**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 June 30, 2007.








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


For
      the
      transition period from to
          .





Commission
      file number: 000-24293





**LMI
      AEROSPACE, INC.**


(Exact
      name of registrant as specified in its charter)





**Missouri**
              (State
                or other jurisdiction of
              incorporation
                or organization)
            **43-1309065**
              (I.R.S.
                Employer
              Identification
                No.)**411
                Fountain Lakes Blvd.**
              **St.
                Charles, Missouri**
              (Address
                of principal executive offices)
            **63301**
              (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.





Yes
ý                                No
       ̈





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





Large
      Accelerated Filer  ̈                                                      Accelerated
      Filer ý                                           Non-Accelerated
      Filer  ̈





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).





Yes
 ̈                                No
      ý





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





On
      July
      30, 2007, there were 11,220,227 shares of our common stock, par value $0.02
      per
      share outstanding.





**LMI
      AEROSPACE, INC.**





**QUARTERLY
      REPORT ON FORM 10-Q**


**FOR
      THE FISCAL QUARTER ENDING JUNE 30, 2007**





PART
                I.FINANCIAL
                INFORMATIONPage
                No.**Item
                1.  Financial Statements (unaudited).**Condensed
                Consolidated Balance Sheets as of June 30, 2007 and December 31,
                2006.
            3Condensed
                Consolidated Statements of Operations for the three months and six
                months
                ended June 30, 2007 and 2006.
            4Condensed
                Consolidated Statements of Cash Flows for the six months ended June
                30,
                2007 and 2006.
            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.**
            18**Item
                4.  Controls
                and Procedures.**
            19PART
                II.  OTHER INFORMATION**Item
                1.  Legal
                Proceedings.**
            20**Item
                1A.  Risk Factors.**
            20**Item
                2.  Unregistered Sales of Equity Securities and Use of
                Proceeds.**
            20**Item
                3.  Defaults Upon Senior Securities.**
            20**Item
                4.  Submission of Matters to a Vote of Security
                Holders.**
            21**Item
                5.  Other Information.**
            21**Item
                6.  Exhibits.**
            21SIGNATURE
                PAGE
            22EXHIBIT
                INDEX
            23





2


**PART
      I**


**FINANCIAL
      INFORMATION**


**LMI
      Aerospace, Inc.**


**Condensed
      Consolidated Balance Sheets**


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


(Unaudited)June
                30, 2007
            
            
            December
                31, 2006AssetsCurrent
                assets:Cash
                and cash equivalents
            
            $
            9,985
            
            
            $
            24,411Short-term
                investments
            
            
            16,224
            
            
            
            2,243Trade
                accounts receivable, net of allowance of $239 at June 30, 2007 and
                $311 at
                December 31, 2006
            
            
            19,171
            
            
            
            14,658Inventories
            
            
            37,200
            
            
            
            33,956Prepaid
                expenses and other current assets
            
            
            1,622
            
            
            
            1,760Deferred
                income taxes
            
            
            2,199
            
            
            
            2,210Income
                taxes receivable
            
            
            548
            
            
            
            232Total
                current assets
            
            
            86,949
            
            
            
            79,470Property,
                plant and equipment, net
            
            
            17,585
            
            
            
            19,514Goodwill
            
            
            5,653
            
            
            
            5,653Customer
                intangible assets, net
            
            
            3,220
            
            
            
            3,425Other
                assets
            
            
            934
            
            
            
            548Total
                assets
            
            $
            114,341
            
            
            $
            108,610Liabilities
                and stockholders’ equityCurrent
                liabilities:Accounts
                payable
            
            $
            7,878
            
            
            $
            9,758Accrued
                expenses
            
            
            4,447
            
            
            
            3,916Short-term
                deferred gain on sale of real estate
            
            
            233
            
            
            
            147Current
                installments of long-term debt and capital lease
                obligations
            
            
            319
            
            
            
            238Total
                current liabilities
            
            
            12,877
            
            
            
            14,059Long-term
                deferred gain on sale of real estate
            
            
            3,890
            
            
            
            2,493Long-term
                debt and capital lease obligations, less current
                installments
            
            
            776
            
            
            
            583Deferred
                income taxes
            
            
            965
            
            
            
            965Total
                long-term liabilities
            
            
            5,631
            
            
            
            4,041Stockholders’
                equity:Common
                stock, $.02 par value per share; authorized 28,000,000 shares; issued
                11,608,183 shares and 11,577,631 shares at June 30, 2007 and December
                31,
                2006, respectively
            
            
            232
            
            
            
            232Preferred
                stock, $.02 par value per share; authorized 2,000,000 shares; none
                issued
                in both periods
            
            
            -
            
            
            
            -Additional
                paid-in capital
            
            
            66,293
            
            
            
            66,104Treasury
                stock, at cost, 389,432 shares at June 30, 2007 and 389,732 share
                at
                December 31, 2006
            
            
            (1,848
            )
            
            
            (1,849
            )Retained
                earnings
            
            
            31,156
            
            
            
            26,023Total
                stockholders’ equity
            
            
            95,833
            
            
            
            90,510Total
                liabilities and stockholders’ equity
            
            $
            114,341
            
            
            $
            108,610





*See
      accompanying notes to condensed consolidated financial
      statements.*






3




**LMI
      Aerospace, Inc.**


**Condensed
      Consolidated Statements of Operations**


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


*(Unaudited)*







Three
                Months Ended
            
            
            Six
                Months EndedJune
                30
            
            
            June
                302007
            
            
            2006
            
            
            2007
            
            
            2006Net
                sales
            
            $
            33,935
            
            
            $
            32,768
            
            
            $
            66,112
            
            
            $
            62,010Cost
                of sales
            
            
            24,717
            
            
            
            23,921
            
            
            
            48,623
            
            
            
            44,842Gross
                profit
            
            
            9,218
            
            
            
            8,847
            
            
            
            17,489
            
            
            
            17,168Selling,
                general and administrative expenses
            
            
            4,933
            
            
            
            4,170
            
            
            
            9,943
            
            
            
            8,371Income
                from operations
            
            
            4,285
            
            
            
            4,677
            
            
            
            7,546
            
            
            
            8,797Other
                income (expense):Interest
                income (expense), net
            
            
            185
            
            
            
            77
            
            
            
            391
            
            
            
