Borrowings
                  under long-term notes payable
              
              
              -
              
              
              2,200,000Borrowings
                  under short term notes payable
              
              
              525,000
              
              
              -Principal
                  payments on long-term notes payable
              
              
              (1,604,368
              )
              
              (2,861,842
              )Principal
                  payments on short-term notes payable
              
              
              (5,489,555
              )
              
              -Cost
                  of stock redemption/registration
              
              
              (84,682
              )
              
              (258,146
              )Net
                  cash used in financing activities
              
              
              (6,653,605
              )
              
              (919,988
              )




*See
      Notes to Condensed Consolidated Financial Statements.*




6




**AVANTAIR,
      INC. AND SUBSIDIARIES**


**Condensed
      Consolidated Statements of Cash Flows**


**Three
      Months Ended September 30, 2008 and 2007**


**(Unaudited)**


**2008**
              
              **2007**Net
                  decrease in cash and cash equivalents
              
              $
              (10,931,926
              )
              $
              (9,382,389
              )Cash
                  and cash equivalents, beginning of the period
              
              
              19,149,777
              
              
              12,577,468Cash
                  and cash equivalents, end of the period
              
              $
              8,217,851
              
              $
              3,195,079**SUPPLEMENTAL
                  DISCLOSURE OF CASH FLOW INFORMATION:**Interest
                  paid (net of amounts capitalized)
              
              $
              1,142,147
              
              $
              201,568**SUPPLEMENTAL
                    DISCLOSURE OF NON-CASH FINANCING AND INVESTING
                    ACTIVITIES**Accretion
                  of Series A convertible preferred stock
              
              $
              22,385
              
              $
              652,325Dividends
                  payable on Series A convertible preferred stock
              
              $
              369,128
              
              $
              -




*See
      Notes to Condensed Consolidated Financial Statements.*




7




**AVANTAIR,
      INC. AND SUBSIDIARIES**


**Notes
      to Condensed Consolidated Financial Statements**


**(Unaudited)**





**NOTE
      1 - BUSINESS OPERATIONS**




*General*




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





On
      October 2, 2006, the Company signed a definitive stock purchase agreement
      with Avantair Inc. (“Old Avantair”). The agreement, as amended on
      December 15, 2006, provided for Avantair to issue 6,684,822 shares of
      common stock to the stockholders of Old Avantair in exchange for all of the
      issued and outstanding shares of Old Avantair (the “Share Exchange” or “Reverse
      Merger”). On February 22, 2007, the stockholders of Avantair voted in favor
      of the Reverse Merger. On February 22, 2007, upon the closing of the reverse
      acquisition of Ardent Acquisition Corp., the Company received approximately
      $36.3 million. For further details on this reverse acquisition, refer to the
      audited consolidated financial statements and the notes thereto included in
      the
      Company’s Annual Report on Form 10-K for the fiscal year ended June 30,
      2008.




Avantair
      is engaged in the sale and management of fractional ownerships of professionally
      piloted aircraft for personal and business use. As of September 30, 2008,
      Avantair operated 49 aircraft (which includes 5 core aircraft), with 60
      additional Piaggio aircraft on order. Avantair operates fixed flight based
      operations (FBO) in Camarillo, California and effective August 1, 2008, in
      Caldwell, New Jersey. The Company also provides aircraft maintenance, concierge
      and other services to customers and services to the Avantair fleet from hangars
      and office locations in Clearwater, Florida, Camarillo, California and Caldwell,
      New Jersey.




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





*Interim
      Reporting*




The
      accompanying unaudited interim condensed consolidated financial statements
      were
      prepared in accordance with accounting principles generally accepted in the
      United States of America and the interim condensed financial statement rules
      and
      regulations of the Securities and Exchange Commission. In the opinion of
      management, these statements included all adjustments (consisting only of normal
      recurring adjustments) necessary for a fair presentation of the condensed
      consolidated financial statements. The interim condensed operating results
      are
      not necessarily indicative of the results for a ful1 year or any interim period.
      The June 30, 2008 consolidated balance sheet has been derived from the audited
      consolidated financial statements included in the Company’s Annual Report on
      Form 10-K for the fiscal year ended June 30, 2008.





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,
      2008.





*Basis
      of Presentation*





All
      material intercompany accounts and transactions have been eliminated in the
      condensed 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 successful recovery of the Company’s assets and the
      satisfaction of its liabilities in the normal course of business. As of
      September 30, 2008, the Company’s recurring losses resulted in an accumulated
      deficit of approximately $80 million and a working capital deficiency of
      approximately $29 million. To achieve profitable income from operations before
      depreciation and amortization on a sustainable basis, management currently
      estimates that the Company will need to have 45 fully fractionalized aircraft.
      At September 30, 2008, the Company had 42.4 fractionalized aircraft. Therefore,
      Avantair’s primary growth strategy is to continue to increase the number of
      fractional share owners and aircraft under management. The Company believes
      income from operations before depreciation and amortization is useful to
      investors as it excludes non-cash expenses that do not directly relate to the
      operation of fractionalized aircraft. This measure is a supplement to accounting
      principles generally accepted in the United States of America (“GAAP”) used to
      prepare the Company’s condensed consolidated financial statements and should not
      be viewed as a substitute for GAAP measures. In addition, the Company’s non-GAAP
      measure may not be comparable to non-GAAP measures of other companies. Income
      from operations according to GAAP would include depreciation and amortization
      expense, estimated to be approximately $360,000 per month at the time of fully
      fractionalizing the 45 th aircraft. In connection with future financing of growth, the Company may obtain
      additional funds through equity financing, including the sale of additional
      shares of common stock, assets sales, accelerated payments of maintenance and
      management fees, debt financing, or a combination thereof. The Company believes
      that its capital on hand, as may be augmented by these means to fund future
      growth, is sufficient to continue operations for the foreseeable
      future.




8




*Use
      of Estimates*




The
      preparation of financial statements in conformity with GAAP requires management
      to make certain estimates and assumptions that affect the amounts reported
      in
      the financial statements and accompanying disclosures. These estimates and
      assumptions are based upon management’s best knowledge of current events and
      actions that the Company may take in the future. 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 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 (benefit from) income taxes and related deferred tax accounts,
      certain accrued expenses and contingencies, and ability to continue as a going
      concern.





*Revenue
      Recognition*




The
      Company sells fractional shares of aircraft and the related maintenance and
      management services that accompany aircraft ownership. The aircrafts are sold
      in
      1/16th shares or multiples thereof. The purchase agreement grants the customer
      the right to the use of the aircraft for a specified number of hours each year
      the aircraft is in service. When a customer purchases a fractional share, they
      are also required to enter into a five-year management and maintenance
      agreement. Under the terms of the maintenance and management agreement, the
      Company agrees to manage, operate and maintain the aircraft on behalf of the
      customer in exchange for a fixed monthly fee.




