LMI AEROSPACE INC, 424A, 1998-06-08

LMI AEROSPACE INC
424A, 1998-06-08
AIRCRAFT PARTS & AUXILIARY EQUIPMENT, NEC

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<PAGE> 1

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.

PROSPECTUS Subject to completion, dated June 5, 1998
- --------------------------------------------------------------------------------

2,300,000 SHARES

LMI LOGO
LMI AEROSPACE, INC.
Common Stock
All of the 2,300,000 shares of Common Stock, par value $0.02 per share (the
"Common Stock"), offered hereby (the "Offering"), are being offered by LMI
Aerospace, Inc., a Missouri corporation (the "Company"). Prior to the Offering,
there has been no public market for the Common Stock. It is currently estimated
that the initial public offering price will be between $12.00 and $14.00 per
share. See "UNDERWRITING" for information relating to the factors considered in
determining the initial public offering price. The Company has filed an
application to designate the Common Stock for quotation on the Nasdaq National
Market under the proposed symbol "LMIA."
------------------------------------

FOR A DISCUSSION OF CERTAIN RISKS THAT SHOULD BE CONSIDERED BY PROSPECTIVE
PURCHASERS OF THE COMMON STOCK OFFERED HEREBY, SEE "RISK FACTORS" COMMENCING ON
PAGE 7.
------------------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=================================================================================================================
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS
PUBLIC COMMISSIONS(1) TO COMPANY(2)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................ $ $ $
- -----------------------------------------------------------------------------------------------------------------
Total(3)............................. $ $ $
=================================================================================================================
</TABLE>

(1) The Company has agreed to indemnify the several Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "UNDERWRITING."

(2) Before deducting estimated expenses of the Offering of $550,000, all of
which will be paid by the Company.

(3) The Company has granted the Underwriters a 45-day option to purchase up to
an aggregate of 345,000 additional shares of Common Stock at the price to
the public less underwriting discounts and commissions for the purpose of
covering over-allotments, if any. If the Underwriters exercise such option
in full, the total Price to Public, Underwriting Discounts and Commissions
and Proceeds to Company will be $ , $ and $ ,
respectively. See "UNDERWRITING."

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

The Common Stock is being offered by the Underwriters, subject to prior
sales, when, as and if issued to and accepted by them and subject to certain
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders, in whole or in part. It is expected that the
delivery of certificates representing the Common Stock will be made against
payment therefor on or about , 1998.

EVEREN SECURITIES, INC. GEORGE K. BAUM & COMPANY
<PAGE> 2

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF COMMON STOCK TO COVER SYNDICATE SHORT
POSITIONS, OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND
THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."
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<PAGE> 3

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and the Consolidated
Financial Statements and the Notes thereto, appearing elsewhere in this
Prospectus. Unless otherwise indicated, all share and per share data (other than
the historical financial statements contained herein) reflects a stock dividend
of 2.29 shares paid on each share held of record on May 1, 1998. Unless
otherwise indicated, the information in this Prospectus assumes that the
Underwriters' over-allotment option will not be exercised. Unless the context
otherwise requires, references to the Company are to LMI Aerospace, Inc., a
Missouri corporation, and its wholly-owned subsidiaries, Leonard's Metal, Inc.,
a Missouri corporation, and LMI Finishing, Inc., an Oklahoma corporation.

THE COMPANY

LMI Aerospace, Inc. is a leading fabricator, finisher and integrator of
formed, close tolerance aluminum and specialty alloy components for use by the
aerospace industry. For approximately 50 years the Company has been engaged in
manufacturing components for a wide variety of aerospace applications.
Components manufactured by the Company include leading edge wing slats, flaps
and lens assemblies; cockpit window frame assemblies; fuselage skins and
supports; and passenger and cargo door frames and supports. The Company
maintains multi-year contracts with leading original equipment manufacturers
("OEMs") and primary subcontractors ("Primes") of commercial, corporate,
regional and military aircraft. Typically such contracts, which govern virtually
all of the Company's sales, designate the Company as the sole supplier of the
aerospace components sold under the contracts. Customers include Boeing,
Lockheed Martin, Northrop Grumman, Gulfstream, Learjet, Canadair, DeHavilland
and PPG. The Company manufactures approximately 14,000 parts for integration
into such models as Boeing's 737, 747, 757, 767 and 777 commercial aircraft,
Gulfstream's G-IV and G-V corporate aircraft, Canadair's RJ regional aircraft,
and Lockheed Martin's F-16 and C-130 military aircraft.

In addition to supplying quality components, the Company provides its
customers with value-added services, including engineered tool design,
production and repair; heat treating; chemical milling; assembly; and metal
finishing processes, such as polishing and painting. The Company believes that
such value-added services provide significant benefits to its customers
including: (i) reduced administrative costs resulting from the Company's ability
to serve as a single point of purchase for a wide array of required products and
services, (ii) faster, more efficient production rates, and (iii) greater
consistency in meeting scheduled delivery dates. As a result, the Company
believes that its value-added services are an increasingly important factor in
the selection of the Company to provide aerospace components.

For the five-year period ended December 31, 1997, the Company's revenue
increased from $18.4 million to $55.1 million. During the same period operating
income increased from $279,000 to $9.6 million. Net income, which was generally
breakeven from 1993 to 1995, increased to $1.2 million in 1996 and $5.3 million
in 1997. At March 31, 1998, the Company's backlog of customer orders scheduled
for delivery prior to December 31, 1998 increased to a record level of $34.3
million. See "SUMMARY CONSOLIDATED FINANCIAL INFORMATION."

The Company believes that it is well positioned to benefit from several
industry trends, including: (i) increased new aircraft production; (ii)
increased outsourcing by OEMs and Primes; (iii) a decrease in the number of
preferred suppliers of aerospace components; and (iv) increased consolidation of
aerospace component suppliers.

THE INDUSTRY

The aerospace components industry is enjoying favorable trends driven by
strong growth in production of new commercial, corporate and regional aircraft.
Aircraft manufacturers are currently experiencing record levels of new orders.
The market for new commercial aircraft is estimated at $50 billion, the market
for corporate jet aircraft is estimated at $6 billion and the market for
regional jet aircraft is estimated at $3 billion.

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<PAGE> 4

- According to Boeing's 1997 Current Market Outlook (the "Boeing Report"),
annual deliveries of commercial aircraft can be expected to increase from
approximately 400 in 1996 to more than 700 in 1998, increasing the
worldwide fleet of aircraft from 11,500 at the end of 1996 to over 16,000
at the end of 2006 and over 23,000 at the end of 2016. Additionally,
expenditures for new commercial aircraft production are expected to total
approximately $490 billion for the period from 1996 to 2006. Such
increases result from the need of aircraft operators to accommodate a
projected 75% increase in global air travel through the year 2006. The
demand for commercial aircraft is rapidly increasing as a result of the
following: (i) increasing profitability of airline operators; (ii) a
worldwide increase in miles flown by existing aircraft; and (iii) the
need to modify or replace older aircraft to comply with more stringent
governmental noise and safety regulations.

- According to the Allied Signal Annual Business Aviation Outlook dated
September 1997 (the "Allied Report"), 2,300 new corporate jet aircraft
are expected to be delivered from 1997 through 2001, a 61% increase over
the previous five-year period. The demand for corporate aircraft is
rapidly increasing as a result of the following: (i) the introduction of
new, larger and more efficient aircraft; (ii) the growing popularity of
fractional aircraft ownership; (iii) the minimal availability of used
aircraft; (iv) the need for long range flights to expanding international
markets; (v) the increased demand for more expedient travel; and (vi) the
continued surge in corporate profitability and the U.S. stock market.

- Regional jets (32-70 seat capacity) are the most rapidly growing market
segment in commercial aircraft. Annual deliveries are estimated to double
from 96 units in 1997 to more than 210 by 2000. The demand for regional
jets is rapidly increasing as a result of the following: (i) ability to
pull passengers into major airline hubs or bypass hubs altogether; (ii)
expanded frequency of service on routes served by larger jets; (iii)
break even load factors are much lower on regional airlines than on
majors; (iv) extended range relative to previously utilized regional
turboprops; and (v) ability to service routes which would otherwise be
unprofitable if served by larger jets.

- In addition to demand related to production of new aircraft, the
aerospace components industry is benefiting from an increasing demand for
aftermarket components resulting from the growing number of aircraft in
service.

GROWTH STRATEGY

The Company's primary objective is to expand its position as a leading
components supplier to the aerospace industry through the application of a
comprehensive business strategy combining various customer service, operating
and growth objectives.

Capitalize on Favorable Industry Trends. The Company believes its strong
market position and alignment with many of the leading OEMs and Primes will
enable it to benefit from several industry trends allowing it to increase
production capabilities and expand operations to meet anticipated increases in
demand. The Company believes that it is well-positioned to take advantage of the
current trends and expected growth in the aerospace components industry as a
result of its ability to maintain consistent on time delivery, its key customer
relationships, its status as a supplier of value-added content, its ability to
deliver consistent component quality, the active involvement of its employees
and its geographic proximity to its customers. See "BUSINESS -- Competitive
Strengths."

Pursue Strategic Acquisitions. The Company seeks to leverage its core
competencies in existing and related markets by identifying and pursuing
complementary acquisitions in the aerospace industry that offer strategic value,
such as cost savings, increased manufacturing capacity, increased process
capability and/or new customer relationships. The Company believes that the
fragmented nature of the industry for aerospace components should provide the
Company with additional opportunities to exploit industry consolidation trends.

Expand Aftermarket Presence. The Company intends to increase its
penetration of the aerospace components aftermarket by expanding its product and
service offerings in response to the inventory needs of aftermarket
participants, tailoring its delivery procedures to meet the specific
requirements of this market and increasing its sales and marketing efforts to
increase awareness by such participants of the Company's capabilities.
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<PAGE> 5

Diversify Customer Base. The Company believes that opportunities exist to
establish additional relationships with OEMs, Primes and distributors of
aerospace products not currently supplied by the Company. In addition, the
Company is currently marketing its capabilities to unserved business units of
its current customers.

Expand Integration Capabilities. The Company intends to grow by increasing
the array of manufacturing, assembly and finishing services which it can offer
existing and prospective customers by expanding its capability to integrate
parts into higher level aerospace components. The Company believes that such
integration capability will enhance its reputation as a single point of purchase
for the aerospace industry. Furthermore, the Company believes that by expanding
its integration capabilities, it will increase its relative importance to its
customers and expand its revenue content per plane.

The Company's executive offices are located at 3600 Mueller Road, St.
Charles, Missouri 63302, and its telephone number is (314) 946-6525.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company........... 2,300,000 shares(1)
Common Stock to be outstanding after the 8,290,721 shares(1)(2)
Offering....................................
Use of Proceeds............................... To repay certain debt, pursue strategic acquisitions,
expand manufacturing capacity, finance working
capital requirements, and fund other general
corporate purposes. See "USE OF PROCEEDS."
Proposed Nasdaq National Market Symbol........ LMIA
</TABLE>

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

(1) Does not include up to 345,000 shares of Common Stock issuable upon full
exercise of the Underwriters' over-allotment option.

(2) Based on shares outstanding as of June 1, 1998. Excludes 859,827 shares of
Common Stock reserved, as of the date of this Prospectus, for issuance in
connection with the Company's stock based compensation plans and 98,700
shares for which Lawrence J. LeGrand, Chief Operating Officer of the
Company, through his individual retirement account has subscribed but not
yet purchased. See "MANAGEMENT -- Benefit Plans," "CAPITALIZATION" and
"PRINCIPAL SHAREHOLDERS."

FORWARD-LOOKING STATEMENTS

Any forward-looking statements set forth in this Prospectus are necessarily
subject to significant uncertainties and risks. When used in this Prospectus,
the words "believes," "anticipates," "intends," "plans," "projects,"
"estimates," "expects" and similar expressions are intended to identify
forward-looking statements. Actual results could be materially different from
those reflected in such forward-looking statements as a result of various
factors, including, but not limited to, those matters discussed under the
caption "RISK FACTORS" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS". Readers are cautioned not to place undue
reliance on forward-looking statements, which speak only as of the date hereof.
The Company undertakes no obligation to publicly release the results of any
revisions to these forward-looking statements which may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

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<PAGE> 6

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------------------- ---------------------
1993(1) 1994 1995 1996 1997 1997 1998
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................... $ 18,383 $ 20,710 $ 25,424 $ 35,016 $ 55,080 $ 12,690 $ 16,335
Cost of sales............................... 15,041 17,274 20,366 26,725 38,932 9,393 11,502
--------- --------- --------- --------- --------- --------- ---------
Gross profit.............................. 3,342 3,437 5,058 8,291 16,148 3,297 4,833
Selling, general & administrative
expense................................. 3,063 3,337 3,883 5,256 6,549 1,489 1,883
--------- --------- --------- --------- --------- --------- ---------
Income from operations.................... 279 100 1,175 3,035 9,599 1,808 2,950
Interest expense.......................... (347) (522) (1,038) (1,123) (1,020) (283) (258)
Other (expense) income, net(2)............ 293 263 (48) 15 10 1 5
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes......... 225 (159) 89 1,927 8,589 1,526 2,697
Provision for income taxes................ 381 (62) 52 740 3,306 587 1,038
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)......................... $ (156) $ (97) $ 37 $ 1,187 $ 5,283 $ 939 $ 1,659
========= ========= ========= ========= ========= ========= =========
Net income (loss) per common share(3):
Basic................................... $ (0.03) $ (0.02) $ 0.01 $ 0.21 $ 0.91 $ 0.16 $ 0.28
Diluted................................. $ (0.03) $ (0.02) $ 0.01 $ 0.20 $ 0.89 $ 0.16 $ 0.28
Weighted average shares outstanding....... 4,942,404 5,350,969 5,529,483 5,779,833 5,836,700 5,822,839 5,908,471
OTHER FINANCIAL DATA:
EBITDA(4)................................. $ 1,870 $ 1,764 $ 3,091 $ 5,062 $ 11,788 $ 2,308 $ 3,599
Capital expenditures...................... 1,732 4,746 1,736 1,316 3,856 335 1,405
Gross profit margin....................... 18.2% 16.6% 19.9% 23.7% 29.3% 26.0% 29.6%
EBITDA margin............................. 10.2% 8.5% 12.2% 14.5% 21.4% 18.2% 22.0%
</TABLE>

<TABLE>
<CAPTION>
MARCH 31, 1998
------------------------
ACTUAL AS ADJUSTED(5)
------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and equivalents...................................... $ 604 $24,031
Working capital........................................... 11,710 35,394
Total assets.............................................. 36,883 60,310
Total long-term debt, excluding current portion........... 8,829 5,256
Stockholders' equity...................................... 18,410 45,667
</TABLE>

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(1) On December 31, 1993, the Company elected to change from a Subchapter S
corporation to a C corporation. As a result of this change in tax status,
the Company adopted Statement of Financial Accounting Standards No. 109
(SFAS No. 109), "Accounting for Income Taxes." Under SFAS No. 109, deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax bases of the assets and liabilities and their
financial reporting amounts at each year-end based on enacted tax laws and
statutory tax rates applicable to the periods in which the differences are
expected to affect taxable income. Income tax expense represents the
recognition of deferred tax assets and liabilities at December 31, 1993.

(2) Other (expense) income includes income from insurance proceeds (net of
related flood expense) of $280 and $255 in 1993 and 1994, respectively.

(3) Complete pro forma presentation is not shown above as adjustments are not
significant. Pro forma net income of $5,398 and $1,712 for the year ended
December 31, 1997 and the three months ended March 31, 1998, respectively,
(versus historical net income of $5,283 and $1,659 for the year ended
December 31, 1997 and the three months ended March 31, 1998, respectively,
shown above) is the amount net income would have been if the $3.8 million of
debt anticipated to be retired with the offering proceeds had been retired
at the beginning of the period. Pro forma net income per common share for
the year ended December 31, 1997 of $0.88 and $0.87, basic and diluted,
respectively, and for the three months ended March 31, 1998, of $0.28 and
$0.27, basic and diluted, respectively, reflects the incremental increase in
the number of shares of Common Stock which are required to generate funds
necessary to retire the debt, and the increase in net income, net of tax,
due to the debt retirement.

(4) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. EBITDA is a widely accepted, supplemental financial
measurement used by many investors and analysts to analyze and compare
companies' performance. EBITDA as presented may not be comparable to
similarly titled indicators reported by other companies because not all
companies necessarily calculate EBITDA in an identical manner, and,
therefore, it is not necessarily an accurate means of comparison between
companies. EBITDA should only be read in conjunction with all of the
Company's financial data summarized above and its Consolidated Financial
Statements prepared in accordance with generally accepted accounting
principles ("GAAP"), appearing elsewhere herein. EBITDA is not intended to
represent cash flows (as determined in accordance with GAAP) or funds
available for management's discretionary use for the periods listed, nor has
it been presented as an alternative to operating income (as determined in
accordance with GAAP) and should not be considered in isolation or as a
substitute for indicators of performance prepared in accordance with GAAP.
EBITDA is presented as additional information because management believes it
to be a useful indicator of the Company's ability to meet debt service and
capital expenditure requirements and because certain debt covenants of the
Company utilize EBITDA to measure compliance with such covenants. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION -- Liquidity and Capital Resources."

(5) Adjusted to give effect to the receipt of the net proceeds from the sale by
the company of 2,300,000 shares of Common Stock to be sold in this Offering
(at an assumed initial public offering price of $13.00 per share) and the
application of the estimated net proceeds to working capital and repayment
of a portion of certain debt (after deduction of underwriting discounts and
commissions and estimated offering expenses payable by the Company) as set
forth in "USE OF PROCEEDS" and "CAPITALIZATION."

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<PAGE> 7

RISK FACTORS

Prospective investors should consider carefully the following factors, in
addition to the other information contained in this Prospectus, in evaluating an
investment in the Common Stock offered hereby.