            (350
            )Other,
                net
            
            
            (30
            )
            
            
            (1
            )
            
            
            (23
            )
            
            
            1Income
                before income taxes
            
            
            4,440
            
            
            
            4,753
            
            
            
            7,914
            
            
            
            8,448Provision
                for income taxes
            
            
            1,549
            
            
            
            1,796
            
            
            
            2,782
            
            
            
            3,182Net
                income
            
            $
            2,891
            
            
            $
            2,957
            
            
            $
            5,132
            
            
            $
            5,266Amounts
                per common share:Net
                income per common share
            
            $
            0.26
            
            
            $
            0.27
            
            
            $
            0.46
            
            
            $
            0.54Net
                income per common share assuming dilution
            
            $
            0.26
            
            
            $
            0.26
            
            
            $
            0.46
            
            
            $
            0.53Weighted
                average common shares outstanding
            
            
            11,150,899
            
            
            
            11,112,507
            
            
            
            11,150,899
            
            
            
            9,837,038Weighted
                average dilutive common shares outstanding
            
            
            11,267,118
            
            
            
            11,239,257
            
            
            
            11,271,228
            
            
            
            9,961,988






*See
      accompanying notes to condensed consolidated financial
      statements.*





4


**LMI
      Aerospace, Inc.**


**Condensed
      Consolidated Statements of Cash Flows**


*(Amounts
      in thousands)*


*(Unaudited)*





**Six
                Months Ended June 30****2007**
            
            
            **2006**Operating
                activities:Net
                income
            
            $
            5,132
            
            
            $
            5,266Adjustments
                to reconcile net income to net cash provided by operating
                activities:Depreciation
                and amortization
            
            
            1,759
            
            
            
            1,905Charges
                for bad debt expense
            
            
            221
            
            
            
            34Charges
                for inventory obsolescence and valuation
            
            
            460
            
            
            
            352Restricted
                stock compensation
            
            
            187
            
            
            
            86Changes
                in operating assets and liabilities:Trade
                accounts receivable
            
            
            (4,734
            )
            
            
            (1,362
            )Inventories
            
            
            (3,704
            )
            
            
            (5,298
            )Prepaid
                expenses and other assets
            
            
            (270
            )
            
            
            (97
            )Income
                taxes
            
            
            (262
            )
            
            
            (2,618
            )Accounts
                payable
            
            
            (1,880
            )
            
            
            1,485Accrued
                expenses
            
            
            141
            
            
            
            528Net
                cash (used) provided by operating activities
            
            
            (2,950
            )
            
            
            281Investing
                activities:Additions
                to property, plant and equipment
            
            
            (3,542
            )
            
            
            (1,846
            )Purchase
                of debt securities
            
            
            (16,017
            )
            
            
            (6,342
            )Proceeds
                from matured securities
            
            
            2,250
            
            
            
            -Proceeds
                from sale of real estate
            
            
            5,920
            
            
            
            -Acquisition
                of Technical Change Associates
            
            
            -
            
            
            
            (614
            )Other,
                net
            
            
            (362
            )
            
            
            2Net
                cash used by investing activities
            
            
            (11,751
            )
            
            
            (8,800
            )Financing
                activities:Proceeds
                from public offering
            
            
            -
            
            
            
            39,249Proceeds
                from issuance of debt and origination of capital leases
            
            
            408
            
            
            
            -Net
                payments on revolving line of credit
            
            
            -
            
            
            
            (8,898
            )Principal
                payments on long-term debt and notes payable
            
            
            (134
            )
            
            
            (5,036
            )Proceeds
                from exercise of stock options
            
            
            1
            
            
            
            110Net
                cash provided by financing activities
            
            
            275
            
            
            
            25,425Net
                (decrease) increase in cash and cash equivalents
            
            
            (14,426
            )
            
            
            16,906Cash
                and cash equivalents, beginning of year
            
            
            24,411
            
            
            
            35Cash
                and cash equivalents, end of quarter
            
            $
            9,985
            
            
            $
            16,941Supplemental
                disclosures of cash flow information:Interest
                paid
            
            $
            62
            
            
            $
            504Income
                taxes paid (refunded), net
            
            $
            3,084
            
            
            $
            5,800




*See
      accompanying notes to condensed consolidated financial
      statements.*





5
 
 
 **LMI
        Aerospace, Inc.**
 **Notes
        to Condensed Consolidated Financial Statements**
 *(Dollar
        amounts in thousands, except share and per share data)*
 *(Unaudited)*
 June
        30,
        2007





**1.  Accounting
      Policies**





**Description
      of Business**





LMI
      Aerospace, Inc. (the “Company”) fabricates, machines, and integrates formed,
      close tolerance aluminum and specialty alloy components and sheet metal products
      for use by the aerospace, semiconductor and medical products 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, California; Vista,
      California; Savannah, Georgia, Ogden, Utah, and Mexicali, Mexico.





**Basis
      of Presentation**





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America 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 of America 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 six months ending June 30, 2007 are not necessarily indicative of the
      results that may be expected for the year ending December 31,
      2007.  These financial statements should be read in conjunction with
      the consolidated financial statements and accompanying footnotes included in
      the
      Company’s Annual Report on Form 10-K for the year ended December 31, 2006, as
      filed with the Securities and Exchange Commission.





**Customer
      Concentration**





Direct
      sales to the Company’s largest customer accounted for 28.9% and 32.4% of the
      Company’s total revenues for the three months ended June 30, 2007 and June 30,
      2006, respectively. Direct sales to the Company’s largest customer accounted for
      31.3% and 32.6% of the Company’s total revenues for the six months ended June
      30, 2007 and June 30, 2006, respectively. Account receivable balances related
      to
      the largest customer based on direct sales were 26.8% and 31.9% at June 30,
      2007
      and December 31, 2006, respectively.





Direct
      sales to the Company’s second largest customer accounted for 15.8% and 14.9% of
      the Company’s total revenues for the three months ended June 30, 2007 and June
      30, 2006, respectively. Direct sales to the Company’s second largest customer
      accounted for 15.7% and 15.1% of the Company’s total revenues for the six months
      ended June 30, 2007 and June 30, 2006, respectively. Account receivable balances
      related to the second largest customer based on direct sales were 18.9% and
      10.4% at June 30, 2007 and December 31, 2006, respectively.