*Fractional
      Aircraft Shares*




The
      Company does not have objective evidence to determine the fair value and
      allocate fractional share revenue from that generated from the management and
      maintenance agreement, 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” to account for the sale of fractional
      shares of aircraft. Accordingly, as the sales of the fractional shares cannot
      be
      separated from the underlying maintenance and management agreement, fractional
      share sale revenue is recognized ratably over the five-year life of the
      maintenance and management agreement. The period in which revenue is recognized
      will be evaluated on a periodic basis. Factors that 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. If a customer
      prepays its management and maintenance fee for a period of one year or longer,
      the prepayment is recorded as unearned revenue and amortized into revenue on
      a
      monthly basis in accordance with the schedule provided for within each
      agreement.





*Charter
      Card and Demonstration Revenue*





*Charter
      Card revenue* .
      The
      Company sells access to its aircraft fleet through either a 15 or 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 on an incremental basis as aircraft hours are
      flown.





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




*Prepaid
      Pilot Training*





The
      costs
      related to the training of pilots as required by Federal Aeronautic Regulations
      are capitalized and amortized over the twelve month certification period. These
      costs were expensed in prior years. This change did not have a material impact
      on the Company’s financial position or results of operation.




9




*FBO
      and Other Revenue*





FBO
      and
      other revenue are comprised primarily of revenue from the sale of fuel at the
      Company’s FBO facilities and rental of hangar space at the Company’s operating
      locations. This revenue is recorded when goods are delivered or services have
      been rendered.





*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
      revenue from the sale of fractional shares as income over the five-year period.
      The aircraft costs related to sales of fractional shares consist of the cost
      of
      the aircraft and are recorded as an asset and recognized as the cost of aircraft
      shares sold over the five-year period.





*Maintenance
      Policy*




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




*Income
      Taxes*




Income
      taxes are accounted for under the asset and liability method in accordance
      with
      Statement of Financial Accounting Standards No. 109 (“SFAS No. 109”), *“Accounting
      for Income Taxes.”* 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.





*Stock-Based
      Compensation*





The
      Company has one stock-based compensation plan, the 2006 Long Term Incentive
      Plan, which is shareholder approved, for employees, certain non-employees and
      non-employee directors. Stock-based awards under this plan may consist of common
      stock, common stock units, stock options, cash-settled or stock-settled stock
      appreciation rights, restricted stock and other stock-based awards. The Company
      issues common stock to satisfy stock option exercises or vesting of stock
      awards.




The
      Company accounts for share-based compensation to employees and directors in
      accordance with SFAS 123(R) *“Share-Based
      Payment,”* 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. In addition, the
      Company recognizes in its income statement the grant-date fair value of stock
      options and other equity-based compensation issued to employees and directors.
      Compensation expense for equity-based awards is recognized over the requisite
      service period, usually the vesting period, while compensation expense for
      liability-based awards (those usually settled in cash rather than stock) is
      measured to fair-value at each balance sheet date until the award is
      settled.




Stock-based
      compensation expense related to these plans, which is included in “General and
      administrative” costs in the accompanying Condensed Consolidated Statements of
      Operations, was $95,708 and $115,355 for the three months ended September 30,
      2008 and 2007, respectively. There were no related income tax benefits
      recognized in the accompanying Condensed Consolidated Statements of Operations
      for the three months ended September 30, 2008 or for the comparable 2007 period.
      The Company made no stock option or restricted stock grants during the three
      months ended September 30, 2008. As of September 30, 2008, the Company had
      200,834 shares of restricted stock and 150,000 stock options outstanding. The
      Company did not issue warrants during the three months ended September 30,
      2008.




10




*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. A
      total of 14,496,834 of potentially dilutive securities were excluded from the
      calculation of diluted loss per share for the three months ended September
      30,
      2008 and were comprised of 14,146,000 warrants to purchase one share of the
      Company’s common stock, 200,834 shares of restricted stock and 150,000
      outstanding options. 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.





*Fair
      Value Measurements*




Effective
      July 1, 2008, the Company adopted the provisions of SFAS No. 157 (SFAS
      157), *“Fair
      Value Measurements* ”
and
      SFAS No. 159 (“SFAS 159”), *“The
      Fair Value Option for Financial Assets and Financial Liabilities — including an
      amendment to FASB Statement No. 115* ”.
      SFAS
      157, which defines fair value, establishes a framework for measuring fair value
      in accordance with GAAP, and expands disclosures about fair value measurements.
      SFAS 157 clarifies that fair value is an exit price, representing the amount
      that would be received to sell an asset or paid to transfer a liability in
      an
      orderly transaction between market participants.  SFAS
      159
      permits an entity to measure certain financial assets and financial liabilities
      at fair value with changes in fair value recognized in earnings each period.
      During the three months ended September 30, 2008, the Company has elected not
      to
      use the fair value option permitted under SFAS 159 for any of its financial
      assets and financial liabilities that are not already recorded at fair
      value.





*Accounting
      for Derivative Instruments*





The
      Company accounts for derivative instruments in accordance with SFAS
      No. 133, *“Accounting
      for Derivative Instruments and Hedging Activities,”* (“SFAS
      133”) as amended, which establishes accounting and reporting standards for
      derivative instruments and hedging activities, including certain derivative
      instruments imbedded in other financial instruments or contracts. The Company
      also considers the EITF 00-19, “Accounting for Derivative Financial Instruments
      Indexed to and Potentially Settled in, a Company’s Own Stock,” which provides
      criteria for determining whether freestanding contracts that are settled in
      a
      company’s own stock, including common stock warrants, should be designated as
      either an equity instrument, an asset or as a liability under SFAS 133. The
      Company evaluates the conversion feature embedded in its Series A Convertible
      Preferred Stock at each reporting period based on the criteria of SFAS 133
      and
      EITF 00-19 to determine whether the conversion feature would be required to
      be
      bifurcated from the Preferred Stock and accounted for separately as a
      derivative.  Based on management’s evaluation, the embedded conversion
      feature did not require bifurcation and derivative accounting as of September
      30, 2008.





*Reclassifications*





Certain
      balances for the three months ended September 30, 2007 were reclassified to
      conform to classifications adopted in the current year.




