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,
         1998.

[   ]    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:    0-24293

                               LMI AEROSPACE, INC.
             (Exact name of registrant as specified in its charter)

                Missouri                                    43-1309065
    (State or Other Jurisdiction of                      (I.R.S. Employer
     Incorporation or Organization)                     Identification No.)

           3600 Mueller Road
         St. Charles, Missouri                                 63302
(Address of Principal Executive Offices)                    (ZIP Code)

                                 (314) 946-6525
              (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 X   No ___

         Indicate  the  number of  shares  outstanding  of each of the  issuer's
classes of common stock, as of the latest practicable date.

            Title of class                       Number of Shares outstanding
            of Common Stock                       as of September 30, 1998
            ---------------                      ----------------------------

Common Stock, par value $.02 per share                   8,419,422
                                                         -----------


<PAGE>
                               LMI AEROSPACE, INC.

                          QUARTERLY REPORT ON FORM 10-Q
                FOR THE FISCAL QUARTER ENDING SEPTEMBER 30, 1998

                          PART I. FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS (UNAUDITED)

         Condensed Consolidated Balance Sheets
         of December 31, 1997 and September 30, 1998

         Condensed  Consolidated  Statements of Operations  for the three months
         and the nine months ending September 30, 1998 and 1997

         Condensed Consolidated Statements of Cash Flows for the  nine months
         ending September 30, 1998 and 1997

         Notes to Unaudited Condensed Consolidated Financial Statements


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

                           PART II. OTHER INFORMATION

Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K


SIGNATURE PAGE


<PAGE>

                               LMI Aerospace, Inc.

                      Condensed Consolidated Balance Sheets
             (Amounts in thousands, except share and per share data)



                                                     December 31,  September 30,
                                                           1997          1998
                                                   -----------------------------
Assets                                                              (unaudited)
Current assets:
   Cash and cash equivalents                            $     244        15,643
   Trade accounts receivable                                8,058        10,073
   Inventories                                              8,701        10,781
   Prepaid expenses                                           147           265
   Other current assets                                       109           133
   Deferred income taxes                                      502           502
                                                   -----------------------------
Total current assets                                       17,761        37,397

Property, plant, and equipment, net                        15,652        18,691
Other assets                                                  216         1,844
                                                   -----------------------------
                                                         $ 33,629      $ 57,932
                                                   =============================

Liabilities and stockholders' equity 
Current liabilities:
   Accounts payable                                     $   3,318      $  3,332
   Amounts due to broker                                       --         2,244
   Accrued expenses                                         1,940         3,846
   Income taxes payable                                       430           289
   Demand note payable to stockholder                         250             -
   Current installments of long-term debt                     567           157
                                                   -----------------------------
Total current liabilities                                   6,505         9,868

Long-term debt, less current installments                   9,274         2,761
Deferred income taxes                                       1,099         1,099
                                                   -----------------------------
Total noncurrent liabilities                               10,373         3,860

Stockholders' equity:
   Common stock of $.02 par value; authorized 
     28,000,000 shares; issued 5,908,471 at 
     December 31, 1997 and 8,734,422 at 
     September 30, 1998, respectively                         118           175
   Additional paid-in capital                               1,543        26,149
   Treasury Stock, at cost, 315,000 shares in 1998             --        (2,244)
   Retained earnings                                       15,090        20,124
                                                  ------------------------------
Total stockholders' equity                                 16,751        44,204
                                                  ------------------------------

                                                  ==============================
                                                         $ 33,629      $ 57,932
                                                  ==============================

See accompanying notes.

<PAGE>

                               LMI Aerospace, Inc.
<TABLE>

                 Condensed Consolidated Statements of Operations
                  (Amounts in thousands, except per share data)
                                   (Unaudited)
<CAPTION>

                                                  For the Three Months                 For the Nine Months
                                                  Ended September 30                   Ended September 30
                                                   1997               1998             1997           1998
                                           ------------------------------------------------------------------
<S>                                           <C>               <C>             <C>             <C> 

Net sales                                         $ 13,975         $  15,165       $ 41,048        $ 47,158
Cost of sales                                        9,598            10,454         29,258          32,798
                                           ------------------------------------------------------------------
Gross profit                                         4,377             4,711         11,790          14,360