CUSTOMER CONCENTRATION

A significant portion of the Company's sales is dependent, directly or
indirectly, on relationships with various business units of The Boeing Company
("Boeing"). During 1995, 1996 and 1997, direct sales to business units of
Boeing, including Boeing Seattle, Boeing Wichita and Boeing North American,
accounted for approximately 45%, 46% and 59% of the Company's sales,
respectively. In addition, during the same time periods sales to Boeing vendors
for integration and shipment to Boeing's business units accounted for
approximately 19%, 20% and 17% of the Company's sales, respectively. Aggregate
direct sales during the same periods to the Company's three largest customers
accounted for approximately 74%, 73% and 81% of sales, respectively. The Company
expects that a small number of large customers will continue to account for a
substantial portion of its sales for the foreseeable future. Although
substantially all of the Company's sales are made pursuant to multi-year
contracts, such contracts are terminable upon 30 days notice by the customer and
typically do not require the customer to purchase any specific quantity of
products. To strengthen the relationship between the Company and Boeing, the
Company has located its facilities in close geographic proximity to the
principal production facilities of Boeing. The Wichita facility is close to
Boeing Wichita; the Auburn facility is close to Boeing Seattle; and the Tulsa
facility is close to Boeing North American. See "BUSINESS -- Customers." As a
result, the Company's business, financial condition or results of operations
could be materially adversely affected by the decision of a single customer to
reduce or terminate its orders with the Company. In addition, there can be no
assurance that sales to customers that have in the past accounted for
significant sales individually or as a group will continue, or if continued,
will reach or exceed historical levels in any future periods.

AEROSPACE INDUSTRY

The Company derives all of its sales and operating income from the services
and components that it provides to its customers in the aerospace industry. As a
result the Company's business is directly affected by certain characteristics
and trends of the aerospace industry that affect its customers, such as (i)
fluctuations in the aerospace industry's business cycle, (ii) varying fuel and
labor costs, (iii) intense price competition and regulatory scrutiny, (iv)
certain trends including a possible decrease in aviation activity, a decrease in
outsourcing by aircraft manufacturers or the failure of projected market growth
to materialize or continue and (v) changes in military budgeting and procurement
for certain military aircraft. In the event that such characteristics and trends
adversely affect customers in the aerospace industry, they would reduce the
overall demand for the Company's products and services, thereby decreasing the
Company's sales and operating income. There can be no assurance that
characteristics and trends that might affect the aerospace industry will not
adversely affect the Company's results of operations. See "BUSINESS -- Industry
Outlook."

DEPENDENCE UPON KEY MANAGEMENT PERSONNEL

The Company's long-term success and growth strategy depend on its senior
management. The Company has entered into written employment agreements with all
of its senior management personnel and maintains key man life insurance policies
on the lives of certain of such personnel. However, the loss of service of one
or more of the Company's senior management personnel could have a material
adverse effect on the Company's business, financial condition or results of
operation. See "MANAGEMENT."

NEED TO ATTRACT AND RETAIN QUALIFIED PERSONNEL

The Company's success and future growth will also depend on management's
ability to attract, hire, train, integrate and retain qualified personnel in all
areas of its business. The unemployment rate is currently very low in all of the
Company's locations, and competition for personnel, particularly skilled and
unskilled manufacturing operators, is intense. Through innovative recruiting and
training programs, the Company has been successful at

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<PAGE> 8

increasing its work force in all locations. However, continued restriction of
the labor market could impair the Company's ability to adequately staff its
operations. If the Company is unable to attract, hire, train, integrate and
retain qualified personnel, the Company's business, financial condition or
results of operations could be materially and adversely affected.

STRATEGIC ACQUISITIONS

A key element of the Company's growth strategy is expansion through the
acquisition of complementary businesses involved in the aerospace industry. The
Company's ability to expand by acquisition is dependent on, and may be limited
by, the availability of suitable acquisition candidates and the Company's
capital resources. See "BUSINESS -- Growth Strategy," "USE OF PROCEEDS," and
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Liquidity and Capital Resources." Acquisitions involve risks that
could adversely affect the Company's operating results, including assimilation
of the operations and personnel of acquired companies, the potential
amortization of intangible assets, the potential loss of key employees of the
acquired companies and the incurrence of substantial, additional indebtedness in
funding such acquisitions. Furthermore, although the Company will investigate
the business operations and assets of entities that it acquires, there may be
liabilities that the Company fails or is unable to discover, and for which the
Company as a successor owner or operator may be liable. The Company evaluates
acquisition opportunities from time to time, but the Company has not entered
into any commitments or binding agreements to date. There can be no assurance
that the Company will be able to consummate acquisitions on satisfactory terms,
or at all, or that it will be successful in integrating any such acquisitions
into its operations.

COMPETITION

Components for new aircraft and replacement components for existing
aircraft are provided by a large fragmented group of companies, including
certain business units of or affiliated with the Company's customers. However,
the Company is unaware of any single company with which it competes in all of
the Company's processes. The Company believes that participants in the aerospace
components industry compete primarily with respect to reliability of delivery,
price and quality. The Company also believes that competition in its industry
will increase substantially as a result of industry consolidations and trends
toward favoring greater outsourcing of components and reducing the number of
preferred suppliers. Certain of the Company's competitors, including business
units affiliated with the Company's customers, have substantially greater
financial, production and other resources than the Company. These competitors
may have (i) the ability to adapt more quickly to changes in customer
requirements and industry conditions or trends, (ii) stronger relationships with
customers and suppliers and (iii) greater name recognition than the Company.
There can be no assurance that competitive pressures will not materially and
adversely affect the Company's business, financial condition or results of
operation. See "BUSINESS -- Competition" and "-- Industry Outlook."

RAW MATERIALS

Most of the Company's aerospace components are manufactured from aerospace
quality aluminum sheet metal and extrusion. From time to time the Company, and
the aerospace components industry as a whole, has experienced shortages in the
availability of aerospace quality aluminum sheet metal and extrusion. Such
shortages could inhibit the Company's ability to deliver products to its
customers on a timely basis. In an attempt to secure adequate supplies the
Company has entered into a multi-year aluminum sheet metal supply agreement with
Aluminum Company of America ("ALCOA"), a dominant domestic supplier of aerospace
quality aluminum, extending until the end of the year 2000, and is negotiating
similar agreements regarding extrusion with Tiernay Metals, Inc., a distributor,
and Universal Alloy Corp., a producer. However, there can be no assurance that
the Company will be able to purchase sufficient aerospace quality aluminum sheet
metal or extrusion to meet its production needs in the future, or that such
materials will be available on satisfactory terms or at reasonable prices. Any
such material shortage or price escalation could have a material adverse effect
on the business, financial condition or results of operation of the Company. See
"BUSINESS -- Suppliers and Procurement Practices."

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GOVERNMENTAL REGULATIONS; ENVIRONMENTAL COMPLIANCE

The Company's operations are subject to extensive and frequently changing
federal, state and local laws and substantial regulation by government agencies,
including the United States Environmental Protection Agency ("EPA"), the United
States Occupational Safety and Health Administration ("OSHA") and the Federal
Aviation Administration ("FAA"). Among other matters these agencies impose
requirements that regulate the operation, handling, transportation and disposal
of hazardous materials generated or used by the Company during the normal course
of its operations, govern the health and safety of the Company's employees and
require the Company to meet certain standards and licensing requirements for
aerospace components. This extensive regulatory framework imposes significant
compliance burdens and risks on the Company and, as a result, may substantially
affect its operational costs. See "BUSINESS -- Regulatory Matters."

In addition, the Company may become liable for the costs of removal or
remediation of certain hazardous substances released on or in its facilities
without regard to whether or not the Company knew of, or caused, the release of
such substances. The Company believes that it currently is in material
compliance with applicable laws and regulations and is not aware of any material
environmental violations at any of its current or former facilities. There can
be no assurance, however, that its prior activities did not create a material
environmental situation for which the Company could be responsible or that
future uses or conditions (including, without limitation, changes in applicable
environmental laws and regulation, or an increase in the amount of hazardous
substances generated or used by the Company's operations) will not result in any
material environmental liability to the Company or result in a material adverse
effect to the Company's financial condition or results of operations. See
"BUSINESS -- Regulatory Matters."

PRODUCT LIABILITY

Although the Company is not engaged in the design of any part, component or
sub-assembly, the Company's business exposes it to possible claims of personal
injury, death or property damage which may result from the failure or
malfunction of any component or subassembly fabricated by the Company. The
Company currently has in place aviation products liability and premises
insurance, which the Company believes provides coverage in amounts and on terms
that are generally consistent with industry practice. The Company has not
experienced any product liability claims related to its products. However, the
Company may be subject to a material loss, to the extent that a claim is made
against the Company that is not covered in whole or in part by insurance, which
could have a material adverse effect on the Company's business, financial
condition or results of operations. In addition, there can be no assurance that
insurance coverages can be maintained in the future at a cost acceptable to the
Company.

DISCRETIONARY USE OF PROCEEDS

The Company has no specific plan for approximately $23.5 million of the net
proceeds of this Offering after retirement of $3.8 million of Company debt. The
Company is raising such funds to increase its working capital and for other
general corporate purposes, including the acquisition of complementary
businesses. Consequently, the board of directors of the Company (the "Board")
will have broad discretion over the use of most of the net proceeds of this
Offering for the foreseeable future. See "USE OF PROCEEDS."

NATURAL DISASTERS

One of the facilities of the Company has experienced damage due to floods
in the past. Although the Company maintains standard blanket flood loss
insurance on all of its facilities, a flood or other natural disaster could have
a material adverse effect on its business or operating results.

CONTROL BY PRINCIPAL SHAREHOLDERS

Upon completion of this Offering directors and executive officers will
beneficially own approximately 53.1% of the then outstanding shares of Common
Stock (51.1% if the Underwriter's over-allotment option is exercised in full).
See "PRINCIPAL SHAREHOLDERS." As a result, such shareholders acting together
will have the ability to exercise effective voting control of the Company over
any matter being voted on by the Company's
9
<PAGE> 10

shareholders, including the election of all of the Company's directors and any
merger, sale of assets or other change of control of the Company. See
"AUTHORIZED AND OUTSTANDING CAPITAL STOCK."

ABSENCE OF PRIOR MARKET; DETERMINATION OF OFFERING PRICE

Prior to the Offering there has been no public market for the Common Stock.
Although the Company has applied for quotation of the Common Stock on the Nasdaq
National Market, there can be no assurance that an active or liquid trading
market will develop upon completion of the Offering or, if developed, that it
will be sustained. The initial public offering price of the Common Stock was
determined by negotiations among the Company and the Representatives and does
not necessarily bear any relationship to assets, book value, earnings history or
other established criteria of value. Investors may not be able to resell their
shares at or above the initial public offering price. See "UNDERWRITING."

VOLATILITY OF MARKET PRICE

The market price of the Common Stock could be subject to wide fluctuations
in response to quarterly variations in operating results, changes in financial
estimates by security analysts or failure of the Company to meet such estimates
and other events or factors. In addition, the stock market has experienced
volatility that has affected the market prices of equity securities of many
companies. The resulting changes in such market prices are often unrelated to
the operating performance of such companies. Accordingly, market volatility
could adversely affect the market price of the Common Stock.

ANTI-TAKEOVER PROVISIONS

The Company's Restated Articles of Incorporation (the "Articles") and
Amended and Restated Bylaws (the "Bylaws") contain certain provisions that
reduce the probability of a change of control or acquisition of the Company,
even if the current directors and executive officers were to reduce
significantly their percentage ownership of the Common Stock as a group. These
provisions include, but are not limited to (i) the ability of the Board to issue
preferred stock in one or more series with such rights, obligations and
preferences as the Board may determine, without any further vote or action by
the shareholders; (ii) advance notice procedures for shareholders to nominate
candidates for election as directors of the Company and for shareholders to
submit proposals for consideration at shareholders' meetings; (iii) the
staggered election of directors; and (iv) restrictions on the ability of
shareholders to call special meetings of shareholders. In addition, the Company
is subject to Section 459 of Chapter 351 of the General and Business Corporation
Law of Missouri, which, under certain circumstances, may prohibit a business
combination between the Company and a shareholder owning 20% or more of the
outstanding voting power of the Company. This provision may have the effect of
delaying, deterring, or preventing certain potential acquisitions or a change in
control of the Company. See "AUTHORIZED AND OUTSTANDING CAPITAL
STOCK -- Preferred Stock," " -- Special Provisions of the Articles, Bylaws and
Missouri Law" and "PRINCIPAL SHAREHOLDERS."

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, 948,783 shares of Common Stock will be
eligible for sale to the public by persons who are not "affiliates" of the
Company. All the remaining shares of Common Stock outstanding are "restricted"
within the meaning of Rule 144 under the Securities Act ("Rule 144") and may not
be sold in the absence of registration under the Securities Act or an exemption
therefrom. Moreover, all shares of Common Stock outstanding prior to this
Offering are subject to agreements which prohibit, without the prior consent of
the Representatives, the sale or other disposition of such shares prior to
December 31, 1998. Sales of substantial amounts of Common Stock in the public
market following the Offering, or the perception that such sales may occur,
could adversely affect the market price of the Common Stock. These factors also
could make it more difficult for the Company to raise funds through future
offerings of Common Stock. See "SHARES ELIGIBLE FOR FUTURE SALE."

10
<PAGE> 11

DILUTION

Purchasers of Common Stock in this Offering will experience immediate and
substantial dilution of $7.45 per share (or 57.3%) in the net tangible book
value of the Common Stock. See "DILUTION" and "PRINCIPAL SHAREHOLDERS."

YEAR 2000 COMPLIANCE

The Company has recently installed information systems and software in all
of its locations, other than at its Tulsa location, which possess the capability
of accurately processing dates including the year 2000 or any subsequent year
("Year 2000 Compliant"). The Company has determined that it will need to upgrade
its software to render the Tulsa facility's systems Year 2000 Compliant and
expects to complete such upgrade/replacement within the next 12 months. There
can be no assurance that such upgrade/replacement will begin as planned or, if
begun, will be completed in a timely and cost-effective manner. If the
upgrade/replacement is not completed when planned, the inability of the Tulsa
location's software to accurately process dates may adversely affect the
Company's production schedule. The Company has reviewed publicly reported
information made by its principal customers and suppliers, including Boeing, and
based on such review believes that such customers and suppliers are, or have
taken certain actions with respect to becoming, Year 2000 Compliant. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Year 2000 Compliance."

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,300,000 shares of
Common Stock offered hereby are estimated to be $27.3 million ($31.4 million if
the Underwriters' over allotment option is exercised in full), after deducting
the estimated expenses of the Offering and assuming an initial public offering
price of $13.00 per share. The Company anticipates using such net proceeds to
repay certain debt, pursue strategic acquisitions, expand manufacturing
capacity, finance working capital requirements and fund other general corporate
purposes.

Specifically, the Company anticipates using $3.8 million of the proceeds to
retire $3.4 million of term debt, which accrues interest at an annual rate of 9%
and matures in November 2000, with Magna Bank, N.A. (the "Bank") and a mortgage
for $0.4 million held by the Oklahoma Industrial Finance Authority secured by
the Company's Tulsa, Oklahoma facility.

Pending the use of the net proceeds from the sale of the shares of Common
Stock as described above, such funds will be used to reduce temporarily the
principal balance under the Company's credit facility, as amended, with the
Bank, dated as of March 30, 1998 (the "Credit Facility"), which provides for the
availability of up to $15.0 million of borrowings until March 31, 2000. At March
31, 1998, the outstanding principal balance under the Credit Facility was $1.5
million, the effective interest rate thereon was 7.09% and the unused
availability thereunder was approximately $13.5 million. Of the $1.5 million
drawn on the Credit Facility, the Company used $0.8 million to retire certain
outstanding subordinated debt, $0.3 million to retire certain shareholder debt
and the balance to reduce certain senior secured indebtedness. After application
of the net proceeds of this Offering to the temporary repayment of the
outstanding principal balance on the Credit Facility, the Company intends to
make additional borrowings under the Credit Facility for the foregoing purposes.

The unused net proceeds from the sale of Common Stock and the Credit
Facility may be used to support the Company's growth strategies through, among
other things, the funding of acquisitions of complementary businesses. Although
the Company has had and expects to have discussions with potential acquisition
candidates it does not have any present agreements or understandings with
respect to any specific acquisitions. Changes in the proposed use of net
proceeds may be made in response to, among other things, changes in the
Company's plans and its future revenues and expenditures, as well as changes in
general industry conditions and technology. Furthermore, no general corporate
purpose has been specifically identified by the Company at this time.

The Company believes that the net proceeds of this Offering, cash flow from
operations, trade credit and its existing line of credit will be sufficient to
meet its immediate cash needs and finance its plans for expansion for the
indefinite future. This belief is based upon certain assumptions regarding the
Company's business and cash
11
<PAGE> 12

flow as well as prevailing industry and economic conditions. The Company's
capital requirements may vary significantly, depending on how rapidly management
seeks to expand the business and the expansion strategies elected.

DIVIDEND POLICY

Subsequent to the Offering the Company intends to retain any future
earnings for use in the operation and expansion of its business. As a result the
Company does not anticipate declaring any dividends on its Common Stock in the
foreseeable future. Any future determination with regard to the payment of
dividends will be at the discretion of the Board and will be dependent upon the
Company's future earnings, financial condition, capital requirements and other
relevant factors. Currently the Credit Facility prohibits the payment of cash
dividends on the Common Stock without the Bank's prior written consent.

DILUTION

The net tangible book value of the Company's Common Stock as of March 31,
1998, was approximately $18.3 million or $3.10 per share. Net tangible book
value per share represents the Company's total tangible assets less total
liabilities, divided by the total number of shares of Common Stock outstanding.

After giving effect to the sale of the 2,300,000 shares of Common Stock
offered by the Company hereby and the receipt of the estimated net proceeds
therefrom of $27.3 million, the pro forma net tangible book value of the Company
as of March 31, 1998, would have been approximately $45.6 million or $5.55 per
share. This represents an immediate increase in net tangible book value of $2.45
per share to existing shareholders and an immediate dilution in net tangible
book value of $7.45 per share to investors in the Offering. The following table
illustrates the per share dilution as of March 31, 1998.

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $13.00
Net tangible book value per share as of March 31, 1998.... $3.10
Increase per share attributable to investors in the
Offering............................................... 2.45
-----
Pro forma net tangible book value per share after the
Offering.................................................. 5.55
------
Dilution in net tangible book value per share to investors
in the Offering........................................... $ 7.45
======
</TABLE>

The following table sets forth on a pro forma basis as of March 31, 1998
the number of shares purchased from the Company, the total consideration paid
and the average price per share paid by the existing shareholders and investors
in the Offering:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------- --------------------- PRICE PAID
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ----------
<S> <C> <C> <C> <C> <C>
Existing shareholders..................... 5,908,471 72.0% $ 3,246,224 9.8% $ 0.55
Investors in the Offering................. 2,300,000 28.0% 29,900,000 90.2% $13.00
--------- ----- ----------- ----- ------
Total........................... 8,208,471 100.0% $33,146,224 100.0%
========= ===== =========== =====
</TABLE>

The foregoing table (i) excludes 131,600 new shares of Common Stock issued
as compensation to, or subscribed for by, Lawrence J. LeGrand, Chief Operating
Officer of the Company, personally or through his individual retirement account
on April 27, 1998, 32,900 shares contributed by the Company to the LMI
Aerospace, Inc. Profit Sharing and Savings Plan and Trust ("Profit Sharing
Plan") on April 27, 1998 and 16,450 shares issued upon the exercise of an option
on June 1, 1998, and (ii) assumes an initial public offering price of $13.00 and
that none of the currently outstanding rights to purchase Common Stock will be
exercised. At March 31, 1998, options to purchase 243,377 shares at a weighted
average exercise price of $2.41 per share were outstanding. To the extent any of
these options are exercised, there will be further dilution to investors in the
Offering. See "CAPITALIZATION" and Note 8 to the Consolidated Financial
Statements.