11




*Recently
      Issued Pronouncements*




In
      December 2007, Financial Accounting Standards Board (the “FASB”) issued SFAS No.
      141 (revised 2007), *"Business
      Combinations"* (“SFAS
      141”). SFAS 141 requires an acquirer to measure the identifiable assets
      acquired, the liabilities assumed and any non-controlling interest in the
      acquiree at their fair values on the acquisition date, with goodwill being
      the
      excess value over the net identifiable assets acquired. SFAS 141 also requires
      the fair value measurement of certain other assets and liabilities related
      to
      the acquisition such as contingencies. SFAS 141 applies prospectively to
      business combinations and is effective for fiscal years beginning on or after
      December 15, 2008. The Company is currently evaluating the impact of adopting
      the presentation and disclosure provisions of SFAS 141 on its financial
      condition, results of operations and cash flows.





In
      December 2007, the FASB issued SFAS No. 160, *"Non-controlling
      Interests in Consolidated Financial Statements"* (“SFAS
      160”). SFAS 160 requires that a non-controlling interest in a subsidiary be
      reported as equity in the consolidated financial statements. Consolidated net
      income should include the net income for both the parent and the non-controlling
      interest with disclosure of both amounts on the consolidated statement of
      income. The presentation provisions of SFAS 160 are to be applied
      retrospectively, and SFAS 160 is effective for fiscal years beginning on or
      after December 15, 2008. The Company is currently evaluating the impact of
      adopting the presentation and disclosure provisions of SFAS 160 on its financial
      condition, results of operations and cash flows.





In
      March
      2008, the FASB issued SFAS No. 161, *“Disclosures
      about Derivative Instruments and Hedging Activities”* (“SFAS
      161”). SFAS 161 changes the disclosure requirements for derivative instruments
      and hedging activities. The Company will be required to provide enhanced
      disclosures about (a) how and why derivative instruments are used,
      (b) how derivative instruments and related hedged items are accounted for
      under SFAS 133, and its related interpretations, and (c) how derivative
      instruments and related hedged items affect the Company's financial position,
      financial performance, and cash flows. This statement is effective for financial
      statements issued for fiscal years and interim periods beginning after
      November 15,  2008.
      The
      Company is currently evaluating the requirements of SFAS 161 and its impact
      on
      its financial condition, results of operations and cash flows. However, the
      adoption of SFAS 161 is not expected to have an impact on the Company’s
      financial position, results of operations or cash flows as the pronouncement
      addresses disclosure requirements only.





In
      April 2008, the FASB issued FASB Staff Position (“FSP”) No. 142-3
      (“FSP 142-3”), *“Determination
      of the Useful Life of Intangible Assets.”* FSP
      142-3 amends the factors an entity should consider in developing renewal or
      extension assumptions used in determining the useful life of recognized
      intangible assets under FASB Statement No. 142, *“Goodwill
      and Other Intangible Assets.”* This new
      guidance applies prospectively to intangible assets that are acquired
      individually or with a group of other assets in business combinations and asset
      acquisitions. FSP 142-3 is effective for fiscal years and interim periods
      beginning after December 15, 2008.  The Company is currently
      evaluating the impact that FSP 142-3 will have on its financial condition,
      results of operations and cash flows.





In
      June
      2008, the FASB issued FASB Staff Position EITF 03-6-1, *“Determining
      Whether Instruments Granted in Share-Based Payment Transactions Are
      Participating Securities”* (“FSP
      EITF 03-6-1”). FSP EITF 03-6-1 states that unvested share-based payment awards
      that contain nonforfeitable rights to dividends or dividend equivalents are
      “participating securities” as defined in EITF 03-6, *“Participating
      Securities and the Two-Class Method under FASB Statement
      No. 128”,* and
      therefore should be included in computing earnings per share using the two-class
      method. According to FSP EITF 03-6-1, a share-based payment award is a
      participating security when the award includes nonforfeitable rights to
      dividends or dividend equivalents. The rights result in a noncontingent transfer
      of value each time an entity declares a dividend or dividend equivalent during
      the award’s vesting period. However, the award would not be considered a
      participating security if the holder forfeits the right to receive dividends
      or
      dividend equivalents in the event that the award does not vest. FSP EITF 03-6-1
      is effective for financial statements issued in fiscal years beginning after
      December 15, 2008, and interim periods within those years. When adopted,
      its requirements are applied by recasting previously reported EPS. The Company
      is currently evaluating the requirements of FSP EITF 03-6-1 and its impact
      on
      its financial condition, results of operations and cash flows.





No
      other
      pronouncements have been recently issued that Avantair believes will have a
      material impact on Avantair’s financial position and results of
      operations.




12




**NOTE
      3 - COMMITMENTS AND CONTINGENCIES**




*Lease
      Commitments*





The
      Company conducts a major part of its operations from leased facilities, which
      include aircraft hangars and administrative offices. The 15 year hangar lease
      in
      Clearwater, Florida expiring in 2020 is classified as an operating lease. The
      lease provided 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.





Most
      of
      the operating leases contain an option to renew at the then fair rental value
      for periods of five to ten years. These options enable the Company to retain
      use
      of facilities in desirable operating areas.





Effective
      August 1, 2008, Avantair, Inc. entered into a Lease Agreement (“Lease”) and
      Operating Agreement for Fueling Service (“Fueling Agreement”) between Essex
      County Improvement Authority (“ECIA”) and the Company. The Lease provides the
      Company with a hangar located at the Essex County Airport in Caldwell, New
      Jersey that is approximately 17,752 square feet, which includes hanger space,
      shop space and office space. The Lease will be month to month until it is
      approved by the Essex County Board of Chosen Freeholders, and once the Lease
      is
      approved, ECIA and the Company shall enter into a ten year lease term. The
      annual rent for the Lease is $230,776, payable in monthly installments of
      $19,231. The annual rent shall be adjusted on the first day of each new year
      of
      the ten year lease term by adding the product of the current annual rent
      multiplied by the percentage change of the CPI index not to exceed 4% for the
      preceding 12 months. The Fueling Agreement shall be in force and effect while
      the Company is in lawful possession of the property pursuant to the Lease,
      but
      it shall not extend beyond the term of the Lease. The Lease and the Fueling
      Agreement will allow the Company to operate a full service FBO at Essex County
      Airport.





Effective
      August 4, 2008, the Company terminated the month- to- month lease agreement
      for
      the principal property located at 155 Passaic Avenue, Fourth Floor, Fairfield,
      New Jersey, which offered 100 square feet of office space.





In
      addition, the Company leases transportation equipment and data processing
      equipment under operating leases expiring during the next three
      years.