Selling, general, and administrative
   expenses                                          1,567             2,267          4,728           6,000
                                           ------------------------------------------------------------------
Income from operations                               2,810             2,444          7,062           8,360

Interest (expense)/income                             (245)               84           (776)           (379)
                                           ------------------------------------------------------------------

Income before income taxes                           2,565             2,528          6,286           7,981
Provision for income taxes                             987               850          2,420           2,921
                                           ==================================================================
Net income                                        $  1,578           $ 1,678        $ 3,866         $ 5,060
                                           ==================================================================

Net income per common share                         $ .27              $ .19          $ .66           $ .74
                                           ==================================================================

Net income per common share - assuming
   dilution                                         $ .27              $ .19           $ .66          $ .72
                                           ==================================================================

Weighted average common shares
   outstanding                                   5,822,839         8,675,074      5,822,839       6,870,833
                                           ==================================================================
Weighted average dilutive stock options
   outstanding                                      86,164           167,209         68,474         147,205
                                           ==================================================================

</TABLE>

See accompanying notes.


<PAGE>

                               LMI Aerospace, Inc.
<TABLE>

                 Condensed Consolidated Statements of Cash Flows
                             (Amounts in thousands)
                                   (Unaudited)
<CAPTION>

                                                           For the Nine Months Ended September 30
                                                                   1997                1998
                                                           ----------------------------------------
<S>                                                            <C>                <C>
Operating activities
Net income                                                        $ 3,866            $   5,060
Adjustments to reconcile net income to
  Net cash provided by operating activities:
   Net cash provided by operating activities:
     Depreciation and amortization                                 1,505                1,915
     Changes in operating assets and liabilities:
       Trade accounts receivable                                  (2,106)              (1,635)
       Inventories                                                  (912)              (1,617)
       Prepaid expenses                                               11                 (114)
       Other current assets                                           21                  (68)
       Other assets                                                   35                   84
       Income taxes payable                                          (48)                (141)
       Accounts payable                                              373                  (23)
       Accrued expenses                                              857                1,728
                                                            ---------------------------------------
Net cash provided by operating activities                          3,602                5,189

Investing activities
Additions to property, plant, and equipment, net                  (2,258)              (3,991)
Acquisition of company, net of cash acquired                           -               (2,791)
                                                           ----------------------------------------
Net cash used in investing activities                             (2,258)              (6,782)

Financing activities
Proceeds from issuance of long-term debt                             391                2,073
Principal payments on long-term debt                              (1,987)              (9,247)
Proceeds from exercise of stock options                                -                   29
Proceeds from subscriptions receivable                                 -                  600
Proceeds from issuance of common stock, net                          297               23,537
Proceeds from issuance of treasury stock                               5                   --
                                                           ----------------------------------------
Net cash used in financing activities                             (1,294)              16,992

Net change in cash and cash equivalents                               50               15,399
Cash and cash equivalents, beginning of period                       205                  244
                                                           ----------------------------------------
Cash and cash equivalents, end of period                       $     255            $  15,643
                                                           ========================================


Supplemental Disclosures of Non-Cash Flow Information

  Common Stock contributed to profit sharing plan                      -           $      296
  Stock bonus issued to officer of Company                             -                  200
  Treasury stock acquired and due to broker                                             2,244

</TABLE>

See accompanying notes.


<PAGE>

                               LMI Aerospace, Inc.

              Notes to Condensed Consolidated Financial Statements
         (Dollar amounts in thousands, except share and per share data))
                                   (Unaudited)
                               September 30, 1998

1. Accounting Policies

Basis of Presentation

LMI  Aerospace,  Inc.  (the  Company)  (formerly  Leonard's  Metal,  Inc.)  is a
fabricator,  finisher,  and integrator of formed,  close tolerance  aluminum and
specialty alloy components for use by the aerospace  industry.  The Company is a
Missouri  corporation with  headquarters in St. Charles,  Missouri.  The Company
maintains  facilities in St.  Charles,  Missouri;  Seattle,  Washington;  Tulsa,
Oklahoma; Wichita, Kansas; and Irving, Texas (see Note 3).

