**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-Q**





ý
            Quarterly
                Report pursuant to Section 13 or 15(d) of the Securities Exchange
                Act of
                1934.


For
      the
      quarterly period ended September 30, 2005.








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


For
      the
      transition period from ______
      to ______.





Commission
      file number: 000-24293





**LMI
      AEROSPACE, INC.**


(Exact
      Name of Registrant as Specified in its Charter)





**Missouri**
              (State
                or Other Jurisdiction of
              Incorporation
                or Organization)
            **43-1309065**
              (IRS
                Employer
              Identification
                No.)**3600
                Mueller Road**
              **St.
                Charles, Missouri**
              (Address
                of Principal Executive Offices)
            **63302-0900**
              (Zip
                Code)





**(636)
      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. ý Yes  ̈ No





Indicate
      by check mark whether the registrant is an accelerated filer (as defined in
      Rule
      12b-2 of the Exchange Act).  ̈ Yes ý No





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).  ̈ Yes ý 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 of common stock
            Number
                of shares outstanding as of
              November
                9, 2005Common
                Stock, par value $.02 per share
            8,321,855











**LMI
      AEROSPACE, INC.**




**QUARTERLY
      REPORT ON FORM 10-Q**


**FOR
      THE FISCAL QUARTER ENDING SEPTEMBER 30, 2005**





PART
      I. FINANCIAL INFORMATION




Page
                  No.**Item
                  1.  Financial Statements (unaudited).**Condensed
                  Consolidated Balance Sheets as of
                  September 30, 2005 and December 31, 2004.
              3Condensed
                  Consolidated Statements of
                  Operations for the three months and nine months ended September
                  30, 2005
                  and 2004.
              4Condensed
                  Consolidated Statements of Cash
                  Flows for the nine months ended September 30, 2005 and
                  2004.
              5Notes
                  to Condensed Consolidated
                  Financial Statements.
              6**Item
                  2.  Management’s Discussion and Analysis of
                  Financial Condition and Results of
                  Operations.**
              12**Item
                  3.  Quantitative and Qualitative Disclosures
                  About Market Risk.**
              19**Item
                  4.  Controls and
                  Procedures.**
              19
 
 PART
        II. OTHER INFORMATION
 
 **Item
                  1.  Legal
                  Proceedings.**
              21**Item
                  6.  Exhibits.**
              21SIGNATURE
                  PAGE
              22EXHIBIT
                  INDEX
              23











**PART
      I**


**FINANCIAL
      INFORMATION**





**LMI
      Aerospace, Inc.**


**Condensed
      Consolidated Balance
      Sheets**


*(Amounts
      in thousands, except share and per share data)*





(Unaudited)
              September
                30, 2005
            
            December
                31, 2004Assets:Current
                Assets:Cash
                and cash equivalents
            
            $
            77
            
            $
            414Trade
                accounts receivable, net of allowance of$222
                at September 30, 2005 and $213 at December 31, 2004
            
            
            12,485
            
            
            9,093Inventories
            
            
            26,040
            
            
            23,687Prepaid
                expenses and other current assets
            
            
            1,038
            
            
            981Deferred
                income taxes
            
            
            2,043
            
            
            2,043Total
                current assets
            
            
            41,683
            
            
            36,218Property,
                plant and equipment, net
            
            
            17,538
            
            
            18,947Goodwill
            
            
            5,653
            
            
            5,653Customer
                intangible assets, net
            
            
            3,180
            
            
            3,408Other
                assets
            
            
            833
            
            
            1,155Total
                assets
            
            $
            68,887
            
            $
            65,381Liabilities
                and stockholders’ equityCurrent
                liabilities:Accounts
                payable
            
            $
            6,354
            
            $
            5,857Accrued
                expenses
            
            
            3,390
            
            
            2,728Income
                taxes payable
            
            
            1,729
            
            
            67Current
                installments of long-term debt and capital leaseobligations
            
            
            1,756
            
            
            1,973Total
                current liabilities
            
            
            13,229
            
            
            10,625Long-term
                debt and capital lease obligations, less currentinstallments
            
            
            15,102
            
            
            17,583Subordinated
                debt
            
            
            1,000
            
            
            1,000Deferred
                income taxes
            
            
            1,821
            
            
            1,821Total
                long-term liabilities
            
            
            17,923
            
            
            20,404Stockholders’
                equity:Common
                stock, $.02 par value per share; 28,000,000 sharesauthorized;
                8,763,877 shares and 8,736,427 shares issuedat
                September 30, 2005 and 2004, respectively
            
            
            175
            
            
            175Preferred
                stock, $.02 par value per share; 2,000,000shares
                authorized; none issued in both periods
            
            
            -
            
            
            -Additional
                paid-in capital
            
            
            26,245
            
            
            26,171Treasury
                stock, at cost, 457,022 shares at September 30, 2005 and499,712
                shares at December 31, 2004
            
            
            (2,168
            )
            
            (2,371
            )Retained
                earnings
            
            
            13,483
            
            
            10,377Total
                stockholders’ equity
            
            
            37,735
            
            
            34,352Total
                liabilities and stockholders’ equity
            
            $
            68,887
            
            $
            65,381





*See
      accompanying notes.*








**LMI
      Aerospace, Inc.**


**Condensed
      Consolidated Statements of
      Operations**


*(Amounts
      in thousands, except share and per share data)*


*(Unaudited)*





Three
                Months Ended
              September
                30,
            
            Nine
                Months Ended
              September
                30,2005
            
            2004
            
            2005
            
            2004Net
                sales
            
            $
            24,255
            
            $
            23,032
            
            $
            72,236
            
            $
            63,447Cost
                of sales
            
            
            17,917
            
            
            18,272
            
            
            55,051
            
            
            51,689Gross
                profit
            
            
            6,338
            
            
            4,760
            
            
            17,185
            
            
            11,758Selling,
                general and administrative expenses
            
            
            3,844
            
            
            3,192
            
            
            10,784
            
            
            10,499Income
                from operations
            
            
            2,494
            
            
            1,568
            
            
            6,401
            
            
            1,259Other
                income (expense):Interest
                expense
            
            
            (406
            )
            
            (798
            )
            
            (1,249
            )
            
            (1,806
            )Other,
                net
            
            
            2
            
            
            414
            
            
            2
            
            
            422Income
                (loss) before income taxes
            
            
            2,090
            
            
            1,184
            
            
            5,154
            
            
            (125
            )Provision
                for income taxes
            
            
            787
            
            
            39
            
            
            1,958
            
            
            114Net
                income (loss)
            
            $
            1,303
            
            $
            1,145
            
            $
            3,196
            
            $
            (239
            )Amounts
                per common share:Net
                income (loss) per common share
            
            $
            0.16
            
            $
            0.14
            
            $
            0.39
            
            $
            (0.03
            )Net
                income (loss) per common share,assuming
                dilution
            
            $
            0.16
            
            $
            0.14
            
            $
            0.38
            
            $
            (0.03
            )Weighted
                average common sharesoutstanding
            
            
            8,268,794
            
            
            8,181,786
            
            
            8,248,959
            
            
            8,181,786Weighted
                average diluted stockoptions
                outstanding
            
