UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

                                    FORM 10-Q
 (Mark One)

|X|  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                      For the period ended: June 30, 2008

|_|  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934



                   For the transition period from         to

                       Commission File Number: 333-128758

                      UTILICRAFT AEROSPACE INDUSTRIES, INC.

        (Exact name of small business issuer as specified in its charter)

                  Nevada                                        20-1990623
      (State or other jurisdiction of                        (I.R.S. Employer
      incorporation or organization)                       Identification No.)

           7339 Paeso Del Volcan
          Albuquerque, New Mexico                                 87121
 (Address of principal executive offices)                       (Zip Code)



                                  866-654-3721

                           (Issuer's telephone number)

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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. |X| Yes |_|
No

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
definitions  of "large  accelerated  filer",  "accelerated  filer" and  "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

   Large accelerated filer |_|       Accelerated filer |_|
   Non-accelerated filer |_|         Smaller reporting company [X]

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

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

                   Class                        Outstanding at August 5, 2008
----------------------------------------  --------------------------------------
Common Stock, par value $.0001 per share               180,993,552 shares






--------------------------------------------------------------------------------
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<PAGE>


                      UTILICRAFT AEROSPACE INDUSTRIES, INC.

                                    FORM 10-Q

                                    CONTENTS
                                                                            Page
PART I -- FINANCIAL INFORMATION
-------------------------------

           Item 1.          Financial Statements                               3

           Item 2.          Management's Discussion and Analysis              16

           Item 3           Quantative And Qualitative Disclosures
                              About Market Risk                               21

           Item 4T          Controls and Procedures                           21


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

           Item 1.          Legal Proceedings                                 21


           Item 1A.         Risk Factors                                      21


           Item 2.          Unregistered Sales of Equity Securities and
                              Use of Proceeds                                 21


           Item 3.          Defaults Upon Senior Securities                   21


           Item 4.          Submission of Matters to a Vote of
                              Security Holders                                21


           Item 5.          Other Information                                 21


           Item 6.          Exhibits                                          22


           Signatures                                                         22


           Certifications                                               Attached



                                        2

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<PAGE>
<TABLE>
<CAPTION>

PART I. FINANCIAL INFORMATION

Item 1. Financial Statement

                      Utilicraft Aerospace Industries, Inc.
                                 Balance Sheets
                    As of June 30, 2008 and December 31, 2007


                                                                       June 30, 2008   December 31, 2007
                                                                        (Unaudited)       (Audited)
                                                                       -------------    -------------
<S>                                                                    <C>              <C>
                                     Assets
                                     ------

Current assets:
   Cash                                                              $         912    $       1,025
   Accounts Receivable                                                      15,500           11,000
                                                                     -------------    -------------
      Total Current Assets                                                  16,412           12,025

Other Assets - Investment in Common Stock                                    1,000            1,000
                                                                     -------------    -------------

      Total Assets                                                   $      17,412    $      13,025
                                                                     -------------    -------------

                 Liabilities and Stockholders' Equity (Deficit)
                 ----------------------------------------------

Current Liabilities:
   Accounts Payable                                                  $     424,170    $     424,170
   Accrued Expenses                                                         32,781           28,281
   Deferred Compensation                                                 2,146,414        2,146,414
   Advances from Stockholders                                                    0          384,500
                                                                     -------------    -------------

      Total Current Liabilities                                          2,603,365        2,983,365
                                                                     -------------    -------------

Stockholders' Equity (Deficit):
   Preferred Stock, $.0001 par value, 25,000,000 shares authorized,
    no shares issued                                                            --               --
   Common Stock, $.0001 par value, 475,000,000 shares authorized,
    180,993,552 and 179,493,552 shares issued and outstanding at
    June 30, 2008 and December 31, 2007, respectively                       18,100           17,949

Additional Paid-in Capital                                               6,282,474        5,799,659

Accumulated Deficit                                                     (8,886,527)      (8,787,948)

                                                                     -------------    -------------
      Total Stockholders' Equity (Deficit)                              (2,585,953)      (2,970,340)

                                                                     -------------    -------------

      Total Liabilities and Stockholders' Equity (Deficit)           $      17,412    $      13,025
                                                                     -------------    -------------



              The accompanying notes are an integral part of these
                         unaudited financial statements.

                                        3

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<PAGE>


                      Utilicraft Aerospace Industries, Inc.
                                   (UNAUDITED)
                            Statements of Operations





                                           Three Months   Three Months      Six Months       Six Months
                                              Ended          Ended            Ended            Ended
                                             June 30,       June 30,         June 30,         June 30,
                                              2008            2007             2008             2007
                                         -------------    -------------    -------------    -------------


Revenues                                 $          0      $         0     $         0      $          0
                                         -------------    -------------    -------------    -------------

Operating expenses:

   Related party reorganization costs                0                0                0                0
   Compensation and related costs                    0          306,663           43,215          575,263
   General and administrative,
     exclusive of compensation costs
     shown separately above                     49,265          202,550           55,363          311,484

   Engineering, research and
     development                                     0           18,649               0            35,873

   Interest expense                                  0           44,591               0            50,037
                                         -------------    -------------    -------------    -------------
     Total operating expenses                   49,264          572,453           98,578          972,657
                                         -------------    -------------    -------------    -------------
Loss before provision for income taxes        ( 49,264)        (572,453)        ( 98,578)        (972,657)

Provision for income taxes                        --               --               --               --
                                         -------------    -------------    -------------    -------------

Net loss                                 $    ( 49,264)   $    (572,453)   $    ( 98,578)   $    (972,657)
                                         =============    =============    =============    =============


Basic net loss per share based on
   weighted average common shares        $       (0.00)   $       (0.00)   $       (0.00)   $       (0.01)
                                         =============    =============    =============    =============


Weighted average number of common
   shares outstanding                      179,719,579      158,661,557      179,719,579      158,661,557
                                         =============    =============    =============    =============



              The accompanying notes are an integral part of these
                         unaudited financial statements.




                                        4

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<PAGE>


                      Utilicraft Aerospace Industries, Inc.
                                   (UNAUDITED)
                            Statements of Cash Flows
               For the Six Months Ended June 30, 2008 and 2007


                                                                       Six Months         Six Months
                                                                          Ended              Ended
                                                                         June 30,           June 30,
                                                                           2008               2007
                                                                        ---------          ---------

Cash Flows from Operating Activities:

Net loss                                                                $ (98,578)         $(972,657)

Adjustments to Reconcile Net Loss to Net Cash Used in Operating
   Activities:
   Depreciation                                                                 0              2,705
   Warrants Issued for Services                                            13,465                  0
   Common Stock Issued for Services                                        85,000            112,500
   Deferred Compensation                                                        0            203,735
   Deferred Rent                                                                0             12,000
Changes in Operating Assets and Liabilities:
   Accounts Receivable                                                     (4,500)                 0
   Accounts Payable and Accrued Expenses                                    4,500             43,190
   Payroll Taxes Payable                                                        0             83,970
   Accrued Interest, Related Party                                              0             10,228
   Accrued Aircraft Rent, Related Party                                         0             15,000
                                                                        ---------          ---------
Net Cash Used in Operating Activities                                       (113)           (489,329)
                                                                        ---------          ---------