12
<PAGE> 13

CAPITALIZATION

The following table sets forth as of March 31, 1998, the cash and cash
equivalents, short-term debt and capitalization of the Company (i) on an actual
basis; and (ii) as adjusted to give effect to the sale by the Company of
2,300,000 shares of the Common Stock offered hereby and the application of the
estimated net proceeds therefrom. This table should be read in conjunction with
the Consolidated Financial Statements and the Notes thereto and "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------------
ACTUAL AS ADJUSTED(1)
--------- ----------------
(IN THOUSANDS, EXCEPT SHARE
DATA)
<S> <C> <C>
Cash and cash equivalents................................... $ 604 $24,031
======= =======
Short-term debt, including current portion of long-term
debt...................................................... $ 640 $ 383
======= =======
Long-term debt, less current portion........................ $ 8,829 $ 5,256
------- -------
Stockholders' equity:
Preferred Stock, $0.02 par value; 2,000,000 shares
authorized; none issued or outstanding actual and as
adjusted............................................... -- --
Common Stock, $0.02 par value; 28,000,000 shares
authorized, 5,908,471(2) issued and outstanding actual;
8,208,471(2) issued and outstanding as adjusted........ 118 164
Additional paid-in capital................................ 1,543 28,754
Retained earnings......................................... 16,749 16,749
------- -------
Total stockholders' equity............................. $18,410 $45,667
======= =======
Total capitalization.............................. $27,239 $50,923
======= =======
</TABLE>

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

(1) Reflects the sale by the Company of 2,300,000 shares of the Common Stock
offered hereby at an assumed public offering price of $13.00 per share less
underwriting discounts and commissions and estimated offering expenses and
the application of the estimated net proceeds therefrom. See "USE OF
PROCEEDS."

(2) Reflects shares of Common Stock outstanding as of March 31, 1998. Excludes
859,827 shares of Common Stock reserved as of the date of this Prospectus,
for issuance upon exercise of options granted under the Company's stock
based compensation plans. Also excludes (i) 131,600 new shares of Common
Stock issued as compensation to, or subscribed for by, Lawrence J. LeGrand,
Chief Operating Officer of the Company, personally or through his individual
retirement account on April 27, 1998, (ii) 32,900 shares contributed by the
Company to the Profit Sharing Plan on April 27, 1998, and (iii) 16,450
shares issued upon the exercise of an option on June 1, 1998. See
"MANAGEMENT -- Benefit Plans."

13
<PAGE> 14

SELECTED CONSOLIDATED FINANCIAL INFORMATION

The following table sets forth selected statement of operations, balance
sheet and other operating data of LMI Aerospace, Inc. and its subsidiaries. The
selected statements of operations and balance sheet data, as of and for the
three months ended March 31, 1997 and 1998 are derived from unaudited financial
statements. The unaudited financial statements have been prepared by the Company
on a basis consistent with the Company's audited financial statements and, in
the opinion of management, include all adjustments, consisting only of normal
recurring adjustments, necessary for a fair presentation of the Company's
results of operations for the period. The results of operations for the three
months ended March 31, 1998 are not necessarily indicative of results to be
expected for any future period. The selected statements of operations and
balance sheet data as of and for the years ended December 31, 1993, 1994, 1995,
1996 and 1997 are derived from the audited consolidated financial statements of
the Company. The consolidated financial statements for the years ended December
31, 1993 and 1994, have been audited by KPMG Peat Marwick LLP, independent
auditors. The consolidated financial statements for the years ended December 31,
1995, 1996 and 1997, have been audited by Ernst & Young LLP, independent
auditors. The selected consolidated financial data should be read in conjunction
with the consolidated financial statements of the Company, including the notes,
thereto, and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" included elsewhere herein.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
--------------------------------------------------------------- -----------------------
1993(1) 1994 1995 1996 1997 1997 1998
---------- ---------- ---------- ---------- ----------- ---------- ----------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................... $ 18,383 $ 20,710 $ 25,424 $ 35,016 $ 55,080 $ 12,690 $ 16,335
Cost of sales....................... 15,041 17,274 20,366 26,725 38,932 9,393 11,502
---------- ---------- ---------- ---------- ----------- ---------- ----------
Gross profit...................... 3,342 3,437 5,058 8,291 16,148 3,297 4,833
Selling, general & administrative
expense......................... 3,063 3,337 3,883 5,256 6,549 1,489 1,883
---------- ---------- ---------- ---------- ----------- ---------- ----------
Income from operations............ 279 100 1,175 3,035 9,599 1,808 2,950
Interest expense.................. (347) (522) (1,038) (1,123) (1,020) (283) (258)
Other (expense) income, net(2).... 293 263 (48) 15 10 1 5
---------- ---------- ---------- ---------- ----------- ---------- ----------
Income (loss) before income
taxes........................... 225 (159) 89 1,927 8,589 1,526 2,697
Provision for income taxes........ 381 (62) 52 740 3,306 587 1,038
---------- ---------- ---------- ---------- ----------- ---------- ----------
Net income (loss)................. $ (156) $ (97) $ 37 $ 1,187 $ 5,283 $ 939 $ 1,659
========== ========== ========== ========== =========== ========== ==========
Net income (loss) per common
share(3):
Basic........................... $ (0.03) $ (0.02) $ 0.01 $ 0.21 $ 0.91 $ 0.16 $ 0.28
Diluted......................... $ (0.03) $ (0.02) $ 0.01 $ 0.20 $ 0.89 $ 0.16 $ 0.28
Weighted average shares
outstanding..................... 4,942,404 5,350,969 5,529,483 5,779,833 5,836,700 5,822,839 5,908,471
OTHER FINANCIAL DATA:
EBITDA(4)......................... $ 1,870 $ 1,764 $ 3,091 $ 5,062 $ 11,788 $ 2,308 $ 3,599
Capital expenditures.............. 1,732 4,746 1,736 1,316 3,856 335 1,405
Gross profit margin............... 18.2% 16.6% 19.9% 23.7% 29.3% 26.0% 29.6%
EBITDA margin..................... 10.2% 8.5% 12.2% 14.5% 21.4% 18.2% 22.0%
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1998
----------------------------------------------- ------------------------
1993 1994 1995 1996 1997 ACTUAL AS ADJUSTED(5)
------- ------- ------- ------- ------- ------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and equivalents..................... $483.... $ 151 $ 181 $ 205 $ 244 $ 604 $24,031
Working capital.......................... 6,111 6,933 8,919 8,626 11,256 11,710 35,394
Total assets............................. 18,724 25,454 27,370 29,046 33,269 36,883 60,310
Total long-term debt, excluding current
portion................................ 7,000 11,620 12,674 10,735 9,274 8,829 5,256
Stockholders' equity..................... 9,220.. 9,147 9,966 11,161 16,751 18,410 45,667
</TABLE>

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

14
<PAGE> 15

recognized for the tax consequences in future years of differences between
the tax bases of the assets and liabilities and their financial reporting
amounts at each year-end based on enacted tax laws and statutory tax rates
applicable to the periods in which the differences are expected to affect
taxable income. Income tax expense represents the recognition of deferred
tax assets and liabilities at December 31, 1993.

(2) Other (expense) income includes income from insurance proceeds (net of
related flood expense) of $280 and $255 in 1993 and 1994, respectively.

(4) EBITDA represents earnings before interest, income taxes, depreciation and
amortization. EBITDA is a widely accepted, supplemental financial
measurement used by many investors and analysts to analyze and compare
companies' performance. EBITDA as presented may not be comparable to
similarly titled indicators reported by other companies because not all
companies necessarily calculate EBITDA in an identical manner, and,
therefore, it is not necessarily an accurate means of comparison between
companies. EBITDA should only be read in conjunction with all of the
Company's financial data summarized above and its Consolidated Financial
Statements prepared in accordance with generally accepted accounting
principles ("GAAP"), appearing elsewhere herein. EBITDA is not intended to
represent cash flows (as determined in accordance with GAAP) or funds
available for management's discretionary use for the periods listed nor has
it been presented as an alternative to operating income (as determined in
accordance with GAAP) and should not be considered in isolation or as a
substitute for indicators of performance prepared in accordance with GAAP.
EBITDA is presented as additional information because management believes it
to be a useful indicator of the Company's ability to meet debt service and
capital expenditure requirements and because certain debt covenants of the
Company utilize EBITDA to measure compliance with such covenants. See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS -- Liquidity and Capital Resources."

15
<PAGE> 16

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with "Selected
Consolidated Financial Information," the Consolidated Financial Statements and
the Notes thereto and the other financial information included elsewhere in this
Prospectus.

HISTORY

The business of the Company was founded by the Leonard family in 1948. For
50 years the Company has continued to grow as a supplier of precision metal
components to the aerospace industry. In January 1984, the present principal
shareholders of the Company acquired a controlling ownership and established a
strategy for growth and market expansion. Part of that strategy was to establish
facilities near the Company's principal customers. As a result, the Company
opened its Wichita, Kansas facility near Boeing Wichita in 1984 and in 1988,
opened its Auburn, Washington facility near Boeing Seattle. The Company
continued its expansion in 1989 by adding a second manufacturing center to its
principal location in St. Charles, Missouri to handle increasing work volume and
expand its technical capabilities. In 1995, the Company continued its strategy
of opening facilities near customers and expanded its value-added service
capability by establishing its chemical milling and metal finishing operation,
LMI Finishing, Inc., in Tulsa, Oklahoma in close proximity to Boeing North
American. As a result of its expansion and at the conclusion of the most recent
cyclical downturn in the aerospace industry, the Company was positioned to
capitalize on the rapid growth in production of commercial, corporate and
regional aircraft that began in 1995. In connection with the Company's
acquisition strategy, the Company changed its name to LMI Aerospace, Inc. and
established Leonard's Metal, Inc., a wholly-owned subsidiary, to operate the
present fabrication business of the Company.

OVERVIEW

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

Net sales consist primarily of sales of aerospace components manufactured
or assembled by the Company to OEMs and Primes. Virtually all of the Company's
net sales are governed by multi-year contracts which typically designate the
Company as the sole supplier of the components supplied by the Company. Such net
sales are recorded when finished components are shipped. Included in cost of
sales are: (i) direct manufacturing costs of components sold, such as aluminum
sheet metal, extrusion and other materials; labor required to fabricate,
assemble and finish the components; and purchased outside services such as
forming, milling, painting and finishing not performed by the Company, and (ii)
manufacturing overhead, including indirect labor, fringe benefits, supplies,
maintenance, depreciation, insurance and other miscellaneous items. Selling,
general and administrative expenses consist primarily of compensation and
related benefits to certain administrative employees, communications and
professional fees.

For the five-year period ended December 31, 1997, the Company's revenue
increased from $18.4 million to $55.1 million. During the same period, operating
income increased from $279,000 to $9.6 million. Net income, which was generally
breakeven from 1993 to 1995, increased to $1.2 million in 1996 and $5.3 million
in 1997. At

16
<PAGE> 17

March 31, 1998, the Company's backlog of customer orders scheduled for delivery
prior to December 31, 1998 increased to a record level of $34.3 million.

In 1994, the Company implemented "lean manufacturing" techniques to improve
the efficiency and productivity of its operations. Through lean manufacturing
the Company seeks to eliminate waste generated in the movement of people, in the
use of materials and products, in lengthy set-ups, in production breaks and by
misused space. The Company's lean manufacturing techniques include: one piece
work flow as opposed to batch processing, pull versus push production control
and scheduling systems, and simple, but disciplined, housekeeping and
organization techniques. The Company believes such techniques, implemented
through the Company's team structure and reinforced with employee stock
ownership and its incentive bonus programs, have contributed to its improved
performance.

RESULTS OF OPERATIONS

The following table sets forth selected statements of operations data for
the periods indicated expressed as a percentage of net sales:

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31
------------------------ ---------------
1995 1996 1997 1997 1998
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net sales...................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales.................................. 80.1 76.3 70.7 74.0 70.4
----- ----- ----- ----- -----
Gross profit................................... 19.9 23.7 29.3.. 26.0 29.6
Selling, general and administrative expense.... 15.3 15.0 11.9 11.8 11.5
----- ----- ----- ----- -----
Income from operations......................... 4.6 8.7.. 17.4 14.2 18.1
Interest expense............................... (4.1) (3.2) (1.8) (2.2) (1.6)
Other expense, net............................. (0.2)
----- ----- ----- ----- -----
Income before income tax....................... 0.3 5.5.. 15.6 12.0 16.5
Provision for income taxes..................... 0.2 2.1 6.0 4.6 6.3
----- ----- ----- ----- -----
Net income..................................... 0.1% 3.4% 9.6% 7.4% 10.2%
===== ===== ===== ===== =====
</TABLE>

Quarter Ended March 31, 1998 compared to Quarter Ended March 31, 1997

Net Sales. Net Sales for the first quarter of 1998 increased 28.7% to $16.3
million from $12.7 million for 1997. The largest portion of this increase
resulted from an additional $1.6 million of revenue from deliveries of leading
edge skins and related parts for Boeing's 737 New Generation aircraft ("737NG").
The demand for commercial aircraft is rapidly increasing as a result of the
following: (i) increasing profitability of airline operators; (ii) a worldwide
increase in miles flown by existing aircraft; and (iii) the need to modify or
replace older aircraft to comply with more stringent governmental noise and
safety regulations. The demand for corporate aircraft is rapidly increasing as a
result of the following: (i) the introduction of new, larger and more efficient
aircraft; (ii) the growing popularity of fractional aircraft ownership; (iii)
the minimal availability of used aircraft; (iv) the need for long range flights
to expanding international markets; (v) the increased demand for more expedient
travel; and (vi) the continued surge in corporate profitability and the U.S.
stock market.

Gross Profit. Gross profit in the first quarter of 1998 increased 46.6% to
$4.8 million (or 29.6% of net sales) from $3.3 million (or 26.0% of net sales)
in 1997. This increase is attributable to direct manufacturing cost of
components sold which increased to $5.1 million (31.2% of sales) in the first
quarter of 1998 from $4.3 million (34.3% of sales) in 1997. Additionally,
indirect labor and fringe benefits included in cost of sales increased by $1.0
million to $4.3 million in 1998 (26.7% of net sales) from $3.3 million (26.2% of
net sales) in 1997.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $0.4 million to $1.9 million (11.5% of net
sales) in 1998 from $1.5 million (11.8% of net sales) in 1997. Costs for wages,
salaries and related fringe benefits included in selling, general and
administrative expenses accounted for

17
<PAGE> 18

$0.2 million of this increase, rising to $1.1 million (6.7% of net sales) in
1998 from $0.9 million (7.2% of net sales) in 1997.

Interest Expense. Interest expense was basically unchanged at $0.3 million
in the first quarter of 1998 and 1997. Additionally, on March 31, 1998, the
Company negotiated a new lending agreement which replaced its outstanding
revolving credit agreement, subordinated debt, and demand note to a shareholder,
which will reduce the Company's cost of borrowing in future periods.

Provision for Income Taxes. The effective income tax rate for 1998 and 1997
was 38.5% resulting in total tax expense of $1.0 million in 1998 and $0.6
million in 1997.

Net Income. As a result of the foregoing the net income of the Company
increased 76.7% to $1.7 million (or 10.2% of net sales) in 1998 from $0.9
million (or 7.4% of net sales) in 1997.

Year Ended December 31, 1997 compared to Year Ended December 31, 1996

Net Sales. Net Sales for 1997 increased 57.3% to $55.1 million from $35.0
million for 1996. This increase in net sales was primarily due to the overall
upturn in the commercial aerospace market, with each quarter of 1997 showing
gains over 1996. Net sales of aircraft components for all Boeing 7-series models
the Company supports were increased in 1997. In total, these sales increases on
all Boeing 7-series aircraft components were $19.1 million. Included in this
increase was the Company's participation on Boeing's 737NG which created an
increase in net sales of $5.0 million from $0.9 million in 1996 to $5.9 in 1997.
Recent announcements by Boeing regarding potential decreases in the 747
production rate caused by the Asian financial crisis could dilute the Company's
ability to continue this upward trend in net sales. The Company derived $14.6
million of its net sales from the 747 in 1997 compared to $10.0 million in 1996.

Gross Profit. Gross profit in 1997 increased 94.8% to $16.1 million (or
29.3% of net sales) from $8.3 million (or 23.7% of net sales) in 1996. This
improvement in gross profit was primarily due to: (i) the increase in sales
volume, resulting in a greater absorption of fixed costs, (ii) beneficial
impacts from the Company's employment of lean manufacturing techniques, (iii)
expanded employee training programs and (iv) targeted capital investment over
recent years.

Direct manufacturing cost of components sold increased to $17.2 million
(31.2% of sales) in 1997 from $11.1 million (31.7% of sales) in 1996.
Additionally, in manufacturing overhead, indirect labor and fringe benefits
included in cost of sales increased by $4.7 million to $14.4 million in 1997
(26.1% of net sales) from $9.7 million (27.7% of net sales) in 1996.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $1.2 million to $6.5 million (11.9% of net
sales) in 1997 from $5.3 million (15.0% of net sales) in 1996. Costs for wages,
salaries and related fringe benefits included in selling, general and
administrative expenses accounted for $1.0 million of this increase, rising to
$4.1 million (7.4% of net sales) in 1997 from $3.1 million (8.9% of net sales)
in 1996. Also included in 1996 selling, general and administrative expenses was
an estimated expense of $250,000 for legal and remediation costs related to a
parcel of property purchased by the Company in 1992 that was subsequently found
to contain limited environmental contaminants (the "Clean Up Costs"). The
Company believes that such expense was a one time cost. A portion of such costs
was related to legal fees incurred as a result of a lawsuit brought by the
Company against the former owners of the contaminated property for breach of
contract. As of the date of this Prospectus, no judgment had been rendered. The
remainder of such costs was primarily incurred as a result of certain monitoring
and clean up activities conducted by the Company in accordance with the Missouri
Department of Natural Resources Voluntary Cleanup Program (the "Voluntary
Compliance"). See Note 10 to the Consolidated Financial Statements.