            
            113,720
            
            
            -
            
            
            109,171
            
            
            -





*See
      accompanying notes.*

















**LMI
      Aerospace, Inc.**


**Condensed
      Consolidated Statements of Cash
      Flows**


*(Amounts
      in thousands)*


*(Unaudited)*





Nine
                Months Ended
              September
                30,2005
            
            2004Operating
                activities:Net
                income (loss)
            
            $
            3,196
            
            $
            (239
            )Adjustments
                to reconcile net income (loss) toNet
                cash provided by operating activities:Depreciation
                and amortization
            
            
            3,278
            
            
            3,499Non-cash
                gain on sale of Versaform, Canada
            
            
            -
            
            
            (523
            )Non-cash
                loss on sale of equipment
            
            
            4
            
            
            44Changes
                in operating assets and liabilities:Trade
                accounts receivable
            
            
            (3,392
            )
            
            (2,002
            )Inventories
            
            
            (2,353
            )
            
            716Prepaid
                expenses and other assets
            
            
            (125
            )
            
            (587
            )Income
                taxes
            
            
            1,687
            
            
            1,648Accounts
                payable
            
            
            497
            
            
            991Accrued
                expenses
            
            
            663
            
            
            728Net
                cash provided by operating activities
            
            
            3,455
            
            
            4,275Investing
                activities:Additions
                to property, plant and equipment
            
            
            (1,298
            )
            
            (823
            )Proceeds
                from sale of Versaform, Canada
            
            
            -
            
            
            964Proceeds
                from sale of equipment
            
            
            17
            
            
            10Net
                cash provided (used) by investing activities
            
            
            (1,281
            )
            
            151Financing
                activities:Net
                borrowing (payment) on revolving line of credit
            
            
            (1,174
            )
            
            977Principal
                payments on long-term debt
            
            
            (1,524
            )
            
            (5,564
            )Proceeds
                from exercise of stock options
            
            
            187
            
            
            -Net
                cash used by financing activities
            
            
            (2,511
            )
            
            (4,587
            )Effect
                of exchange rate changes on cash
            
            
            -
            
            
            20Net
                decrease in cash and cash equivalents
            
            
            (337
            )
            
            (181
            )Cash
                and cash equivalents, beginning of year
            
            
            414
            
            
            441Cash
                and cash equivalents, end of quarter
            
            $
            77
            
            $
            260Supplemental
                disclosures of cash flow information:Interest
                paid
            
            $
            1,292
            
            $
            1,298Income
                taxes paid (refunded), net
            
            $
            263
            
            $
            (1,645
            )





Supplemental
      Schedule of Non-cash Investing and Financing Activities


At
      August
      31, 2004, the Company sold 100% of its stock in its Versaform Canada division,
      whereby all of the assets and certain liabilities were transferred to a private
      group of investors, as follows:


Accounts
                receivable, net
            196Inventories
            47Prepaid
                expenses
            22Net
                property plant and equipment
            249Accounts
                payable
            34Accrued
                expenses
            26Income
                taxes payable
            13


The
      sale
      resulted in cash proceeds of $868, plus an additional note receivable of
      $96.





*See
      accompanying note* s.


**LMI
            Aerospace, Inc.**
 **Notes
            to Condensed Consolidated Financial
            Statements**
 *(Amounts
            in thousands, except share and per share data)*
 *(Unaudited)*


**1.  Accounting
      Policies**




**Description
      of Business**




LMI
      Aerospace, Inc. (the “Company”) fabricates, machines and integrates formed,
      close tolerance aluminum and specialty alloy components for use by the aerospace
      and technology industries. 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; Irving, Texas; Sun Valley and Vista, California; and Savannah,
      Georgia.




**Basis
      of Presentation**




The
      accompanying unaudited condensed consolidated financial statements have been
      prepared 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. 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 nine months ending September 30, 2005 are not necessarily
      indicative of the results that may be expected for the year ending December
      31,
      2005. These financial statements should be read in conjunction with the
      condensed consolidated financial statements and accompanying footnotes included
      in the Company’s Annual Report on Forms 10-K and 10-K/A for the year ended
      December 31, 2004, as filed with the Securities and Exchange
      Commission.





**Customer
      Concentration**





Direct
      sales to the Company’s largest customer accounted for 33.8% and 24.4% of the
      Company’s total revenues at September 30, 2005 and September 30, 2004,
      respectively.





Direct
      sales to the Company’s second largest customer accounted for 19.8% and 18.7% of
      the Company’s total revenues at September 30, 2005 and September 30, 2004,
      respectively.





Direct
      sales to the Company’s third largest customer accounted for 6.9% and 9.2% of the
      Company’s total revenues at September 30, 2005 and September 30, 2004,
      respectively.





**Use
      of Estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States 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.




**Stock-Based
      Compensation**





The
      Company accounts for its stock-based compensation in accordance with Accounting
      Principles Board (“APB”) Opinion No. 25, *Accounting
      for Stock Issued to Employees* ,
      and
      related interpretations and provides the pro forma disclosures required by
      Statements of Financial Accounting Standards (“SFAS”) No. 123, *Accounting
      for Stock-Based Compensation* ,
      and
      SFAS No. 148, *Accounting
      for Stock-Based Compensation - Transition and Disclosure* .
      No
      stock-based employee compensation expense is recognized in the statement of
      operations, as all options granted had an exercise price equal to the fair
      market value of the underlying common stock on the date of grant. Had the
      Company determined compensation cost based on the fair value of the underlying
      common stock at the grant date under SFAS No. 123, net income and earnings
      per
      share amounts would have been as follows:





Three
                Months Ended
              September
                30,
            
            Nine
                Months Ended
              September
                30,2005
            
            2004
            
            2005
            
            2004Net
                Income (loss)
            
            $
            1,303
            
            $
            1,145
            
            $
            3,196
            
            $
            (239
            )Total
                stock-based employee compensationexpense
                determined under fair valuebased
                method, net of tax effect
            
            
            (1
            )
            
            (1
            )
            
            (19
            )
            
            (13
            )Pro
                forma net income (loss)
            
            $
            1,302
            
            $
            1,144
            
            $
            3,177
            
            $
            (252
            )Net
                Income (loss) per common share - basicand
                assuming dilution1As
                reported
            
            $
            0.16
            
            $
            0.14
            
            $
            0.39
            
            $
            (0.03
            )Pro
                forma
            
            $
            0.16
            
            $
            0.14
            
            $
            0.38
            
            $
            (0.03
            )





1  Options
      to purchase 10,500 and 369,893 shares of common stock were outstanding at
      September 30, 2005 and September 30, 2004, respectively, but were not included
      in the computations of diluted EPS because the options’ exercise price was
      greater than the year to date average market price of the common
      shares.