Direct
      sales to the Company’s third largest customer accounted for 12.4% and 12.2% of
      the Company’s total revenues for the three months ended June 30, 2007 and June
      30, 2006, respectively. Direct sales to the Company’s third largest customer
      accounted for 11.9% and 10.5% of the Company’s total revenues for the six months
      ended June 30, 2007 and June 30, 2006, respectively. Account receivable balances
      related to the third largest customer based on direct sales were 9.8% and 10.3%
      at June 30, 2007 and December 31, 2006, respectively.




**Use
        of Estimates**


6
 
 **LMI
            Aerospace, Inc.**
 **Notes
            to Condensed Consolidated Financial Statements**
 *(Dollar
            amounts in thousands, except share and per share data)*
 *(Unaudited)*
 June
            30,
            2007




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





**Cash
      and Cash Equivalents**




Cash
      and
      cash equivalents include cash on hand, amounts due from banks and all highly
      liquid investment instruments with an initial maturity of three months or less,
      excluding those held in our trading accounts.




**Short-term
      Investments**





Short-term
      investments consist of investment instruments with an initial maturity of one
      year or less, including those with an initial maturity of three months or less
      held in our trading accounts. At June 30, 2007, all securities were classified
      as held-to-maturity and recorded at amortized costs.





**Income
      Taxes**




The
      Company accounts for income taxes under the provisions of Statement of Financial
      Accounting Standards (“SFAS”) No. 109, “Accounting for Income Taxes” (“SFAS No.
      109”). 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. On January 1, 2007, the Company adopted FASB Interpretation
      No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of
      FASB Statement No. 109” (“FIN 48”), which prescribes a recognition
      threshold and measurement process for recording in the financial statements
      uncertain tax positions taken or expected to be taken in a tax return. In
      addition, FIN 48 provides guidance on the derecognition, classification,
      accounting in interim periods and disclosure requirements for uncertain tax
      positions.





The
      Company had no unrecognized tax benefits as of the January 1, 2007 adoption
      date
      and as of June 30, 2007. The Company expects no significant increases or
      decreases in unrecognized tax benefits due to changes in tax positions within
      one year of June 30, 2007. The Company recognizes accrued amounts of interest
      and penalties related to its uncertain tax positions as part of its income
      tax
      expense within its consolidated statement of operations. The Company has no
      interest or penalties relating to income taxes recognized in the balance sheet
      as of June 30, 2007. At June 30, 2007, returns for the calendar years 2002
      through 2006 remain subject to examination by U.S. and various state tax
      jurisdictions.





**2.  Inventories**




**June
                30, 2007**
            
            **December
                31, 2006**Raw
                materials
            
            $
            6,142
            
            
            $
            5,583Work
                in progress
            
            
            8,380
            
            
            
            8,073Manufactured
                and purchased components
            
            
            8,714
            
            
            
            8,438Finished
                goods
            
            
            13,964
            
            
            
            11,862Total
                inventories
            
            $
            37,200
            
            
            $
            33,956






7
 
 **LMI
            Aerospace, Inc.**
 **Notes
            to Condensed Consolidated Financial Statements**
 *(Dollar
            amounts in thousands, except share and per share data)*
 *(Unaudited)*
 June
            30,
            2007




These
      amounts include reserves for obsolete and slow-moving inventory of $1,938 and
      $1,932 and a reserve for lower of cost or market of $303 and $255 at June,
      2007
      and December 31, 2006, respectively.





**3.  Goodwill
      and Intangible Assets**





As
      required by SFAS No. 142, “Goodwill and Other Intangible Assets” (“SFAS No.
      142”), the Company performs a goodwill impairment test at least annually. 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 2006, the Company performed the required annual impairment
      test under SFAS No. 142 and concluded that the remaining goodwill balance was
      not further impaired.  Goodwill balance was $5,653 at June 30, 2007
      and December 31, 2006.





**Customer-Related
      Intangible Assets**




Customer-related
      intangible assets resulted from the acquisitions of Versaform and Technical
      Change Associates, Inc. and have an original estimated useful life of 5 to
      15
      years.  The carrying value at June 30, 2007 and December 31, 2006 were
      as follows:




June
                30, 2007
            
            December
                31, 2006Gross
                Amount
            
            $
            4,694
            
            
            $
            4,694Accumulated
                Amortization
            
            
            (1,474)
            
            
            
            (1,269)Intangible
                assets, net
            
            $
            3,220
            
            
            $
            3,425


Customer
      related intangibles amortization expense was $103 and $136 for the three months
      ended June 30, 2007 and 2006, respectively, and $205 and $202 for the six months
      ended June 30, 2007 and 2006, respectively.





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





Long-term
      debt at June 30, 2007 and December 31, 2006, respectively, consists solely
      of
      various notes payable for the purchase of certain equipment. The notes are
      payable in monthly installments including interest at fixed annual rates ranging
      from 6.70% to 7.20% through January 2012. The notes payable are secured by
      the
      equipment purchased.






8
 
 **LMI
          Aerospace, Inc.** **Notes
            to Condensed Consolidated Financial Statements**
 *(Dollar
            amounts in thousands, except share and per share data)*
 *(Unaudited)*
 June
            30,
            2007





On
      December 28, 2006, the Company entered into an Amended and Restated Credit
      Agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association
      (“Wells Fargo”). The Credit Agreement provides for a $40,000 revolving loan
      facility, under which there is no requirement to provide a borrowing base of
      collateral to support advances. The revolving loan facility is subject to an
      unused commitment fee and bears an interest rate between LIBOR plus 0.75% and
      1.75% based on the ratio of the Company’s total funded debt to earnings before
      interest, taxes, depreciation and amortization. The outstanding principal
      balance is due and payable in full on March 31, 2012.  The credit
      facility is secured by all of the Company’s non-real estate assets and requires
      the Company to meet certain financial and non-financial covenants. At June
      30,
      2007, there were no outstanding balances under this facility.





In
      connection and concurrently with its acquisition of D3 Technologies, Inc. on
      July 31, 2007, the Company entered into a new credit facility with Wachovia
      Bank, N.A. replacing the Credit Agreement with Wells Fargo.  See
      Note 7 below.