Interest Expense. Interest expense decreased slightly to $1.0 million in
1997 from $1.1 million in 1996. Such decrease resulted primarily from decreased
borrowings. In early 1998, the Company negotiated a new lending agreement which
replaced the outstanding revolving credit agreement, subordinated debt, and
demand note to a shareholder, substantially reducing the Company's cost of
borrowing.

18
<PAGE> 19

Provision For Income Taxes. The effective income tax rate for 1997 and 1996
was 38.5% and 38.4%, respectively, resulting in total tax expense of $3.3
million in 1997 and $0.7 million in 1996.

Net Income. As a result of the foregoing the net income of the Company
increased 445.1% to $5.3 million (or 9.6% of net sales) in 1997 from $1.2
million (or 3.4% of net sales) in 1996.

Year Ended December 31, 1996 compared to Year Ended December 31, 1995

Net Sales. Net Sales increased 37.7% in 1996 to $35.0 million from $25.4
million in 1995. The Company's sales increased rapidly in the third and fourth
quarters of 1996. This increase was due to the overall improvement in the
commercial aircraft market. Additionally, net sales to a new customer in the
corporate/regional market accounted for $1.3 million of the increase.

Gross Profit. Gross profit in 1996 increased 63.9% to $8.3 million (23.7%
of net sales) from $5.1 million (19.9% of net sales) in 1995. The Company's
Tulsa facility implemented a process improvement plan that reduced the amount of
labor and material required to generate sales, resulting in a $1.0 million
increase in gross margin. The remaining improvement was due to better absorption
of fixed expenses generated by the increase in net sales.

Selling, general and administrative expenses. Selling, general and
administrative expenses increased $1.4 million in 1996 to $5.3 million (15.0% of
net sales) from $3.9 million (15.3% of net sales) in 1995. Costs for wages,
salaries and related fringe benefits increased $1.0 million to $3.1 million
(8.9% of net sales) in 1996 from $2.1 million (8.3% of net sales) in 1995. Also
included in 1996 selling, general and administrative expenses was the Clean Up
Costs. The Company believes that such expense was a one time cost. A portion of
such costs was related to legal fees incurred as a result of a lawsuit brought
by the Company against the former owners of the contaminated property for breach
of contract. As of the date of this Prospectus, no judgment had been rendered.
The remainder of such costs were primarily incurred as a result of the Voluntary
Compliance. The Company believes that all material costs related to this
contaminated property have been accrued. See Note 10 to the Consolidated
Financial Statements.

Interest Expense. Interest expense increased slightly to $1.1 million in
1996 from $1.0 million in 1995, primarily as a result of the establishment of an
asset based credit facility used to support the Company's growth in net sales.

Provision For Income Taxes. Income tax expense for 1996 and 1995 was $0.7
million and $0.05 million respectively.

Net Income. As a result of the foregoing, the net income of the Company
increased to $1.2 million (or 3.4% of net sales) in 1996 from a break even
position in 1995.

LIQUIDITY AND CAPITAL RESOURCES

In March 1998, the Company amended its Credit Facility to allow the
Company, among other things, to borrow up to $15.0 million. Under the Credit
Facility the Company may choose an interest rate calculated at either LIBOR plus
an applicable margin or at the prime rate plus an applicable margin. The margin
applicable to LIBOR varies from 1.4% to 2.4% and the margin applicable to the
prime rate varies from 0.5% to 0.25%, in each case based upon the Company's
ratio of total indebtedness to earnings before interest, taxes, depreciation,
and amortization. At March 31, 1998 the effective interest rate under the Credit
Facility was 7.09%, and the Company had borrowings of $1.5 million and
additional availability of approximately $13.5 million. The Credit Facility
contains certain covenants, including, among other things, maintaining a
tangible net worth of at least $15.0 million which minimum shall increase as of
the end of each fiscal year by an amount equal to 75% of the after-tax net
income and maintaining a consolidated EBITDA of at least $10.5 million.

The Company's ability to make scheduled principal or interest payments or
to refinance its indebtedness will depend upon its future operating performance
and cash flow, which are subject to prevailing economic conditions, prevailing
interest rate levels, and financial, competitive, business and other factors,
many of which are beyond its control, as well as the availability of borrowings
under the Credit Facility or successor facility.

19
<PAGE> 20

The Company has historically made significant capital expenditures to allow
for growth. This trend is expected to continue in 1998 as the Company plans
additional capital investment of approximately $4.0 million. Also, additional
working capital will be needed pursuant to the strategic initiative of the
Company to provide higher value added capabilities through fabrication and the
subcontracting of components for assemblies required by its customers.

The Company's working capital needs are generally funded through cash flows
from operations and a revolving credit agreement. The Company generated $2.7
million and $5.8 million in cash from operating activities in 1996 and 1997,
respectively, which was used, in part, to finance investment in property, plant
and equipment of $1.3 million and $3.9 million, respectively in such years. In
the first quarter of 1998, the Company generated cash of $2.4 million from
operations compared to $1.7 million in the first quarter of 1997, which was used
to fund investment in property, plant and equipment of $1.4 million in 1998 and
$0.3 million in 1997. Also, in such periods, the Company used cash from
operating activities to pay down indebtedness.

The Company believes that its existing financing facilities together with
its cash flow from operations will provide sufficient capital to fund
operations, make the required debt repayments and meet anticipated capital
spending needs. However, there can be no assurance that the Company will
continue to generate sufficient cash flow at or above current levels. If the
Company is unable to generate sufficient cash flow from operations in the future
to service its indebtedness, it may be required to refinance all or a portion of
its existing indebtedness or to obtain additional financing. There can be no
assurance that any such refinancing would be possible or that any additional
financing could be obtained at all or on favorable terms.

YEAR 2000 COMPLIANCE

Many information systems and software were designed and developed without
consideration to the impact of the next millennium and accordingly, may not be
Year 2000 Compliant. As a result of a recent upgrade/ replacement, the
information systems and software at all of the Company's locations, other than
Tulsa, are Year 2000 Compliant. The Company will need to upgrade and/or replace
the software used by the Tulsa facility in order to render such systems Year
2000 Compliant. The Company expects to complete implementation of the
upgrade/replacement within the next 12 months and estimates the cost will not be
material. The Company has reviewed publicly reported information made by its
principal customers and suppliers, including Boeing, and based on such review
believes that such customers and suppliers are, or have taken certain actions
with respect to becoming, Year 2000 Compliant.

QUARTERLY FINANCIAL INFORMATION

In the last two years, the Company has experienced significant growth. Set
forth below is certain financial information regarding the Company for the last
eight fiscal quarters.

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1996
Net sales...................................... $ 7,718 $ 7,766 $ 8,913 $10,619
Cost of sales.................................. 6,067 5,760 6,628 8,270
Net income..................................... 196 371 392 228(1)
Net income per common share.................... $ 0.03 $ 0.06 $ 0.07 $ 0.04
Net income per common share -- assuming
dilution..................................... 0.03 0.06 0.07 0.04
1997
Net sales...................................... $12,690 $14,383 $13,975 $14,032
Cost of sales.................................. 9,393 10,266 9,598 9,675
Net income..................................... 939 1,350 1,577 1,417
Net income per common share.................... $ 0.16 $ 0.23 $ 0.27 $ 0.24
Net income per common share -- assuming
dilution..................................... 0.16 0.23 0.27 0.24
</TABLE>

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

(1) Includes a charge of $250 for environmental remediation -- see Note 10 to
the Consolidated Financial Statements.

20
<PAGE> 21

BUSINESS

GENERAL

LMI Aerospace, Inc. is a leading fabricator, finisher and integrator of
formed, close tolerance aluminum and specialty alloy components for use by the
aerospace industry. For approximately 50 years, the Company has been engaged in
manufacturing components for a wide variety of aerospace applications.
Components manufactured by the Company include leading edge wing slats, flaps
and lens assemblies; cockpit window frame assemblies; fuselage skins and
supports; and passenger and cargo door frames and supports. The Company
maintains multi-year contracts with leading original equipment manufacturers
("OEMs") and primary subcontractors ("Primes") of commercial, corporate,
regional and military aircraft. Such contracts, which govern virtually all of
the Company's sales, typically designate the Company as the sole supplier of the
aerospace components sold under the contracts. Customers include Boeing,
Lockheed Martin, Northrop Grumman, Gulfstream, Learjet, Canadair, DeHavilland
and PPG. The Company manufactures approximately 14,000 parts for integration
into such models as Boeing's 737, 747, 757, 767 and 777 commercial aircraft,
Gulfstream's G-IV and G-V corporate aircraft, Canadair's RJ regional aircraft,
and Lockheed Martin's F-16 and C-130 military aircraft.

In addition to supplying quality components the Company provides its
customers with value-added services, including engineered tool design,
production and repair; heat treating; chemical milling; assembly; and metal
finishing processes, such as polishing and painting. The Company believes that
such value-added services provide significant benefits to its customers
including: (i) reduced administrative costs resulting from the Company's ability
to serve as a single point of purchase for a wide array of required products and
services, (ii) faster, more efficient production rates, and (iii) greater
consistency in meeting scheduled delivery dates. As a result, the Company
believes that its value-added services are an increasingly important factor in
the selection of the Company to provide aerospace components.

For the five-year period ended December 31, 1997, the Company's revenue
increased from $18.4 million to $55.1 million. During the same period operating
income increased from $279,000 to $9.6 million. Net income, which was generally
breakeven from 1993 to 1995, increased to $1.2 million in 1996 and $5.3 million
in 1997. At December 31, 1997, the Company's backlog of customer orders
scheduled for delivery within the next twelve months increased to a record level
of $40.5 million from $34.1 million at December 31, 1996. See "SUMMARY
CONSOLIDATED FINANCIAL INFORMATION."

INDUSTRY OUTLOOK

The aerospace components industry currently is enjoying favorable trends
driven by strong growth in production of new commercial, corporate and regional
aircraft. As OEMs searched for cost cutting opportunities during the aerospace
industry recession of the early part of this decade, aerospace component
manufacturers, including the Company, were forced to accept lower-priced,
smaller orders to maintain market share, which resulted in lower profit margins.
However, in recent years, aerospace component manufacturers have benefitted as
production rates in the aerospace industry have increased. These increased
production rates have created capacity constraints among OEMs and Primes,
resulting in longer lead times for scheduled product delivery. Accordingly, OEMs
and Primes are actively seeking to negotiate multi-year contracts with qualified
aerospace components suppliers, like the Company, in an attempt to assure
adequate production capacity for required components.

The Company believes that there are numerous barriers to entry into the
aerospace components industry. These barriers include: (i) proven expertise in
close tolerance manufacturing techniques; (ii) required compliance with
increasingly stringent quality standards imposed by OEMs and Primes; (iii)
implementation of the publicly announced plans of OEMs and Primes to reduce the
number of preferred suppliers of aerospace components; and (iv) significant
initial capital investment and tooling requirements necessary for the
manufacture of certain aerospace components.

21
<PAGE> 22

The Company believes the following trends are affecting the aerospace
components industry:

Increased Demand for New Aircraft. Aircraft manufacturers are currently
experiencing record new levels of orders. The market for new commercial aircraft
is estimated at $50 billion, the market for corporate jet aircraft, is estimated
at $6 billion and the market for regional jet aircraft is estimated at $3
billion.

- According to Boeing's 1997 Current Market Outlook (the "Boeing Report"),
annual deliveries of commercial aircraft can be expected to increase from
approximately 400 in 1996 to more than 700 in 1998, increasing the
worldwide fleet of aircraft from 11,500 at the end of 1996 to over 16,000
at the end of 2001 and over 23,000 at the end of 2016. Additionally,
expenditures for new commercial aircraft production are expected to total
approximately $490 billion for the period from 1996 to 2006. Such
increases result from the need of aircraft operators to accommodate a
projected 75% increase in global air travel through the year 2006. The
demand for commercial aircraft is rapidly increasing as a result of the
following: (i) increasing profitability of airline operators; (ii) a
worldwide increase in miles flown by existing aircraft; and (iii) the
need to modify or replace older aircraft to comply with more stringent
governmental noise and safety regulations.

Increased Outsourcing. Suppliers of aerospace components, including the
Company, have benefitted from an accelerating trend for OEMs and Primes to
outsource a greater percentage of the components required to produce new
aircraft. Boeing has indicated that it intends to increase from 48% to 52% the
portion of each aircraft purchased from outside sources. Outsourcing allows OEMs
and Primes to focus their resources on assembly and integration by employing the
expertise of aerospace components suppliers, such as the Company, which have
developed specialized tooling and manufacturing and finishing techniques and
have achieved economies of scale unavailable to individual OEMs and Primes. Such
a focus benefits the OEMs and Primes by: (i) increasing the production rates
achievable by the OEMs and Primes through the integration of higher level
sub-assemblies and components, and (ii) limiting their capital investment by
eliminating the need for sophisticated equipment, machinery and systems required
to manufacture certain components. As OEMs and Primes continue to become more
cost and value conscious, the Company anticipates that the trend toward
outsourcing will continue to accelerate.

Reduction in Number of Preferred Suppliers. In an attempt to increase
quality and service, reduce purchasing costs and streamline purchasing
decisions, OEMs and Primes have formed relationships with an increasingly
smaller number of preferred suppliers. The Company believes that during the last
few years OEMs and Primes have significantly reduced the number of component
suppliers with which they do business. In each case to date where the Company
had an established relationship, the Company has benefitted from such reduction
in suppliers. The Company believes that due to its strong customer relationships
and its long-standing reputation

22
<PAGE> 23

for quality and reliability, OEMs and Primes will continue to select the Company
as one of their preferred suppliers.

Industry Consolidation. Suppliers of aerospace components have been
undergoing consolidation. The Company believes that several factors are
contributing to this consolidation, including: (i) the high level of
fragmentation within the industry; (ii) the consolidation of the OEM and Prime
industry; (iii) an effort by OEMs and Primes to reduce their supplier bases; and
(iv) the increased demands placed on suppliers to provide value-added content
and services.

COMPETITIVE STRENGTHS

The Company has been providing products and services to the aerospace
industry for approximately 50 years and believes it has gained a reputation for
consistent high quality and reliability. Because of its strong market position,
the Company believes that it enjoys broader name recognition, closer customer
relations and greater business opportunities than are available to many of its
competitors. The Company also believes that it is well-positioned to take
advantage of the current trends and expected growth in the aerospace components
industry as a result of the following competitive strengths:

Consistent On-Time Delivery. The Company's manufacturing systems and
procedures undergo continuous review and refinement to ensure the timely and
consistent delivery of aerospace components to its customers. The Company's work
center teams, together with its process engineering group, employ lean
manufacturing techniques to design efficient administrative and manufacturing
processes in order to meet customers' component specifications and scheduling
requirements. These systems and procedures have allowed the Company to establish
a reputation for reliability with its customers and provided a foundation for
the Company's growth.

Key Customer Relationships. The Company actively seeks to develop close
relationships with its customers and as a result enjoys multi-year contracts
with many of its customers, including certain of the Boeing business units,
Lockheed Martin, Northrop Grumman, Learjet, Canadair and PPG. Such contracts,
which govern virtually all of the Company's sales, typically designate the
Company as the sole supplier of the aerospace components sold under the
contracts. The Company believes that its strong customer relationships provide
it with a significant competitive advantage in obtaining and securing new
business opportunities.

Supplier of Value-Added Content. The Company manufactures formed, close
tolerance aluminum and specialty alloy components designed for a variety of
harsh, demanding environments, which often require high tensile strength,
toughness, durability and resistance to corrosion and metal fatigue. To meet
these demands and enhance its reputation as a single point of purchase to the
aerospace industry, the Company has developed significant capabilities to
deliver value-added content and services. Such capabilities include tool making,
heat treating, assembly, chemical milling and metal finishing processes such as
polishing and painting. The Company believes that such services provide
significant benefits to its customers including: (i) reduced administrative
costs resulting from the Company's ability to serve as a single point of
purchase for a wide array of required products and services, (ii) faster, more
efficient production rates, and (iii) greater consistency in meeting scheduled
delivery dates. As a result, the Company believes that its value-added services
are an increasingly important factor in the selection of the Company to provide
aerospace components.

Consistent Component Quality. The Company has implemented a series of
programs designed to maintain and continually improve the quality of the
components manufactured. The Company's quality assurance and control team is
composed of approximately 50 persons and is charged with implementing the
Company's vigorous auditing and testing program. In March 1998, the Company
received certification of compliance with Boeing's new and stringent D1-9000
(Rev. A) quality standards. The Company believes that the substantial expense
necessary to meet the stringent quality demands of OEMs and Primes represents a
barrier to entry into the aerospace components industry.

Active Employee Involvement. The Company believes that it benefits
significantly from the creative and intellectual resources of its employees and
aggressively seeks to involve its employees in all aspects of its business.
Through continual education and training, stock ownership, incentive based
compensation (including profit sharing and bonus programs) and a work center
team organization, the Company has developed a skilled

23
<PAGE> 24

and flexible work force capable of adapting quickly to the varied demands of its
customers. The Company further believes that such extensive employee involvement
enables the Company to continually improve its processes and efficiency,
maintain consistent on-time delivery, provide quality products and control
costs.

Geographic Proximity to Customers. Consistent with its strategic plan, as
opportunities for significant growth have occurred, the Company has located its
facilities in close geographic proximity to the principal production facilities
of its customers. The Wichita facility is close to Boeing Wichita; the Auburn
facility is near Boeing Seattle; and the Tulsa facility is close to Boeing North
American. Geographic proximity to customers provides the Company with
opportunities for strengthening customer relationships by allowing for quicker
responses to customer demands. Customers' needs for offload work, emergency
spares and replacement components which require a very quick turn time, can be
met more easily and both shipping time and costs are reduced. Additionally,
close proximity facilitates interaction between the engineering and production
personnel of the Company and its customers and allows for a more efficient
resolution of production issues.

GROWTH STRATEGY

Pursue Strategic Acquisitions. The Company seeks to leverage its core
capabilities in existing and new markets by identifying and pursuing
complementary acquisitions in the aerospace industry that offer strategic value,
such as cost savings, increased manufacturing capacity, increased process
capability and/or new customer relationships. The Company believes that the
fragmented nature of the industry for aerospace components should provide the
Company with additional opportunities to exploit industry consolidation trends.