In
      December 2004, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      123 (revised 2004), *Share-Based
      Payments* (‘SFAS
      No. 123R”), which revises and replaces SFAS No. 123 and supercedes APB Opinion
      No. 25. SFAS 123R requires the measurement of all share-based payments to
      employees, including grants of employee stock options, using a fair-value based
      method and the recording of such expense in its consolidated statements of
      operations. The pro forma disclosures previously permitted under SFAS No. 123
      will no longer be an alternative to financial statement recognition. The
      provisions for SFAS No. 123R are effective for fiscal year beginning after
      December 15, 2005 for small business issuers. The Company does not expect that
      the adoption of SFAS No. 123R will have a significant impact on its consolidated
      financial statements.





**Income
      Taxes**




The
      Company accounts for income taxes under the provisions of SFAS No. 109, *Accounting
      for Income Taxes* .
      The
      objectives of accounting for income taxes are to recognize the amount of taxes
      payable or refundable for the current year and deferred tax liabilities and
      assets for the future tax consequences of events that have been recognized
      in
      the Company’s financial statements or tax returns. SFAS No. 109 also requires
      that deferred tax assets be reduced by a valuation allowance if it is more
      likely than not that some portion or all of the deferred tax asset will not
      be
      realized.





**LMI
            Aerospace, Inc.**
 **Notes
            to Condensed Consolidated Financial Statements**
 *(Amounts
            in thousands, except share and per share data)*
 *(Unaudited)*


**2.  Inventories**


Inventories
      consist of the following:





September
                30, 2005
            
            December
                31, 2004Gross
                inventoryRaw
                materials
            
            $
            5,691
            
            $
            4,603Work
                in progress
            
            
            7,087
            
            
            6,931Finished
                goods
            
            
            15,498
            
            
            14,458Total
                gross inventory
            
            
            28,276
            
            
            25,992ReservesLower
                of cost or market
            
            
            (182
            )
            
            (288
            )Obsolescence
                & slow moving
            
            
            (2,054
            )
            
            (2,017
            )Total
                reserves
            
            
            (2,236
            )
            
            (2,305
            )Net
                inventory
            
            $
            26,040
            
            $
            23,687





**3.  Goodwill
      and Intangibles**





As
      required by SFAS No. 142, *Goodwill
      and Other Intangible Assets* ,
      the
      Company performs an annual goodwill impairment test on a reporting segment
      basis. A fair value approach is utilized by management regarding projected
      cash
      flows and other factors to determine the fair value of the respective assets.
      If
      required, an impairment charge is recognized for the amount by which the
      carrying amount of goodwill exceeds its fair value.





In
      the
      fourth quarter of 2004, the Company performed the required annual impairment
      test under SFAS No. 142 and concluded that the remaining goodwill balance,
      which
      relates to the Machining and Technology segment only, was not impaired. Goodwill
      was $5,653 at September 30, 2005 and December 31, 2004.





**Customer
      Related Intangibles**




The
      carrying amount of customer related intangibles at September 30, 2005 and
      December 31, 2004 were as follows:




Gross
              Amount
            
            Accumulated
              Amortization
            
            Useful
              LifeVersaform
                Corporation
            
            $
            3,975
            
            $
            795
            
            
            15
                yearsSeptember
                30, 2005
            
            $
            3,975
            
            $
            795Versaform
                Corporation
            
            $
            3,975
            
            $
            596Stretch
                Forming Corporation
            
            
            329
            
            
            300December
                31, 2004
            
            $
            4,304
            
            $
            896





Customer
      related intangibles amortization expense was $66 and $96 for the three months
      ended September 30, 2005 and 2004, respectively, and $228 and $288 for the
      nine
      months ended September 30, 2005 and 2004, respectively.





**LMI
            Aerospace, Inc.**
 **Notes
            to Condensed Consolidated Financial Statements**
 *(Amounts
            in thousands, except share and per share data)*
 *(Unaudited)*


**4.  Long-Term
      Debt and Revolving Line of Credit**





Long-term
      debt and the revolving line of credit consist of the following:





September
                30,
              2005
            
            December
                31,
              2004Term
                Loans:Real
                estate
            
            $
            3,372
            
            $
            3,645Equipment
            
            
            3,835
            
            
            4,720Revolving
                line of credit
            
            
            9,416
            
            
            10,590Note
                payable to director, principal and interest payablemonthly
                at 7%
            
            
            --
            
            
            181Notes
                payable, principal and interest payable monthly,at
                fixed rates, ranging from 6.99% to 8.88%
            
            
            235
            
            
            420Total
                debt
            
            
            16,858
            
            
            19,556Less
                current installments
            
            
            1,756
            
            
            1,973Total
            
            $
            15,102
            
            $
            17,583Subordinated
                notes due December 2007 payable tocertain
                directors, interest payable monthly at 12%
            
            $
            1,000
            
            $
            1,000





**New
      Credit Facility**





On
      November 29, 2004 the Company negotiated a new lending agreement (the “Credit
      Facility”) with Wells Fargo Business Credit, Inc. (“Wells Fargo”). The Credit
      Facility is structured as follows:





·
            A
                revolving line of credit (the “Revolver”) of up to $18,000, subject to a
                borrowing base calculation. At September 30, 2005, the Company had
                $9,416
                outstanding under the Revolver. The borrowing base calculation at
                September 30, 2005 allowed the Company to borrow up to $14,366. The
                Revolver requires monthly payments of interest at Wells Fargo’s prime
                lending rate (6.75% at September 30, 2005) and matures on November
                15,
                2007.


·
            An
                equipment term loan (the “Equipment Loan”) of $4,720 payable monthly over
                three years in equal monthly principal installments of $98. The Equipment
                Loan requires monthly interest payments at Wells Fargo’s prime lending
                rate plus 4%. This rate can be reduced to Wells Fargo’s prime lending rate
                plus 0.5% if the Company is able to meet the covenants under the
                Credit
                Facility and pays a fee of $100.


·
            A
                real estate term loan (the “Real Estate Loan”) of $3,645 payable in equal
                monthly principal installments of $30 over three years, using a ten
                year
                amortization table. The Real Estate Loan requires interest at Wells
                Fargo’s prime lending rate plus 4%. This rate can be reduced to Wells
                Fargo’s prime lending rate plus 0.5% if the Company is able to maintain
                sufficient liquidity and reduce the borrowing base calculations by
                $1,800
                over the first year of the Real Estate
                Loan.





Under
      the
      Revolver, Equipment Loan and Real Estate Loan, the Company has an option to
      fix
      the interest rate for a period not to exceed 90 days. The Credit Facility is
      secured by all the assets of the Company and requires the Company to meet
      certain non-financial and financial covenants, including minimum levels of
      net
      income and net worth and limits on capital expenditures. The Credit Facility
      expires on November 15, 2007 and includes prepayment penalties for early
      termination of the Credit Facility.





In
      connection with the Credit Facility, the Company issued an aggregate of $1,000
      of subordinated notes to certain of its directors. These subordinated notes
      provide for no principal payments and quarterly interest payments at 12% per
      annum and mature on December 31, 2007. Prepayments are allowed only if certain
      financial transactions or measurements are accomplished.