Cash Flows from Investing Activities:
   Payments on Performance Flight Test Aircraft                                 0           (352,928)
   Purchase of computers                                                        0           (  6,175)
                                                                        ---------           ---------

Net Cash Used in Investing Activities                                           0           (359,103)
                                                                        ---------          ---------

Cash Flows from Financing Activities:
   Proceeds from Issuance of Common Stock                                       0            960,100
   Advance from note payable                                                    0            142,894
   Advances from related party                                                  0              5,000
   Repayment of Advances from Related Party                                     0           (137,872)
                                                                        ---------          ---------
Net Cash Provided by Financing Activities                                       0            970,122
                                                                        ---------          ---------

Net Increase in Cash                                                         (113)           121,690
Cash at Beginning of Period                                                 1,025             35,800
                                                                        ---------          ---------
Cash at End of Period                                                   $     912          $ 157,490
                                                                        ---------          ---------

Supplemental Cash Flow Disclosures:
Interest Paid                                                           $       0          $       0
Warrants Issued for Services                                            $  13,465          $ 112,500
Common Stock Issued for Services                                        $  85,000          $       0

</TABLE>



              The accompanying notes are an integral part of these
                         unaudited financial statements.



                                        5

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<PAGE>


                      UTILICRAFT AEROSPACE INDUSTRIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                                  June 30, 2008


NOTE  1 - BASIS OF PRESENTATION AND GOING CONCERN UNCERTAINTY:

The condensed consolidated financial statements have been prepared by Utilicraft
Aerospace  Industries,  Inc. ("the Company"),  without audit, in accordance with
accounting  principles  generally  accepted  in the United  States  for  interim
financial  information and with the  instructions to Form 10-Q and Article 10 of
Regulation  S-X.  Accordingly,  they do not include all of the  information  and
footnotes  required by accounting  principles  generally  accepted in the United
States for complete financial  statements.  Management  believes the disclosures
made in this document are adequate so as not to make the  information  presented
misleading.

In the opinion of management,  the accompanying unaudited condensed consolidated
financial  statements,  taken as a whole, contain all adjustments which are of a
normal recurring  nature  necessary to present fairly the financial  position of
the  Company as of June 30,  2008,  and the results of its  operations  and cash
flows for the interim  periods  presented.  Operating  results for the six-month
period ended June 30, 2008 are not  necessarily  indicative  of the results that
may be expected  for the year ending  December 31,  2008.  It is suggested  that
these condensed  financial  statements be read in conjunction with the financial
statements  and notes thereto  included in the Company's  Form 10-K for the year
ended December 31, 2007, which was filed April 15, 2008.

Utilicraft Aerospace  Industries,  Inc., (the "Company") was incorporated in the
State of  Nevada on  December  9, 2004 and uses a  December  31 year end.  Until
December 12, 2007, the Company was engaged in the development and marketing of a
freight forwarding  aircraft,  and certain  information  systems relating to the
operation and function of the aircraft and freight  management.  The goal of the
Company was to implement  solutions to the problem of declining  capacity in the
short haul (or feeder)  route  segments  of the air cargo hub and spoke  system.
Since the strategic sale of its assets and Freight Feeder aircraft technology in
December  of 2007,  the Company is now  focusing  its  business-plan  efforts to
actively seeking new strategic aerospace products for development,  particularly
related to the  enhancement  of the Freight  Feeder  aircraft  in the  air-cargo
markets  worldwide - to continue to build the asset base, to develop  cash-flow,
all aimed at building shareholder value.

The financial  statements  of the Company have been  prepared  assuming that the
Company will continue as a going concern.  However,  since inception the Company
has a  loss  from  operations  of  approximately  $8,887,000.  This  is  largely
attributable to the  reorganization  costs  associated with American  Utilicraft
Corporation ("AMUC") and the costs of sustaining a corporate  infrastructure and
the related overhead deemed necessary to support the Company's  operations while
raising capital to develop a prototype of the freight feeder aircraft.  Although
the Company has a working  capital  deficiency  of  $2,586,953 at June 30, 2008,
approximately $2,103,145 of this deficiency is owed to the principal officers of
the Company and will be paid when and if funds are available.

In light of the Company's  current  financial  position and the  uncertainty  of
raising  sufficient  capital to achieve its business plan,  there is substantial
doubt about the Company's  ability to continue as a going  concern.  The Company
will be  dependent on its major  shareholders  or private  placement  capital to
provide  for its  operating  expenses  while the  Company  seeks  new  strategic
aerospace  products for development.  Despite these activities,  there can be no
assurance that management's efforts to adequately capitalize the Company will be
successful.

There have been no changes in accounting policies used by the Company during the
quarter ended June 30, 2008.


NOTE 2 -  RECENT ACCOUNTING PRONOUNCEMENTS
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements,  which
provides   enhanced  guidance  for  using  fair  value  to  measure  assets  and
liabilities.  The standard  applies  whenever other standards  require or permit
assets or liabilities to be measured at fair value. The standard does not expand
the use of fair value in any new  circumstances.  SFAS No. 157 is effective  for
financial  statements  issued for fiscal years beginning after November 15, 2007
and interim periods within those fiscal years.  The Company adopted SFAS No. 157
as of January  1, 2008 and the  adoption  did not have a material  impact on the
consolidated  financial  statements or results of operations of the Company,  as
disclosed in Note 4.


                                        6

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<PAGE>

                      UTILICRAFT AEROSPACE INDUSTRIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                                  June 30, 2008


NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS - CONTINUED

In  February  2007,  the FASB issued  SFAS No.  159,  The Fair Value  Option for
Financial  Assets and  Financial  Liabilities--Including  an  Amendment  of FASB
Statement  No.  115,  which  permits  entities  to choose to  measure  financial
instruments and certain warranty and insurance contracts at fair value. The SFAS
No.  159   applies  to  all   reporting   entities,   including   not-for-profit
organizations,  and contains  financial  statement  presentation  and disclosure
requirements for assets and liabilities  reported at fair value. SFAS No. 159 is
effective as of the beginning of an entity's first fiscal year that begins after
November 15,  2007.  The Company  adopted  SFAS No. 159 on January 1, 2008.  The
Company  chose not to elect the  option to measure  the fair  value of  eligible
financial assets and liabilities.

 In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally  Accepted
Accounting  Principles.  The new  standard  is  intended  to  improve  financial
reporting by  identifying a consistent  framework,  or hierarchy,  for selecting
accounting  principles  to be used in preparing  financial  statements  that are
presented in conformity with U.S. generally accepted  accounting  principles for
nongovernmental  entities. SFAS No. 162 is effective 60 days following the SEC's
approval of the Public Company Accounting Oversight Board Auditing amendments to
AU Section  411,  The Meaning of Present  Fairly in  Conformity  with  Generally
Accepted Accounting Principles. We are evaluating the impact of adoption of SFAS
No. 162 and we do not currently expect adoption to have a material impact on our
results of operations, cash flows or financial position.