**5.  Earnings
      Per Common Share**





Basic
      net
      income per common share is based upon the weighted average number of common
      shares outstanding. Diluted net income per common share is based upon the
      weighted average number of common shares outstanding, including the dilutive
      effect of stock options and restricted stock, using the treasury stock and
      if
      converted methods.  The number of such shares for the quarter ended
      June 30, 2007 and June 30, 2006 subject to stock options and restricted stock
      was 116,219 and 126,750, respectively.  The number of such shares for
      the six months ended June 30, 2007 and June 30, 2006 subject to stock options
      and restricted stock was 120,329 and 124,950, respectively.





**6.  Stock-Based
      Compensation**





On
      July
      7, 2005, the Company’s shareholders approved the LMI Aerospace, Inc. 2005
      Long-term Incentive Plan (the “2005 Plan”). The 2005 Plan replaced the Amended
      and Restated LMI Aerospace, Inc. 1998 Stock Option Plan (the “1998 Plan”) as the
      Company’s only compensation plan under which shares of the Company’s common
      stock are authorized for issuance to employees or directors. The 2005 Plan
      provides for the grant of non-qualified stock options, incentive stock options,
      shares of restricted stock, restricted stock units, stock appreciation rights,
      performance awards and other stock-based awards and cash bonus awards. A total
      of 1,200,000 shares of the Company’s Common Stock are reserved for issuance in
      connection with awards granted under the 2005 Plan.





Effective
      January 1, 2006, the Company adopted SFAS No. 123 (revised 2004), “Share-Based
      Payment” (“SFAS No. 123R”), which revises and replaces SFAS No. 123, “Accounting
      for Stock-Based Payments” (“SFAS No. 123”) and supersedes APB Opinion No. 25,
“Accounting for Stock Issued to Employees” (“APB No. 25”). SFAS No. 123R
      requires that compensation expense be recognized for all share-based payments
      based on the grant date fair value. The Company adopted SFAS No. 123R using
      the
      modified prospective method of transition. Accordingly, prior periods have
      not
      been restated. In connection with the adoption of SFAS No. 123R, the Company’s
      pre-tax income from operations for 2006 was not materially different than if
      it
      had continued to account for share-based compensation under APB No. 25, as
      the
      majority of outstanding options was vested at December 31, 2005. The Company
      did
      not grant any options during the three and six months ended June 30, 2007 and
      June 30, 2006, respectively.






9
 
 **LMI
            Aerospace, Inc.**
 **Notes
            to Condensed Consolidated Financial Statements**
 *(Dollar
            amounts in thousands, except share and per share data)*
 *(Unaudited)*
 June
            30,
            2007





A
      summary
      of stock option activity under the Company’s share-based compensation plans for
      the six months ended June 30, 2007 is presented below:





**Stock
                Options**
            
            **Shares**
            
            
            **Weighted**
              **Average**
              **Exercise Price**
            
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Life**
            
            **Aggregate**
              **Intrinsic**
              **Value**Outstanding
                at January 1, 2007
            
            
            137,234
            
            
            $
            3.24Granted
            
            
            -
            
            
            
            -Exercised
            
            
            (300
            )
            
            
            4.75Forfeited
                or expired
            
            
            (300
            )
            
            
            4.75Outstanding
                at June 30, 2007
            
            
            136,634
            
            
            $
            3.24
            
            3.6
                yrs
            
            $
            2,878Exercisable
                at June 30, 2007
            
            
            136,634
            
            
            $
            3.24
            
            3.6
                yrs
            
            $
            2,878





The
      total
      intrinsic value of options exercised during the six months ended June 30, 2007
      was $5 based upon the market price on exercise date.





The
      following table summarizes information about stock options outstanding at June
      30, 2007:





**Range
                of**
              **Exercise**
              **Prices**
            **Number
                of**
              **Outstanding**
              **Options**
            **Weighted**
              **Average**
              **Remaining**
              **Contractual**
              **Life**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            **Number**
              **Exercisable**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**$1.31
                - $1.95
            12,000
            7.0
            $
            1.31
            12,000
            $
            1.31$1.96
                - $2.90
            78,234
            3.2
            
            2.56
            78,234
            
            2.56$2.91
                - $4.35
            13,500
            3.5
            
            3.51
            13,500
            
            3.51$4.36
                - $6.06
            32,900
            3.2
            
            5.44
            32,900
            
            5.44Total
            136,634
            3.6
            $
            3.24
            136,634
            $
            3.24





A
      summary
      of the activity for non-vested restricted stock awards as of June 30, 2007
      and
      changes during the six-month period is presented below:






10
 
 **LMI
          Aerospace, Inc.** **Notes
            to Condensed Consolidated Financial Statements**
 *(Dollar
            amounts in thousands, except share and per share data)*
 *(Unaudited)*
 June
            30,
            2007




**Restricted
                Stock Awards**
            
            **Shares**
            
            
            **Weighted**
              **Average**
              **Grant
                Date**
              **Fair
                Value**Outstanding
                at January 1, 2007
            
            
            37,000
            
            
            $
            12.85Granted
            
            
            30,552
            
            
            
            17.98Vested
            
            
            (4,550
            )
            
            
            (14.16
            )Forfeited
            
            
            -
            
            
            
            -Outstanding
                at June 30, 2007
            
            
            63,002
            
            
            $
            15.24





Common
      stock compensation expense related to restricted stock awards granted under
      the
      2005 Plan was $98 ($63 after tax) and $192 ($124 after tax) for the three and
      six months ended June 30, 2007 and $43 ($27 after tax) and $86 ($54 after tax)
      for the three and six months ended June 30, 2006.





At
      June
      30, 2007 there was $647 of total unrecognized compensation costs related to
      non-vested share-based compensation awards granted under the Plan. That cost
      is
      expected to be recognized over a weighted average period of 1.6 years. At June
      30, 2006 there was $409 of total unrecognized compensation costs related to
      non-vested share-based compensation awards granted under the Plan. That cost
      is
      expected to be recognized over a weighted average period of 2.3
      years.





**7.  Subsequent
      Event**





On
      July
      31, 2007, the Company acquired all of the outstanding capital stock of D3
      Technologies, Inc. (“D3 Technologies”), a premier design and engineering
      services firm, at a purchase price of $65,000 in cash.