**LMI
            Aerospace, Inc.**
 **Notes
            to Condensed Consolidated Financial Statements**
 *(Amounts
            in thousands, except share and per share data)*
 *(Unaudited)*


**5.  Business
      Segment Information**





As
      set
      forth in the criteria of SFAS No. 131, *Disclosures
      about Segments of an Enterprise and Related Information* , ** the
      Company is organized into two reportable segments: the Sheet Metal segment
      and
      the Machining and Technology segment. The Sheet Metal segment fabricates,
      finishes and integrates close tolerance aluminum and specialty alloy components
      primarily for the aerospace industry. The Machining and Technology segment
      machines close tolerance aluminum and specialty alloy components for the
      aerospace, semiconductor and medical products industries.





The
      accounting policies of the segments are the same as those described in Note
      1 of
      the Condensed Consolidated Financial Statements included as part of this
      Quarterly Report on Form 10-Q. Sales between segments are insignificant.
      Corporate assets, liabilities and expenses related to the Company’s corporate
      offices are allocated to the segments, except for interest expense and income
      taxes. The table below presents information about reported segments on the
      basis
      used internally to evaluate segment performance:





Three
                Months Ended
              September
                30,
            
            Nine
                Months Ended
              September
                30,2005
            
            2004
            
            2005
            
            2004Net
                sales:Sheet
                Metal
            
            $
            20,891
            
            $
            19,406
            
            $
            61,938
            
            $
            51,628Machining
                and Technology
            
            
            3,364
            
            
            3,626
            
            
            10,298
            
            
            11,819$
            24,255
            
            $
            23,032
            
            $
            72,236
            
            $
            63,447Income
                (loss) from operations:Sheet
                Metal
            
            $
            2,830
            
            $
            1,241
            
            $
            7,105
            
            $
            (134
            )Machining
                and Technology
            
            
            (336
            )
            
            327
            
            
            (704
            )
            
            1,393$
            2,494
            
            $
            1,568
            
            $
            6,401
            
            $
            1,259Interest
                expense:Sheet
                Metal
            
            $
            -
            
            $
            150
            
            $
            3
            
            $
            407Machining
                and Technology
            
            $
            -
            
            $
            130
            
            $
            -
            
            $
            441Corporate
            
            $
            406
            
            $
            518
            
            $
            1,246
            
            $
            958$
            406
            
            $
            798
            
            $
            1,249
            
            $
            1,806Depreciation
                and Amortization:Sheet
                Metal
            
            $
            753
            
            $
            966
            
            $
            2,460
            
            $
            2,863Machining
                and Technology
            
            
            133
            
            
            100
            
            
            327
            
            
            296Corporate
            
            
            151
            
            
            113
            
            
            491
            
            
            340$
            1,037
            
            $
            1,179
            
            $
            3,278
            
            $
            3,499





**LMI
            Aerospace, Inc.**
 **Notes
            to Condensed Consolidated Financial Statements**
 *(Amounts
            in thousands, except share and per share data)*
 *(Unaudited)*





Three
                Months Ended
              September
                30,
            
            Nine
                Months Ended
              September
                30,2005
            
            2004
            
            2005
            
            2004Capital
                expenditures:Sheet
                Metal
            
            $
            447
            
            $
            145
            
            $
            949
            
            $
            774Machining
                and Technology
            
            
            99
            
            
            2
            
            
            113
            
            
            18Corporate
            
            
            182
            
            
            10
            
            
            236
            
            
            31$
            728
            
            $
            157
            
            $
            1,298
            
            $
            823





September
                30, 2005
            
            December
                31, 2004Goodwill:Machining
                and Technology
            
            $
            5,653
            
            $
            5,653$
            5,653
            
            $
            5,653Total
                Assets:Sheet
                Metal
            
            $
            50,573
            
            $
            45,017Machine
                and Technology
            
            
            14,453
            
            
            15,981Corporate
            
            
            3,861
            
            
            4,383$
            68,887
            
            $
            65,381





**6.  Comprehensive
      Income (Loss)**





Comprehensive
      income (loss) includes adjustments to net income (loss) for the change in
      foreign currency translations related to the Company’s former Canadian
      subsidiary, which was sold in 2004, as follows:





Three
                Months Ended
              September
                30,
            
            Nine
                Months Ended
              September
                30,2005
            
            2004
            
            2005
            
            2004Net
                income (loss)
            
            $
            1,303
            
            $
            1,145
            
            $
            3,196
            
            $
            (239
            )Other
                comprehensive income (loss):Foreign
                currency translationadjustments
            
            
            -
            
            
            8
            
            
            -
            
            
            (20
            )Comprehensive
                income (loss)
            
            $
            1,303
            
            $
            1,153
            
            $
            3,196
            
            $
            (259
            )
















**ITEM
      2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
      CONDITION AND RESULTS OF OPERATIONS.**




**Statement
      Regarding Forward-Looking Information**





The
      Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for
      forward-looking statements. The Company makes forward-looking statements in
      the
“Management’s Discussion and Analysis of Financial Condition and Results of
      Operations” section of this Quarterly Report on Form 10-Q, which represent the
      Company’s expectations or beliefs about future events and financial performance.
      When used in this report, the words
“expect,”“believe,”“anticipate,”“goal,”“plan,”“intend,”“estimate,”“may,”“will”
      or similar words are intended to identify forward-looking statements. These
      forward-looking statements are subject to known and unknown risks, uncertainties
      and assumptions, including those referred to in the “Risk Factors” section of
      the Company’s Annual Report on
      Forms
      10-K and 10-K/A for the year ended December 31, 2004, as filed with the
      Securities and Exchange Commission on March 31, 2005.





In
      light
      of these risks, uncertainties and assumptions, the forward-looking events
      discussed may not occur. In addition, actual results could differ materially
      from those suggested by the forward-looking statements. Accordingly, investors
      are cautioned not to place undue reliance on the forward-looking statements.
      Except as required by law, the Company undertakes no obligation to publicly
      update or revise any forward-looking statements, whether as a result of new
      information, future events or otherwise. Investors should, however, review
      additional disclosures made by the Company from time to time in its periodic
      filings with the Securities and Exchange Commission.





This
      Quarterly Report on Form 10-Q should be read completely and with the
      understanding that the Company’s actual future results may be materially
      different from what the Company expects. All forward-looking statements made
      by
      the Company in this Form 10-Q and in the Company’s other filings with the
      Securities and Exchange Commission are qualified by these cautionary
      statements.





The
      condensed consolidated financial statements are prepared in accordance with
      accounting principles generally accepted in the United States, which require
      the
      Company to make estimates and assumptions. (See Note 1 of the Condensed
      Consolidated Financial Statements included as part of this Quarterly Report
      on
      Form 10-Q).





The
      Company believes that certain significant accounting estimates have the
      potential to have a more significant impact on the financial statements either
      because of the significance of the financial statements to which they relate
      or
      because they involve a higher degree of judgment and complexity. A summary
      of
      such critical accounting estimates can be found in the section entitled
“Management’s Discussion and Analysis of Financial Condition and Results of
      Operation” contained in the Company’s Annual Report on Forms 10-K and 10-K/A for
      the fiscal year ended December 31, 2004.





**Overview**





LMI
      Aerospace, Inc., its direct and indirect wholly-owned subsidiaries and other
      required consolidated entities are collectively referred to as “the Company.”
      Also, unless the context otherwise requires, the terms “we,”“us,” or “our” refer
      to the Company.