Expand Aftermarket Presence. Historically the Company's components have
been supplied primarily for use in the construction of new aircraft. The Company
believes that a substantial opportunity exists for sales growth through greater
emphasis on the market for components used in the repair and maintenance of
existing aircraft. In 1997 industry sources estimated the global aviation
aftermarket to be $47 billion annually and projected that it would grow to $60
billion by the year 2000. The Company intends to increase its penetration of the
aerospace components aftermarket by expanding its product and service offerings
in response to the inventory needs of aftermarket participants, tailoring its
delivery procedures to meet the specific requirements of this market and
increasing its sales and marketing efforts to increase awareness by such
participants of the Company's capabilities.

Expand Integration Capabilities. The Company intends to grow by increasing
the array of manufacturing, assembly and finishing services which it can offer
existing and prospective customers by expanding its capability to integrate
parts into higher level aerospace components. The Company believes that such
integration capability will enhance its reputation as a single point of purchase
for the aerospace industry. Furthermore, the Company believes that by expanding
its integration capabilities it will increase its relative importance to its
customers and expand its revenue content per plane.

CUSTOMERS

The Company manufacturers and supplies approximately 14,000 parts to
leading OEMs and Primes of commercial, corporate, regional and military
aircraft, primarily under multi-year contracts. Such contracts

24
<PAGE> 25

typically designate the Company as the sole supplier of the aerospace components
sold under the contracts. Customers include the following leading OEMs and
Primes:

<TABLE>
<CAPTION>
COMMERCIAL MODELS
---------- ------
<S> <C>
Boeing 737 Classic, 737NG, 707, 727, 747, 757, 767 and 777
Northrop Grumman 747, 757 and 767
PPG 737NG, 747, 767, 777 and MD-80
National Machine 737NG
Canadair 767
</TABLE>

<TABLE>
<CAPTION>
CORPORATE AND REGIONAL
- ----------------------
<S> <C>
Gulfstream G-IV and G-V
Canadair Regional Jet and Challenger 604
Learjet Models 31, 45 and 60
DeHavilland CL415 and Dash-8
Boeing 737 Business Jet
Nordam Citation V, VII, VIII, Ultra, Bravo and Excel, Lear 60, and
Beech 400A
PPG Citation III, VII, X and Excel
Northrop Grumman G-IV
</TABLE>

<TABLE>
<CAPTION>
MILITARY
--------
<S> <C>
Lockheed Martin F-16 and C-130
Boeing AWACS, F-18 and F-15
</TABLE>

The Company has a long-standing relationship with Boeing, which has
steadily grown to include several Boeing business units including Boeing
Seattle, Boeing North American, and Boeing Helicopter. During 1995, 1996 and
1997, direct sales of Boeing business units accounted for a total of
approximately 45%, 46% and 59% of the Company's sales, respectively. According
to industry sources, Boeing holds more than a 50% share of the worldwide
commercial aircraft market. Each of Boeing's business units operate to a
significant degree as autonomous manufacturers, and as such, the Company has
entered into one or more multi-year contractual relationships with many of the
Boeing business units with which it does business. In general, these agreements
provide for: (i) payment on a net 30 day basis; (ii) termination for convenience
upon 30 days notice; (iii) reasonable manufacturing lead time for delivery of
components; (iv) limitations on and specifications for the scope of work to be
performed; and (v) pricing of components by quotes. In addition, these contracts
are typically "requirements" contracts under which the purchaser commits to
purchase all of its requirements of a particular component from the Company.
Specific orders are placed with the Company on a periodic basis covering
delivery dates as far in the future as the year 2000. The Company believes that
its relationship with Boeing extends beyond the expressed language of the
multi-year contracts. Such belief is based on, among other things, discussions
with Boeing personnel, the longevity and growth of the relationship, and the
Company's experience with Boeing during occasional periods without an effective
contract.

PRODUCTS

The Company is a leading fabricator, finisher and integrator of formed,
close tolerance aluminum and specialty alloy components for use by the aerospace
industry. For approximately 50 years the Company has been engaged in
manufacturing components for a wide variety of aerospace applications. All
components are fabricated from designs prepared and furnished by its customers.
The following table describes some of the

25
<PAGE> 26

Company's principal products (consisting of manufactured components and
assemblies) and the models into which they are integrated:

<TABLE>
<CAPTION>
PRODUCT MODELS
- ------- ------
<S> <C>
Wing leading edge skins, flapskins 737NG
Detail interior components 737 Classic, 737NG, 707, 727, 747, 757,
767, 777 and C-130
Wing panels and floorbeams 747
Door assembly structural details 737 Classic, 737NG, 747 and 757,
Challenger 604, Regional Jet, F-16 and
C-130
Thrust reversers and engine G-IV, CL415, 737 Classic and 777
nacelles/cowlings
Cockpit window frames and landing light 737NG, 747, 767, 777, Citation III, VII
lens assembly and Excel, DC-8 and 9, MD-80, KC-10 and
F-16
Fuselage and wing skin Models 45 and 60, Dash-8, 737 Classic,
737NG, 747, 757, 767, 777, C-130 and F-16
Structural sheet metal & extruded Various models
components
</TABLE>

Once a customer submits specifications for a product, the Company utilizes
its 40 person engineering and planning group to evaluate and develop the tooling
requirements, design the manufacturing process and prepare a product flow plan.
The Company utilizes an advanced computer assisted design system to translate
customer provided specifications into computer numerical control ("CNC")
instructions for use with many of the Company's forming and milling equipment.

MANUFACTURING PROCESSES

The manufacturing facilities are organized on a work center basis focusing
on a particular manufacturing process. Each work center is staffed by a team of
operators who are supported by a supervisor, lead operators and quality
inspectors. Throughout each stage of the manufacturing and finishing processes,
the Company collects, maintains and evaluates data, including customer design
inputs, process scheduling, material inventory, labor, inspection results and
completion and delivery dates. The Company's information systems employ this
data in order to provide more accurate pricing and scheduling information to its
customers as well as to establish production standards used to measure internal
performance.

Consistent with the Company's strategy of continually emphasizing quality,
all employees participate in an on-going training program which combines
classroom, hands-on and on-the-job instruction. New employees attend an
extensive orientation seminar to acquaint them with the aerospace components
industry and the Company's quality expectations, history, mission, safety
procedures and other rules. To motivate employees to meet and exceed the
Company's production efficiency objectives, management has implemented a bonus
program under which the bonus amount payable by the Company is based on the
amount of sales per paid manhour and the value of product produced.

Furthermore, through the use of lean manufacturing techniques, the Company
seeks to eliminate waste generated in the movement of people, in the use of
materials and products, in lengthy set-ups, in production breaks and by misused
space. The Company's lean manufacturing methods include: (i) one piece work flow
as opposed to batch processing, (ii) pull versus push production control and
scheduling systems, and (iii) disciplined, housekeeping and organization
techniques. The Company believes that its training and motivation programs,
combined with extensive use of lean manufacturing techniques, have greatly
increased the Company's efficiency, manufacturing capacity and profitability.

In manufacturing close tolerance components, the Company uses several
forming processes to shape or "form" a "work piece" (aluminum, stainless steel
or titanium sheet metal and extrusion) into components by applying pressure
through impact, stretching or pressing the raw material (sheet metal or
extrusion) to cause conformance to a die. The shapes may be simple with a single
angle, bend or curve, or may be complex with compound contours having multiple
bends and angles. Some processes incorporate heat to soften the metal prior

26
<PAGE> 27

to or during forming. Forming processes include: drop hammer, bladder press,
sheet metal and extrusion stretch, skin stretch, stretch draw, hot joggle and
brake forming.

The following are more detailed descriptions of several of the Company's
processes:

Drop Hammer Forming. The Company utilizes drop hammer forming to shape
work pieces by placing them between a mated die and a moving punch. The
work piece is placed on the working surface of the die and is formed into a
component through repeated impacts of the punch on the work piece. The
impact causes the work piece to take the shape of the punch and die. This
process provides an economical means of producing parts ranging in size
from a few inches up to ten feet in length with complex, compound contours.
The Company has one of the largest capacities for drop hammer forming in
the aerospace components industry.

Bladder Forming. The bladder forming process (fluid cell press)
utilizes a bladder filled with hydraulic fluid which is placed under
pressure to form the component. The work piece is placed on top of a die
which rests on a table. A rubber blanket is then placed over the work piece
and the table is moved into the press. As the bladder is placed under
pressure, it expands to cover the rubber blanket and forces it and the work
piece to conform to the shape of the die. The Company employs bladder
forming for components with formed simple contours.

Stretch Forming. The stretch forming process involves the stretching
and wrapping of a work piece along the surface of a precisely shaped die.
To obtain the desired component shape, opposite ends of the material are
held in the jaws of the stretch form machine, then hydraulically stretched
and wrapped to conform to the working surface of the die. The Company
utilizes several different types of stretch form machines, each type
designed to stretch form extrusion, sheet metal or leading edge wing skins.

Hot Joggle. The Company uses the hot joggle process to create a
clearance step for intersecting parts. A work piece is placed between a
mated die and punch and is heated to a precise temperature to make it
malleable enough to set a form, but not hot enough to alter the temper of
the metal. The joggle press then creates the joggle by stepping down a
surface from the original plane of the work piece.

Cutting and Punching. Various cutting and punching processes, such as
CNC turret punch, CNC laser cutting, CNC and conventional milling, are used
for cutting out the shapes of flat pattern parts. Cutting, trimming and
drilling functions such as CNC and conventional milling, five axis CNC
routing and other machine and hand routing methods are used to complete
formed components by trimming excess material, cutting and drilling holes.
CNC processes utilize computer programs (generated by Company employees
from CAD models provided by the customer which direct the cutting, punching
and/or drilling pattern of the machine. Other trimming processes use dies,
templates or fixtures as the guide for trimming and/or drilling.

Most parts require heat treating after forming which helps to strengthen
and, then through controlled cooling, harden the material. This process along
with older dies and tools, can cause slight distortion which is then modified
with manual forming techniques also referred to as "line-up" or "check and
straighten." The Company's highly skilled craftsmen provide the customer with
great flexibility in utilizing customer's tools and small order quantities often
associated with spares production.

VALUE-ADDED SERVICES

The Company offers its customers both cost and time savings by having the
process capabilities necessary for the production of most components from start
to finish.

Tooling. While most of the dies, tools and fixtures needed in the
manufacturing process are owned and supplied by customers, the Company offers
its customers the ability to produce fiberglass route and drill tools, chemical
milling templates, kirksite extrusion and sheet stretch blocks, and other
original tooling. It also has extensive capabilities in the repair and rework of
tools and dies originally supplied by its customers. The Company supports the
tooling operations with its own foundry which pours lead and kirksite tops for
drop hammer dies.

27
<PAGE> 28

Heat Treat and Age. Most components require heat treating and/or aging as
part of the production process. The heat treat process is used to alter the
temper of the material for increased formability and retention of the formed
shape. The process involves heating work pieces to a prescribed temperature,
usually in the range of 850 degrees to 950 degrees Fahrenheit, for a prescribed
period of time. Multiple components can be heat treated at one time, so long as
the prescribed process time and temperature are the same. After heating, the
components are immediately submerged in a glycol solution or water to rapidly
cool and suspend the hardening of the metal. The components are then
refrigerated at sub-zero temperatures to retard work hardening until the forming
process is completed. At ambient temperatures the metal slowly hardens. After
all forming, trimming and drilling processes are complete, most components go
through the age process, which involves slow heating at lower temperatures (up
to 400 degrees Fahrenheit), to accelerate the hardening of the metal to its
final temper.

CMM Inspection and Engineering. The computer controlled coordinate
measuring machine ("CMM") uses a computer operated touch probe to measure the
accuracy of angles, contours and other features on a tool or component relative
to customer defined models or coordinates permitting the Company to accurately
inspect close tolerance components. The CMM also is used to engineer a CAD model
from an existing part.

Chemical Milling. Chemical milling is used to reduce the amount of material
in specific places on a component in order to reduce weight within the aircraft
and to facilitate the mating of components. The working piece is first coated
(dipped or sprayed) with a maskant, which dries to a rubber-like finish sealing
the component. The Company uses a water based maskant which is much safer for
both employees and the environment than the traditional solvent based maskant.
After masking, the portion of the part to be reduced is scribed out by tracing a
template. These areas are then de-masked, and the part is dipped into the
chemical milling tank, containing an alkaline solution, for a prescribed period
of time. The solution then reduces the metal in the exposed areas.

Metal Finishing, Polishing and Painting. Through its Tulsa facility the
Company provides anodizing, painting, polishing and non-destructive testing. The
chromic acid anodizing process is performed prior to paint or polish to help
control rust, corrosion and part deterioration. Penetrant inspection is a
non-destructive inspection method during which components are dipped into a dye
solution which penetrates any small defects on the surface of the part and makes
them visible under ultra violet light.

Most components are painted or polished before final shipment. Paint is
applied according to customer specification; some components receive a simple
primary coat while others receive primary and finish coats. Skin quality
components such as those in the leading edge wing program are polished with
electric polishers and by hand to a mirror finish which is visible on the
exterior of the aircraft after final assembly.

Consistent with the Company's commitment to maintaining environmental and
employee safety, the Tulsa facility has a state-of-the-art air circulation and
filter system as well as its own waste water treatment equipment. Waste water
from both the anodizing and chemical milling processes pass through the
treatment equipment and all metals and toxic materials are removed, making the
water safe for disposal through the normal sewer system. The metals are
condensed into filter cakes which are then disposed of through certified
hazardous waste disposal vendors.

Assembly. The Company completes small and medium sized assemblies,
incorporating its manufactured parts and those produced by other vendors. In the
assembly process the Company uses riveting, bolting, spot and fusion welding,
and bonding. Customer supplied and Company manufactured jigs and fixtures are
used to ensure the proper alignment of edges and holes. The Company's new
information system and the expansion of its purchasing department further
increase its ability to acquire and track parts and hardware details from
multiple vendors to integrate with its own components into assemblies.

BACKLOG

At March 31, 1998 and 1997, the Company had outstanding purchase orders
representing an aggregate invoice price of approximately $55.6 million and $39.0
million, respectively. Of the $55.6 million backlog at March 31, 1998, $34.3
million is scheduled for delivery prior to the end of fiscal 1998. Historically,
cancellations of such orders have been infrequent and immaterial, however OEMs
often modify purchase orders to accelerate or delay delivery dates. The level of
unfilled orders at any given time during the year will be materially affected

28
<PAGE> 29

by the timing of the Company's receipt of orders and the speed with which those
orders are filled. Moreover, sales during any period may include sales which are
not part of the backlog at the end of the prior period. Accordingly, prospective
purchasers of Common Stock in this Offering should not place undue reliance on
the Company's backlog as an indication of sales for any future period.

The following table provides certain information with respect to the
Company's total backlog as of December 31, 1995, 1996 and 1997 and the portion
of backlog scheduled for delivery within 12 months of such dates:

<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------
1995 1996 1997
----- ----- -----
(IN MILLIONS)
<S> <C> <C> <C>
Total....................................................... $23.3 $43.1 $48.9
Portion deliverable within 12 months........................ 12.4 34.1 40.5
</TABLE>

SUPPLIERS AND PROCUREMENT PRACTICES

The Company's principal raw materials consist of aerospace-quality aluminum
sheet metal and extrusion which it purchases, along with specialized services,
from certain vendors. From time to time there have been shortages of aerospace
quality aluminum sheet metal and extrusion, resulting in temporary increases in
the cost of such raw materials and causing the Company to have delays in
production schedules. In an attempt to assure itself of adequate supplies, the
Company has entered into a multi-year aluminum sheet metal supply agreement with
ALCOA, a dominant domestic supplier of aerospace quality aluminum, and is
negotiating a similar agreement regarding extrusion with Tiernay Metals, Inc., a
distributor, and Universal Alloy Corp., a producer. To mitigate the effect of
fluctuations in the price of raw materials, the Company has negotiated
agreements with some of its customers, including certain Boeing business units,
permitting the Company to flow through a major portion of any price change to
its customers. Furthermore, Boeing is engaged in negotiations with one or more
aluminum suppliers which would entitle Boeing vendors, such as the Company, to
purchase aluminum from Boeing's supplier on terms and conditions equal to those
available to Boeing.

The Company believes that its sources of supply of non-aluminum products
and its relationships with its suppliers are satisfactory. While the loss of any
one supplier could have a material adverse effect on the Company until
alternative suppliers are located and have commenced providing products,
alternative suppliers exist for substantially all of the products and services
purchased by the Company.

The Company has developed procurement practices to ensure that all supplies
received conform to contract specifications. Through its computerized material
resource planning system, the Company is able to track inventories and product
ordering to optimize purchasing decisions. For cost, quality control and
efficiency reasons, the Company generally purchases supplies only from vendors
approved by the Company's customers and/or with whom the Company has on-going
relationships. The Company chooses its vendors primarily based on the quality of
the products and services supplied, record for on-time performance and the
specification of such vendors by the Company's customers as the preferred source
of supply. The Company regularly evaluates and audits its approved vendors based
on their performance.

QUALITY ASSURANCE AND CONTROL

The Company continually seeks to maintain high quality standards in the
processing of its products. Accordingly, the Company employs approximately 50
full time quality control and assurance personnel. Each work order introduced to
the Company's manufacturing facilities contains an inspection plan specifying
required inspection points. Quality inspectors are assigned to each work center
and are trained in the testing required in connection with products passing
through the assigned work center. Although a large percentage of the Company's
products are 100% inspected immediately prior to shipment by a customer employee
or a customer designated Company employee, Boeing has approved a sampling
inspection program for certain components using statistical process control data
maintained by the Company.

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<PAGE> 30

In March 1998, the Company became certified as compliant with Boeing's new
D1-9000 (Rev. A) quality assurance standard. During April 1998, the Company
distributed all revised procedures and integrated such new procedures with its
on-going employee training program and lean manufacturing techniques to assist
employees in becoming familiar with the new procedures. The Company has expanded
its existing internal audit program to ensure on-going compliance. In addition,
the Company intends to supplement its quality assurance and control program in
1999 with ISO 9002 certification of all of its facilities.

SALES AND MARKETING

The Company's sales and marketing organization consists of six program
managers and two independent sales representatives. The Company's sales
personnel are devoted to maintaining and expanding customer relationships
through continual education of existing and potential customers with respect to
the Company's capabilities. Specifically, the Company is focused on expanding
its presence in the fabrication of aftermarket spare parts and components for
use in new corporate, regional and military aircraft. As a result, sales
personnel have focused their efforts on diversifying the Company's product mix
to include aerospace programs unrelated to new commercial aircraft production.