The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles 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 generally  accepted  accounting  principles  for complete
financial statements. In the opinion of management,  all adjustments (consisting
of normal recurring  accruals)  considered  necessary for a fair  representation
have been  included.  Operating  results  for the three  and nine  months  ended
September  30, 1998 are not  necessarily  indicative  of the results that may be
expected for the year ended December 31, 1998. These financial statements should
be  read  in  conjunction  with  the  consolidated   financial   statements  and
accompanying  footnotes  for the year ended  December  31, 1997  included in the
Company's prospectus dated June 29, 1998 as filed with the SEC.

Earnings per Common Share

In 1997, the Company  adopted SFAS No. 128,  Earnings per Share,  which replaced
the  calculation of primary and fully diluted  earnings per share with basic and
diluted  earnings per share. All earnings per share amounts for all periods have
been presented or, where appropriate, restated to conform to SFAS No. 128.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting   principles  requires  management  to  make  certain  estimates  and
assumptions.  These estimates and assumptions affect the reported amounts in the
financial  statements and accompanying  notes.  Actual results could differ from
those estimates.

2. Initial Public Offering

On April 27, 1998, the Company's  Board of Directors  authorized the filing of a
registration  statement with the Securities and Exchange  Commission relating to
an initial public offering of 2,300,000 shares of the Company's  unissued common
stock (345,000 additional shares if the underwriters'  over-allotment option was
exercised). In connection with the initial public offering, the Company effected
a 2.29-for-one stock dividend of the Company's common stock payable June 1, 1998
to  shareholders  of record on May 1, 1998. All  references in the  accompanying
financial  statements  to the  number of shares of common  stock and per  common
share amounts have been retroactively adjusted to reflect the stock dividend. In
addition,  the Company's  capital  structure  was changed to reflect  28,000,000
shares of common stock and 2,000,000 shares of preferred stock authorized.

During 1998, the Company completed its Initial Public Offering ("IPO"),  selling
2,645,000  shares  (including the underwriters 15% over allotment) at $10.00 per
share ($23.5 million after fees and expenses of $2.9 million).

3. Acquisition

On August 11, 1998,  the Company  announced  that it had reached an agreement in
principal to acquire the assets of Precise Machine Company ("Precise"), based in
Irving, Texas. Precise manufactures precision machined components used primarily
by the defense,  aerospace and  financial  service  industries  and had sales of
approximately  $3 million for the year ended  1997.  The sale was  completed  on
August  25,  1998.  The  purchase   price  for  the  net  assets   acquired  was
approximately $2,844 in cash.

This acquisition has been accounted for by the purchase method, and accordingly,
the results of operations were included in the Company's Condensed  Consolidated
Statements of Operations  from the date of  acquisition.  The purchase price has
been  allocated to the assets  acquired and  liabilities  assumed based on their
fair value at the date of the acquisition. The excess of the purchase price over
the fair  value of net  assets  acquired,  totaling  $1,728,  was  allocated  to
goodwill, and is being amortized over a 25-year period on a straight-line basis.
Amortization of Goodwill through September 30, 1998 was approximately $6.

<PAGE>

4. Equity Transactions

During  April 1998,  the  Company  issued  32,900 new shares of common  stock as
compensation to one of its officers,  pursuant to an employment  agreement,  and
recorded  approximately $200 of deferred  compensation  expense to be recognized
over the  subsequent 24 months.  In addition,  the Company sold 98,700 shares of
common stock to one of its officers,  pursuant to an employment  agreement.  The
Company had no compensation obligation related to this transaction.

On  September  25,  1998,  the  Company  announced  that its Board of  Directors
authorized  the Company's  repurchase  of up to 600,000  shares of the Company's
common stock. On September 29, 1998, the Company purchased 315,000 shares in the
open market at a price of $7.125 per share and this  transaction was recorded at
cost in stockholders' equity with the corresponding  liability in Amounts due to
Broker.

5. Inventories

Inventories consist of the following:
                                                December 31,     September 30,
                                                    1997              1998
                                            ------------------------------------
Raw materials                                       $2,990          $ 4,321
Work in process                                      3,875            3,610
Finished goods                                       1,836            2,850
                                            ====================================
                                                    $8,701         $ 10,781
                                            ====================================

6. Property, Plant, and Equipment

Property, plant, and equipment consist 
of the following:

                                                December 31,     September 30,
                                                    1997              1998
                                            ------------------------------------
Land                                             $      638          $    638
Buildings                                             7,405             8,677
Machinery and equipment                              18,376            20,970
Software costs                                          523               607
Leasehold improvements                                  426               832
Construction in progress                                298               790
                                            ------------------------------------
                                                     27,666            32,514
Less accumulated depreciation                       (12,014)          (13,823)
                                            ====================================
                                                   $ 15,652          $ 18,691
                                            ====================================

<TABLE>
<CAPTION>

7. Long-Term Debt

Long-term debt consists of the following:

                                                                       December 31,        September 30,
                                                                           1997                 1998
                                                                    -----------------------------------------
<S>                                                                   <C>                 <C>

Revolving line of credit, interest payable monthly, at a
   variable rate                                                         $  1,281            $     --
Industrial Development Revenue Bond, interest payable
   monthly, at a variable rate                                              2,500               2,500
Term loan note payable, principal and interest payable
   monthly, at a fixed rate of 9.0%                                         3,482                  --
Real estate note payable, principal and interest payable
   monthly, at a variable rate                                                428                  --
Notes payable, principal and interest payable monthly, at
   fixed rates, ranging from 8.78% to 9.56%                                 1,233                 339
Subordinated debentures, interest payable monthly, at a fixed
   rate of 11%                                                                800                  --
Capital lease obligations                                                     117                  79
                                                                    -----------------------------------------
                                                                            9,841               2,918
Less current installments                                                     567                 157
                                                                    =========================================
                                                                          $ 9,274             $ 2,761
                                                                    =========================================

</TABLE>

<PAGE>

On March 31, 1998, the Company  secured a $15,000  unsecured line of credit with
Magna Bank to fund various corporate needs. Interest is payable monthly based on
a quarterly  cash flow leverage  calculation  and the LIBOR rate.  This facility
matures on March 30, 2000 and requires compliance with certain non-financial and
financial   covenants   including   minimum   tangible   net  worth  and  EBITDA
requirements.  The credit  facility  prohibits the payment of cash  dividends on
common stock without  Magna's prior written  consent.  The Company drew upon the
line in March 1998 to retire certain  outstanding  debt balances,  including the
previous revolving line of credit ($1,281 at December 31, 1997), demand notes to
former shareholders ($250 at December 31, 1997), and the subordinated debentures
($800 at December 31, 1997). On July 6, 1998, the Company  received the proceeds
($21,390) from the initial public offering and retired certain  outstanding debt
balances, including the term loan note payable ($3,351 at June 30, 1998) and the
real estate note payable ($416 at June 30, 1998). In addition,  the Company paid
down the revolving line of credit ($2,309 at June 30, 1998).

The Industrial  Revenue Bond ("IRB") bears interest at a variable rate, which is
based on the existing market rates for comparable  outstanding  tax-exempt bonds
(4.1  percent and 4.2  percent at December  31,  1997 and  September  30,  1998,
respectively),  not to  exceed 12  percent.  The IRB is  secured  by a letter of
credit,  and Magna Bank NA ("Magna"),  which holds 100 percent  participation in
the letter of credit,  has a security  interest in certain  equipment.  The bond
matures in November 2000.

The Company  entered  into  various  notes  payable for the  purchase of certain
equipment.  The notes are  payable in monthly  installments  including  interest
(ranging from 8.78 percent to 9.56 percent  through  November  2002).  The notes
payable are secured by equipment. During the quarter, certain notes payable were
paid off at the discretion of management.

8. Commitments and Contingencies

The  Company is  involved  in various  claims and legal  actions  arising in the
ordinary  course  of  business.  In the  opinion  of  management,  the  ultimate
disposition  of these  matters  will not have a material  adverse  effect on the
Company's financial position.


<PAGE>


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS

Except for the historical  information  contained  herein,  the following report
contains  forward-looking  statements that involve risks and uncertainties.  The
Company's  actual results could differ  materially  from those  discussed  here.
Factors that could cause or contribute to such differences  include, but are not
limited to, those discussed in the section entitled Management's  Discussion and
Analysis of Financial Conditions and Results of Operations.