Concurrent
      with the acquisition, the Company entered into a Credit Agreement (the “Credit
      Agreement”) with Wachovia Bank, National Association (as Administrative Agent,
      Swingline Lender and Issuing Lender), Wells Fargo Bank, National Association
      (as
      Syndication Agent) and the other lender parties. The Credit Agreement provides
      for a senior secured revolving credit facility in an aggregate principal amount
      of up to $80,000 (the “Facility”). Borrowings under the Facility are secured by
      substantially all of the Company’s assets and bear interest at either the “Base
      Rate” (the higher of the federal funds rate plus one-half of one percent or the
      prime commercial lending rate of Wachovia Bank) plus the applicable interest
      margin ranging from 0.125% to 1.0%, depending upon the Company’s then total
      leverage ratio or the LIBOR rate.  Interest accruing under the LIBOR
      rate option is defined as the LIBOR rate plus the applicable interest margin
      ranging from 1.125% to 2.0% depending upon the Company’s then total leverage
      ratio.  The maturity date of the Facility, which is subject to
      acceleration upon breach of the financial covenants (consisting of a maximum
      total leverage ratio and a minimum fixed charge coverage ratio) and other
      customary non-financial covenants contained in the Credit Agreement, is July
      31,
      2012.





The
      purchase price for D3 Technologies was funded in part with $38,500 of borrowings
      under the Credit Agreement and the remainder with the Company’s existing
      cash.






11





**Item
      2.  Management’s Discussion and Analysis of Financial Condition and
      Results of Operations.**





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 Form 10-K for the year
      ended December 31, 2006, as filed with the Securities and Exchange Commission
      on
      March 15, 2007.





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 of America, 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 policies 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 policies can be found in the section entitled
“Management’s Discussion and Analysis of Financial Condition and Results of
      Operations” contained in the Company’s Annual Report on Form 10-K for the fiscal
      year ended December 31, 2006.




12




**OVERVIEW**





We
      manufacture and distribute formed and machined components for use in the
      aerospace, technology and commercial sheet metal industries. We primarily sell
      our products to the large commercial aircraft, military, corporate and regional
      aircraft, and technology markets within the aerospace and technology industries.
      Historically, our business was primarily dependent on the large commercial
      aircraft market, with Boeing as our principal customer. In order to diversify
      our product 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.





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. (“Tempco”) and its affiliates, which expanded
      our aerospace product line and introduced us 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 various 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.





In
      January 2006, we acquired the assets of Technical Change Associates, Inc.
      (“TCA”), a provider of lean manufacturing, facility layout and business planning
      consulting services. This acquisition will facilitate our continued efforts
      in
      improving production efficiency as well as supporting our other operational
      objectives.





On
      July
      31, 2007, we acquired all of the capital stock of D3 Technologies, Inc., a
      premier design and engineering services firm based in San Diego, California
      for
      a purchase price of $65 million in cash.  We believe that the combined
      capabilities of LMI and D3 Technologies will substantially improve the value
      proposition that we can offer our customers, provide additional participation
      with the aerospace industry and add unique composite materials engineering
      expertise.  See Part II, Item 1A “Risk
      Factors”and Note 7 of the Condensed Consolidated Financial
      Statements.





13




**RESULTS
      OF OPERATIONS**




*Three
      months ended June 30, 2007 compared to June 30, 2006*





The
      following table is a summary of our operating results for the three months
      ended
      June 30, 2007 and June 30, 2006:





Three
                Months Ended
            
            
            Three
                Months EndedJune
                30, 2007
            
            
            June
                30, 2006($
                in millions)Net
                sales
            
            $
            33.9
            
            
            $
            32.8Cost
                of sales
            
            
            24.7
            
            
            
            23.9Gross
                profit
            
            
            9.2
            
            
            
            8.9S,G
                & A
            
            
            4.9
            
            
            
            4.2Income
                from operations
            
            
            4.3
            
            
            
            4.7Interest
                income (expense), net
            
            
            0.1
            
            
            
            0.1Income
                before income taxes
            
            
            4.4
            
            
            
            4.8Provision
                for income taxes
            
            
            1.5
            
            
            
            1.8Net
                Income
            
            $
            2.9
            
            
            $
            3.0








**Net
      Sales.**  The following table specifies the amount of net sales
      by category for the second quarter of 2007 and 2006 and the percentage of total
      net sales for each period represented by each category (dollars in
      millions).





Category
            
            Three
                Months
              Ended
                June 30,
              2007
            
            
            %
                of
              Total
            
            
            Three
                Months
              Ended
                June
              30,
                2006
            
            
            %
                of
              TotalCorporate
                and Regional Aircraft
            
            $
            11.4
            
            
            
            33.7
            %
            
            $
            12.5
            
            
            
            38.1
            %Large
                Commercial Aircraft
            
            
            11.4
            
            
            
            33.5
            
            
            
            9.5
            
            
            
            29.0Military
            
            
            8.3
            
            
            
            24.6
            
            
            
            7.8
            
            
            
            23.8Technology
            
            
            1.6
            
            
            
            4.9
            
            
            
            1.9
            
            
            
            5.8Other
                (1)
            
            
            1.1
            
            
            
            3.4
            
            
            
            1.1
            
            
            
            3.4Total
            
            $
            33.9
            
            
            
            100.0
            %
            
            $
            32.8
            
            
            
            100.0
            %





(1)  Includes
      various
      aerospace products and consulting revenue.





Net
      sales
      for the second quarter of 2007 were $33.9 million, up 3.4% from $32.8 million
      in
      the second quarter of 2006. The increase in net sales occurred in the large
      commercial aircraft and military markets we serve and was offset by decreases
      in
      corporate and regional aircraft and technology sales.





Net
      sales
      of components for corporate and regional aircraft decreased $1.1 million or
      8.8%
      from $12.5 million for the quarter ended June 30, 2006 to $11.4 million for
      the
      quarter ended June 30, 2007.  This decrease was primarily attributable
      to lower sales to Gulfstream. A new ordering process with Gulfstream caused
      a
      spike in net sales in the second quarter of 2006. Subsequent quarters, including
      the second quarter of 2007, have not reached the same level as we have worked
      with the customer to improve various elements of the new ordering
      process.