The
      following “Management’s Discussion and Analysis of Financial Condition and
      Results of Operations,” commonly referred to as MD&A, is intended to help
      the reader understand the Company, our operations and our business environment.
      MD&A is provided as a supplement to, and should be read in conjunction with,
      our condensed consolidated financial statements and the accompanying notes
      as
      well as our Annual Report on Form 10-K for the year ended December 31,
      2004.








**Our
      Business**





We
      are a
      leader in fabricating, machining, finishing and integrating formed, close
      tolerance aluminum and specialty alloy components and sheet metal products
      for
      use by the aerospace and technology industries. Aerospace components
      manufactured by us 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. We manufacture more than 30,000 aerospace
      components for integration into a variety of civilian and military aircraft
      platforms manufactured by leading original equipment manufacturers and prime
      subcontractors. We also produce components and assemblies for laser equipment
      used by semiconductor and medical equipment manufacturers in the technology
      industry and sheet metal products for various companies in the commercial sheet
      metal industry. In addition to manufacturing quality components, we provide
      our
      customers with value-added services related to the design, production and
      finishing of its components.





Historically,
      our business was primarily dependent on the commercial aircraft market, with
      Boeing Company as our principal customer. In order to diversify our products
      and
      customer base, we implemented an acquisition and marketing strategy in the
      late
      1990’s that has broadened the number of industries to which we sell our
      components, and, within the aerospace industry, diversified our customer base
      to
      reduce our dependence on Boeing Company. The following table specifies our
      sales
      by market as a percentage of total sales for the nine months ended September
      30,
      2005 as compared to the nine months ended September 30, 2004:





Market
            Nine
                Months Ended
              September
                30, 2005
            
            Nine
                Months Ended
              September
                30, 2004Corporate
                and regional aircraft
            41.9
            %
            
            34.7
            %Commercial
                aircraft
            28.0
            
            
            26.5Military
                products
            16.9
            
            
            20.1Technology
                products
            8.3
            
            
            10.6Other
                (1)
            4.9
            
            
            8.1Total
            100.0
            %
            
            100.0
            %


(1)
      Includes commercial sheet metal and various aerospace
      products.





Beginning
      in 2001, we began an aggressive acquisition campaign that resulted in the
      consummation of four transactions through 2002. In April 2001, we acquired
      Tempco Engineering Inc. and certain of its affiliates (“Tempco”), which expanded
      our aerospace product line and introduced the Company to the technology
      industry. In 2002, we acquired Versaform Corporation and certain of its
      affiliates (“Versaform), as well as Stretch Forming Corporation (“SFC”) and
      Southern Stretch Forming and Fabrication, Inc. (“SSFF”). The Versaform
      acquisition significantly increased our presence in the corporate and regional
      aircraft market while adding some military products to our product
      line.





The
      SFC
      acquisition further supplemented our military product line. Finally, our
      acquisition of SSFF increased our business in the corporate and regional
      aircraft market.





As
      a
      result of the development of Tempco’s business, the Company determined that
      Tempco should operate and be managed as an autonomous unit and, accordingly,
      as
      a business segment separate from our other businesses. The Tempco business,
      which sells machined components to both the aerospace and technology industries,
      is referred to in this discussion as the Machining and Technology segment,
      and
      our other businesses are referred to as the Sheet Metal segment.








**RESULTS
      OF OPERATIONS**





*Three
      months ended September 30, 2005 compared to three months ended September 30,
      2004*





The
      following table is a summary of the Company’s operating results for the three
      months ended September 30, 2005 and September 30, 2004:





($
                in millions)
            
            Three
                Months Ended
              September
                30, 2005
            
            Three
                Months Ended
              September
                30, 2004Sheet
              Metal
            
            Machining
                & Technology
            
            Total
            
            Sheet
              Metal
            
            Machining
                &
              Technology
            
            TotalNet
                sales
            
            $
            20.8
            
            $
            3.4
            
            $
            24.2
            
            $
            19.4
            
            $
            3.6
            
            $
            23.0Cost
                of sales
            
            
            14.7
            
            
            3.2
            
            
            17.9
            
            
            15.4
            
            
            2.8
            
            
            18.2Gross
                profit
            
            
            6.1
            
            
            0.2
            
            
            6.3
            
            
            4.0
            
            
            0.8
            
            
            4.8S,
                G & A
            
            
            3.3
            
            
            0.5
            
            
            3.8
            
            
            2.7
            
            
            0.5
            
            
            3.2Income
                (loss) fromoperations
            
            $
            2.8
            
            $
            (0.3
            )
            $
            2.5
            
            $
            1.3
            
            $
            0.3
            
            $
            1.6





**Sheet
      Metal Segment**





**Net
      Sales.** The
      following table specifies the amount of the Sheet Metal segment’s net sales by
      category for the third quarter of 2005 and 2004 and the percentage of the
      segment’s total net sales for each period represented by each
      category.





($
      in
      millions)


Category
            
            3rd
                Qtr
              2005
            
            %
                of
              Total
            
            3rd
                Qtr
              2004
            
            %
                of
              TotalCorporate
                and regional
            
            $
            10.2
            
            
            49.1
            %
            $
            9.8
            
            
            50.5
            %Commercial
                aircraft
            
            
            7.2
            
            
            34.6
            
            
            5.6
            
            
            28.9Military
                products
            
            
            2.5
            
            
            12.0
            
            
            2.6
            
            
            13.4Other
            
            
            0.9
            
            
            4.3
            
            
            1.4
            
            
            7.2Total
            
            $
            20.8
            
            
            100.0
            %
            $
            19.4
            
            
            100.0
            %





Net
      sales
      for the Sheet Metal segment for the quarter ended September 30, 2005 were $20.8
      million, an increase of 7.2% from $19.4 million for the quarter ended September
      30, 2004.





Net
      sales
      for use on corporate and regional aircraft were $10.2 million in the third
      quarter of 2005 compared to $9.8 million in the third quarter of 2004, an
      increase of 4.1%. This increase resulted primarily from a growth in net sales
      for use on Gulfstream aircraft from $8.3 million in the third quarter of 2005
      to
      $7.8 million in the third quarter of 2004. This increase was offset by declines
      in demand for Bombardier aircraft components and auxiliary power unit components
      for various aircraft.





Net
      sales
      for commercial aircraft were $7.2 million in the quarter ended September 30,
      2005, a 28.6% increase from $5.6 million in the quarter ended September 30,
      2004. This increase was primarily driven by higher production rates for the
      Boeing 737, which generated net sales of $4.6 million in the third quarter
      of
      2005 compared to $3.3 million in the third quarter of 2004. Net sales of
      components for the Boeing 747 of $1.5 million in the third quarter of 2005,
      up
      from $1.3 million in the third quarter of 2004, also contributed to this
      increase in net sales. However, sales of Boeing products were reduced by
      approximately $0.5 million in the quarter due to delivery deferrals related
      to a
      work stoppage at Boeing facilities.