Overview

LMI Aerospace,  Inc. is a leading fabricator,  finisher and integrator of formed
and machined, close tolerance aluminum and specialty alloy components for use by
the aerospace industry. The Company has been engaged in manufacturing components
for a wide variety of aerospace  applications.  Components  manufactured  by the
Company  include  leading edge wing slats,  flaps and lens  assemblies;  cockpit
window frame  assemblies;  fuselage skins and supports,  and passenger and cargo
door  frames and  supports.  The Company  maintains  multi-year  contracts  with
leading  original   equipment   manufacturers  and  primary   subcontractors  of
commercial,  corporate,  regional and military aircraft.  Such contracts,  which
govern the majority of the  Company's  sales,  designate the Company as the sole
supplier of the aerospace components sold under the contracts. Customers include
Boeing,  Lockheed  Martin,  Northrop  Grumman,  Gulfstream,  Learjet,  Canadair,
DeHavilland  and PPG. The Company  manufactures  approximately  14,000 parts for
integration  into such models as Boeing's 737, 747, 757, 767 and 777  commercial
aircraft  and  F-15,  F-18,  C-17  military  aircraft,  Canadair's  RJ  regional
aircraft,  Gulfstream's G-IV and G-V corporate  aircraft,  and Lockheed Martin's
F-16 and C-130 military aircraft.

The  Company  has  executed  new  contracts  this year with  several  of its key
customers.  During the third quarter,  the Company reached agreement with Boeing
Seattle to extend its current  long-term  contract  for five years.  The current
contract  was to expire on December  31,  1998 and now  expires on December  31,
2003.  Earlier this year, the Company  entered into a new 10-year  contract with
the Wichita  division of Boeing and reached an  agreement  to renew its contract
with  Lockheed  Martin,  extending  the  agreement  for an  additional  4 years.
Additionally,  the Company  has begun to accept  orders and ship  components  to
Boeing-St.   Louis  (formerly  McDonnell  Douglas,  Inc.)  on  several  military
platforms,  including  the F-15,  F-18 and C-17.  Although the orders under this
program are just  commencing  and had minimal effect on the first nine months of
1998,  they are  indicative of the  Company's  strategy to diversify its revenue
base.

In August, 1998, the Company purchased the assets of Texas based Precise Machine
Company  ("Precise"),  a company  specializing  in the  manufacture of precision
machined  components  to  the  aerospace,   financial  services,   and  printing
industries.  The Company  believes  that the addition of Precise will expand its
integration capabilities to better support its customer base as well as allow it
to gain access to non-aerospace  customers.  This acquisition is also consistent
with the Company's  strategy of locating  facilities  in close  proximity to its
customers.  Precise  provides the Company with a facility near Northrop  Grumman
and Lockheed Martin, customers also served by Precise.

Results of Operations - Quarter  Ended  September 30, 1998 compared to September
30, 1997.

Net Sales.  Net sales for the quarter  ended  September  30, 1998 rose 8.5% from
$14.0 million in 1997 to $15.2  million.  This increase was primarily due to the
Company's  participation  on the 737 New  Generation  ("737 NG") model  aircraft
which added $1.3  million in sales in the third  quarter  rising to $3.0 million
from $1.7 million.

Additionally, net sales on the 747 model aircraft contributed an additional $0.4
million, rising to $3.6 million from $3.2 million. Although the third quarter of
1998 continued to be positively  impacted by the 747, Boeing has announced a 30%
reduction  in output on this model and,  therefore,  reductions  in volume  will
likely occur in future periods. With production rates declining and scheduled to
end in  2000,  sales of the 737  Classic  components  were  down  $1.2  million,
dropping from $2.2 million to $1 million.

Gross Profit.  Gross profit  increased 7.6% in the third quarter of 1998 to $4.7
million  (31.1% of net  sales)  from $4.4  million  (31.3% of net  sales).  This
improvement in gross profit was primarily due to the increase in sales volume.

Selling,  General, and Administrative Expenses ("SG&A"). SG&A increased 44.6% in
the third quarter of 1998 to $2.3 million (14.9% of net sales) from $1.6 million
(11.2% of net  sales) in 1997.  Included  in the  third  quarter  SG&A is a $0.3
million  charge from the  settlement  of a claim that was  disclosed  in the S-1
filed in June,  1998.  Excluding this charge,  SG&A would have been 13.1% of net
sales.

<PAGE>

Income  Taxes.  The  effective  tax rate in the third  quarter of 1998 was 33.6%
compared to 38.5% in 1997. During the third quarter,  the Company recognized the
benefit of state  income  tax  credits  relating  to 1997  income  taxes of $0.1
million. Excluding this benefit, the effective tax rate would have been 37.5%.