14





Net
      sales
      of products used in large commercial aircraft were $11.4 million for the second
      quarter of 2007, an increase of $1.9 million or 20% from $9.5 million in the
      second quarter of 2006. Net sales to this market were driven by higher
      production rates on certain models of Boeing aircraft. In particular, we
      generated net sales for the Boeing 737 of $6.6 million in the second quarter
      of
      2007, up 24.3% from $5.3 million in the second quarter of 2006, and net sales
      for the Boeing 747 of $2.5 million in the second quarter of 2007, up 29.5%
      from
      $1.9 million in the second quarter of 2006. In addition, sales for the Boeing
      787, which began in the first quarter of 2007 generated $0.5 million in the
      second quarter. These increases were partially offset by a $0.5 million decrease
      in sales for the Boeing 777 from $1.7 million in the second quarter of 2006
      to
      $1.2 million in the second quarter of 2007 due to the substantial completion
      in
      the second quarter of 2006 of a temporary 777 wing component offload program
      that had contributed $0.9 million of net sales in the second quarter of
      2006.





Military
      products generated $8.3 million of net sales in the second quarter of 2007
      compared to $7.8 million in the second quarter of 2006, an increase of $0.5
      million or 6.4%.  New programs supporting the Sikorsky Black Hawk
      helicopter program generated $5.0 million of net sales in the second quarter
      of
      2007, up 15.6% from $4.3 million of net sales in the second quarter of 2006.
      This was offset by declining volume on the Lockheed F-16.




Technology
      products generated $1.6 million of net sales for the second quarter of 2007
      compared to $1.9 million for the second quarter of 2006, a decrease of
      15.8%.  This decrease was due to lower net sales of products used in
      both semiconductor equipment and medical technology products.





**Gross
      Profit.**  Gross profit for the second quarter of 2007 was $9.2
      million (27.1% of net sales), compared to $8.9 million (27.1% of net sales)
      in
      the second quarter of 2006. Gross profit was positively impacted by our higher
      production rates with aerospace customers which provided better coverage of
      fixed costs, but was reduced by increased salaries and wages, primarily from
      investment in the materiel organization and higher than expected workers
      compensation cost related to prior year claims. Specifically, salary and wages
      increased $0.6 million, or 13%, from $4.6 million for the three months ended
      June 30, 2006 to $5.2 million for the three months ended June 30, 2007.
      Additional workers compensation cost incurred for prior year claims was $0.3
      million for the three months ended June 30, 2007.





**Selling,
      General and Administrative Expenses.**Selling, general and
      administrative expenses for the second quarter of 2007 were $4.9 million (14.5%
      of net sales) compared to $4.2 million (12.8% of net sales) in the second
      quarter of 2006.  This increase resulted from higher professional
      service fees and compensation and fringe benefit costs resulting from increased
      staffing to support our planned growth.





**Net
      Interest Income (Expense).**  Interest income for the second
      quarter of 2007 was $0.1 million, unchanged from the second quarter of 2006.
      Our
      indebtedness was substantially reduced with the proceeds of our secondary public
      offering of common stock completed in March 2006. We continue to pay interest
      on
      certain equipment loans which remain outstanding and certain banking fees to
      maintain our borrowing availability.  We generated interest income by
      investing cash on hand of approximately $16 million.





**Income
      Tax Expense.**  During the second quarter of 2007, we had
      income tax expense of $1.5 million compared to $1.8 million in the second
      quarter of 2006. We applied an effective tax rate of 34.9% to income for the
      second quarter of 2007 compared to 37.5% for the second quarter of 2006. The
      reduction in rate is derived from additional deductions available for
      manufacturers and strategies used to reduce state income taxes.




*Six
        months ended June 30, 2007 compared to June 30,2006*
 
 The
        following table is a summary of the Company’s operating results for the six
        months ended June 30, 2007 and June 30, 2006:




15






Six
                Months Ended
            
            
            Six
                Months EndedJune
                30, 2007
            
            
            June
                30, 2006($
                in millions)Net
                sales
            
            $
            66.1
            
            
            $
            62.0Cost
                of sales
            
            
            48.6
            
            
            
            44.8Gross
                profit
            
            
            17.5
            
            
            
            17.2S,G
                & A
            
            
            9.9
            
            
            
            8.4Income
                from operations
            
            
            7.6
            
            
            
            8.8Interest
                income (expense), net
            
            
            0.3
            
            
            
            (0.3
            )Income
                before income taxes
            
            
            7.9
            
            
            
            8.5Provision
                for income taxes
            
            
            2.8
            
            
            
            3.2Net
                Income
            
            $
            5.1
            
            
            $
            5.3





**Net
      Sales.**  The following table specifies the amount of net sales
      by category for the six months ended June 30, 2007 and 2006 and the percentage
      of total net sales for each period represented by each category (dollars in
      millions).





Category
            
            Six
                Months Ended
              June
                30, 2007
            
            
            %
                of
              Total
            
            
            Six
                Months Ended
              June
                30, 2006
            
            
            %
                of
              TotalCorporate
                and Regional Aircraft
            
            $
            23.7
            
            
            
            35.9
            %
            
            $
            23.9
            
            
            
            38.5
            %Large
                Commercial Aircraft
            
            
            22.1
            
            
            
            33.4
            
            
            
            18.6
            
            
            
            30.0Military
            
            
            14.9
            
            
            
            22.5
            
            
            
            12.8
            
            
            
            20.6Technology
            
            
            3.3
            
            
            
            5.0
            
            
            
            3.9
            
            
            
            6.3Other
                (1)
            
            
            2.1
            
            
            
            3.2
            
            
            
            2.8
            
            
            
            4.5Total
            
            $
            66.1
            
            
            
            100.0
            %
            
            $
            62.0
            
            
            
            100.0
            %





(1)  Includes
      various
      aerospace products and consulting revenue.





Net
      sales
      for the first six months of 2007 were $66.1 million, up $4.1 million or 6.6%
      from $62.0 million in the first six months of 2006.





Net
      sales
      of product for use on corporate and regional aircraft slightly decreased from
      $23.9 million for the first six months of 2006 to $23.7 million in the first
      six
      months of 2007.  Increased sales to Gulfstream were offset by lower
      production rates in regional aircraft.