June 2006, the FASB issued  Interpretation No. 48 ("FIN No 48"),  Accounting for
Uncertainty  in Income Taxes - an  interpretation  of FASB  Statement 109, which
clarifies  the  accounting  for  uncertainty  in income taxes  recognized  in an
enterprise's  financial  statements in accordance with SFAS No. 109,  Accounting
for  Uncertainty  in Income  Taxes.  The  Interpretation  provides a recognition
threshold and measurement  attribute for the financial statement recognition and
measurement  of a tax  position  taken or  expected to be taken in a tax return.
Under FIN No. 48, the Company may  recognize  the tax benefit  from an uncertain
tax position  only if it is more likely than not that the tax  position  will be
sustained  on  examination  by the taxing  authorities,  based on the  technical
merits of the position.  The tax benefits recognized in the financial statements
from such a position  should be measured based on the largest benefit that has a
greater likelihood of being realized upon ultimate  settlement.  FIN No. 48 also
provides  guidance on  de-recognition,  classification,  interest and penalties,
accounting  in  interim  periods,  disclosure,  and  transition.  FIN No.  48 is
effective  for us beginning  July 1, 2007. We do not expect FIN No. 48 to have a
material impact on our financial statements.

In  March  2008,  the  FASB  issued  No.  161,   "Disclosures  about  Derivative
Instruments  and Hedging  Activities,  an  amendment of FASB  Statement  No. 133
("SFAS  161").  SFAS  161  requires  enhanced   disclosures  about  an  entity's
derivative  and hedging  activities  and thereby  improves the  transparency  of
financial reporting. This Statement is effective for financial statements issued
for fiscal years and interim  periods  beginning  after November 15, 2008,  with
early application encouraged.  This Statement encourages,  but does not require,
comparative  disclosures for earlier periods at initial adoption.  Management is
currently  evaluating the effects of this  statement,  but it is not expected to
have any impact on the Company's financial statements.

NOTE 3 - Impact of Recently Issued Accounting Pronouncements

In June 2003, the Securities and Exchange Commission ("SEC") adopted final rules
under Section 404 of the Sarbanes-Oxley Act of 2002 ("Section 404"), as amended.
Commencing  with the Company's  Annual  Report for the year ending  December 30,
2009, the Company is required to include a report of management on the Company's
internal  control over  financial  reporting.  The internal  control report must
include  a  statement  of  management's   responsibility  for  establishing  and
maintaining  adequate internal control over financial reporting for the Company;
of  management's  assessment  of the  effectiveness  of the  Company's  internal
control over  financial  reporting as of year-end and of the  framework  used by
management to evaluate the effectiveness of the Company's  internal control over
financial reporting. Furthermore in the following year the Company's independent
accounting firm has to issue an attestation  report  separately on the Company's
internal  control  over  financial  reporting  on whether it  believes  that the
Company has maintained,  in all material  respects,  effective  internal control
over financial reporting.


                                        7

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<PAGE>


                      UTILICRAFT AEROSPACE INDUSTRIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                                  June 30, 2008


NOTE 3 - IMPACT OF RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS - CONTINUED

In December 2007, the FASB issued SFAS No. 141(R) "Business  Combinations." SFAS
141(R) requires all business combinations  completed after the effective date to
be accounted for by applying the acquisition method  (previously  referred to as
the purchase method).  Companies  applying this method will have to identify the
acquirer,  determine the  acquisition  date and purchase  price and recognize at
their  acquisition  date  fair  values  of  the  identifiable  assets  acquired,
liabilities  assumed, and any noncontrolling  interests in the acquirer.  In the
case  of  a  bargain  purchase  the  acquirer  is  required  to  reevaluate  the
measurements of the recognized  assets and  liabilities at the acquisition  date
and  recognize a gain on that date if an excess  remains.  SFAS  141(R)  becomes
effective for fiscal periods  beginning  after December 15, 2008. The Company is
currently evaluating the impact of SFAS 141(R).

In February 2008, the FASB issued Staff Position (FSP) FAS 157-2, Effective Date
of FASB Statement No. 157, which defers the implementation for the non-recurring
financial  assets and liabilities from fiscal years beginning after November 15,
2007 to fiscal years  beginning  after November 15, 2008. The provisions of SFAS
No. 157 will be applied prospectively.  The statement provisions effective as of
December  29, 2007,  do not have a material  effect on the  Company's  financial
position  and  results  of  operations.  Management  does not  believe  that the
remaining  provisions  will have a material  effect on the  Company's  financial
position  and results of  operations  when they become  effective  on January 1,
2009. The adoption of FSP FAS 157-2 is not expected to have a material impact.


NOTE  4 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Management Estimates:

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and liabilities at the dates of the financial  statements and
the reported amounts of operating expenses during the reporting periods.  Actual
results could differ from these estimates.

Cash and Cash Flows:

For purposes of the statements of cash flows,  cash includes demand deposits and
time deposits with  maturities of less than three months.  None of the Company's
cash is restricted.

The Company  maintains  cash  accounts,  which could  exceed  federally  insured
limits.  The  Company  has not  experienced  any losses  from  maintaining  cash
accounts in excess of federally  insured  limits.  Management  believes that the
Company does not have significant credit risk related to its cash accounts.

Fair Value of Financial Instruments:

In accordance with the reporting requirements of SFAS No. 107, Disclosures About
Fair Value of Financial  Instruments,  the Company  calculates the fair value of
its assets and  liabilities  which qualify as financial  instruments  under this
statement and includes this additional information in the notes to the financial
statements  when the fair value is different  than the  carrying  value of those
financial instruments.  The estimated fair value of the loans from related party
approximate   their  carrying  amounts  due  to  the  short  maturity  of  these
instruments.  At June 30,  2008,  the Company  did not have any other  financial
instruments.

Stock Based Compensation:

Prior to December 31,  2005,  we accounted  for stock based  compensation  under
Statement of Financial  Accounting  Standards No. 123 Accounting for Stock-Based
Compensation  (123).  As permitted  under this standard,  compensation  cost was
recognized using the intrinsic value method  described in Accounting  Principles
Board  Opinion  No.  25,  Accounting  for Stock  Issued to  Employees  (APB 25).
Effective  December  15,  2005,  the  Company  adopted  Statement  of  Financial
Accounting Standards No. 123 (Revised 2004),  Share-Based Payment (FAS 123R) and
applied  the  provisions  of  the  Securities  and  Exchange   Commission  Staff
Accounting  Bulletin No. 107 using the  modified-prospective  transition method.
The Company had not issued any options to employees in the prior  periods  thus;
there was no impact of adopting the new standard.


                                        8

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<PAGE>
<TABLE>
<CAPTION>

                      UTILICRAFT AEROSPACE INDUSTRIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                                  June 30, 2008


NOTE  4 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

The Company accounts for stock-based compensation arrangements for non-employees
under Emerging Issues Task Force No. 96-18,  "Accounting for Equity  Instruments
That Are Issued to Other Than  Employees for Acquiring,  or in Conjunction  with
Selling,  Goods or  Services"  (EITF  96-18) and SFAS No. 123,  "Accounting  for
Stock-Based  Compensation"  (SFAS 123). As such, those transactions are measured
on the grant date at either the fair value of the equity  instruments  issued or
the consideration received, whichever is more reliably measurable.