Military
      products generated net sales of $2.5 million for the quarter ended September
      30,
      2005 compared to $2.6 million for the quarter ended September 30, 2004. Net
      sales for use on Lockheed products were $1.6 million in the third quarter of
      2005 compared to $1.7 million in the third quarter of 2004. The $0.1 million
      decline was offset by net sales of $0.2 million generated under a new long
      term
      agreement with Sikorsky Aircraft Corporation. These modest changes resulted
      in
      the $0.1 million decrease in net sales of military products from the third
      quarter of 2004 to the third quarter of 2005.




**Gross
      Profit.**  Gross
      profit for the segment was $6.1 million (29.3% of net sales) for the third
      quarter of 2005, up from $4.0 million (20.6% of net sales) for the third quarter
      of 2004. This increase was driven by better manufacturing efficiencies, exiting
      certain poorly performing products and improved coverage of fixed
      costs.





**Selling,
      General and Administrative Expenses.** **** Selling,
      general and administrative expenses were $3.3 million (15.9% of sales) for
      the
      quarter ended September 30, 2005 compared to $2.7 million (13.9% of net sales)
      for the quarter ended September 30, 2004. This increase is primarily
      attributable to increased salary and wages for higher levels of employment,
      additional costs for bonuses and higher professional services.





**Machining
      and Technology Segment**





**Net
      Sales.** The
      following table specifies the amount of the Machining and Technology segment’s
      net sales by category for the third quarter of 2005 and 2004 and the percentage
      of the segment’s total net sales for each period represented by each
      category:





($
      in
      millions)


**Category**
            
            3rd
                Qtr of 2005
            
            %
                of
              Total
            
            3rd
                Qtr of 2004
            
            %
                of
              TotalMilitary
                products
            
            $
            1.3
            
            
            38.2
            %
            $
            1.9
            
            
            51.6
            %Technology
                products
            
            
            1.7
            
            
            50.0
            
            
            1.4
            
            
            38.8Other
            
            
            0.4
            
            
            11.8
            
            
            0.3
            
            
            9.6Total
            
            $
            3.4
            
            
            100.0
            %
            $
            3.6
            
            
            100.0
            %





Net
      sales
      for the Machining and Technology segment were $3.4 million in the third quarter
      of 2005, down 5.6% from $3.6 million in the third quarter of 2004.





Net
      sales
      of military products were $1.3 million for the third quarter of 2005, down
      from
      $1.9 million for the third quarter of 2004. This decline was due to decreased
      demand for Apache helicopter components for Alliant Techsystems and
      Boeing.





Net
      sales
      of components used in technology products were $1.7 million in the quarter
      ended
      September 30, 2005 compared to $1.4 million in the quarter ended September
      30,
      2004. Net sales of laser components for both the medical and semiconductor
      industries grew slightly during the period.





**Gross
      Profit.** Gross
      profit for the quarter ended September 30, 2005 was $0.2 million (5.9% of net
      sales) compared to $0.8 million (22.2% of net sales) in the quarter ended
      September 30, 2004. The $0.6 million decline resulted from poor labor
      efficiencies, moving and rearrangement costs incurred to better align production
      areas, and lower net sales providing less coverage of fixed costs.





**Selling,
      General and Administrative Expenses.**  Selling,
      general and administrative expenses were $0.5 million in the third quarter
      of
      2005, unchanged from the third quarter of 2004.





**Non-segment
      Expenses**





**Interest
      Expense.**  Interest
      expense was $0.4 million in the quarter ended September 30, 2005 compared to
      $0.8 million in the quarter ended September 30, 2004. The third quarter of
      2005
      did not include the fee of $0.3 million payable to the Company’s prior lender
      that was included in the third quarter of 2004, which contributed to the $0.4
      million decline in interest expense. Additionally, lower outstanding interest
      bearing debt balances at September 30, 2005 of $17.9 compared to $20.6 at
      September 30, 2004 generated lower interest costs which were partially offset
      by
      increased interest rates.





**Other.** Other
      income for the quarter third quarter of 2005 was $0.0 million, down from $0.4
      million in 2004, primarily because the Company sold a subsidiary in British
      Columbia, Canada during the third quarter of 2004, which generated a gain of
      $0.4 million.





**Income
      Tax Expense.** Income
      tax expense was $0.8 million in the third quarter of 2005 compared to $0.0
      million in the third quarter of 2004. During the third quarter of 2005, the
      Company utilized an effective income tax rate of 37.5%. During the third quarter
      of 2004, the Company utilized tax benefits from tax losses in the first and
      second quarters of 2004 to offset any liability for the third
      quarter.





*Nine
      months ended September 30, 2005 compared to September 30, 2004*





The
      following table is a summary of the Company’s operating results for the nine
      months ended September 30, 2005 and September 30, 2004:





($
                in millions)
            
            Nine
                Months Ended
              September
                30, 2005
            
            Nine
                Months Ended
              September
                30, 2004Sheet
              Metal
            
            Machining
                & Technology
            
            Total
            
            Sheet
              Metal
            
            Machining
                &
              Technology
            
            TotalNet
                sales
            
            $
            61.9
            
            $
            10.3
            
            $
            72.2
            
            $
            51.6
            
            $
            11.8
            
            $
            63.4Cost
                of sales
            
            
            45.5
            
            
            9.5
            
            
            55.0
            
            
            42.6
            
            
            9.0
            
            
            51.6Gross
                profit
            
            
            16.4
            
            
            0.8
            
            
            17.2
            
            
            9.0
            
            
            2.8
            
            
            11.8S,
                G & A
            
            
            9.3
            
            
            1.5
            
            
            10.8
            
            
            9.1
            
            
            1.4
            
            
            10.5Income
                (loss) fromoperations
            
            $
            7.1
            
            $
            (0.7
            )
            $
            6.4
            
            $
            (0.1
            )
            $
            1.4
            
            $
            1.3





**Sheet
      Metal Segment**





**Net
      Sales.** The
      following table specifies the amount of the Sheet Metal segment’s net sales by
      category for the nine months ended September 30, 2005 and September 30, 2004
      and
      the percentage of the segment’s total net sales for each period represented by
      each category.





($
      in
      millions)


Category
            
            Nine
                Months Ended September 30, 2005
            
            %
                of
              Total
            
            Nine
                Months Ended September 30, 2004
            
            %
                of
              TotalCorporate
                and regional
            
            $
            30.2
            
            
            48.8
            %
            $
            22.0
            
            
            42.6
            %Commercial
                aircraft
            
            
            20.1
            
            
            32.5
            
            
            16.8
            
            
            32.6Military
                products
            
            
            7.1
            
            
            11.5
            
            
            8.7
            
            
            16.9Other
            
            
            4.5
            
            
            7.2
            
            
            4.1
            
            
            7.9Total
            
            $
            61.9
            
            
            100.0
            %
            $
            51.6
            
            
            100.0
            %





Net
      sales
      for the Sheet Metal segment were $61.9 million for the nine months ended
      September 30, 2005 compared to $51.6 million for the nine months ended September
      30, 2004, an increase of 20.0%.