A majority of the Company's sales to existing customers are awarded after
receipt of a request for quotation ("RFQ"). On receipt, the RFQ is preliminarily
reviewed by a team consisting of members of the Company's senior management, a
program manager, an estimator and the plant manager. If the Company determines
that the program is adequately compatible with the Company's capabilities and
objectives, a formal response is prepared by a member of the Company's estimator
group. Although a substantial percentage of programs are awarded on a
competitive bid basis, the Company has recognized a trend favoring direct
pricing. In direct pricing programs, the customer submits an indicated price
offer for acceptance or rejection by the Company. The Company expects that as
customers seek to limit the number of suppliers, direct pricing will become
increasingly common.

COMPETITION

Components for new aircraft and replacement components for existing
aircraft are provided by a large fragmented group of companies, including
certain business units affiliated with the Company's customers. However, the
Company believes that the trends in the aerospace industry favor greater
outsourcing of components and reducing the number of preferred suppliers. Under
written multi-year contracts with its customers governing virtually all of the
Company's sales, the Company is typically designated as the sole supplier of the
aerospace components sold under such contracts. The Company is unaware of any
competitor with which it competes in all of the Company's processes.

The Company believes that participants in the aerospace components industry
compete primarily with respect to reliability of delivery, price and quality.
Certain of the Company's competitors, including business units affiliated with
the Company's customers, have substantially greater financial, production and
other resources than the Company. These competitors may have the ability to
adapt more quickly to changes in customer requirements, stronger relationships
with customers and suppliers and greater name recognition than the Company.
Moreover, certain of the Company's customers may determine to directly
manufacture a greater percentage of required components.

REGULATORY MATTERS

The aerospace industry is highly regulated in the U.S. by the Federal
Aviation Administration and is regulated in other countries by similar agencies
to ensure that aviation products and services meet stringent safety and
performance standards. The FAA prescribes standards and licensing requirements
for aircraft components, including those fabricated by the Company. Because the
Company fabricates to meet specifications and designs created by its customers,
it is not required to obtain any licenses or approvals from the FAA. The Company
is subject, however, to inspection and audit by the FAA and to quality control
and assurance programs instituted by many of its customers.

The Company is also subject to various federal, state, local and foreign
environmental requirements, including those relating to discharges to air, water
and land, the handling and disposal of solid and hazardous

30
<PAGE> 31

waste, and the cleanup of properties affected by hazardous substances. In
addition, certain environmental laws, such as CERCLA and similar state laws,
impose strict, retroactive, and joint and several liability upon persons
responsible for releases or potential releases of hazardous substances. The
Company has not incurred, nor does it expect to incur, significant costs to
address any releases or potential releases. It is possible, however, given the
retroactive nature of CERCLA liability, that the Company will from time to time
receive notices of potential liability relating to current or former activities.

The Company has been and is in substantial compliance with environmental
requirements and believes it has no liabilities under environmental
requirements, except those which would not be expected to have a material
adverse effect on the Company's business, results of operations, or financial
condition. However, some risk of environmental liability is inherent in the
nature of the Company's business and the Company might in the future incur
material costs to meet current or more stringent compliance, cleanup or other
obligations pursuant to environmental requirements. See "RISK
FACTORS -- Governmental Regulations; Environmental Compliance."

EMPLOYEES

As of March 31, 1998, the Company had 756 employees, of whom seven were
engaged in executive positions, 167 were engaged in administrative positions and
582 were in manufacturing operations. None of the Company's employees is subject
to a collective bargaining agreement, and the Company has not experienced any
material business interruption as a result of labor disputes since it was
formed. The Company believes that it has an excellent relationship with its
employees.

The Company strives to continuously train and educate its employees thereby
enhancing the skill and flexibility of its work force. Through the use of
internally developed programs, which include formal classroom and on-the-job,
hands-on training, and independently developed programs, the Company seeks to
attract, develop and retain the personnel necessary to achieve the Company's
growth and profitability objectives.

FACILITIES

The following table provides certain information with respect to the
Company's headquarters and distribution centers:

<TABLE>
<CAPTION>
SQUARE
LOCATION PRINCIPAL USE(S) FOOTAGE INTEREST
- -------- ---------------- ------- --------
<S> <C> <C> <C>
3600 Mueller Road Executive and Administrative 56,943 Owned
St. Charles, MO Offices and Manufacturing Center
3030-3050 N. Hwy 94 Manufacturing Center and Storage 92,736 Owned
St. Charles, MO
3000-3010 N. Hwy 94 Assembly and Storage 24,400 Leased(1)
St. Charles, MO
204 H Street NW Manufacturing Center 45,328 Leased(2)
Auburn, WA
101 Western Ave. So. Manufacturing Center 79,120 Leased(3)
Auburn, WA
2629-2635 Esthner Ct. Manufacturing Center 34,377 Owned
Wichita, KS
2621 W. Esthner Ct. Administrative Offices and Storage 19,545 Leased(4)
Wichita, KS
2104 N. 170th St. E. Ave. Finishing Facility 75,000 Owned
Tulsa, OK
</TABLE>

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

(1) Subject to a yearly rental amount of $52,186 expiring on February 28, 2004.

(2) Subject to a yearly rental amount of $160,200 expiring on December 31, 1999.

31
<PAGE> 32

(3) Subject to a graduated yearly rental amount from $264,100 in 1998 to
$418,800 in 2005. Such lease expires as of June 30, 2005, but the Company
retains the option to extend the lease until June 30, 2008 at the monthly
rate of $39,090.

(4) Subject to a yearly rental amount of $55,200 expiring on June 30, 2000. The
Company retains two options to extend the lease term for an additional 36
months each with a yearly rental amount of $60,000 and $63,600,
respectively.

The Company believes that its present facilities are in good condition, are
adequately insured and together with those under construction, are suitable and
adequate for the conduct of its current operations.

LEGAL PROCEEDINGS

The Company has received a letter dated May 26, 1998 alleging certain
claims against the Company on behalf of two former employees based on
discrimination, retaliation and harassment. The Company is presently
investigating the factual basis for such allegations. Based on the preliminary
results of such investigation, the Company believes that the allegations are
substantially without merit and intends to vigorously defend this matter.

The Company is also a party to other legal proceedings which are routine
claims and lawsuits arising in the ordinary course of its business. The Company
does not believe that any of such claims and lawsuits, individually or in the
aggregate, will have a material adverse effect on the Company's business.

32
<PAGE> 33

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth certain information with respect to each
director and executive officer of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Joseph Burstein................... 70 Chairman of the Board and Director
Ronald S. Saks.................... 54 Chief Executive Officer, President and Director
Lawrence J. LeGrand............... 47 Chief Operating Officer and Director
Lawrence E. Dickinson............. 38 Chief Financial Officer and Secretary
Duane E. Hahn..................... 45 Vice President, Regional Manager and Director
Robert T. Grah.................... 44 General Manager (LMI Finishing, Inc.)
Phillip A. Lajeunesse............. 45 General Manager (Wichita, KS)
Bradley L. Nelson................. 39 General Manager (Auburn, WA)
Ernest R. Bailey.................. 62 General Manager (St. Charles, MO)
Sanford S. Neuman................. 62 Assistant Secretary and Director
Thomas M. Gunn.................... 54 Director
Alfred H. Kerth, III.............. 48 Director
</TABLE>

Set forth below are biographies of each director and each executive officer
of the Company.

Joseph Burstein has been a director, the Chairman of the Board and
Secretary of the Company since 1984. Prior to his association with the Company,
Mr. Burstein was President of Associated Transports, Inc. Mr. Burstein is an
entrepreneur and has had an interest in several businesses, including two travel
agencies and a 100% interest in Chestnut Mountain Ski Resort, Galena, Illinois.
Mr. Burstein graduated from the University of Nebraska.

Ronald S. Saks has served as President and as a director of the Company
since 1984. Prior to his employment with the Company, Mr. Saks was an Executive
Vice President with Associated Transports, Inc. for eight years and was a Tax
Manager with Peat Marwick Mitchell & Co., now known as KPMG Peat Marwick LLP,
for the eight years prior thereto. Mr. Saks obtained his Bachelor's degree in
Business Administration from Washington University in 1966. He also studied
engineering at the Massachusetts Institute of Technology, and completed an
Executive Education program at Stanford University. Mr. Saks is a Certified
Public Accountant.

Lawrence J. LeGrand became Chief Operating Officer and a director of the
Company in April 1998. His previous 24 years were spent with KPMG Peat Marwick,
LLP, where he became a partner in 1980. Mr. LeGrand is a Certified Public
Accountant and has extensive experience in mergers and acquisitions where he has
represented both publicly held and privately owned buyers and sellers. Mr.
LeGrand graduated with a Bachelor's degree in Commerce and Finance from St.
Louis University in 1973 and presently serves as the Vice Chairman of the Board
of Trustees of St. Louis University.

Lawrence E. Dickinson has been the Chief Financial Officer of the Company
since 1993. He served as a Financial Analyst and Controller for LaBarge, Inc.
from 1984 to 1993 and as a Cost Accountant with Monsanto from 1981-1984. Mr.
Dickinson received his Bachelor's degree in Accounting from the University of
Alabama and received his Master's degree in Business Administration from
Washington University in 1994.

Duane E. Hahn joined the Company in 1984 and served as the Assistant
General Manager until 1988, at which time he moved to Auburn, Washington to set
up and manage the Auburn facility as Vice President and General Manager. In
1996, Mr. Hahn became the Vice President of Manufacturing and Regional Manager
of the Company. Prior to joining the Company, Mr. Hahn served as a supervisor
for Associated Transports, Inc. Mr. Hahn received his Associate's Degree from
Nebraska Technical College in 1971. Mr. Hahn has extensive continuing education
experience in lean manufacturing, just-in-time, and other world class
manufacturing techniques. Mr. Hahn became a director of the Company in October
1990.

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<PAGE> 34

Robert T. Grah joined the Company in 1984 as Production Control Manager.
Mr. Grah has held various management positions with the Company including
Purchasing and Contracts Manager, Maintenance Manager, Facilities Manager, and
was promoted to his current position as General Manager of LMI Finishing, Inc.
in 1996. Prior to joining the Company, Mr. Grah was a supervisor for Associated
Transports, Inc., and a manager for Beneficial Finance. Mr. Grah's education has
included Florissant Valley Community College, and numerous continuing education
courses in management, Total Preventative Maintenance, and various environmental
and technical subjects.

Phillip A. Lajeunesse joined the Company in 1988 as the Corporate Quality
Assurance Manager. In 1990, he became the Plant Manager of the Company's St.
Charles facility, and in 1996, he became the General Manager of the Wichita
facility. Prior to joining the Company, Mr. Lajeunesse was a supervisor for
Kaman Aerospace for nine years, and for six years was a supervisor for United
Nuclear Corporation. Mr. Lajeunesse obtained an Associate's degree in Chemical
Engineering from Thames Valley State Technical College in 1973, an Associate's
degree in Business Administration from Bryant College in 1984, and a Master's of
Business Administration from Washington University in 1994.

Bradley L. Nelson joined the Company as a Production Supervisor in the
Auburn facility in 1990. In 1994, he was promoted to Manufacturing Manager, and
in 1996 he assumed his current position as General Manager of the Auburn
facility. Previously, Mr. Nelson was Production Manager for Fabrication
Technologies from 1989 to 1990, the owner of Totem Lake Service Center from 1984
to 1989, and Plant Manager for Tonoro Growers from 1981 to 1984. Mr. Nelson's
continuing education courses include general management and manufacturing
management and methods.

Ernest R. Bailey joined the Company in 1997 as the General Manager of the
St. Charles facility. From 1996 to 1997, Mr. Bailey was the General Manager for
North American Machining Products, Inc. From 1994 to 1996, he was the Plant
Manager for Precision Machine Works, and from 1987 to 1993, he was the General
Manager for Rohr, Inc., in Auburn, Washington. His background also includes
administration and management experience at Kenworth Truck Company, KME
Manufacturing, and Heath Tecna, Inc. Mr. Bailey obtained his Associate's degree
in Business Administration from Green River Community College in 1976, and his
Bachelor's degree in Business Administration from Pacific Western University in
1995.

Sanford S. Neuman is an Assistant Secretary and has been a director of the
Company since 1984. Mr. Neuman is a founding member of the St. Louis, Missouri
law firm of Gallop, Johnson & Neuman, L.C. and has been engaged in the private
practice of law for more than 30 years. Mr. Neuman graduated from Washington
University in 1956 with a Bachelor's degree in Business Administration. Mr.
Neuman received his law degree from Washington University in St. Louis in 1959
and his L.L.M. in taxation from New York University in 1961.

Thomas M. Gunn is a recently elected director of the Company. Mr. Gunn is a
retired executive who previously served as Senior Vice President of Business
Development for the former McDonnell Douglas until its merger with Boeing in
1997. Since 1975, Mr. Gunn held several positions, including numerous vice
president positions with McDonnell Douglas. Prior to joining McDonnell Douglas,
Mr. Gunn served as counsel to the U.S. Senate Committee on Appropriations, the
U.S. Senate Committee on Government Operations and the U.S. Senate Judiciary
Subcommittee on Criminal Law and Procedures and was an attorney with the Federal
Trade Commission. Mr. Gunn graduated from St. Louis University with a Bachelor's
degree in Political Science in 1965 and a Doctorate in Law in 1967.

Alfred H. Kerth, III is a recently elected director of the Company. As of
June 1, 1998, Mr. Kerth became the President and Chief Operating Officer of the
Eads Center, which functions as a pro bono consultancy in public and civic
affairs to certain groups such as not-for-profit organizations. Previously, Mr.
Kerth was a Senior Vice President and Senior Partner at Fleishman-Hillard in St.
Louis. Prior to joining Fleishman-Hillard in 1987, Mr. Kerth was Vice President,
Marketing for Centerre Bank. Mr. Kerth holds a Bachelor of Arts degree in
Economics from the University of Missouri, St. Louis and a Master's Degree in
Urban Studies from Occidental College in Los Angeles.

The Bylaws currently provide for a Board consisting of seven members, each
of whom serves in such capacity for a three-year term or until his successor has
been elected and qualified, subject to earlier resignation,

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<PAGE> 35

removal or death. The number of directors comprising the Board may be increased
or decreased by resolution adopted by the affirmative vote of a majority of the
Board; however, the Bylaws provide that the number of directors cannot be less
than three or more than nine. The Articles and Bylaws provide for three classes
of directorships serving staggered three-year terms such that approximately
one-third of the directors are elected at each annual meeting of shareholders.
The term of office of Messrs. Neuman and Hahn will continue until the 1999
annual meeting of shareholders, the term of office of Messrs. Gunn and Kerth
will continue until the 2000 annual meeting of shareholders and the term of
office of Messrs. Saks, Burstein and LeGrand will continue until the 2001 annual
meeting of shareholders.

DIRECTOR'S COMPENSATION

The Company intends to pay each director who is not an employee of the
Company $1,500 for each Board meeting or committee meeting attended, and will
reimburse all directors for out-of-pocket expenses incurred in connection with
their attendance at Board and committee meetings. No director who is an employee
of the Company will receive compensation for services rendered as a director.

AUDIT COMMITTEE

The Board intends to establish an audit committee to be comprised of three
directors, at least two of whom shall be independent directors. The audit
committee will have the responsibility of recommending the accounting firm that
will serve as the Company's independent auditors, reviewing the scope and
results of the audit and services provided by the Company's independent
accountants, and meeting with the financial staff of the Company to review
accounting procedures and policies and records.

COMPENSATION COMMITTEE; INTERLOCKS AND INSIDER PARTICIPATION

The Company intends to establish a compensation committee to be comprised
of three directors, at least two of whom shall be independent directors. This
committee will be given the responsibility of reviewing the Company's financial
records to determine overall compensation benefits for executive officers of the
Company and to establish and administer the policies which govern employees'
salaries and benefit plans. In addition, the committee has been charged with
reviewing the professional development of the Company's executive officers and
developing and executing a plan for management succession and transition.

35
<PAGE> 36

EXECUTIVE COMPENSATION

Summary Compensation Table. The following table sets forth certain
information with respect to the annual and long-term compensation for the year
ended December 31, 1997 paid to, earned by or awarded to the Company's Chief
Executive Officer and each of the four other most highly compensated executive
officers (collectively, the "Named Officers") whose compensation exceeded
$100,000 for services rendered in all capacities to the Company in 1997.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------
OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION
--------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Ronald S. Saks...................................... 1997 $150,000 $246,266 $1,795
President and CEO
Duane E. Hahn....................................... 1997 105,000 209,748 1,795
Vice President
Phillip A. Lajeunesse............................... 1997 92,500 102,300 1,795
General Manager (Wichita, KS)
Robert T. Grah...................................... 1997 69,999 81,736 1,732
General Manager (Tulsa, OK)
Bradley L. Nelson................................... 1997 69,999 76,636 1,716
General Manager (Auburn, WA)
</TABLE>

Option Grants. The following table sets forth certain information with
respect to grants of stock options pursuant to the Company's 1989 Employee
Incentive Stock Option Plan (the "Option Plan") to each of the Named Officers
during the year ended December 31, 1997. No stock appreciation rights were
granted to the Named Officers during such year.

OPTIONS/SAR GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL
TOTAL PERCENT OF REALIZABLE VALUE
NUMBER OF TOTAL AT ASSUMED RATES
SECURITIES OPTIONS/ OF STOCK PRICE
UNDERLYING SARS EXERCISE APPRECIATION FOR
OPTIONS/ GRANTED TO OR BASE OPTION TERM(1)
SARS EMPLOYEES IN (PRICE EXPIRATION -----------------
NAME GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
- ---- ------------ ------------ ------------ ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Bradley L. Nelson................. 4,935 8.30% $3.67 12/31/99 $2,327 $4,938
</TABLE>

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

(1) The per-share market price at the time of grant used for this purpose is
deemed to be equal to the fair market value of the Company's Common Stock as
determined by the Board on the date of grant, which amount was equal to the
exercise price as adjusted for the 2.29 to 1 stock dividend. The potential
realizable value assumes a rate of annual compound stock price appreciation
of 5% and 10% from the date the option was granted over the full option
term. Such rates are required by the Securities and Exchange Commission and
do not represent the Company's estimate or projection of future prices of
the Common Stock.

Option Exercises and Fiscal Year End Values. The following table sets forth
certain information concerning option exercises and option holdings for the year
ended December 31, 1997 with respect to each of the Named Officers. No options
were exercised by the Named Officers during such year. No stock appreciation
rights were

36
<PAGE> 37

exercised by the Named Officers during such year nor did any Named Officer hold
any stock appreciation rights at the end of that year.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTIONS/SAR VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FISCAL YEAR END AT FISCAL YEAR END(1)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Duane E. Hahn.................................... 57,575 0 $157,180 0
Bradley L. Nelson................................ 24,675 0 59,055 0
Robert T. Grah................................... 16,450 0 44,908 0
Phillip A. Lajeunesse............................ 16,450 0 44,908 0
</TABLE>

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

(1) The fair market value at year end used for this purpose is deemed to be
$4.63, based on an independent valuation obtained by the Company as of
November 30, 1997 adjusted for the 2.29 to 1 stock dividend.