In July  2006,  the FASB  issued  FASB  Interpretation  No. 48,  Accounting  for
Uncertainty in Income Taxes (FIN 48). FIN 48 clarifies the accounting for income
taxes by  prescribing a minimum  probability  threshold that a tax position must
meet before a financial  statement benefit is recognized.  The minimum threshold
is  defined  in FIN 48 as a tax  position  that is more  likely  than  not to be
sustained  upon  examination  by  the  applicable  taxing  authority,  including
resolution of any related appeals or litigation processes based on the technical
merits of the  position.  The tax  benefit to be  recognized  is measured as the
largest  amount of benefit  that is greater than fifty  percent  likely of being
realized  upon ultimate  settlement.  FIN 48 must be applied to all existing tax
positions upon initial  adoption.  The  cumulative  effect of applying FIN 48 at
adoption,  if any,  is to be  reported  as an  adjustment  to  opening  retained
earnings  for the  year  of  adoption.  FIN 48 is  effective  for the  Company's
year-end 2007, but is not expected to have a material impact on our consolidated
financial  statements,  with  the  possible  exception  of  certain  disclosures
relative  to our  net  operating  loss  carryovers  and  the  related  valuation
allowance.

Income taxes:

The Company  employs the asset and  liability  method in  accounting  for income
taxes  pursuant to Statement of Financial  Accounting  Standards  (SFAS) No. 109
"Accounting  for Income  Taxes."  Under  this  method,  deferred  tax assets and
liabilities are determined based on temporary  differences between the financial
reporting  and tax  bases of  assets  and  liabilities  and net  operating  loss
carryforwards,  and are  measured  using  enacted  tax  rates  and laws that are
expected to be in effect when the differences are reversed.

Net loss per share:

Basic net loss per share is computed  based upon the weighted  average number of
common  shares  outstanding  during  the  periods,   adjusted  for  contingently
returnable  shares and is computed by dividing net loss by the adjusted weighted
average number of shares during the periods. Diluted net loss per share is based
upon the  weighted  average  number  of common  shares  outstanding  during  the
periods,  adjusted  for  contingently  returnable  shares,  plus the  number  of
incremental  shares of common stock  contingently  issuable upon the exercise of
the outstanding  warrants. No effect has been given to the potential exercise of
the  warrants  because  their  effect  would  be  anti-dilutive.  The  Company's
potentially  dilutive securities (28, 560, 257 common stock potentially issuable
under  outstanding  options/warrants)  were not included in the  computation  of
diluted EPS because to do so would have been antidilutive.

Basic net loss per share has been computed as follows:
                                                                       Six Months       Six Months
                                                                         Ended            Ended
                                                                     June 30, 2008    June 30, 2007
                                                                     -------------    -------------
<S>                                                                  <C>              <C>
Net loss                                                             $     (98,578)   $    (972,657)
                                                                     =============    =============

Weighted average common shares outstanding                             179,719,579      215,570,489
Less - weighted average contingently returnable shares                           0      (56,908,932)
                                                                     -------------    -------------
Adjusted weighted average for basic net loss per share computation     179,719,579      158,661,557
                                                                     =============    =============
Basic net loss per share                                             $       (0.00)   $       (0.01)
                                                                     =============    =============
</TABLE>


                                        9

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<PAGE>

                      UTILICRAFT AEROSPACE INDUSTRIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                                  June 30, 2008



NOTE  4 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Engineering, research and development

The Company incurred no expenses for  engineering,  research and development for
the six  months  ended  June  30,  2008 as the  Company's  aircraft  development
operations  were sold in 2007.  During the six months ended June 30,  2007,  the
Company's  expenses of $35,873 for engineering,  research and development  costs
related to new aircraft design were expensed as they were incurred.

NOTE 5 - ACCOUNTS RECEIVABLE

Accounts  receivable  consists  of  amount  due  from  Freight  Feeder  Aircraft
Corporation  towards the accrued fees to the  Company's  audit firm for the 2007
audit  and  June 30,  2008  quarterly  10Q  review.  The  Company  assesses  the
collectibility of its accounts receivable regularly. Based on this assessment an
allowance for doubtful accounts was not considered necessary at June 30, 2008.

NOTE 6 - INVESTMENT IN COMMON STOCK

The investment in common stock  represents the nominal amount of $1,000 assigned
to the 15,250,000 shares of Freight Feeder Aircraft Corporation (Freight Feeder)
common  stock  received by the  Company in the asset  disposition  in 2007.  The
nominal amount of $1,000 is recorded for the Freight Feeder's common stock as it
did not have a market  value or  determinable  positive  book  value at June 30,
2008.

NOTE 7 -  CAPITAL STRUCTURE DISCLOSURES

The  Company's  capital  structure is not complex.  The Company is authorized to
issue 25,000,000 shares of preferred stock with a par value of $.0001 per share.
The Company is authorized to issue 475,000,000 shares of common stock with a par
value of $.0001 per share.

Preferred stock:

No shares of preferred stock have been issued as of June 30, 2008.

Common stock:

Each common  stock share has one voting  right and the right to dividends if and
when declared by the Board of Directors.

Stock options, warrants and other rights:

As of June 30,  2008,  the Company has not adopted  any  employee  stock  option
plans.

Valuation of stock issued for services:

In April of 2008, the Company issued 3,252,960 shares of restricted common stock
for warrants exercised in previous year.

In June of 2008, the Company issued 1,000,000 shares of restricted  common stock
for services rendered and valued the shares at $0.05 per share.


                                       10

--------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
                      UTILICRAFT AEROSPACE INDUSTRIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                                  June 30, 2008


NOTE 7 -  CAPITAL STRUCTURE DISCLOSURES - CONTINUED

Warrants:

In March 2008,  the Company's  Chief  Financial  Officer  earned,  by employment
contract terms, the option to purchase 250,000 shares at an exercise price equal
to $0.50 per share. The options vested immediately and expire on March 16, 2011.
We estimated the fair value of these options using the Black Scholes method with
assumptions  including:  (1) term of 3 years; (2) a computed  volatility 208.79%
(3) a  discount  rate of 1.65% and (4) zero  dividends.  The fair value of these
options was estimated to be $13,465 and is included in compensation expenses for
the three months ended March 31, 2008.

In 2007, the Company  granted  warrants to purchase  250,000 shares to the Chief
Financial Officer an exercise price equal to $0.50 per share. The options vested
immediately  and expire on March 16, 2010.  We estimated the fair value of these
options using the Black Scholes method with assumptions including: (1) term of 3
years; (2) a computed  volatility 127% (3) a discount rate of 4.51% and (4) zero
dividends.  The fair value of these  options was  estimated to be $56,787 and is
included in compensation expenses for the year ended December 31, 2007.