*Purchase
      Commitments*





On
      June
      20, 2008, Avantair assigned its rights and obligations to purchase twenty
      Embraer Phenom 100 aircraft positions to Share 100 Holding Co., LLC, a
      wholly-owned subsidiary of Avantair. On the same date, Avantair entered into
      a
      membership interest purchase agreement with Executive Air Shares Corporation
      (“EAS”), in which EAS purchased the Class A membership of Share 100 and Avantair
      retained the Class B membership. EAS, as Class A member, has the rights and
      obligations to purchase the Phenom 100 aircraft with positions one through
      eighteen and to fund payment due in connection with these aircraft. EAS paid
      Share 100 approximately $2.47 million in connection with these transactions
      and
      will make an additional $750,000 capital contribution to Share 100 on or before
      December 1, 2008, all of which has or will be, respectively, immediately
      distributed to Avantair. Avantair, as Class B member, has the rights and
      obligations to purchase aircraft positions nineteen and twenty and to fund
      payment due in connection with these aircraft. EAS has the option to purchase
      aircraft nineteen and twenty, which must be exercised by October 1, 2010; if
      exercised, EAS shall reimburse Avantair for all payments made relative to these
      aircraft and provide all remaining funds required. In the event that EAS does
      not exercise the option to purchase aircrafts nineteen and twenty by October
      1,
      2010, Avantair will have the right and obligation to purchase the nineteenth
      and
      twentieth aircraft.  If EAS defaults under its obligations to purchase the
      aircraft positions, EAS will forfeit all deposits paid for the undelivered
      aircraft, including the funds distributed to Avantair. Avantair will then be
      responsible for the rights and obligations of the remaining undelivered
      aircraft.  If Avantair defaults under its obligations to purchase the last
      two aircraft positions, any deposits paid by Avantair in connection with the
      undelivered Class B Aircraft will be forfeited.





As
      of
      September 30, 2008, the Company has agreed to purchase 60 additional Avanti
      II
      P-180 aircraft from Piaggio America. The total commitment is approximately
      $349
      million to be delivered through fiscal 2013.





From
      time
      to time, the Company may lease aircraft that require purchase commitments.
      Please see “ *Financing
      Commitments”* below *.*




13




*Financing
      Commitments- Short-term notes payable*




*CNM,
      Inc.*





On
      October 2, 2006, the Company and CNM, Inc. (“CNM”) and its principal
      stockholders entered into a revolving credit agreement (the “Agreement”) that
      provides for the Company to borrow $7,600,000 from CNM. This borrowing was
      conditional on the execution of a definitive stock purchase agreement with
      a
      public company, which occurred on October 2, 2006. The parties also agreed
      that upon the completion of the stock purchase agreement and approval of the
      proposed acquisition by the public company shareholders, the Company would
      repay
      a minimum of $19,000,000 of the borrowings under the revolving credit agreement.
      Per the terms of the Agreement, upon the completion of the Reverse Merger,
      the
      Company repaid approximately $19,000,000 of the borrowings under the revolving
      credit agreement with CNM.





In
      addition, upon the execution of the stock purchase agreement, the outstanding
      balance after repayment of the $19,000,000, which may be no more than
      $10,000,000, was to be converted into a term loan payable quarterly over three
      years and bear interest at 10% per annum. The borrowings under the
      arrangement were to be collateralized by a first priority lien and security
      interest in all of the Company’s assets.





Under
      the
      agreement, the Company also has agreed to provide the principal stockholder
      of
      CNM 100 hours of use of its aircraft over the three-year period. The fair value
      of aircraft usage of approximately $200,000 was accrued and will be amortized
      to
      interest expense over the term of the remaining debt under a method that will
      produce a constant periodic rate of return. In the fiscal quarter ended
      September 30, 2008, CNM used approximately 11 hours at an internal cost of
      $11,550.





In
      August
      2007, the Company and 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.”





*Midsouth
      Services, Inc.*





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





In
      addition, on July 31, 2008, Avantair, Inc. (the "Company") entered into two
      new
      Floor Plan Finance Agreements (each, an “Agreement” and collectively "the
      Agreements"), pursuant to which MidSouth Services, Inc. has agreed to extend
      credit to the Company in an amount not to exceed $5,345,000 under each Agreement
      ($10,690,000 in total for the Agreements), for an initial term of three months
      for each Agreement. Indebtedness under the Agreements will be used by the
      Company to fund the purchase of new Piaggio P-180 aircraft. The Company shall
      have the sole option to renew the Agreements for three consecutive additional
      one month terms at the expiration of the initial term. The effective dates
      of
      the two Agreements are July 31, 2008, and August 1, 2008, respectively. 
The Company has agreed to pay to the Lender a monthly facility fee of $75,000
      under each Agreement. Borrowings outstanding under these arrangements at
      September 30, 2008 totaled approximately $10.5 million.





In
      connection with the entry into the Agreements, on July 31, 2008, the Company
      terminated the prior Floor Plan Finance Agreements dated March 3, 2008 and
      October 3, 2007 between the Company and Midsouth.





*Century
      Bank, F.S.B.*





On
      May
      29, 2008 the Company entered into a Promissory Note (“Note”) with Century Bank,
      F.S.B. (“Lender”), pursuant to which Lender agreed to provide financing to the
      company in the amount of $5,200,000 to be used towards the purchase of a new
      Piaggio P-180 aircraft. The Company paid the following fees for the Note: (1)
      $37,500 on the effective date of the Note and (2) $75,000 on the 30th day of
      the
      each month thereafter until repayment in full of the principal amount of the
      Note (“Term”). The Principal amount of the Note was to be paid in
      full within 120 days from the effective date of the Note. The Company was
      to make partial payments to Lender in $325,000 increments upon the closing
      of
      each fractional interest and Lender was to provide partial lien releases as
      to
      the respective fractional interests sold. In July 2008, the Company repaid
      the
      full amount of the Note with Century Bank, F.S.B. and paid a fee of $26,000,
      constituting 0.5% of the principal balance.




14




*Financing
      Commitments- Long-term notes payable*





*Wells
      Fargo Equipment Finance, Inc.*




In
      February 2005, the Company entered into financing arrangements for the purchase
      of three aircraft under various notes payable with Wells Fargo Equipment
      Finance, Inc. In January 2008, the Company sold one of these aircraft and repaid
      the outstanding balance on the related note payable. The notes outstanding
      at
      September 30, 2008 in the amount of $3,390,680 are payable in monthly
      installments ranging from $10,644 to $38,480 with interest ranging from 5.96%
      to
      6.12% per annum, through 2012. The notes are collateralized by the
      aircraft.