Net
      sales
      of product used in large commercial aircraft were $22.1 million for the six
      months ended June 30, 2007, an increase of $3.5 million or 18.8% from $18.6
      million for the six months ended June 30, 2006.  This increase was
      driven by higher production rates on certain models of Boeing aircraft.
      Specifically, we generated $12.8 million net sales for the Boeing 737 during
      the
      six months ended June 30, 2007, up 24.6% from $10.2 million net sales for the
      six months ended June 30, 2006. We also generated net sales of $4.9 million
      for
      the Boeing 747 during the first half of 2007, up 25.6% from $3.9 million net
      sales for the first half of 2006. In addition, we began shipments for parts
      used
      on the Boeing 787 in 2007 and generated $0.7 million net sales for the first
      half of the year. Partially offsetting the increase was a decrease of sales
      on a
      777 wing component offload program that was substantially completed in the
      second quarter of 2006.





Military
      products generated $14.9 million of net sales in the first half of 2007 compared
      to $12.8 million in the first half of 2006, an increase of $2.1 million or
      16.4%.  This increase was primarily attributable to the 38.3% growth
      in sales of components and assemblies for Sikorsky’s Black Hawk program which
      generated $8.3 million in the first half of 2007 compared to $6.0 million in
      the
      first half of 2006. This was offset by declining volume on the Lockheed
      F-16.






16


Technology
      products generated $3.3 million of net sales for the six months ended June
      30,
      2007 compared to $3.9 million for the six months ended June 30, 2006, a decrease
      of $0.6 million or 15.4%.  This decrease was due to lower net sales of
      products used in both semiconductor equipment and medical technology
      products.





**Gross
      Profit.**  Gross profit increased from $17.2 million (27.7% of
      net sales) for the six months ended June 30, 2006 to $17.5 million (26.5% of
      net
      sales) for the six months ended June 30, 2007. Gross profit was positively
      impacted by our higher production rates with aerospace customers which provided
      better coverage of fixed costs, but was reduced by increased salaries and wages,
      primarily from investment in the materiel organization and higher than expected
      workers compensation cost related to prior year claims. Specifically, salary
      and
      wages increased $1.2 million, or 13%, from $9.1 million for the six months
      ended
      June 30, 2006 to $10.3 million for the six months ended June 30, 2007.
      Additional workers compensation cost incurred for prior year claims was $0.5
      million for the six months ended June 30, 2007.





**Selling,
      General and Administrative Expenses.**Selling, general and
      administrative expenses were $9.9 million (15.0% of net sales) during the six
      months ended June 30, 2007 compared to $8.4 million (13.5% of net sales) for
      the
      six months ended June 30, 2006.  This increase is primarily due to
      higher employment levels resulting in additional salaries, wages and fringe
      benefit costs to support our growth.





**Net
      Interest Income (Expense).**  Interest income for the first
      half of 2007 was $0.3 million compared to interest expense of $0.3 million
      in
      the first half of 2006.  During the first quarter of 2006, we
      concluded a public offering of common stock that raised $39.2 million in
      cash.  We used a portion of the proceeds to reduce the majority of our
      indebtedness and are currently investing the remaining balance plus the cash
      we
      are generating.





**Income
      Tax Expense.**  During the first half of 2007, we had income
      tax expense of $2.8 million compared to $3.2 million in the first half of 2006.
      The $0.6 million decrease was primarily due to a decreased effective tax rate
      derived from additional deductions available for manufacturers and strategies
      taken to reduce state income taxes.





**LIQUIDITY
      AND CAPITAL RESOURCES**





During
      the first half of 2007, we used $3.0 million of cash in operating activities
      compared to $0.3 million cash provided during the first half of 2006. Cash
      was
      reduced by a $4.7 million increase in accounts receivable due to greater
      shipments near the end of the second quarter of 2007, changes in payment terms
      on certain contracts affecting 2007 and shifting of sales to programs with
      longer payment terms. Cash was also reduced by a $3.7 million increase in
      inventories, primarily due to increased levels of raw materials and finished
      goods. These inventory increases were due to production increases to support
      growing revenues expected in the last six months of 2007. Cash was also
      decreased by a $1.9 million reduction in accounts payable, primarily due to
      a
      $0.6 million payment made to purchase inventory from a customer and a $0.8
      million payment to purchase equipment.





Net
      cash used in
      investing activities was $11.7 million for the first half of 2007 compared
      to
      $8.8 million for the first half of 2006. We invested $16.0 million of funds
      in
      short-term securities, offset by cash proceeds from matured securities of $2.3
      million. We also incurred $3.5 million of capital expenditures during the first
      half of 2007 compared to $1.8 million during the first half of
      2006.On December 28, 2006, we entered into an agreement with
      a third party to sell and lease back certain of our real estate properties
      for a
      total sale price of $10.3 million. The sale of one of these properties occurred
      on December 28, 2006 for a sale price of $4.3 million. On February 13, 2007,
      the
      sale of the three remaining properties was completed at a price of $5.9 million,
      which favorably impacted our cash flow. The total non-cash gain from sale of
      these properties of $4.3 million is deferred and will be recognized over the
      term of the lease.




17




Cash
      provided by financing activities was $0.3 million for the first half of 2007
      compared to $25.4 million for the first half of 2006. The 2006 increases
      resulted from our public offering of common stock, completed on March 29, 2006,
      reduced by payments of outstanding debt.





On
      July
      31, 2007, we entered into a Credit Agreement (the “Credit Agreement”) with
      Wachovia Bank, National Association (as Administrative Agent, Swingline Lender
      and Issuing Lender), Wells Fargo Bank, National Association (as Syndication
      Agent) and the other lender parties. The Credit Agreement provides for a senior
      secured revolving credit facility in an aggregate principal amount of up to
      $80
      million (the “Facility”). Borrowings under the Facility are secured by
      substantially all of our assets and bear interest at either the “Base Rate” (the
      higher of the federal funds rate plus one-half of one percent or the prime
      commercial lending rate of Wachovia Bank) plus the applicable interest margin
      ranging from 0.125% to 1.0%, depending upon our then total leverage ratio or
      the
      LIBOR rate.  Interest accruing under the LIBOR rate option is defined
      as the LIBOR rate plus the applicable interest margin ranging from 1.125% to
      2.0% depending upon our then total leverage ratio.  The maturity date
      of the Facility, which is subject to acceleration upon breach of the financial
      covenants (consisting of a maximum total leverage ratio and a minimum fixed
      charge coverage ratio) and other customary non-financial covenants contained
      in
      the Credit Agreement, is July 31, 2012.