Net Income. As a result of the foregoing,  the net income rose 6.4% in the third
quarter of 1998, rising to $1.7 million from $1.6 million.

Results of  Operations  - Nine  Months  Ended  September  30,  1998  compared to
September 30, 1997

Net Sales.  Net sales  increased  14.9% in the nine months ended  September  30,
1998, rising from $41.0 million in 1997 to $47.2 million. Net sales increased on
all Boeing 7-series  models with the exception of the 737 Classic,  which Boeing
is phasing out of production. The increase in net sales was primarily due to the
Company's  participation  on the 737 NG aircraft  which  resulted in a net sales
increase of $5.8 million in 1998, growing to $9.2 million from $3.4 million. The
first nine  months of 1998 also were aided by  increased  shipments  on the 747,
with sales growing to $12.1 million from $11.0 million.  The Company's net sales
of components for the 737 Classic  decreased  approximately  $2.8 million,  from
$7.5 million in 1997 to $4.7 million in 1998.

Gross  Profit.  Gross profit  increased  21.8% in the first nine months of 1998,
from $11.8 million  (28.7% of net sales) to $14.4 million  (30.5% of net sales).
The increase in margin was  predominantly the result of better coverage of fixed
costs afforded by the increase in net sales.

Selling,  General, and Administrative Expenses ("SG&A"). SG&A increased 26.9% in
1998,  from $4.7 million  (11.5% of net sales) in 1997 to $6.0 million (12.7% of
net sales).  The Company's SG&A is driven in large part by the salaries,  wages,
and related  fringe  benefits paid to its selling and  administrative  employees
which  accounted for $0.3 million of the increase and the  previously  mentioned
lawsuit settlement of $0.3 million.

Income Taxes.  The  effective  income tax rate for the first nine months of 1998
was 36.6%,  down from 38.5% in 1997. This reduction in the effective rate is the
result of the Company's  recognition  of current and prior year state income tax
credits.

Net Income.  The increase in net sales,  improvements in gross profits and other
changes  discussed above,  drove net income up for the nine months 30.9% to $5.1
million in 1998 from $3.9 million.

Liquidity and Capital Resources.

During 1998, the Company  completed its IPO, selling 2,645,000 shares (including
the  underwriters  15% over  allotment) at $10.00 per share ($23.5 million after
fees and expenses of $2.9  million).  Immediately  upon receipt of the cash from
the IPO, the Company retired term debt of $3.3 million with Magna Bank, N.A. and
$0.4 million with the Oklahoma Industrial Finance Authority. Both of these notes
were secured by real estate of the Company.  Additionally, the Company used $2.4
million of the proceeds to  temporarily  pay down the  revolving  line of credit
with Magna  Bank,  N.A.  The Company  maintains  its ability to borrow up to $15
million under this revolving line of credit.  The balance of these proceeds from
the IPO will be used to fund  acquisitions,  working  capital needs,  or capital
investment needs.

Also during the third  quarter,  the Company  received  approval of its Board of
Directors to  repurchase up to 600,000  shares of its common stock.  The Company
purchased  315,000  shares near the end of the third  quarter for $2.2  million.
This  transaction  was funded early in the fourth quarter and was reflected as a
liability at September 30, 1998.

In August,  1998,  the Company  completed  the  acquisition  of Precise  Machine
Company of Irving,  Texas.  The Company used $2.9 million of the IPO proceeds to
purchase the net assets of Precise.

The working capital needs of the Company are generally funded by cash flows from
operations. During the first nine months of 1998, operating activities generated
$5.2 million of cash  compared to $3.6 million in the first nine months of 1997.
The growth of the Company has required a substantial  investment in  receivables
and inventories with each growing by $1.6 million.

The Company continued to invest in property,  plant and equipment  spending $4.0
million in 1998. In Tulsa,  the Company  completed a 33,000 square foot addition
($1.1 million)  nearly  doubling its available  space to 75,000 square feet. The
Auburn facility upgraded its punching  capability with the addition of a new CNC
punching machine ($0.4 million) to replace an older, slower model and spent $0.4
million  upgrading  and  customizing  a newly leased 80,000 square foot facility
that will replace the current  45,000  square foot  facility.  The Company spent
$0.3 million as it began expansion  efforts at one of its St. Charles  locations
which will add  approximately  20,000 square feet. The Company estimates it will
expend an  additional  $1.0  million  over the  balance  of 1998,  primarily  on
facility expansions. Capital spending should be reduced in 1999 to approximately
$3.0 million.