*Jet
      Support Services, Inc.*





On
      April
      24, 2006, Avantair financed an aircraft maintenance program contract with Jet
      Support Services, Inc. (“JSSI”) in the amount of $3.4 million. The promissory
      note provides for seven monthly installments of $145,867 and 53 monthly
      installments of $45,867, respectively, including interest at 7% per year. On
      April 15, 2008, the Company entered into a payment arrangement with JSSI by
      means of a $5.5 million promissory note. The note matures on April 1, 2011
      and bears interest at the rate of 10% per annum, with 35 monthly payments
      of principal and interest in an amount of $185,127 beginning on June 2,
      2008. The note covers the balance of the aforementioned $3.4 million promissory
      note, other costs and fees to be paid by the Company under service agreements
      with JSSI and related deferred financing costs of approximately $1.0 million
      which will be amortized over the life of the note using the effective interest
      method. In connection with the parties entering into this payment arrangement
      and the $5.5 million promissory note, the parties terminated the airframe
      maintenance contract and have agreed to apply the unamortized prepayment under
      the airframe maintenance contract to the engine maintenance program and will
      amortize this amount over the remaining 37 month term of that
      program.





In
      addition, the Company entered into another payment arrangement with JSSI by
      means of a $525,000 promissory note dated July 31, 2008 with five monthly
      payments of $105,000 commencing August 1, 2008. The note constitutes payment
      of
      the purchase of airframe parts inventory by the Company from JSSI.




*Bank
      of America*





In
      January 2007, the Company assumed a term loan totaling $2,290,640 from Bank
      of
      America in connection with the acquisition of the outstanding interest in
      Aircraft Support. The term loan provided for monthly installments of $9,550
      plus
      interest at LIBOR plus 2% through July 1, 2011. The Company subsequently
      repaid the full amount of the term loan with the execution of a new note
      agreement with Century Bank on August 2, 2007 detailed below.





*JMMS,
      Inc.*





On
      August 11, 2006, the Company entered into a sale and leaseback agreement
      with JMMS, LLC. The lease transaction has been accounted for as a finance lease
      under FASB Statement No. 13 “ *Accounting
      for Leases,”* (SFAS
      13)
      and provides for monthly payments of $39,500 through July 11,
      2011.





*Century
      Bank, F.S.B.*





In
      August
      2007, the Company and Century Bank F.S.B executed a $2.2 million note agreement
      for the purchase of one aircraft. The note outstanding at September 30, 2008
      in
      the amount of $2,057,417 is payable in monthly installments of $27,175 with
      interest of 8.25% per annum, through July 1, 2011. The note is
      collateralized by the aircraft.





*Wachovia
      Ban* k





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





*Midsouth
      Services, Inc.*





On
      October 10, 2007, the Company entered into a sale and leaseback agreement with
      Midsouth Services, Inc. The lease transaction has been accounted for as finance
      lease under SFAS 13 and provides for monthly payments of $39,500 through October
      1, 2021.




15




**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, 2008, Avantair operated 49 aircraft (which includes 5 core
      aircraft) with 60 additional Piaggio Avanti II aircraft on order. Avantair
      operates fixed flight based operations (FBO) in Camarillo, California and,
      effective August 1, 2008 in Caldwell, New Jersey. The Company also provides
      aircraft maintenance, concierge and other services to customers and services
      to
      the Avantair fleet from hangars and office locations in Clearwater, Florida,
      Camarillo, California and Caldwell, New Jersey.




Avantair
      generates revenues primarily through the sale of fractional ownership shares
      of
      aircraft, by providing operations, maintenance and management services related
      to these aircraft, and from the sale of time cards providing either 15 or 25
      hours of flight time per year of access to its aircraft fleet without the
      requirement of purchasing fractional ownership shares. The Company markets
      and
      sells fractional ownership interests to individuals and businesses with a
      minimum share size of a 1/16 th ownership interest. Under maintenance and management agreements with fractional
      owners, Avantair provides pilots, maintenance, fuel and hangar space for the
      aircraft.





As
      a
      relatively new Company, Avantair has expended funds necessary to establish
      the
      operations and business infrastructure required of a fractional airline and
      has
      not generated sufficient cash from operations to fund its growth. Therefore,
      the
      Company has raised additional funds through equity offerings, debt financing
      and
      the sale of assets to fund operations. In connection with future financing
      of
      growth, and depending upon the Company’s generation of cash from operations, the
      Company may obtain additional funds through equity financing, including the
      sale
      of additional shares of common stock, assets sales, accelerated payments of
      maintenance and management fees, debt financing, or a combination
      thereof.





Avantair
      presently sources all of its aircraft from a single manufacturer, Piaggio
      America, Inc. As of September 30, 2008, Avantair had contractual commitments
      to
      purchase 60 additional Piaggio Avanti II aircraft through 2013 at wholesale
      pricing for an aggregate of approximately $349 million from this manufacturer.
      The Company has been able to defer aircraft deliveries to bring them
      in line with sales expectations based upon existing economic conditions and
      the
      contract provides flexibility to defer aircraft deliveries in the future. At
      September 30, 2008, the Company had 6.5 fractional aircraft shares available
      for
      sale. In addition to the cost of acquiring aircraft, Avantair’s primary expenses
      have been related to fuel, aircraft repositioning (i.e., moving an aircraft
      to
      another location to accommodate a customer’s need and demonstration flights for
      sales purposes), maintenance, charters and insurance.





To
      achieve profitable income from operations before depreciation and amortization
      on a sustainable basis, management currently estimates that the Company will
      need to have 45 fully fractionalized aircraft. At September 30, 2008, the
      Company had 42.4 fractionalized aircraft. Therefore, Avantair’s primary growth
      strategy is to continue to increase the number of fractional share owners and
      aircraft under management. The Company believes income from operations before
      depreciation and amortization is useful to investors as it excludes certain
      non-cash expenses that do not directly relate to the operation of fractionalized
      aircraft. This measure is a supplement to accounting principles generally
      accepted in the United States of America (GAAP) used to prepare the Company’s
      condensed consolidated financial statements and should not be viewed as a
      substitute for GAAP measures. In addition, the Company’s non-GAAP measure may
      not be comparable to non-GAAP measures of other companies. Income from
      operations according to GAAP would include depreciation and amortization
      expense, estimated to be approximately $360,000 per month at the time of fully
      fractionalizing the 45 th aircraft.  See also further discussion at “Liquidity and Capital Resources”
section following.




16




**Results
      of Operations**




*Three
      Months Ended September 30, 2008 Compared with Three Months Ended September
      30,
      2007*




Revenues
      for the three months ended September 30, 2008 were $32.7 million, an
      increase of 27.4% from $25.7 million for the three months ended
      September 30, 2007. This increase was the result of a 27.4% increase in the
      revenue generated from the sale of fractional aircraft shares to $12.5 million
      for the three months ended September 30, 2008 from $9.8 for the comparable
      2007 period, an increase of 31.6% in maintenance and management fees to $17.1
      million for the three months ended September 30, 2008 from $13.0 for the
      comparable 2007 period, an increase of 12.5% in charter card and demonstration
      revenue to $2.4 million for the for the three months ended September 30,
      2008 from $2.1 million for the comparable 2007 period, and an decrease of 4.3%
      in FBO and other revenue to $0.74 million for the three months ended
      September 30, 2008 from $0.77 million for the comparable 2007
      period.