EMPLOYMENT ARRANGEMENTS WITH NAMED OFFICERS

On January 1, 1997, the Company entered into an employment agreement with
Ronald S. Saks providing for his employment as President and Chief Executive
Officer. The agreement is for a six year period that automatically extends for
successive one year periods. Mr. Saks' employment agreement provides for an
annual base salary in 1997 of $150,000 and of $240,000 for the remaining years
of his contract payable in equal monthly installments. Mr. Saks is also entitled
to a bonus based on the performance of the Company (the "Performance Bonus") if
its annual net income as of the last day of each fiscal year is more than $5
million. Such bonus is capped at $120,000 for each year subsequent to 1997.

As of May 1, 1998, the Company entered into an employment agreement with
Lawrence J. LeGrand providing for his employment as the Chief Operating Officer
of the Company. The agreement will terminate on December 31, 2002 and is
automatically extended for successive one-year periods. Mr. LeGrand's employment
agreement provides for an annual base salary of $225,000 payable in equally
monthly installments during the period May 1, 1998 through December 31, 2002.
The agreement provides for a Performance Bonus if the Company's annual net
income as of the last day of each fiscal year is more than $5 million. Such
bonus is capped at $150,000.

On January 1, 1998, the Company entered into an employment agreement with
Duane E. Hahn providing for his employment as the Vice President and Regional
Manager for the Company's facilities located in Auburn, Washington, Wichita,
Kansas, and at the location of the LMI Finishing, Inc. plant in Tulsa, Oklahoma.
The agreement is for a two year period that automatically extends for successive
one year periods. Mr. Hahn's employment agreement provides for a base salary of
$150,000 payable in equal monthly installments. Mr. Hahn is also entitled to a
Performance Bonus if the Company's annual net income as of the last day of each
fiscal year is more than $5 million. Such bonus is capped at $75,000.

On January 1, 1998, the Company entered into an employment agreement with
Phillip A. Lajeunesse providing for his employment as the General Manager for
the Company's facility in Wichita, Kansas. The agreement is for a two year
period that automatically extends for successive one year periods. Mr.
Lajeunesse's employment agreement provides for a base salary of $125,000 in 1998
and $135,000 in 1999 payable in equal monthly installments. Mr. Lajeunesse is
also entitled to a Performance Bonus if the Company's annual net income as of
the last day of each fiscal year is more than $5 million. Such bonus is capped
at $50,000.

On January 1, 1998, the Company entered into an employment agreement with
Robert T. Grah providing for his employment as the General Manager for LMI
Finishing Inc.'s facility in Tulsa, Oklahoma. The agreement is for a two year
period that automatically extends for successive one year periods. Mr. Grah's
employment agreement provides for a base salary of $105,000 for the calendar
year 1998 and $115,000 for the calendar year 1999, with each amount payable in
equal monthly installments. Mr. Grah is also entitled to a Performance Bonus
37
<PAGE> 38

if the Company's annual net income as of the last day of each fiscal year is
more than $5 million. Such bonus is capped at $70,000.

On January 1, 1998, the Company entered into an employment agreement with
Bradley L. Nelson providing for his employment as the General Manager for the
Company's facility in Auburn, Washington. The agreement is for a two year period
that automatically extends for successive one year periods. Mr. Nelson's
employment agreement provides for a base salary of $105,000 for the calendar
year 1998 and $115,000 for the calendar year 1999, with each amount payable in
equal monthly installments. Mr. Nelson is also entitled to a Performance Bonus
if the Company's annual net income as of the last day of each fiscal year is
more than $5 million. Such bonus is capped at $70,000.

All such employment agreements provide that in addition to the base salary
and formula based Performance Bonus, the employees may receive such additional
bonus as the Board may authorize, and shall also participate in any health,
accident and life insurance programs and other benefits available to the
employees of the Company. The employment agreements also provide that the
employees are entitled to an annual paid vacation as well as the use of an
automobile.

Each employment agreement described above may be terminated upon: (i) the
dissolution of the Corporation, (ii) the death or severe disability of the
employee, or (iii) 10 days written notice by the Company to the employee upon
breach or default by the employee of any terms of the agreement.

BENEFIT PLANS

Profit Sharing and Savings Plan. The LMI Aerospace, Inc. Profit Sharing and
Savings Plan and Trust (the "Profit Sharing Plan") is a qualified defined
contribution plan which contains both a profit sharing feature and a "cash or
deferred arrangement" that allows active participants to take advantage of
Section 401(k) of the Internal Revenue Code ("Section 401(k)"). All employees of
the Company who have completed 1,000 hours of service become Profit Sharing Plan
participants.

Pursuant to the profit sharing provisions of the Profit Sharing Plan, the
Company makes annual discretionary contributions to the Profit Sharing Plan in
amounts determined by the Board. Pursuant to the methods described in such plan,
the Company's annual discretionary contribution is allocated equally among all
active participants. The cash or deferred arrangement of the Profit Sharing Plan
is designed to qualify under Section 401(k). It permits participants to defer
payment of between 1% and 15% of such participant's compensation in a tax-
advantaged manner. To encourage systematic savings by Profit Sharing Plan
participants, the Company may make matching contributions to active
participants. Currently, the Company makes matching contributions equal to 50%
of an active participant's compensation deferred up to a maximum matching
contribution of $225 per eligible participant.

Participants are at all times fully vested in amounts in their cash or
deferred accounts (i.e., 401(k) contributions), matching amounts made by the
Company, amounts rolled over from other eligible retirement plans for the
benefit of the participant and certain amounts previously withdrawn by a
participant which are later restored to the Profit Sharing Plan. For
discretionary contributions made to the Profit Sharing Plan by the Company,
participants vest in their account balances in 10% increments upon completion of
their first year with the Company and continue in such increments up to the
completion of the fourth year of service and vest in 20% increments upon
completion of the fifth, sixth and seventh years of service, with full vesting
upon completion of seven years of service.

1989 Employee Incentive Stock Option Plan. In December 1989, the Company
adopted the Incentive Stock Option Plan (the "1989 Option Plan") for key
employees and officers of the Company or any wholly-owned subsidiary. The
purpose of the 1989 Option Plan is to encourage the ownership of the stock of
the Company and to provide additional incentive for participants to promote the
success of the Company and to encourage them to remain in its employ. The 1989
Option Plan is administered by the Board which has broad authority in such
administration. Awards to employees are in the form of options to purchase
Common Stock. Each option is evidence by a stock option agreement stating the
number of shares of common stock to which it pertains, price as fixed by the
Board, and the terms and conditions under which the option may be exercised, as
determined by the

38
<PAGE> 39

Board. The 1989 Option Plan provides that such options may be issued on the
condition that any purchases of stock thereunder shall be for investment
purposes and not with a view to resale or distribution. The 1989 Option Plan
further provides that upon the occurrence of certain events, the 1989 Option
Plan will automatically terminate and all outstanding options granted under the
1989 Option Plan shall terminate, provided that the Board will have the right to
accelerate the time in which options may be exercised prior to such termination.
The Company reserves an aggregate of 259,827 shares of common stock for issuance
under the 1989 Option Plan. The Company has granted options to the following
executive officers under the 1989 Option Plan:

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME SUBJECT TO OPTIONS
---- ------------------
<S> <C>
Duane E. Hahn............................................... 57,575
Bradley L. Nelson........................................... 24,675
Robert T. Grah.............................................. 16,450
Phillip A. Lajeunesse....................................... 16,450
Lawrence E. Dickinson....................................... 9,870
Ernest R. Bailey............................................ 4,935
</TABLE>

1998 Stock Option Plan. The Company's 1998 Stock Option Plan (the "1998
Option Plan") is designed to provide additional incentives for employees of the
Company and its subsidiaries to promote the success of the business and to
enhance the Company's ability to attract and retain the services of qualified
persons. The plan is administered by a committee, or if one is not appointed, by
the Board. The committee (or the Board in its absence) is authorized to grant to
employees (including officers) selected by it incentive stock options and non-
qualified stock options. The maximum number of shares available for issuance
under the 1998 Option Plan is 600,000 shares of Common Stock. The 1998 Option
Plan will expire on, and no options may be granted thereunder, after the tenth
anniversary of the 1998 Option Plan, subject to the right of the Board to
terminate the 1998 Option Plan at any time prior thereto. The Board may amend
the 1998 Option Plan at any time.

An option enables the optionee to purchase shares of Common Stock at the
exercise price. The per share exercise price of any options granted under the
1998 Option Plan may not be less than the fair market value of the Common Stock
at the time the option is granted, provided that with respect to an incentive
stock option granted to an optionee who is or will be the beneficial owner of
more than 10% of the combined voting power of all classes of the Company's
stock, the exercise price may not be less than 110% of the fair market value of
the Common Stock on the date of grant. In order to obtain the shares, a
participant must pay the exercise price to the Company at the time of exercise
of the option. The exercise price may be paid in cash or, with the consent of
the committee, stock of the Company, including stock acquired under the same
option. Incentive stock options are intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended.

Incentive stock options and non-qualified stock options may be granted with
terms of no more than 10 years from the date of grant, provided that in the
event the grant of an incentive stock option to an optionee who is or will be
the beneficial owner of more than 10% of the combined voting power of all
classes of the Company's stock, the term of such option may not exceed five
years. Options will survive for a limited period of time after the optionee's
death, disability or normal retirement from the Company. Any shares as to which
an option expires, lapses unexercised, or is terminated or canceled may be
subject to a new option.

39
<PAGE> 40

CERTAIN TRANSACTIONS

From time to time the Company has engaged in various transactions with
certain of its directors, executive officers and other affiliated parties. The
following paragraphs summarize certain information concerning certain
transactions and relationships which have occurred during the past three fiscal
years or are currently proposed.

The Joseph Burstein Revocable Trust U/T/A August 20, 1983, for which Joseph
Burstein, the Chairman of the Board, is the trustee, loaned $250,000 to the
Company as evidenced by a promissory note dated August 10, 1995. Such
indebtedness bore interest at a rate of 10.5% per annum and was payable on
demand. Such indebtedness and accrued interest thereon was paid in full on March
31, 1998.

In May 1996, NSS Leasing, Inc. ("NSS"), controlled by Mr. Burstein, entered
into a lease agreement with the Company by which NSS leased certain equipment to
the Company. Such lease agreement contained terms and conditions no less
favorable to the Company than could have been obtained from an unaffiliated
third party. During 1996 and 1997, the Company paid NSS $30,336 and $74,413,
respectively, pursuant to the terms of such lease. Of the amount paid in 1997,
$59,250 constituted the purchase price of the buy-out for such equipment.

In August 1996, a trust of which no affiliate of the Company was a
beneficiary, loaned $300,000 to the Company as evidenced by a subordinated
promissory note dated August 15, 1996 (the "Trust"). Lawrence J. LeGrand is the
trustee of such Trust. Such indebtedness bore interest at a rate of 11% per
annum and was payable on March 15, 1999. The indebtedness and accrued interest
thereon was paid in full on March 31, 1998. Mr. LeGrand became a director of the
Company on April 17, 1998, and Chief Operating Officer of the Company on May 1,
1998.

The terms of each of the foregoing transactions were negotiated on an
arm's-length basis. All future transactions between the Company and its
officers, directors, principal shareholders and affiliates must be approved by a
majority of the independent and disinterested outside directors.

40
<PAGE> 41

PRINCIPAL SHAREHOLDERS

The following table sets forth certain information as of June 1, 1998
regarding the beneficial ownership of Common Stock by (i) each shareholder who
is known by the Company to own beneficially more than 5% of the outstanding
shares of Common Stock, (ii) each director, (iii) each executive officer named
in the Summary Compensation Table, and (iv) all directors and executive officers
as a group. Unless otherwise specified, the address of all shareholders is the
principal address of the Company set forth in the Prospectus.

<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
BENEFICIALLY OWNED BENEFICIALLY OWNED
NAME OF BENEFICIAL OWNER PRIOR TO THE OFFERING PERCENT AFTER THE OFFERING PERCENT
------------------------ --------------------- ------- ------------------ -------
<S> <C> <C> <C> <C>
Ronald S. Saks(1)......................... 4,632,951 77.3% 2,840,559 34.3%
The Guaranty Trust Company of Missouri, as
trustee for the Profit Sharing
Plan(2)................................. 964,259 16.1 964,259 11.6
Sanford S. Neuman(4)...................... 660,000 11.0 282,940 3.4
Joseph and Geraldine Burstein(3).......... 599,296 10.0 599,296 7.2
Gary R. Saks(5)........................... 367,519 6.1 367,519 4.4
Duane E. Hahn(6).......................... 354,543 5.9 354,543 4.2
Lawrence J. LeGrand(7).................... 230,300 3.8 230,300 2.7
Robert T. Grah(8)......................... 78,150 1.3 78,150 *
Phillip A. Lajeunesse(9).................. 54,367 * 54,367 *
Bradley L. Nelson(10)..................... 29,511 * 29,511 *
Thomas M. Gunn............................ -- -- -- --
Alfred H. Kerth, III...................... -- -- -- --
All directors & executive officers as a
group (12 in group)..................... 5,383,022 86.6 4,526,796 53.1
</TABLE>

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

* Less than 1%.

(1) All of such shares of Common Stock are held of record by the Leonard's
Metal Inc. Voting Trust dated November 11, 1996 ("Voting Trust No. 1") for
which Mr. Saks is the Trustee. Pursuant to the terms of Voting Trust No. 1,
Mr. Saks has the unqualified exclusive right and power to exercise all
voting rights with respect to the stated shares except for (a) the right to
sell or otherwise dispose of the shares or take any action in conflict with
any shareholder agreement and (b) the right to take any corporate action
which, under the provisions of Chapter 351 of the Missouri Revised
Statutes, requires approval or consent by the holders of at least
two-thirds ( 2/3) of the outstanding voting shares without first obtaining
the consent of the holders representing the beneficial interest in Voting
Trust No. 1. The shares subject to Voting Trust No. 1 include shares
beneficially owned by: (i) Ronald S. Saks Revocable Trust U/T/A dated June
21, 1991 (2,840,559); (ii) Joseph Burstein Revocable Trust U/T/A dated
August 20, 1983 (599,296); (iii) Sanford S. Neuman (282,940); (iv) Lawrence
J. LeGrand (131,600); (v) Duane E. Hahn (238,525); (vi) Saks Family 1993
Trust (21,385); and (vii) Robert T. Grah (31,255). Mr. Saks has resigned as
voting trustee of Voting Trust No. 1 effective on the date on which the
Registration Statement, of which this Prospectus is a part, is declared
effective. As a result, Voting Trust No. 1 will terminate on such date in
accordance with its terms.

(2) All such shares of Common Stock are held for the benefit of the Profit
Sharing Plan. The shares subject to the Profit Sharing Plan include shares
beneficially owned by: (i) Duane E. Hahn (58,443); (ii) Robert T. Grah
(30,445); (iii) Phillip A. Lajeunesse (13,242); and (iv) Bradley L. Nelson
(4,836). The address of the Guaranty Trust Company of Missouri is 7707
Forsyth Boulevard, St. Louis, Missouri 63105.

(3) All such shares of Common Stock are held of record by Voting Trust No. 1
for the benefit of Joseph Burstein Revocable Trust U/T/A dated August 20,
1983 for which Mr. Burstein and Mrs. Burstein are Co-Trustees. The
Bursteins' address is 536 Fairways, St. Louis, Missouri 63141.

(4) Includes 282,940 shares of Common Stock held of record by Voting Trust No.
1 for the benefit of Mr. Neuman. Also includes 377,060 shares of Common
Stock held of record by the Leonard's Metal Inc. Voting Trust dated
December 31, 1996 ("Voting Trust No. 2") for which Mr. Neuman is the
Trustee. Pursuant to the terms of Voting Trust No. 2, Mr. Neuman has the
unqualified exclusive right and power to

41
<PAGE> 42

exercise all voting rights with respect to the stated shares except for (a)
the right to sell or otherwise dispose of the shares or take any action in
conflict with any Shareholder Agreement and (b) the right to take any
corporate action which requires approval or consent by the holders of at
least two-thirds ( 2/3) of the outstanding voting shares under the
provisions of Chapter 351 of the Missouri Revised Statutes without first
obtaining the consent of the holders representing the beneficial ownership
of not less than two-thirds ( 2/3) of the shares of Common Stock which are
subject to the terms of Voting Trust No. 2. Mr. Neuman has resigned as
voting trustee of Voting Trust No. 2 effective on the date on which the
Registration Statement, of which this Prospectus is a part, is declared
effective. As a result, Voting Trust No. 2 will terminate on such date in
accordance with its terms. Mr. Neuman's address is 101 South Hanley, St.
Louis, MO 63105.

(5) Includes 21,385 shares of Common Stock held of record by Voting Trust No. 1
for the benefit of The Saks Family 1993 Trust for which Gary Saks is the
Trustee. Also includes 328,039 shares of Common Stock held of record by
Voting Trust No. 2 for the benefit of The Saks Family 1993 Trust and trusts
established for the benefit of the children of Ronald Saks, all for which
Gary Saks is Trustee, and 18,095 shares held of record by Voting Trust No.
2 for the children of Ronald Saks under the Missouri Transfers to Minors
law for which Gary Saks is the Custodian.

(6) Includes 238,525 shares of Common Stock held of record by Voting Trust No.
1 for the benefit of Mr. Hahn. Also includes 58,443 shares of Common Stock
held of record by The Guaranty Trust Company of Missouri for the benefit of
Mr. Hahn. Also includes 57,575 shares of Common Stock issuable upon the
exercise of an immediately exercisable option to purchase such shares. Mr.
Hahn's address is 204 H Street, N.W., Auburn, Washington 98001.

(7) Includes 131,600 shares of Common Stock held of record by Voting Trust No.
1 for the benefit of Mr. LeGrand. Also includes 98,700 shares for which Mr.
LeGrand, through his individual retirement account, has subscribed, which
shares are issuable immediately upon payment of the subscription amount.

(8) Includes 31,255 shares of Common Stock held of record by Voting Trust No. 1
for the benefit of Mr. Grah. Also includes 30,445 shares of Common Stock
held of record by The Guaranty Trust Company of Missouri for the benefit of
Mr. Grah. Also includes 16,450 shares of Common Stock issuable upon the
exercise of immediately exercisable options to purchase such shares. Mr.
Grah's address is 2104 N. 170th Street E. Avenue, Tulsa, Oklahoma 74116.