<PAGE>

Year 2000 Preparedness

The  advent of the year 2000  (sometimes  referred  to as "Y2K")  poses  certain
technological challenges resulting from computer technologies that recognize and
process  calendar  years by the last two digits  rather  than all four digits of
such year (e.g.,  "98" for "1998").  Computer  technologies  programmed  in this
manner may not properly  recognize or process a year that begins with the digits
"20" instead of "19" (the "Year 2000 Problem"). If not corrected,  such computer
technologies  could  produce,  among other  problems,  inaccurate,  erroneous or
unpredictable results or system failures.

To  address  the  Year  2000  Problem,  the  Company,  beginning  in late  1997,
formulated a three-step  plan under which the Company's  information  technology
("IT")  and   non-information   technology,   such  as  embedded  chip  machines
("Non-IT"),  systems would be (i) assessed; (ii) updated, replaced and tested as
necessary, and (iii) monitored for compliance (the "Plan").

As of September 30, 1998, the Company had substantially completed the assessment
phase of the Plan. This phase involves,  among other things,  identification  of
those IT and  non-IT  systems  that were  impacted  in some way by the Year 2000
problem,  and of such systems,  identifying which are principal to the Company's
principal business operations. As part of this assessment,  the Company reviewed
its principal IT system which was installed in late 1997 as part of a previously
formulated  strategic  growth plan and found it to have  satisfied the Company's
Y2K  concerns.  The  Company  also  identified  the other IT systems  which have
certain Y2K concerns and has plans to replace such programs.  Finally,  based on
internal  reviews of the non-IT systems and inquiries made of the  manufacturers
of the non-IT  systems,  the Company  believes that such systems do not have any
material Y2K concerns.

What remains of this assessment phase is a review of the systems of Precise, the
Company's  recent  acquisition,  and  completion  of an  assessment of the Tulsa
facility.  Based on its  preliminary  results,  the Y2K  concerns  at the  Tulsa
facility  (which  supplies  services to the other  divisions  of the Company and
operates  with a backlog of less than 30 days) should be limited and  immaterial
to the Company.

Updating and replacing critical IT systems and components, other than its system
in Tulsa,  was  substantially  completed  by the end of 1997,  as a result of an
upgrade to the Company's IT systems  which had been planned and scheduled  prior
to the  Company's  review  of the Year  2000  Problem.  Updating  and  replacing
noncritical IT systems is scheduled to be completed prior to June 30, 1999.

Monitoring of Y2K concerns generally, is on-going and the Company anticipates it
will continue throughout 1999.

During  all phases of the Plan,  the  Company  has  actively  monitored  the Y2K
preparedness  of  its  key  suppliers,   distributors,   customers  and  service
providers.  Based on the  inquiries  made,  correspondence  received  and  other
verification  procedures  conducted,  the Company  believes that its significant
business  partners  are  resolving  their  respective  Year 2000  Problems  in a
reasonable fashion in line with industry practice.

However,  the  Company  has not yet  engaged  in  discussions  with its  utility
providers (e.g., electricity,  gas, telecommunications)  regarding Y2K concerns.
As part  of the  Plan,  however,  the  Company  will  continue  to  monitor  Y2K
disclosures by, and make certain inquiries of, key providers and agencies to the
businesses  that rely on them and will  generally  strive  for Y2K  preparedness
against  industry-wide  and  geographic  Y2K systemic  risks  comparable to that
maintained by similarly situated organizations exercising appropriate due care.

Because the  Company  had  recently  upgraded  its IT systems  prior to directly
addressing  any Y2K  concerns,  to date,  the Company has incurred an immaterial
amount of costs  that are  directly  attributable  to  addressing  its Year 2000
Problem.  Moreover,  the  Company  expects  additional  Y2K  expenditures  to be
similarly  immaterial.  The Company has funded, and plans to fund, its Year 2000
related expenditures out of general operating income.