Revenue
      from the sale of fractional aircraft shares increased due to a 23% increase
      in
      the number of fractional shares sold to 678.5 through September 30, 2008
      from 552 fractional shares sold through September 30, 2007. The sale of
      fractional shares during the quarter ended September 30, 2008 reflected the
      results of enhanced sales initiatives, including an emphasis on a national
      market, the marketing of the fuel efficiency of the Piaggio aircraft and the
      cost value of an Avantair fractional share compared to light-jet fractional
      shares of competitors.





The
      increase in revenue from maintenance and management fees is primarily due
      to:





·
            an
                increase in the annual maintenance and management fee to $9,650 from
                $9,400 for new and renewing fractional share owners;
                and





·
            an
                increase in the number of fractional share
                owners.





Charter
      card revenue and demonstration revenue increased $0.3 million primarily due
      to a 14% increase in charter card hours flown during the three months ended
      September 30, 2008 over hours flown for the comparable 2007 period due to
      increased marketing of charter cards.





FBO
      and
      other revenue was relatively consistent between the two periods due to increased
      fuel revenue offset by a decrease in remarketing and other revenue.





Operating
      expenses for the three months ended September 30, 2008 were 14.7% higher than
      the three months ended September 30, 2007, with total operating expenses of
      $34.6 million compared to $30.2 million, respectively. The cost of fractional
      aircraft shares sold increased to $10.6 million for the three months ended
      September 30, 2008 from $8.1 million for the three months ended
      September 30, 2007, due to a 23% increase in the number of fractional
      shares sold to 678.5 through September 30, 2008 from 552 fractional shares
      sold through September 30, 2007. The cost of flight operations, together with
      the cost of fuel, increased 3.4% to $16.3 million for the three months ended
      September 30, 2008 from $15.8 million for the three months ended
      September 30, 2007, primarily due to:





·
            an
                increase of $0.9 million in pilot expenses, including salaries and
                related
                pilot expenses, training, hotel expenses, pilot airfare and living
                expenses due to a 51% increase in pilot headcount for the three months
                ending September 30, 2008 over the comparable 2007
                period.





·
            an
                increase of $0.8 million due to increases in both fuel costs and
                flight
                hours;





·
            an
                increase of $0.5 million in flight fees and an increase of $0.1 million
                in
                maintenance expense, both due to an increase in hours
                flown;





·
            the
                above were partially offset by a $1.6 million decrease in charter
                expenses
                due to use of the Company’s core aircraft to alleviate scheduling
                conflicts and due to enhanced flight software and flight scheduling
                staff
                training.




17





General
      and administrative expenses increased 24.9% to $5.7 million for the three months
      ended September 30, 2008 from $4.5 million for the three months ended
      September 30, 2007, primarily due to:





·
            an
                increase of $0.2 million in expenses related to fixed based operations
                including fuel, equipment rental and hangar rent expense partially
                related
                to the addition of the new fixed based operation in Caldwell, New
                Jersey
                which became effective August 1,
                2008;





·
            an
                increase of $0.3 million in pilot training and related expenses
                and;





·
            an
                increase of $0.6 million in salary, payroll tax and employee benefit
                expenses related to the growth of
                employment.





Selling
      expenses decreased 11.3% to $0.9 million for the three months ended
      September 30, 2008 from $1.0 million for the three months ended
      September 30, 2007 due to a decrease of $0.1 million in marketing expenses
      and aircraft shows.





Loss
      from
      operations was $1.9 million for the three months ended September 30, 2008,
      a decrease of 57.7% from $4.5 million for the three months ended
      September 30, 2007 for the reasons set forth above.





Total
      other expense was $1.4 million for the three months ended September 30,
      2008 compared to $0.3 million for the three months ended September 30,
      2007, primarily due to increased interest expense as a result of an increase
      in
      borrowings comprised of $10.5 million in floor plan agreements which were
      entered into to acquire aircraft from Piaggio America, Inc., $8.1 million on
      financing used for the purchase of two core aircraft during fiscal 2008 and
      an
      increase in financing arrangements with Jet Support Services, Inc.





Net
      loss
      decreased to $3.3 million for the three months ended September 30, 2008
      compared to $4.8 million for the three months ended September 30, 2007 due
      to
      the decrease in loss from operations partially offset by the increase in total
      other expense discussed above.




**Liquidity
      and Capital Resources**





Avantair’s
      primary sources of liquidity have been cash provided by operations, cash raised
      from its equity offering with Ardent Acquisition Corp., cash provided from
      its
      debt facility with CNM, Inc., cash raised in the preferred stock offering,
      and
      other asset based borrowing. The Company uses its cash primarily to fund losses
      from operations, deposits made on fractional aircraft, leasehold improvements,
      and the purchase of core aircraft and aircraft which are to be fractionalized
      but which have not yet been pre-sold. Cash generated from operations has not
      been sufficient to provide for all the working capital needed to meet Avantair’s
      present requirements. At September 30, 2008 and June 30, 2008, Avantair had
      a
      working capital deficit of approximately $29 million and $30.2 million,
      respectively, and an accumulated deficit of approximately $80 million and $77
      million, respectively. As of September 30, 2008, cash and cash equivalents
      amounted to approximately $8.2 million and total assets to $187.5 million.
      The
      cash and cash equivalent balance decreased $10.9 million from June 30, 2008
      and
      total assets decreased $17.0 million. The decrease in cash and cash equivalents
      occurred primarily as a result of repayment of approximately $5.3 million of
      indebtedness incurred under floor plan financing of a fractionalized aircraft,
      payment of $0.9 million for deposits on future aircraft deliveries, remittance
      of $0.7 million of funds relating to the sale of fractional shares between
      owners, and $3.2 million repayment of debt, in addition to expenditures for
      the
      cost of operations, including amounts accrued for at June 30, 2008, and capital
      and leasehold improvements. Accounts receivable increased $4.9 million primarily
      as a result of the inclusion of approximately $5 million of receivables
      generated from late September 2008 invoicing of fractional share and charter
      card sales.