Net
      sales
      of components for corporate and regional aircraft were $30.2 million for the
      three quarters ended September 30, 2005, an increase of 37.3% from $22.0 million
      for the three quarters ended September 30, 2004. This increase was primarily
      attributable to increased production rates on Gulfstream aircraft and additional
      components awarded to the segment in the second quarter of 2004, which generated
      $24.9 million of net sales for the first three quarters of 2005 compared to
      $16.1 million for the first three quarters of 2004.





Net
      sales
      of components for commercial aircraft were $20.1 million for the nine months
      ended September 30, 2005 compared to $16.8 million for the nine months ended
      September 30, 2004, an increase of 19.6%. Demand from increasing production
      rates on Boeing’s 737 generated the majority of this growth with net sales for
      this aircraft model reaching $12.2 million for the nine months ended September
      30, 2005 compared to $9.9 million for the nine months ended September 30, 2004.
      Net sales of components for the Boeing 777, which were $2.1 million for the
      nine
      months ended September 30, 2005 compared to $1.5 million for the nine months
      ended September 30, 2004, also contributed to this increase.





Net
      sales
      of military products were $7.1 million for the nine months ended September
      30,
      2005, down 18.4% from $8.7 million for nine months ended September 30, 2004.
      This decrease is primarily due to the movement of certain poorly performing
      C-130 work to other suppliers late in 2004, resulting in net sales for that
      aircraft of $1.4 million in 2005 compared to $3.3 million in 2004, and the
      end
      of a B-52 refurbishment program in early 2004, which contributed no net sales
      in
      2005 and $0.5 million in 2004.





**Gross
      Profit.**  Gross
      profit for the nine months ended September 30, 2005 was $16.4 million (26.5%
      of
      net sales), up from $9.0 million (17.4% of net sales) for the nine months ended
      September 30, 2004. The improvement in gross profit resulted from reduced labor
      costs after a restructuring of the Wichita, Kansas facility in the first half
      of
      2004, better labor efficiencies and a favorable coverage of fixed costs with
      higher sales volumes.





**Selling,
      General and Administrative Expenses.**   Selling,
      general and administrative expenses were $9.3 million for the nine months ended
      September 30, 2005, up $0.2 million from $9.1 million for the nine months ended
      September 30, 2004. The first nine months of 2004 included a restructuring
      charge related to a downsizing of the segment’s Wichita, Kansas facility of $0.7
      million. Excluding this charge, selling, general and administrative expenses
      were up $0.9 million for the nine months ended September 30, 2005. This increase
      was attributable to increased salary and wages, bonus costs and professional
      services.




**Machining
      and Technology Segment**





**Net
      Sales.** The
      following table specifies the amount of the Machining and Technology segment’s
      net sales by category for the nine months ended September 30, 2005 and September
      30, 2004 and the percentage of the segment’s total net sales for each period
      represented by each category:





($
      in
      millions)


**Category**
            
            Nine
                Months Ended September 30, 2005
            
            %
                of
              Total
            
            Nine
                Months Ended September 30, 2004
            
            %
                of
              TotalMilitary
                products
            
            $
            5.1
            
            
            49.5
            %
            $
            4.0
            
            
            33.9
            %Technology
                products
            
            
            3.5
            
            
            34.0
            
            
            6.7
            
            
            56.8Other
            
            
            1.7
            
            
            16.5
            
            
            1.1
            
            
            9.3Total
            
            $
            10.3
            
            
            100.0
            %
            $
            11.8
            
            
            100.0
            %





Net
      sales
      for the Machining and Technology segment for the nine months ended September
      30,
      2005 were $10.3 million, down 12.7% from the nine months ended September 30,
      2004.





Net
      sales
      of military products were $5.1 million for the first three quarters of 2005,
      up
      from $4.0 million for the first three quarters of 2004. This increase was
      primarily due to additional net sales of components for various guidance systems
      and Apache helicopter components early in 2005.





Net
      sales
      of technology products were $3.5 million for the nine months ended September
      30,
      2005, down $3.2 million from $6.7 million for the nine months ended September
      30, 2004. This decline in net sales resulted from lower demand for components
      used in semiconductor equipment.





**Gross
      Profit.**  Gross
      profit for the nine months ended September 30, 2005 was $0.8 million (7.8%
      of
      net sales) compared to $2.8 million (23.7% of net sales) for the nine months
      ended September 30, 2004. This decline in gross profit resulted from lower
      deliveries of higher margin components for technology products.





**Selling,
      General and Administrative Expenses.** Selling,
      general and administrative expenses were $1.5 million for the nine months ended
      September 30, 2005 compared to $1.4 million for the nine months ended September
      30, 2004. This increase was primarily related to higher salary and wage
      costs.





**Non-segment
      Expenses**





**Interest
      Expense** .  Interest
      expense for the nine months ended September 30, 2005 was $1.2 million compared
      to $1.8 million for the nine months ended September 30, 2004. Interest expense
      for the first three quarters of 2004 included $0.6 million of fees payable
      to
      the Company’s prior lender in connection with the extension of a previous credit
      agreement. Excluding this charge, interest expense was unchanged.





**Other.**  There
      was
      no other income for the nine months ended September 30, 2005 compared to $0.4
      million for the nine months ended September 30, 2004, which resulted from the
      sale of the Company’s British Columbia, Canada subsidiary at a gain of $0.4
      million.





**Income
      Tax Expense.** ****  Income
      tax expense for the nine months ended September 30, 2005 was $2.0 million
      compared to $0.1 million for the nine months ended September 30, 2004. The
      Company’s taxes for the first three quarters of 2005 were recorded at an
      effective rate of 37.5%, subject to minor adjustments for uncollectible tax
      receivables. Income taxes for the first three quarters of 2004 were all related
      to income generated at the Company’s Canadian subsidiary.





**LIQUIDITY
      AND CAPITAL RESOURCES**





The
      Company generated cash from operations of $3.5 million for the nine months
      ended
      September 30, 2005. Net income of $3.2 million plus non-cash depreciation and
      amortization of $3.3 million were offset by increases in accounts receivable
      of
      $3.4 million and inventory growth of $2.4 million. The increase in accounts
      receivable resulted from a combination of increasing revenues late in the third
      quarter of 2005 and a change in terms with a customer to no longer offer early
      payment discounts. The growth in inventories was primarily driven by tooling
      costs that should be billed during the fourth quarter of 2005 on two new,
      fast-turn programs and a reduction in shipments of Boeing products late in
      the
      third quarter of 2005 due to a work stoppage at Boeing. Additionally, the
      Company does not expect to pay federal income taxes for 2005 earnings until
      March 2006, thus providing the Company a temporary cash benefit of $1.7 million
      through the nine months ended September 30, 2005.





Capital
      expenditures in 2005 were $1.3 million through September 30. The Company expects
      to spend approximately an additional $1.2 million during the last quarter of
      2005.





The
      Company used its cash flow to fund term loan payments of $1.5 million and pay
      down its revolving line of credit by $1.2 million. The Company’s revolving line
      of credit allows for borrowings of up to $18.0 million, subject to a borrowing
      base calculation. At September 30, 2005, the borrowing base calculation provided
      for an ability to borrow up to $14.3 million; the revolving line of credit
      balance at that date was $9.4 million. The Company believes that the current
      lending arrangement is adequate to support its current cash needs.