In 2007, the Company granted  warrants to purchase a total 510,000 shares to the
Vice President - Marketing,  a Director and accounting  assistant at an exercise
price equal to $3.00. The options vested  immediately and expire on November 30,
2010.  We  estimated  the fair value of these  options  using the Black  Scholes
method  with  assumptions  including:  (1)  term  of 3  years;  (2)  a  computed
volatility  170% (3) a discount rate of 3.09% and (4) zero  dividends.  The fair
value of these  options was  estimated  to be $39,404 and is included in general
and administrative expenses for the year ended December 31, 2007.

A  summary  of all  the  Company's  warrants  outstanding  at June  30,  2008 is
presented in the following table.

                                                   AMUC      PacifiCorp     Related
                                               Stockholders     Group        Party        Total
                                                ----------   ----------   ----------   ----------
<S>                                             <C>          <C>          <C>          <C>

Warrants outstanding, December 31, 2007         17,287,664         --      1,844,388   19,132,052

 Issued                                                       9,178,205      250,000    9,428,205
                                                ----------   ----------   ----------   ----------

Warrants outstanding, June 30, 2008             17,287,664    9,178,205    2,094,388   28,560,257
                                                ----------   ----------   ----------   ----------

</TABLE>

As of June 30,  2008,  the  Company  has  outstanding  warrants  issued  to AMUC
stockholders that are exercisable to purchase 17,287,664 shares of the Company's
common stock at prices  ranging from $.10 to $5.00 per share.  All such warrants
expire in January 2010.

In March of 2008,  the  Company's  Vice  President and Chief  Financial  Officer
earned 250,000 warrants by his employment  agreement for the purchase of 250,000
shares of common  stock as part of his  employment  agreement.  The warrants are
exercisable at $.50 per share.

In January,  2008,  investors  who had advanced the  Company's  $384,500 in 2007
elected  to convert  their  advances  to and  receive a  distribution  of shares
previously  issued to PacifiCorp and also receive a  corresponding  9,178,205 of
warrants previously issued to PacifiCorp in 2005.


                                       11

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<PAGE>

                      UTILICRAFT AEROSPACE INDUSTRIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                                  June 30, 2008



NOTE 7 -  CAPITAL STRUCTURE DISCLOSURES - CONTINUED

In March of 2007,  the  Company's  Vice  President and Chief  Financial  Officer
earned 250,000 warrants by his employment  agreement for the purchase of 250,000
shares of common  stock as part of his  employment  agreement.  The warrants are
exercisable at $.50 per share.

In November of 2007, the Company  issued its Vice President - Marketing  200,000
warrants for the purchase of 200,000 shares of common stock at an exercise price
of $3.00 per share for a period of three years from the date of issuance.

In November of 2007, the Company issued to a director  200,000  warrants for the
purchase of 200,000  shares of common  stock at an  exercise  price of $3.00 per
share for a period of three years from the date of issuance.

In November of 2007, the Company issued,  to an employee,  110,000  warrants for
the purchase of 110,000 shares of common stock at an exercise price of $3.00 per
share for a period of three years from the date of issuance.

In January and March 2006, the Company agreed to issue warrants to its President
to purchase 897,416 and 186,972, respectively, shares of common stock in lieu of
paying interest and for  consideration  of default risk on the additional  loans
made to the Company during 2005 and 2006 (Note 8). The warrants are  exercisable
at $1.00 per share over three years from January 2006 and March 2006.


NOTE 8 - INCOME TAXES


The Company accounts for corporate income taxes in accordance with SFAS No. 109,
Accounting  for  Income  Taxes.  Under  SFAS No.  109,  deferred  tax assets and
liabilities   are   recognized  for  the  estimated   future  tax   consequences
attributable to differences  between the financial statement carrying amounts of
existing  assets and  liabilities  and their  respective tax bases. In addition,
future tax benefits,  such as those from net operating loss carry forwards,  are
recognized to the extent that  realization  of such benefits is more likely than
not.  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 the period that
includes the enactment  date.  On January 1, 2007, we adopted the  provisions of
Financial  Accounting  Standards  Board  Interpretation  No. 48,  Accounting for
Uncertainty  in Income Taxes ("FIN 48"),  which  clarifies  the  accounting  for
uncertainty in income taxes  recognized in a company's  financial  statements in
accordance with Statement of Financial  Accounting Standards No. 109, Accounting
for Income Taxes. The adoption of FIN 48 did not impact our financial condition,
results of operations or cash flows.

At June 30, 2008 and December 31, 2007,  the Company's only deferred tax assets,
are offset by a valuation  allowance,  (there were no deferred tax  liabilities)
which totaled  approximately  $2,962,000 and $2,928,000,  respectively (using an
anticipated effective tax rate of 34%) and was attributable to its net operating
tax loss carryforwards of approximately $6,971,000 incurred since inception.
These net operating losses expire from 2024 through 2026.


NOTE 9  -  COMMITMENTS AND CONTINGENCIES

Legal

The Company is party to legal action pending in the Utah Fourth  Judicial Court,
Utah  County,  State of Utah.  The  Company  has been served with a summons in a
civil case styled Alpine Aviation, Inc. vs. American Utilicraft Corporation, AUC
X-Press Holdings, LLC, Utilicraft Aerospace Industries, Inc., John J. Dupont and
Darby  Boland.  The  Plaintiff  has filed  complaint  against the  defendents to
recover  amounts  Plaintiff  claims  under  a  sale  and  lease  agreement  with
AUC-Xpress  Holdings,  LLC, a  wholly-owned  subsidiary  of American  Utilicraft
Corporation,  entered  into in  2003.  Utilicraft  Aerospace  Industries',  Inc.
response is that it was not formed until  December of 2004 and thus did not have
the  opportunity  to have  corporate  dealings with the  plaintiff.  The Company
believes that the ultimate  disposition  will not have a material adverse effect
on the Company's  consolidated  financial  position,  results of operations  and
liquidity.



                                       12
--------------------------------------------------------------------------------
<PAGE>

                      UTILICRAFT AEROSPACE INDUSTRIES, INC.
                    NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
                                  JUNE 30, 2008

NOTE 9  -  COMMITMENTS AND CONTINGENCIES - CONTINUED

The Company is party to legal action  pending in the Superior Court of the State
of Washington, in and for the County of King. The Company has been served with a
summons in a civil case styled Analytical Methods, Inc. vs. Utilicraft Aerospace
Industries,  Inc.  The  Plaintiff  has filed  complaint  against  the Company to
recover amounts due Plaintiff under a promissory note. The Company recorded this
liability  on  the  Company's  financial   statements  in  2007  and  which  was
subsequently  assumed by Freight  Feeder  Aircraft  Corporation in December 2007
when it  purchased  the assets of  Utilicraft  Aerospace  Industries,  Inc.  and
assumed certain  liabilities.  Assuming that Freight Feeder Aircraft Corporation
complies with its assumption of this  liability,  the Company  believes that the
ultimate  disposition  will not have a material  adverse effect on the Company's
financial position, results of operations and liquidity.