18




As
      of
      September 30, 2008, the Company’s recurring losses resulted in an accumulated
      deficit of approximately $80 million and a working capital deficiency of
      approximately $29 million. To achieve profitable income from operations before
      depreciation and amortization on a sustainable basis, management currently
      estimates that the Company will need to have 45 fully fractionalized aircraft.
      At September 30, 2008, the Company had 42.4 fractionalized aircraft. Therefore,
      Avantair’s primary growth strategy is to continue to increase the number of
      fractional share owners and aircraft under management. The Company believes
      income from operations before depreciation and amortization is useful to
      investors as it excludes non-cash expenses that do not directly relate to the
      operation of fractionalized aircraft. This measure is a supplement to accounting
      principles generally accepted in the United States of America (“GAAP”) used to
      prepare the Company’s consolidated financial statements and should not be viewed
      as a substitute for GAAP measures. In addition, the Company’s non-GAAP measure
      may not be comparable to non-GAAP measures of other companies. Income from
      operations according to GAAP would include depreciation and amortization
      expense, estimated to be approximately $360,000 per month at the time of fully
      fractionalizing the 45 th aircraft. In connection with future financing of growth, the Company may obtain
      additional funds through equity financing, including the sale of additional
      shares of common stock, assets sales, accelerated payments of maintenance and
      management fees, debt financing, or a combination thereof. The Company believes
      that its capital on hand, as may be augmented by these means to fund future
      growth, is sufficient to continue operations for the foreseeable
      future.





Financing
      Arrangements





Avantair’s
      financing arrangements at September 30, 2008, are described below:





Wells
      Fargo Equipment Finance, Inc.: In February 2005, the Company entered into
      financing arrangements for the purchase of three aircraft under various notes
      payable with Wells Fargo Equipment Finance, Inc. In January 2008, the Company
      sold one of these aircraft and repaid the outstanding balance on the related
      note payable. The notes outstanding at September 30, 2008 in the amount of
      $3,390,680 are payable in monthly installments ranging from $10,644 to $38,480
      with interest ranging from 5.96% to 6.12% per annum, through 2012. The
      notes are collateralized by the aircraft.





CNM,
      Inc.: In August 2007, the Company and 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.




Jet
      Support Services, Inc.: On April 24, 2006, Avantair financed an aircraft
      maintenance program contract with Jet Support Services, Inc. (“JSSI”) in the
      amount of $3.4 million. The promissory note provides for seven monthly
      installments of $145,867 and 53 monthly installments of $45,867, respectively,
      including interest at 7% per year. On April 15, 2008, the Company entered into
      a
      payment arrangement with JSSI by means of a $5.5 million promissory note. The
      note matures on April 1, 2011 and bears interest at the rate of
      10% per annum, with 35 monthly payments of principal and interest in an
      amount of $185,127 beginning on June 2, 2008. The note covers the balance
      of the aforementioned $3.4 million promissory note, other costs and fees to
      be
      paid by the Company under service agreements with JSSI and related deferred
      financing costs of approximately $1.0 million which will be amortized over
      the
      life of the note using the effective interest method. In connection with the
      parties entering into this payment arrangement and the $5.5 million promissory
      note, the parties terminated the airframe maintenance contract and have agreed
      to apply the unamortized prepayment under the airframe maintenance contract
      to
      the engine maintenance program and will amortize this amount over the remaining
      37 month term of that program.





In
      addition, the Company entered into another payment arrangement with JSSI by
      means of a $525,000 promissory note dated July 31, 2008 with five monthly
      payments of $105,000 commencing August 1, 2008. The note constitutes payment
      of
      the purchase of airframe parts inventory by the Company from JSSI.




Bank
      of
      America, Inc.: In January 2007, the Company assumed a term loan totaling
      $2,290,640 from Bank of America in connection with the acquisition of the
      outstanding interest in Aircraft Support . The term loan provided for monthly
      installments of $9,550 plus interest at LIBOR plus 2% through July 1, 2011.
      The Company subsequently repaid the full amount of the term loan with the
      execution of a new note agreement with Century Bank on August 2, 2007 and is
      detailed below.





JMMS,
      Inc.: On August 11, 2006, the Company entered into a sale and leaseback
      agreement with JMMS, LLC. The lease transaction has been accounted for as
      finance lease under SFAS 13 and provides for monthly payments of $39,500 through
      July 11, 2011.





Century
      Bank, F.S.B.: In August 2007, the Company and Century Bank F.S.B executed a
      $2.2
      million note agreement for the purchase of one aircraft. The note outstanding
      at
      September 30, 2008 in the amount of $2,057,417 is payable in monthly
      installments of $27,175 with interest of 8.25% per annum, through July 1,
      2011. The note is collateralized by the aircraft.





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





Midsouth
      Services, Inc.: On October 10, 2007, the Company entered into a sale and
      leaseback agreement with Midsouth Services, Inc. The lease transaction has
      been
      accounted for as finance lease under SFAS 13 and provides for monthly payments
      of $39,500 through October 1, 2021.





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




**Off-Balance
      Sheet Arrangements**





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




19




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





*Quantitative
      and Qualitative Disclosures about Market Risk*




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





*Interest
      Rate Risk*




Avantair
      is subject to market risk from exposure to changes in interest rates associated
      with its debt facility with Wells Fargo Bank and its debt facility with Wachovia
      Bank. The current liability, pursuant to which Avantair is obligated to pay
      Wells Fargo Bank, has an interest rate that is 1.0% above prime. The current
      liability, pursuant to which Avantair is obligated to pay Wachovia Bank, has
      an
      interest rate that is equal to the LIBOR rate plus 4.0%. At September 30, 2008,
      the liabilities of Avantair with exposure to interest rate risk were
      approximately $3.5 million.





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




As
      of
      September 30, 2008, under the direction of our Chief Executive Officer and
      Chief
      Financial Officer, we evaluated the effectiveness of the design and operation
      of
      our disclosure controls and procedures, as defined in Rule 13a- 15(e) under
      the Securities Exchange Act of 1934, as amended. This evaluation included a
      review of our disclosure controls and procedures to determine if they are
      designed to provide reasonable assurance that the information required to be
      disclosed in our SEC reports and is recorded, processed, summarized and reported
      within the time period specified by the SEC’s rules and forms, and is
      accumulated and communicated to management, including our Chief Executive
      Officer and Chief Financial Officer, as appropriate to allow timely decisions
      regarding required disclosure. We concluded that, as of September 30, 2008,
      our
      disclosure controls and procedures were ineffective 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, 2008. Avantair is aware of the existence of a material weakness
      in
      the design and operation of Avantair’s internal controls over financial
      reporting that could adversely affect its ability to record, process, and report
      financial information consistent with the assertions of management in the
      financial statements and concludes that the internal controls are ineffective
      as
      of September 30, 2008. 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 evaluation first began with the independent audit of the
      fiscal years ended June 30, 2004, 2005, 2006 and 2007. The auditors' 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.