In
      connection with our acquisition of D3 Technologies, we borrowed a total of
      approximately $38.5 million under the Facility.





The
      foregoing description of the Credit Agreement does not purport to be complete
      and is qualified in its entirety by reference to the Credit Agreement, a copy
      of
      which is attached as Exhibit 4.1 to our Form 8-K filed with the Securities
      and
      Exchange Commission on August 6, 2007.





**CONTRACTUAL
      OBLIGATIONS AND COMMITMENTS**





As
      discussed in the “Liquidity and Capital Resources” section, we completed the
      sale and leaseback of three real estate properties on February 13, 2007. The
      operating lease agreement resulting from the sale expires on February 28, 2025,
      and we have options for three additional five-year renewal terms. As of June
      30,
      2007, the impact of the lease on our future contractual obligations is as follow
      (dollars in thousands):




**Total**
            **Less
                than**
              **1
                year**
            **1-3
                years**
            **3-5
                years**
            **More
                than 5**
              **years****Operating
                Leases**
            $      11,190
            $     521
            $     1,077
            $    1,128
            $     8,464





**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.




Interest
      on both our credit facility outstanding at June 30, 2007 and our new Facility
      described above accrue at a fluctuating rate.  Thus, we are subject to
      potential fluctuations in our debt service as the base rate changes. Based
      on
      the amount of our outstanding debt as of June 30, 2007, a hypothetical 1% change
      in the interest rate of our outstanding credit facility would not result in
      significant changes in our annual interest expense.






18






**Item
          4.  Controls and Procedures.**
  Our
          management, under the supervision and with the participation of our Chief
          Executive Officer and Chief Financial Officer, carried out an evaluation
          of the
          effectiveness of the design and operation of the Company’s disclosure controls
          and procedures (as defined by Rules 13a-15(e) and 15d-15(c) of the Securities
          Exchange Act of 1934, as amended) as of June 30, 2007.  Based upon and
          as of the date of this





No
      change
      in our internal control over financial reporting occurred during the period
      covered by this report that has materially affected, or is reasonable likely
      to
      materially affect, our internal control over financial
      reporting.


19


**PART
      II**





**OTHER
      INFORMATION**





**Item
      1.  Legal Proceedings.**





Certain
      legal proceedings pending against the Company are described in the Company’s
      Annual Report on Form 10-K for the year ended December 31, 2006. Through
      June 30, 2007, there have been no material developments in any legal
      proceedings reported in such Annual Report.





**Item
      1A.  Risk Factors.**





Reference
      is made to the risk factors as previously disclosed in our 2006 Annual
      Report on Form 10-K filed with the Securities and Exchange Commission on March
      15, 2007.





**Item
      2.  Unregistered Sale of Equity, Securities and Use of
      Proceeds.**





None.





**Item
      3.  Defaults Upon Senior Securities.**





None.






20




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





(a)
            The
                annual meeting of the shareholders of the Company was held on June
                13,
                2007.  Of the 11,596,749 shares entitled to vote at such
                meeting, 10,715,641 shares were present at the meeting in person
                or by
                proxy.





(b)
            The
                individuals listed below were elected as Class III Directors of the
                Company at the meeting, and the number of shares voted for, against
                and
                withheld were as follows:







Name
            
            Number
                of Shares VotedFor
            WithheldRonald
                S. Saks
            
            8,475,374
            2,240,267Joseph
                Burstein
            
            9,724,169
            991,472Brian
                D. Geary
            
            8,464,322
            2,251,319




The
      individuals listed below are
      Directors whose term of office continued after the meeting:





Thomas
      G.
      Unger


John
      M.
      Roeder


Sanford
      S. Neuman


John
      S.
      Eulich


Judith
      W.
      Northup





(c)
            In
                addition to the election of Class III Directors, the shareholders
                ratified
                the appointment of BDO Seidman, LLP as the Company’s independent auditor
                for the fiscal year ending December 31, 2007.  The number of
                shares voted for, against and withheld were as
                follows:








Number
                of Shares VotedFor
            Against
            Abstain10,663,123
            46,835
            5,681





(d)           None.





**Item
      5.  Other Information.**




At
        a
        meeting held on August 7, 2007, the Board of Directors of the Company appointed
        Ryan P. Bogan as a Vice President of the Company.  As previously disclosed,
        contemporaneously with the Company's acquisition of D3 Technologies, Mr.
        Bogan
        entered into an employment agreement with D3 Technologies providing for his
        continued services as the President and Chief Executive Officer of D3
        Technologies to December 31, 2010.
 
 Reference
        is made to Item 5.02 of the Company's Current Report on Form 8-K filed with
        the
        Securities and Exchange Commission on August 6, 2007 for the disclosure required
        by Item 5.02(c) of Form 8-K with respect to Mr. Bogan, which disclosure is
        incorporated herein by this reference.





**Item
      6.  Exhibits.**





See
      Exhibit Index.


21




**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, in the County of St. Charles and State of Missouri on the
      9th
      day of August, 2007.




LMI
                AEROSPACE, INC./s/
              Ronald S. SaksRonald
                S. Saks,
              President
                and Chief Executive Officer
              (Principal
                Executive Officer)





LMI
                AEROSPACE, INC./s/
              Lawrence E. DickinsonLawrence
                E. Dickinson
              Chief
                Financial Officer and Secretary
              (Principal
                Financial and Principal Accounting
                Officer)







22




**EXHIBIT
      INDEX**





Exhibit
              Number
            Description10.1
            Standard
                Industrial Lease Agreement dated June 9, 2006 between Welsh Fountain
                Lakes, L.L.C., as landlord and Leonard’s Metal, Inc., as tenant, filed as
                Exhibit 10.1 to the Registrant’s Form 8-K filed June 15, 2006 and
                incorporated herein by reference.10.2
            Stock
                Purchase Agreement dated June 17, 2007 among John J. Bogan, Trustee
                of the
                John J. Bogan Separate Property Trust dated October 5, 1999, William
                A.
                Huston and LMI Aerospace, Inc., filed as Exhibit 2.1 to the Registrant’s
                Form 8-K filed June 18, 2007 and incorporated herein by
                reference.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, Chief Financial
                Officer.32
            Certification
                pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section
                906 of
                Sarbanes-Oxley Act of 2002.













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