Executive compensation:

Freight  Feeder  Aircraft  Corporation  (FFAC),  agreed to assume  the  deferred
compensation,  future base salaries and royalty  payments of the Company's  four
current  executive  officers.  The Company has discontinued  accruing their base
salaries.  The remaining provisions of their employment agreements are to remain
in effect until the employment agreements expire in accordance with their terms.

The employment  agreement for the President of the Company also provides that he
will  receive a bonus  equal to 4% of the "net  profits,"  as  defined,  in each
fiscal year.

If there is a change in control,  of the  Company,  as defined,  each officer is
subject to significant  severance benefits,  which provide,  among other things,
for ten times then current salary, allowance to surrender stock options, receive
health  benefits for two years and to pay legal expenses to defend the officer's
contract up to $250,000 each.

NOTE 10  - RELATED PARTY TRANSACTIONS

In March of 2008,  the Company  issued  warrants to its Vice President and Chief
Financial  Officer 250,000 warrants for the purchase of 250,000 shares of common
stock as part of his employment agreement.  The warrants are exercisable at $.50
per share.

In February 2008,  the Company issued 500,000 shares of restricted  common stock
to  its  Vice  President  and  Chief  Financial  Officer  as  stipulated  in his
employment agreement and valued the shares at $0.07 per share.

In June of 2007, the Company issued 250,000 shares of restricted common stock to
its Vice President and Chief  Financial  Officer as stipulated in his employment
agreement and valued the shares at $0.15 per share.

In November of 2007, the Company  issued its Vice President - Marketing  200,000
warrants for the purchase of 200,000 shares of common stock at an exercise price
of $3.00 per share for a period of three years from the date of issuance.

In November of 2007, the Company issued to a director  200,000  warrants for the
purchase of 200,000  shares of common  stock at an  exercise  price of $3.00 per
share for a period of three years from the date of issuance.

NOTE 11  - FINANCIAL CONDITION AND GOING CONCERN

The financial  statements  of the Company have been  prepared  assuming that the
Company will continue as a going concern.  However,  since inception the Company
has a  loss  from  operations  of  approximately  $8,887,000.  This  is  largely
attributable to the reorganization costs and the costs of sustaining a corporate
infrastructure  and  the  related  overhead  deemed  necessary  to  support  the
Company's  operations  while  raising  capital  to  develop a  prototype  of the
aircraft described above.  Although the Company has a working capital deficiency
of approximately  $2,587,000 at June 30, 2008,  approximately $2,146,414 is owed
under employment agreements and will be paid when and if funds are available.

In light of the Company's  current  financial  position and the  uncertainty  of
raising  sufficient  capital to achieve its business plan,  there is substantial
doubt about the Company's  ability to continue as a going  concern.  The Company
will be dependent on its shareholders are private  placement  capital to provide
for its  operating  expenses  while the Company  seeks new  strategic  aerospace
products for development.  Despite these  activities,  there can be no assurance
that  management's  efforts  to  adequately   capitalize  the  Company  will  be
successful.  The financial statements do not include any adjustments relating to
the  recoverability  and  classification of asset carrying amounts or the amount
and  classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.

                                       13
--------------------------------------------------------------------------------

<PAGE>
<TABLE>
<CAPTION>

Item 2. Management's  Discussion and Analyses of Financial Condition and Results
        of Operation

The following  discussion  should be read in conjunction  with our  consolidated
financial  statements  provided in the annual  report on Form 10-KSB filed April
15, 2008.  Certain  statements  contained herein may constitute  forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995.  These  statements  involve  a number of  risks,  uncertainties  and other
factors that could cause actual results to differ materially,  as discussed more
fully herein.

The  forward-looking  information  set forth in this annual  report is as of the
date of this filing,  and we undertake no duty to update this information.  More
information about potential factors that could affect our business and financial
results is  included  in the  section  entitled  "Risk  Factors"  of this annual
report.

Overview

We are a  company  with no  product  to sell,  no  revenue  stream,  significant
operating  losses  and  negative  cash flow from  operations.  The  Company  has
incurred net losses from  operations of $8,886,527 for the period from inception
to June 30,  2008.  Our  ability to  continue  as a going  concern is subject to
continued  support of our  shareholders  and sales of stock, the vagaries of the
market for our stock and various other  factors.  There is no assurance  that we
can continue as a going concern.

Our current  business plan is to focus on looking for potential  acquisitions or
merger partners, strategic partners for development of aerospace products and to
wait on the maturity of the common stock and  royalties  received by the Company
from Freight Feeder Aircraft  Corporation in conjunction with the Asset Purchase
Agreement  executed with Freight  Feeder  Aircraft  Corporation  on December 12,
2007.

Results of Operations

Six Months and Three Months  Ended June 30, 2008  Compared to the Six Months and
Three Months Ended June 30, 2007.

Net  sales.  The  Company  has not had any  sales  since its  inception  date of
December 9, 2004.

Operating  expenses.  The Company remains in the development stage its operating
expenses  consisting of compensation  related costs,  general and administrative
expenses,  engineering,  research and  development  for the six months and three
months ended June 30, 2008 and 2007 are  comparative  for each of the periods as
indicated in the following summary;


                                         Three           Three
                                         Months          Months      Six Months     Six Months
                                         Ended           Ended         Ended          Ended
                                     June 30, 2008   June 30,2007  June 30, 2008  June 30, 2007
                                       --------       --------       --------       --------
<S>                                    <C>            <C>            <C>            <C>
Compensation related  costs            $      0       $306,663       $ 43,215       $575,263


General and Administrative Expenses      49,265        202,550         55,363        311,484


Engineering, Research and Development         0         18,649              0         35,873


Interest Expense                              0         44,591              0         50,037
                                       --------       --------       --------       --------

Total Operating Expenses               $ 49,265       $572,453       $ 98,578       $972,657
                                       ========       ========       ========       ========

</TABLE>

The Company's  operating expenses in all expense categories for the three months
and six months ended June 30, 2008 as compared to the three and six months ended
June 30, 2007 are  significantly  less  because the Company  sold its assets and
operations  to  Freight  Feeder  Aircraft  Corporation  in  December  of 2007 as
disclosed its annual Form 10-KSB filed on April 15, 2008.

                                       14


--------------------------------------------------------------------------------
<PAGE>

Net Result.  As the result of the Company not having any sales for the  periods,
our net loss  for the  three  and six  months  ended  June  30,  2008 and  2007,
respectively, equaled the total operating expenses for the periods of $(49,264),
$(544,288), $(98,578), and $(933,801), respectively.


Liquidity and Future Capital Requirements

Initially,  at our inception,  we funded operations from proceeds from a private
placement.  We were initially  capitalized with approximately  $2,000,000 raised
from a private  placement  offering  of  20,000,000  shares  of common  stock on
January 19, 2005,  and have  received  approximately  $1,984,000  in  additional
subscriptions or for exercise of warrants since then.

We do not believe that  inflation  has had a material  impact on our business or
operations.