·
            There
                was an insufficient number of accounting staff with the appropriate
                level
                of knowledge, which contributed to errors and deficiencies in financial
                reporting and disclosures.




20





During
      fiscal 2008, Avantair:





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





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




In
      fiscal
      2009, Avantair intends to achieve sustainable compliance by building an
      efficient infrastructure that enables repeatable and reliable actions. The
      compliance infrastructure will entail a control framework which:





·
            will
                ensure that relevant information is identified and communicated in
                a
                timely manner.




·
            will
                develop policies and procedures that help ensure that actions identified
                to manage risk are executed and
                timely.




·
            will
                determine whether internal controls are adequately designed, executed,
                effective and adaptive.




·
            will
                perform evaluations of internal and external factors that impact
                the
                organization’s performance.





The
      control conscience of the Company is a priority, and management intends to
      increase due diligence in all areas. This due diligence will include a review
      of
      internal controls, a formal cultural and environmental assessment of the
      company, and training regarding the COSO framework and the internal control
      requirements of Sarbanes-Oxley. The Company has taken steps beginning in fiscal
      year 2009 by hiring a Director of Financial Reporting and Sarbanes Oxley
      Compliance. The initial roles and responsibilities of the position
      include:





·
            assisting
                department management in understanding and documenting its existing
                business processes, risks and
                controls.





·
            assisting
                management with the development and documentation of its control
                objectives and related control
                activities.





·
            assisting
                management in assessing the effectiveness of its controls and provide
                recommendation for improvement.





·
            assisting
                management in deploying an internal control self-assessment
                process.





·
            assisting
                management with the adoption of technologies to support its documentation,
                evaluation and monitoring of
                controls.





In
      addition, during the first quarter ended fiscal year 2009, the Company
      established a Financial Reporting Committee (FRC) to assist in the oversight
      of
      (1) the integrity of the Company's financial statements, (2) the Company's
      compliance with legal and regulatory requirements and (3) the preparation and
      presentation of the Company’s financial statements; accounting and financial
      reporting principles; internal controls; and procedures designed to assure
      compliance with accounting standards and applicable laws and
      regulations.




The
      committee will further assist by (1) making recommendations on reducing
      unnecessary complexity in the Company’s financial reporting system and making
      financial reports clearer and more understandable to investors, (2) examining
      the Company’s financial reporting system in order to make recommendations
      intended to increase the usefulness of financial information to financial
      statement users, including employees, customers, vendors and investors, (3)
      seeking to ensure that the provision of financial information by the company
      complies with relevant accounting and related legal requirements, (4) ensuring
      to the best of their knowledge that the Company's financial statements and
      disclosures are complete and accurate and are in accordance with generally
      accepted accounting or auditing principles and applicable laws, rules and
      regulations.




21




Because
      Avantair has not completed its remediation plan, management has concluded that
      a
      material weakness in the operation of our disclosure controls and procedures
      exists and that controls are ineffective at September 30, 2008. Any failure
      to
      effectively address a material weakness or other control deficiency of Avantair
      or implement required new or improved controls, or difficulties encountered
      in
      their implementation, could disrupt Avantair’s ability to process key components
      of its results of operations and financial condition timely and accurately
      and
      cause Avantair to fail to meet its reporting obligations under rules of the
      Securities and Exchange Commission.




There
      has
      been no change in the our internal control over financial reporting during
      the
      fiscal quarter ended September 30, 2008 that has materially affected, or is
      reasonably likely to materially affect, our internal control over financial
      reporting.





**PART
      II - OTHER INFORMATION**


**Item
      1.****Legal
      Proceedings.**





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, 2008, there were no legal proceedings
      which outside counsel anticipates would have a material adverse effect on the
      Company’s financial position, results of operations or cash flows.





**Item
      1A.**  **Risk
      Factors.**





There
      have been no material changes from the risk factors as previously disclosed
      in
      the Company’s Annual Report on Form 10-K for the fiscal year ended June 30,
      2008.





**Item
      2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds.**





Effective
      August 1, 2008, 2,951,457 shares of common stock underlying the Company's Series
      A Convertible Preferred Stock were registered and are freely tradable pursuant
      to the declaration of the Company’s Registration Statement on Form S-1 (No.
      333-152036) filed by the Company on June 30, 2008.





In
      addition, on June 17, 2008, the Company filed with the Securities and Exchange
      Commission a post-effective amendment on Form S-3 to the Company’s Registration
      Statement on Form S-1 (No. 333-121028). Upon effectiveness of the amendment,
      the
      registration statement will be available for the issuance of shares of common
      stock upon exercise of the Company’s outstanding publically traded warrants. The
      Company also approved a warrant retirement program, pursuant to which it will
      offer the holders of its 13,800,000 publically traded warrants the opportunity
      to exercise those warrants on an amended term for a limited time. The Company
      is
      modifying the 13,800,000 warrants to reduce the per-share exercise price from
      $5.00 to $2.75. In addition, for each warrant exercised by a holder at the
      reduced exercise price, the holder will have the option to engage in a cashless
      exercise by exchanging ten additional warrants for one additional share of
      common stock. Warrants tendered for cashless exercise may only be tendered
      in
      groups of ten and no fractional shares will be issued for odd lots of nine
      or
      less. The Company filed a Tender Offer Statement on Schedule TO and related
      materials as a pre-commencement communication. The Tender Offer has not
      commenced and the Company and its agents are not currently accepting tenders
      at
      this time. The Company will issue a press release announcing the commencement
      of
      the tender offer once it has begun. In addition to the 13,800,000 warrants
      above, there are also 346,000 additional warrants outstanding which are not
      eligible to participate in the program indicated above. All of these warrants
      are presently exercisable, and all of our common stock issuable upon exercise
      of
      the warrants is available for resale upon exercise.




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





No
      matters were submitted to a vote of our security holders through the
      solicitation of proxies or otherwise during the quarter ended September 30,
      2008.




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





See
      exhibit index




22




**SIGNATURES**





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





November
      13, 2008





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




23




**EXHIBIT
      INDEX**





**Exhibit**
              **Number**
            
            **Description**31.1
            
            Chief
                Executive Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a)
                of
                the Securities Exchange Act of 193431.2
            
            Chief
                Financial Officer Certification pursuant to Rule 13a-14(a) or 15d-14(a)
                of
                the Securities Exchange Act of 193432.1
            
            Chief
                Executive Officer Certification pursuant to 18 U.S.C. Section
                135032.2
            
            Chief
                Financial Officer Certification pursuant to 18 U.S.C. Section
                1350




24