The Company believes that it has  substantially  completed its Plan and that all
remaining actions are not significant.  The Company also believes that such Plan
provides a reasonable  course of action to prepare the Company for the year 2000
and significantly reduce the risks faced by the Company with respect to the Year
2000 Problem.  However, the uncertainty  surrounding the Year 2000 Problem could
lead to a failure of the Company's Plan which may result in an  interruption  in
or failure of certain normal  business  activities or operations.  Such failures
could materially adversely affect the Company's results of operations, liquidity
and financial condition.

The Company could face some risk from the possible failure of one or more of its
suppliers,   distributors   and  service   providers   to  continue  to  provide
uninterrupted  service  through  the  changeover  to the  year  2000.  While  an
evaluation  of the year 2000  preparedness  of such parties has been part of the
Company's  Plan, the Company's  ability to evaluate is limited to some extent by
the  willingness of such parties to supply  information  and the ability of such
parties  to verify  the year 2000  preparedness  of their own  systems  or their
sub-providers.  The  Company  does  not  currently  anticipate  that any of such
parties will fail to provide continuing service due to the Year 2000 Problem.

<PAGE>

The Company, like similarly-situated enterprises, is subject to certain risks as
a result of possible  industry-wide or area-wide  failures triggered by the Year
2000  Problem.  For example,  the failure of certain  utility  providers  (e.g.,
electricity,   gas,  telecommunications)  to  avoid  disruption  of  service  in
connection  with the  transition  from 1999 to 2000 could  materially  adversely
affect the Company's results of operations,  liquidity and financial  condition.
In management's  estimate,  such a system-wide or area-wide failure presents the
most  significant  risk to the Company in connection  with the Year 2000 Problem
because  the  resulting  disruption  may be  entirely  beyond the ability of the
Company to cure. The  significance  of any such  disruption  would depend on its
duration and systemic and geographic  magnitude.  Of course, any such disruption
would likely impact businesses other than the Company.

In order to reduce the risks  enumerated  above,  the Company is developing  and
evaluating contingency plans to deal with events affecting the Company or one of
its business  partners  arising from the Year 2000  Problem.  These  contingency
plans  include  identifying  alternative  suppliers,  distribution  networks and
service providers. Certain catastrophic events (such as the loss of utilities or
the failure of certain governmental bodies to function) are outside the scope of
the Company's  contingency plans, although the Company anticipates that it would
respond to any such catastrophe in a manner designed to minimize  disruptions in
customer  service,  and in full cooperation  with its peer providers,  community
leaders and service organizations.

The  foregoing  discussion of the Company's  Year 2000  Preparedness  contains a
substantial  number of  forward-looking  statements,  indicated by such words as
"expects,"  "believes,"   "estimates,"   "anticipates,"  "plans,"  "assessment,"
"should," "will," and similar words. These forward-looking  statements are based
on the Company's and management's beliefs, assumptions,  expectations, estimates
and projections  any or all of which are subject to future change,  depending on
unknown developments and facts. These forward-looking  statements should be read
in  conjunction  with the  Company's  disclosures  located at the  beginning  of
Management's Discussion and Analysis.


                           PART II. OTHER INFORMATION

Item 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

Sale of Unregistered Stock

Use of Proceeds from the Public Offering

(c)      During the quarter  ended  September  30,  1998,  the Company used $2.8
         million of the  proceeds of the June 30,  1998 IPO to purchase  the net
         assets of Precise Machine Company of Irving, Texas.  Additionally,  the
         Company used $2.2 million of the proceeds to purchase 315,000 shares of
         its common stock during the third quarter.

         The  remainder  of the  proceeds are  currently  held in highly  liquid
         assets to be used to support the Company's growth  strategies  through,
         among  other  things,  the  funding of  acquisitions  of  complementary
         businesses.

Item 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (A)      See Exhibit Index

         (B)       No current reports on Form 8-K have been filed by the Company
                   during the nine month period ended September 30, 1998.


<PAGE>

                                   SIGNATURES

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

                                  LMI AEROSPACE, INC.


Date: November 16, 1998          By:  /s/ Lawrence E. Dickinson
                                       -----------------------------------------
                                        Lawrence E. Dickinson
                                        Chief Financial Officer and Secretary


<PAGE>


                                  EXHIBIT INDEX


Exhibit Number                 Description
--------------                 -----------

         10.15                 General Terms Agreement between Boeing Company
                               and Leonard's Metal, Inc. with Special Business
                               Provisions attached

         27                    Financial Data Schedule