Going Concern

Due to our continuing to not generate revenues to fund operations,  in the Notes
to our financial  statements and in the Report of Independent  Registered Public
Accounting Firm, as of and for the year ended December 31, 2007, our independent
auditors included an explanatory  paragraph regarding concerns about our ability
to continue as a going concern.

The  continuation  of our  business is  dependent  upon  support  from our major
shareholders  and the ability to raise capital from the sale of equity while the
Company seeks new strategic aerospace products for development.  The issuance of
additional equity securities by us could result in a significant dilution in the
equity interests of our current or future stockholders.

There are no  assurances  that we will be able to either (1)  achieve a level of
revenues  adequate  to generate  sufficient  cash flow from  operations;  or (2)
obtain additional financing through either private placements,  public offerings
and/or bank financing necessary to support our working capital requirements.  To
the extent that funds  generated  from  operations  and any private  placements,
public offerings and/or bank financing are  insufficient,  we will have to raise
additional working capital. No assurance can be given that additional  financing
will be  available,  or if  available,  will be on terms  acceptable  to us.  If
adequate working capital is not available we may not increase our operations.

These  conditions  raise  substantial  doubt  about our ability to continue as a
going concern.  The financial statements do not include any adjustments relating
to the recoverability and classification of asset carrying amounts or the amount
and classification of liabilities that might be necessary should we be unable to
continue as a going concern.

Off-Balance Sheet Arrangements

We are not a party to any off-balance  sheet  arrangements  and do not engage in
trading activities involving non-exchange traded contracts. In addition, we have
no financial  guarantees,  debt or lease agreements or other  arrangements  that
could trigger a requirement  for an early payment or that could change the value
of our assets.

Description of Property

The Company is being  provided  office  space in Santa Fe, New Mexico by Freight
Feeder Aircraft Corporation, while the Company continues to search out potential
business opportunities.


Risk Factors

We are  subject to a high degree of risk as we are  considered  to be in unsound
financial  condition.  These risks factors include,  but are not limited to, our
limited operating history,  history of operating losses, the inability to obtain
for additional capital,  the failure to successfully expand our operations,  the
competition in the aircraft industry from competitors with substantially greater
resources,  the legal and regulatory  requirements and uncertainties  related to
our  industry,  the loss of key  personnel,  adverse  economic  conditions,  the
classification of our common stock as "penny stock," the absence of any right to
dividends,  the costs  associated with the issuance of and the rights granted to
additional securities,  the unpredictability of the trading of our common stock.
If any one or more occurs,  it could  materially  harm our  business,  financial
condition or future results of  operations,  and the trading price of our common
stock could decline.


                                       15

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<PAGE>

For a more detailed  discussion as to the risks related to Utilicraft  Aerospace
Industries,  Inc.,  our  industry and our common  stock,  please see the section
entitled, "Description of Business - Risk Factors," in our Annual Report on Form
10-KSB, as filed with the Securities and Exchange Commission on April 15, 2008.

Impact of Inflation

Management  does not  believe  that  general  inflation  has had or will  have a
material effect on operations.

Critical Accounting Policies and Estimates

Use of Estimates

The discussion and analysis of the financial condition and results of operations
are based on the  financial  statements,  which have been prepared in accordance
with accounting  principles  generally accepted in the United States of America.
Note 2, of the Notes to the  financial  statements,  describes  the  significant
accounting  policies essential to the financial  statements.  The preparation of
these financial statements requires management to make estimates and assumptions
that affect the amounts  reported in the financial  statements and  accompanying
notes,  some of which may require  revision in future  periods.  Actual  results
could differ materially from those estimates.

We believe the following to be critical accounting policies and estimates.  That
is,  they  are  both  important  to the  portrayal  of the  Company's  financial
condition  and results,  and they require  significant  management  judgment and
estimates about matters that are inherently  uncertain.  As a result of inherent
uncertainty,  there is a likelihood that materially  different  amounts would be
reported under different conditions or using different assumptions.  Although we
believe  that our  judgments  and  estimates  are  reasonable,  appropriate  and
correct, actual future results may differ materially from our estimates.

Stock Based Compensation

The Company  accounts for equity  instruments  issued to employees  for services
based on the fair value of the equity instruments issued and accounts for equity
instruments  issued  to other  than  employees  based  on the fair  value of the
consideration received or the fair value of the equity instruments, whichever is
more reliably  measurable.  The determined  value is recognized as an expense in
the accompanying statements of operations.

Contingencies

In the normal course of business,  the Company is subject to certain  claims and
legal  proceedings.  The Company records an accrued  liability for these matters
when an adverse outcome is probable and the amount of the potential liability is
reasonably estimable.  The Company does not believe that the resolution of these
matters will have a material  effect upon its  financial  condition,  results of
operations or cash flows for an interim or annual period.

Recently Issued Accounting Pronouncements

Recently issued accounting  pronouncements  and their effect on us are discussed
in the notes to the  financial  statements  in our  December  31,  2007  audited
financial  statements that can be found in our Annual Report on Form 10-KSB,  as
filed with the Securities and Exchange Commission on April 15, 2008.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

A smaller reporting company is not required to provide the information  required
by this Item.


Item 4T. Controls and Procedures

Disclosure Controls and Procedures

The  Company's  management  evaluated,  with  the  participation  of  its  Chief
Executive Officer ("CEO") and Chief Financial Officer ("CFO"), the effectiveness
of the design/operation of its disclosure controls and procedures (as defined in
Rules  13a-15(e) and  15d-15(e)  under the  Securities  Exchange Act of 1934, as
amended ("Exchange Act")) as of December 31, 2007.



                                       16

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<PAGE>

Disclosure  controls  and  procedures  refer to  controls  and other  procedures
designed to ensure that  information  required to be disclosed in the reports we
file or submit under the Exchange Act, is recorded,  processed,  summarized  and
reported within the time periods specified in the rules and forms of the SEC and
that  such  information  is  accumulated  and  communicated  to our  management,
including  our  chief  executive  officer  and  chief  financial   officer,   as
appropriate,  to  allow  timely  decisions  regarding  required  disclosure.  In
designing and  evaluating  our disclosure  controls and  procedures,  management
recognizes  that any controls and  procedures,  no matter how well  designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives,  and  management is required to apply its judgment in evaluating and
implementing possible controls and procedures.

Management  conducted its evaluation of disclosure controls and procedures under
the supervision of our principal  executive officer and our principal  financial
officer.  Based on that  evaluation,  management  concluded  that our  financial
disclosure controls and procedures were not effective related to the preparation
of the 10- Q filing as of June 30, 2008.

Material Weaknesses Identified

In connection with the  preparation of our financial  statements for the quarter
ended June 30, 2008, certain significant deficiencies in internal control became
evident to management  that, in the aggregate,  represent  material  weaknesses,
including,  insufficient  segregation  of duties in our finance  and  accounting
functions due to limited personnel.  During the quarter ended June 30, 2008, the
company  internally  performed all aspects of our financial  reporting  process,
including,  but not limited to, access to the underlying  accounting records and
systems,  the ability to post and record journal entries and  responsibility for
the preparation of the financial  statements.  Due to the fact these duties were
performed  oftentimes by the same people,  a lack of review was created over the
financial  reporting  process that might result in a failure to detect errors in
spreadsheets,  calculations,  or  assumptions  used  to  compile  the  financial
statements  and  related  disclosures  as  filed  with the  SEC.  These  control
deficiencies  could result in a material  misstatement  to our interim or annual
financial statements that would not be prevented or detected.