**ITEM
      3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
      MARKET RISK.**




Market
      risk represents the risk of loss that may impact our consolidated financial
      position, results of operations or cash flows. We are exposed to market risk
      primarily due to fluctuations in interest rates. We do not utilize any
      particular strategy or instruments to manage our interest rate
      risk.





Our
      Credit Facility is comprised of the Revolver, an equipment term loan (the
“Equipment Loan”) and a real estate term loan (the “Real Estate Loan”). The
      Credit Facility carries a fluctuating interest rate that now varies based on
      changes to the prime lending rate of interest of Wells Fargo Business Credit,
      Inc. (“Wells Fargo”). Accordingly, we are subject to potential fluctuations in
      our debt service. Based on the amount of our outstanding debt as of September
      30, 2005, a hypothetical 1% change in the interest rate of our Credit Facility
      would result in a change in our annual interest expense of approximately $0.2
      million.





However,
      under each of the Revolver, the Equipment Loan and the Real Estate Loan, the
      Company has an option to fix the interest rate for a period not to exceed 90
      days, which, while not eliminating interest rate risk, allows the Company to
      moderate the impact of changes in Wells Fargo’s prime lending rate.





**ITEM
      4.  CONTROLS AND
      PROCEDURES.**




As
      of
      September 30, 2005, our Chief Executive Officer and Chief Financial Officer
      carried out an evaluation with the participation of other members of our
      management as they deemed appropriate of the effectiveness of the design and
      operation of our disclosure controls and procedures (as defined in Exchange
      Act
      Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). Based
      upon this evaluation, the Chief Executive Officer and Chief Financial Officer
      concluded that as of September 30, 2005 our disclosure controls and procedures
      were effective in all material respects in ensuring that material information
      required to be disclosed in periodic reports that the Company files with the
      Securities and Exchange Commission is (a) recorded, processed, summarized and
      reported within the time period specified in the SEC’s rules and forms and (b)
      is accumulated and communicated to the Company’s management, including its Chief
      Executive Officer and Chief Financial Officer, as appropriate to allow timely
      decisions regarding required disclosure.




This
      portion of the Company’s Quarterly Report on Form 10-Q is its disclosure of the
      conclusions of its management, including its Chief Executive Officer and Chief
      Financial Officer, regarding the effectiveness of its disclosure controls and
      procedures as of the end of the period covered by this report, based on
      management’s evaluation of those disclosure controls and procedures. You should
      read this disclosure in conjunction with the certifications attached as Exhibits
      31.1 and 31.2 to this Quarterly Report on Form 10-Q for a more complete
      understanding of the topics presented.




In
      connection with our 2004 year-end audit, our independent registered public
      accounting firm identified certain material weaknesses relating to inventory
      valuation at our Vista, California location. In January 2005, we undertook
      three
      corrective actions specifically designed to address this concern, which
      consisted of (i) the conversion of the operating and financial systems at our
      Vista, California location for assimilation into our operating and financial
      systems, (ii) the evaluation and documentation of the procedures at our Vista,
      California location, and (iii) providing more management oversight of the
      accounting for inventories at our Vista, California location.




During
      the second quarter of 2005, we completed the conversion of the operating and
      financial systems formerly utilized at our Vista, California location.
      Accordingly, in the judgment of management, this corrective action has been
      completed and constitutes significant changes in our internal controls. We
      are
      still in the process of evaluating and documenting the procedures related to
      inventory evaluation at our Vista, California location and expect such
      undertaking will be completed by year-end 2005. As part of this undertaking,
      during the third quarter of 2005, we engaged a third party to assess inventory
      controls and document new procedures at the Vista, California location. When
      completed, the corrective action related to such evaluation and documentation
      will constitute a significant change in our internal controls. We are currently
      providing additional managerial oversight for the accounting for inventory
      at
      our Vista, California facility and will continue to train selected accounting
      personnel to perform this function. When completed, this additional oversight
      and training will constitute a significant change in internal controls. We
      will
      continue to evaluate the effectiveness of our disclosure controls and procedures
      and our internal controls on an ongoing basis and will take further action
      as
      appropriate.




The
      Company believes that the interim steps that the Company has taken, including
      increased management review of inventory valuation at its Vista, California
      facility, help to ensure that all material information about the Company is
      accurately disclosed in this Quarterly Report on Form 10-Q.




Based
      on
      the foregoing, our Chief Executive Officer and Chief Financial Officer have
      concluded that as of September 30, 2005 our disclosure controls and procedures
      are effective to ensure that information we are required to disclose in reports
      that we file or submit under the Securities Exchange Act of 1934 is recorded,
      processed, summarized and reported accurately within the time periods specified
      in Securities and Exchange Commission rules and forms.












**PART
      II**




**OTHER
      INFORMATION**





**ITEM
      1.  LEGAL
      PROCEEDINGS.**





In
      February 2004 Versaform Corporation, a wholly-owned subsidiary of the Company,
      was served with a grand jury subpoena and learned that the federal government
      (i.e., the U.S. Attorney's Office for the Southern District of California,
      Department of Defense, Office of Inspector General, Defense Criminal
      Investigative Service, and the Federal Bureau of Investigation) was conducting
      an investigation relating to structural components of B-52 engine cowlings
      Versaform manufactured for Nordam Corporation, components of auxiliary power
      units Versaform manufactured for Hamilton Sundstrand, a United Technologies
      Company, and certain tools Versaform manufactured for Lockheed Martin
      Corporation.




Although
      the investigation is ongoing, neither Versaform nor the Company has been served
      with notice of any pending, related legal action, and they continue to cooperate
      with the government. Documents responsive to the subpoena have been
      produced.




Other
      than noted above, the Company is not a party to any legal proceedings, other
      than routine claims and lawsuits arising in the ordinary course of its business.
      The Company does not believe such claims and lawsuits, individually or in the
      aggregate, will have a material adverse effect on the Company’s
      business.





**ITEM
      6.  EXHIBITS.**





(a)
            Exhibits:See
                Exhibit Index.











**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 11, 2005
            /s/
                Ronald S. SaksRonald
                S. SaksPresident
                and Chief Executive OfficerDate:
                November 11, 2005
            /s/
                Lawrence E. DickinsonLawrence
                E. DickinsonChief
                Financial Officer and Secretary











EXHIBIT
      INDEX







Exhibit
                No.
            Description10.1
            Memorandum
                of Understanding dated November 1, 2005 between LMI Aerospace, Inc.
                and
                Gulfstream Aerospace Corporation.31.1
            Rule
                13a-14(a) Certification of Ronald S. Saks, President and Chief Executive
                Officer.31.2
            Rule
                13a-14(a) Certification of Lawrence E. Dickinson, Secretary and Chief
                Financial Officer32
            Certification
                of Chief Executive Officer and Chief Financial Officer pursuant to
                18
                U.S.C Section 1350 as adopted pursuant to Section 906 of Sarbanes-Oxley
                Act of 2002.