Although we have a code of ethics which provides broad  guidelines for corporate
governance,  our corporate  governance  activities  and processes are not always
formally documented. Specifically, decisions made by the board to be carried out
by management  should be documented and communicated on a timely basis to reduce
the likelihood of any  misunderstandings  regarding key decisions  affecting our
operations and management.

Management's Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal
control over  financial  reporting as defined in Rules  13a-15(f)  and 15d-15(f)
under the Exchange Act. Our  management is also required to assess and report on
the effectiveness of our internal control over financial reporting in accordance
with Section 404 of the Sarbanes-Oxley  Act of 2002 ("Section 404").  Management
assessed the  effectiveness of our internal control over financial  reporting as
of June 30, 2008. In making this  assessment,  we used the criteria set forth by
the Committee of Sponsoring  Organizations of the Treadway  Commission (COSO) in
Internal  Control  -  Integrated   Framework.   During  our  assessment  of  the
effectiveness of internal control over financial  reporting as of June 30, 2008,
management identified a material deficiency as described Disclosure Controls and
Procedures assessment.

Based on the material  weaknesses  noted above,  management  concludes  that the
internal  controls  over  financial  reporting are not effective for the quarter
ended June 30, 2008 as a whole.  We intend to take  appropriate  and  reasonable
steps to make the necessary  improvements to remediate these deficiencies and we
intend to consider the results of our remediation efforts and related testing as
part of our  year-end  2008  assessment  of the  effectiveness  of our  internal
control over financial reporting. During the most recently completed fiscal year
December 31,  2007,  the Company  made the  following  changes (1) hired a Chief
Financial  Officer who has SEC reporting  experience,  (2) instituted use of SEC
disclosure   checklist  for  each  financial  report,   and  (3)  completed  the
centralizing of its accounting  records in its New Mexico  offices.  Nothing has
come to the  attention  of  management  that  causes  them to  believe  that any
material inaccuracies or errors exist in our financial statements as of June 30,
2008.

Changes in Internal Controls over Financial Reporting

Other than the  matters  discussed  above,  during  the  period  covered by this
report,  there were no significant  changes in the Company's  internal  controls
over financial  reporting that have materially affected or are reasonably likely
to materially affect the Company's internal controls over financial reporting.

                                       17

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<PAGE>

PART II -- OTHER INFORMATION

Item 1. Legal Proceedings

The Company is party to legal action pending in the Utah Fourth  Judicial Court,
Utah  County,  State of Utah.  The  Company  has been served with a summons in a
civil case styled Alpine Aviation, Inc. vs. American Utilicraft Corporation, AUC
X-Press Holdings, LLC, Utilicraft Aerospace Industries, Inc., John J. Dupont and
Darby  Boland.  The  Plaintiff  has filed  complaint  against the  defendents to
recover  amounts  Plaintiff  claims  under  a  sale  and  lease  agreement  with
AUC-Xpress  Holdings,  LLC, a  wholly-owned  subsidiary  of American  Utilicraft
Corporation,  entered  into in  2003.  Utilicraft  Aerospace  Industries',  Inc.
response is that it was not formed until  December of 2004 and thus did not have
the  opportunity  to have  corporate  dealings with the  plaintiff.  The Company
believes that the ultimate  disposition  will not have a material adverse effect
on the Company's  consolidated  financial  position,  results of operations  and
liquidity.

The Company is party to legal action  pending in the Superior Court of the State
of Washington, in and for the County of King. The Company has been served with a
summons in a civil case styled Analytical Methods, Inc. vs. Utilicraft Aerospace
Industries,  Inc.  The  Plaintiff  has filed  complaint  against  the Company to
Recover amounts due Plaintiff under a promissory note. The Company recorded this
liability  on  the  Company's  financial   statements  in  2007  and  which  was
subsequently  assumed by Freight Feeders  Aircraft  Corporation in December 2007
when it  purchased  the assets of  Utilicraft  Aerospace  Industries,  Inc.  and
assumed certain  liabilities.  Assuming that Freight Feeder Aircraft Corporation
complies with its assumption of this  liability,  the Company  believes that the
ultimate  disposition  will not have a material  adverse effect on the Company's
financial position, results of operations and liquidity.

The Company did not make  adequate  provisions  for  withholding  FICA and other
taxes from employee  compensation  during 2005, 2006 and 2007. This liability of
approximately  $520,000 in taxes,  interest and penalties was assumed by Freight
Feeders Aircraft Corporation as discussed in the Company's 10-KSB filed on April
15, 2008.  There are possible civil and criminal  penalties that may be assessed
against the Company and its officers unless this shortfall is promptly funded.

Item 1A.  Risk Factors
A smaller reporting company is not required to provide the information  required
by this Item.

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

Recent Sales of Unregistered Securities.

During the  quarter  ending  June 30,  2008,  the  Company  offered and sold the
following  securities  pursuant to  securities  transaction  exemption  from the
registration requirements of the Securities Act of 1933, as amended.

In April of 2008, the Company issued 3,252,960 shares of restricted common stock
for warrants exercised in previous year.

In June of 2008, the Company issued 1,000,000 shares of restricted  common stock
for services rendered and valued the shares at $0.05 per share.

These  securities  that  have  been and will be issued  above  were  issued in a
private  transaction  pursuant to Section 4(2) of the Securities Act of 1933, as
amended,  (the "Securities  Act").  These convertible  securities are considered
restricted  securities  and may not be publicly  resold  unless  registered  for
resale  with  appropriate  governmental  agencies  or  unless  exempt  from  any
applicable registration requirements.

Item 3 - Defaults Upon Senior Securities.

No Response required.


                                       18


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<PAGE>

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

No response required.


Item 5 - Other Information.

No response required.


Item 6 - Exhibits and Reports on Form 8K.

31.1     Certification by Chief Executive Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002 *

31.2     Certification by Chief Financial Officer pursuant to Section 302 of the
         Sarbanes-Oxley Act of 2002 *

32.1     Certification by Chief Executive Officer pursuant to 18 U.S.C.  Section
         1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley  Act of
         2002 *

32.2     Certification by Chief Financial Officer pursuant to 18 U.S.C.  Section
         1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley  Act of
         2002 *

-------------------------------------------------------------------------------


*   Filed herewith

(b) Reports on Form 8-K.

     None

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                                         Utilicraft
Aerospace Industries, Inc.


Dated: August 13, 2008                                   By: /s/ John Dupont
                                                         -------------------
                                                         John Dupont
                                                         Chief Executive Officer



Dated: August 13, 2008                                   By: /s/ Randy Moseley
                                                         ---------------------
                                                         Randy Moseley
                                                         Chief Financial Officer





                                       19


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