(9) Includes 24,675 shares of Common Stock held of record by Voting Trust No. 1
for the benefit of Mr. Lajeunesse. Also includes 13,242 shares of Common
Stock held of record by The Guaranty Trust Company of Missouri for the
benefit of Mr. Lajeunesse. Also includes 16,450 shares of Common Stock
issuable upon the exercise of immediately exercisable options to purchase
such shares. Mr. Lajeunesse's address is 2629 Esthner Court, Wichita, KS
67213.

(10) Includes 4,836 shares of Common Stock held of record by The Guaranty Trust
Company of Missouri for the benefit of Mr. Nelson. Also includes 24,675
shares of Common Stock issuable upon the exercise of immediately
exercisable options to purchase such shares. Mr. Nelson's address is 204 H
Street, N.W., Auburn, Washington 98001.

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<PAGE> 43

AUTHORIZED AND OUTSTANDING CAPITAL STOCK

Upon completion of the Offering the Articles will provide for an authorized
capital of 30,000,000 shares, consisting of 2,000,000 shares of preferred stock,
$0.02 par value per share (the "Preferred Stock"), and 28,000,000 shares of
Common Stock. Based on shares outstanding as of June 1, 1998, upon the
consummation of the Offering, 8,290,721 shares of Common Stock and no shares of
Preferred Stock will be outstanding. The following is a summary description of
material terms of the capital stock of the Company, which is qualified in its
entirety by reference to the Articles.

COMMON STOCK

The holders of Common Stock are entitled to cast one vote for each share
held of record on all matters to be voted on by the Shareholders, including the
election of directors. There is no cumulative voting with respect to the
election of directors. As a result, the holders of Common Stock entitled to
exercise more than 50% of the voting rights in an election of directors can
elect all of the directors then standing for election if they choose to do so.
The holders of Common Stock are entitled to receive dividends when and if
declared by the Board out of legally available funds. In the event of the
liquidation, dissolution or winding up of the affairs of the Company, the
holders of Common Stock are entitled to share ratably in all remaining assets
which are available for distribution to them after payment of liabilities and
after provision has been made for each class of stock, if any, having preference
over the Common Stock. No holder of any share of Common Stock or any other
security of the Company, either now or hereafter authorized or issued, shall
have any preferential or preemptive right to acquire additional shares of Common
Stock or any other security of the Company other than such, if any, as the Board
may in its discretion from time to time determine. All of the outstanding shares
of Common Stock are, and the shares of Common Stock offered hereby will be when
issued for the consideration set forth in this Prospectus, fully paid and
non-assessable.

PREFERRED STOCK

The Articles authorize the Board to establish one or more series of
Preferred Stock and to determine, with respect to any series of Preferred Stock,
the terms, rights and preferences of such series, including voting, dividend,
liquidation, conversion, redemption and any other relative rights, preferences
and limitations. The authorized shares of Preferred Stock will be available for
issuance without further action by the Company's shareholders, unless such
action is required by applicable law or other rules of any stock exchange or
automated quotation system on which the Company's securities may be listed or
traded. Although the Company has no present intention of doing so, it could
issue a series of Preferred Stock that could discourage, impede, delay or
prevent a transaction which would result in a change in control of the Company,
regardless of whether some of the Company's shareholders might believe such a
transaction to be in their best interest.

CERTAIN EFFECTS OF AUTHORIZED BUT UNISSUED STOCK

Upon the completion of the Offering, there will be 18,488,002 shares of
Common Stock, excluding the 859,827 shares of Common Stock reserved for issuance
upon exercise of options granted under the 1989 Option Plan and the 1998 Option
Plan and 345,000 shares of Common Stock reserved for issuance upon exercise of
the Underwriters' over-allotment option, and 2,000,000 shares of Preferred Stock
available for future issuance without shareholder approval. These additional
shares may be issued for a variety of proper corporate purposes, including
raising additional capital, corporate acquisitions and implementing employee
benefit plans. Except as contemplated by the 1989 Option Plan, 1998 Option Plan,
Profit Sharing Plan and Mr. LeGrand's subscription agreement covering 98,700
shares, the Company does not currently have any plans to issue additional shares
of Common Stock or Preferred Stock. See "MANAGEMENT -- Benefit Plans."

One of the effects of the existence of unissued and unreserved shares of
Common Stock and Preferred Stock may be to enable the Board to issue shares to
persons friendly to current management, which could render more difficult or
discourage an attempt to obtain control of the Company by means of a merger,
tender offer, proxy contest, or otherwise, and thereby protect the continuity of
the Company's management and possibly deprive the shareholders of opportunities
to sell their shares of Common Stock at prices higher than the prevailing market

43
<PAGE> 44

prices. Such additional shares also could be used to dilute the stock ownership
of persons seeking to obtain control of the Company.

SPECIAL PROVISIONS OF THE ARTICLES, BYLAWS AND MISSOURI LAW

The Articles and Bylaws of the Company contain certain provisions regarding
the rights and privileges of shareholders, some of which may have the effect of
discouraging certain types of transactions that involve an actual or threatened
change of control of the Company, diminishing the opportunities for a
shareholder to participate in tender offers, including tender offers at a price
above the then current market value of the Common Stock or over a shareholder's
cost basis in the Common Stock, and inhibiting fluctuations in the market price
of the Common Stock that could result from takeover attempts. These provisions
of the Articles and Bylaws are summarized below.

Size of Board, Election of Directors and Classified Board

The Articles provide that the number of directors shall be fixed from time
to time as provided in the Bylaws. The Bylaws provide for a minimum of three and
a maximum of nine persons to serve on the Board. The number of directors may be
increased or decreased by a resolution adopted by the affirmative vote of a
majority of the Board. The Articles further provide that the Board may amend the
Bylaws by action taken in accordance with such Bylaws, except to the extent that
any matters under the Articles or applicable law are specifically reserved to
the shareholders.

The Bylaws provide that the Board will be divided into three classes of
directors, with the classes to be as nearly equal in number as possible, and one
of each such classes shall be elected each year to serve for a three-year term.

Shareholder Nominations and Proposals

The Company's Bylaws provide for advance notice requirements for
shareholder nominations and proposals at annual meetings of the Company.
Shareholders may nominate directors or submit other proposals only upon written
notice to the Company not less than 120 days nor more than 150 days prior to the
date of the notice to shareholders of the previous year's annual meeting. A
shareholder's notice also must contain certain additional information, as
specified in the Bylaws. The Board may reject any proposals that are not made in
accordance with the procedures set forth in the Bylaws or that are not proper
subjects of shareholder action in accordance with the provisions of applicable
law.

Calling Shareholder Meetings; Action by Shareholders Without a Meeting

Matters to be acted upon by the shareholders at special meetings are
limited to those which are specified in the notice thereof. A special meeting of
shareholders may be called by the Board or the President of the Company. As
required by Missouri law, the Bylaws provide that any action by written consent
of shareholders in lieu of a meeting must be signed by the holders of all
outstanding shares of Common Stock.

The foregoing provisions contained in the Articles and Bylaws are designed
in part to make it more difficult and time consuming to obtain majority control
of the Board or otherwise to bring a matter before shareholders without the
Board's consent, and therefore to reduce the vulnerability of the Company to an
unsolicited takeover proposal. These provisions are designed to enable the
Company to develop its business in a manner which will foster its long-term
growth without the threat of a takeover not deemed by the Board to be in the
best interests of the Company and its shareholders, and to reduce, to the extent
practicable, the potential disruption entailed by such a threat. However, these
provisions may have an adverse effect on the ability of shareholders to
influence the governance of the Company and the possibility of shareholders
receiving a premium above the market price for their securities from a potential
acquirer who is unfriendly to management.

44
<PAGE> 45

Indemnification of Directors and Officers

Sections 351.355(1) and (2) of The General and Business Corporation Law of
the State of Missouri provide that a corporation may indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding by reason of the fact that he is or was
a director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if the person acted in good faith and in a
manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful, except that in the case of an action or suit by or in the right of the
corporation, the corporation may not indemnify such persons against judgments
and fines and no person shall be indemnified as to any claim, issue or matter as
to which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of the person's duty to the corporation, unless
and only to the extent that the court in which the action or suit was brought
determines upon application that such person is fairly and reasonably entitled
to indemnity for proper expenses. Section 351.355(3) provides that, to the
extent that a director, officer, employee or agent of the corporation has been
successful in the defense of any such action, suit or proceeding or in defense
of any claim, issue or matter therein, the person shall be indemnified against
expenses, including attorney's fees, actually and reasonably incurred by such
person in connection with such action, suit or proceeding. Section 351.355(7)
provides that a corporation may provide additional indemnification to any person
indemnifiable under subsection (1) of (2), provided such additional
indemnification is authorized by the corporation's articles of incorporation or
an amendment thereto or by a shareholder-approved bylaw or agreement, and
provided further that no person shall thereby be indemnified against conduct
which was finally adjudged to have been knowingly fraudulent, deliberately
dishonest or willful misconduct or which involves an accounting for profits
pursuant to Section 16(b) of the Exchange Act. Article 9 of the Articles permits
the Company to enter into agreements with its directors, officers, employees and
agents to provide such indemnification as deemed appropriate. Article 9 also
provides that the Company may extend to its directors and executive officers
such indemnification and additional indemnification.

The Company may procure and maintain a policy of insurance under which the
directors and officers of the Company will be insured, subject to the limits of
the policy, against certain losses arising from claims made against such
directors and officers by reason of any acts or omissions covered under such
policy in their respective capacities as directors or officers.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions or otherwise, the Company has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.

TRANSFER AGENT

The transfer agent and registrar for the Common Stock will be American
Stock Transfer & Trust Company.

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have outstanding
8,290,721 shares of Common Stock. Of these shares, only those offered for sale
in the Offering and approximately 948,783 currently held by existing
non-affiliate shareholders will be tradable without restriction under the
Securities Act. The remaining 5,041,938 shares of Common Stock held by existing
shareholders are "restricted" within the meaning of Rule 144 promulgated under
the Securities Act. Subject to compliance with the provisions of Rule 144 and
agreements with the Underwriters, all of such shares will be eligible for sale
to the public, notwithstanding the fact that such shares have not been
registered under the Securities Act.

45
<PAGE> 46

In general, under Rule 144 as currently in effect, an affiliate of the
Company, or a person (or persons whose shares are aggregated) who has
beneficially owned restricted securities for at least one year but less than two
years, will be entitled to sell in any three month period a number of shares
that does not exceed the greater of (i) 1% of the then outstanding shares of
Common Stock or (ii) the average weekly trading volume during the four calendar
weeks immediately preceding the date on which notice of the sale is filed with
the Securities and Exchange Commission (the "Commission"). Sales under Rule 144
are subject to certain requirements relating to manner of sale, notice and
availability of current information about the Company. A person (or persons
whose shares are aggregated) who is not deemed to have been an affiliate of the
Company at any time during the 90 days immediately preceding the sale and who
has beneficially owned his or her shares for at least two years is entitled to
sell such shares under Rule 144(k) without regard to the limitations described
above.

All shares of Common Stock outstanding prior to this Offering are subject
to an agreement which prohibits the sale of such shares of Common Stock prior to
December 31, 1998. The agreements will have no effect on the date on which
shares become eligible for sale under Rule 144.

The Company intends to file a registration statement on Form S-8 under the
Securities Act covering approximately 859,827 shares of Common Stock reserved
for issuance under the 1989 Option Plan and 1998 Option Plan. See
"MANAGEMENT -- Benefit Plans." Such registration statement is expected to be
filed as soon as practicable after the date of this Prospectus and will
automatically become effective upon filing. Accordingly, shares registered under
such registration statement will, subject to Rule 144 volume limitations
applicable to affiliates, be available for sale in the open market, except to
the extent that such shares are subject to vesting restrictions. As of March 31,
1998, options to purchase 243,377 shares were granted and outstanding.

No predictions can be made of the effect, if any, that future market sales
of shares of Common Stock or the availability of such shares for sale will have
on the market price prevailing from time to time. Sales of substantial amounts
of Common Stock, or the perception that such sales might occur, could adversely
affect prevailing market prices.

46
<PAGE> 47

UNDERWRITING

Subject to the terms and conditions contained in the Underwriting
Agreement, the syndicate of underwriters named below (the "Underwriters"), for
whom EVEREN Securities, Inc. and George K. Baum & Company are acting as
Representatives (the "Representatives"), have severally agreed, to purchase from
the Company, and the Company has agreed to sell, the respective number of shares
of Common Stock set forth opposite the names of such Underwriters below:

<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
NAME COMMON STOCK
- ---- ------------
<S> <C>
EVEREN Securities, Inc......................................
George K. Baum & Company....................................
---------
Total............................................. 2,300,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by their counsel
and to certain other conditions. The Underwriters are obligated to purchase all
of the shares of Common Stock offered hereby (other than the shares of Common
Stock covered by the over-allotment option described below) if any are
purchased.

The Company has been advised by the Underwriters that they propose to offer
the Common Stock to the public initially at the price set forth on the cover
page of this Prospectus and to certain dealers (who may include the
Underwriters) at such price, less a concession not in excess of $ per share
of Common Stock. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share of Common Stock to certain other
dealers. After the initial public offering, the price to the public, the
concession and the discount to dealers may be changed. The Representatives have
informed the Company that the Underwriters do not intend to confirm sales to
accounts over which they exercise discretionary authority.

The Offering of the Common Stock is made for delivery when, as and if
accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any order for the purchase of the Common Stock.

The Company has granted to the Underwriters an option, exercisable for the
45 days from the date of this Prospectus, to purchase up to an aggregate of
345,000 additional shares of Common Stock at the initial price to public, less
the underwriting discounts and commissions, solely to cover over-allotments, if
any. To the extent that the Underwriters exercise such option, each Underwriter
may be committed, subject to certain conditions, to purchase a number of
additional shares of Common Stock proportionate to such Underwriter's initial
commitment pursuant to the Underwriting Agreement.

In the Underwriting Agreement, the Company has agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required to
make in respect thereof.

Subject to certain exceptions, the Company and all shares of Common Stock
outstanding immediately prior to the completion of this Offering, are subject to
agreements which prohibit, without the prior written consent of EVEREN
Securities, Inc., the offer, sale, contract to sell, grant of any option to
purchase or other disposition of any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for such Common Stock or the
transfer in any other manner of all or a portion of the economic consequences
associated with the ownership of any such Common Stock prior to December 31,
1998.

In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect the price of the
Common Stock. Specifically, the Underwriters may overallot the Offering,
creating a syndicate short position. Underwriters may bid for and purchase
shares of Common Stock in the open market to cover syndicate short positions. In
addition, the Underwriters may bid for and purchase shares of Common Stock in
the open market to stabilize the price of the Common Stock. These activities may
stabilize or

47
<PAGE> 48

maintain the market price of the Common Stock above independent market levels.
The Underwriters are not required to engage in these activities, and may end
these activities at any time.

LEGAL MATTERS

The validity of the Common Stock offered hereby will be passed upon for the
Company by Gallop, Johnson & Neuman, L.C., St. Louis, Missouri. Upon completion
of the Offering, Mr. Sanford S. Neuman, a member of the firm of Gallop, Johnson
& Neuman, L.C., will be the beneficial owner of 282,940 shares of Common Stock
and serves as a director of the Company. Certain legal matters will be passed
upon for the Underwriters by Much Shelist Freed Denenberg Ament Bell &
Rubenstein, P.C., Chicago, Illinois.

EXPERTS

The consolidated financial statements of LMI Aerospace, Inc. at December
31, 1997 and 1996, and for each of the three years in the period ended December
31, 1997, appearing in this Prospectus and Registration Statement have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon appearing elsewhere herein, and are included in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.

RELATIONSHIP WITH INDEPENDENT ACCOUNTANTS

The Company, with the approval of its Board, engaged Ernst & Young LLP as
its independent auditor in March 1998 to replace KPMG Peat Marwick LLP ("KPMG").
KPMG resigned as the Company's independent auditor and withdrew its 1995 and
1996 opinions because KPMG determined that it lacked independence as a result of
a $300,000 loan made by one of its partners, Lawrence J. LeGrand, acting as
trustee on behalf of a non-family trust. See "CERTAIN TRANSACTIONS". During the
period between the date KPMG was engaged and the date on which it resigned,
there were no (i) disagreements between the Company and KPMG on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure or (ii) adverse opinions or a disclaimer of opinion, or
qualification or modifications as to uncertainty, audit scope or accounting
principles in connection with its report on the Company's financial statements.

ADDITIONAL INFORMATION

The Company has filed with the Commission a registration statement on Form
S-1 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules filed therewith. For
further information with respect to the Company and such Common Stock, reference
is hereby made to the Registration Statement and to the Consolidated Financial
Statements, exhibits and schedules filed therewith. Statements contained in this
Prospectus regarding the contents of any contract or document referred to
therein are not necessarily complete and, in each instance, reference is made to
the copy of such contract or the document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. The Registration Statement, including the exhibits thereto, may
be inspected without charge at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices at Seven World Trade Center, New York, New
York 10048 and 500 West Madison Street, Chicago, Illinois 60661. Copies of such
material may be obtained from the Public Reference Section of the Commission,
450 Fifth Street, N.W., Washington, D.C. 20549 and at its public reference
facilities in New York, New York and Chicago, Illinois, upon the payment of the
prescribed fees or retrieved electronically via the Internet at the Commission's
Internet web site. (http://www.sec.gov).

48
<PAGE> 49

LMI AEROSPACE, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors.............................. F-2
Consolidated Balance Sheets as of December 31, 1996 and
1997...................................................... F-3
Consolidated Statements of Operations for the years ended
December 31, 1995, 1996 and 1997.......................... F-4
Consolidated Statements of Stockholders' Equity for the
years ended December 31, 1995, 1996
and 1997.................................................. F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1996 and 1997.......................... F-6
Notes to Consolidated Financial Statements.................. F-7
Condensed Consolidated Balance Sheets as of December 31,
1997 and March 31, 1998
(unaudited)............................................... F-15
Condensed Consolidated Statements of Operations for the
three months ended March 31, 1997 and 1998 (unaudited).... F-16
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1997 and 1998 (unaudited).... F-17
Notes to Condensed Consolidated Financial Statements
(unaudited)............................................... F-18
</TABLE>

F-1
<PAGE> 50

REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
LMI Aerospace, Inc.

We have audited the accompanying consolidated balance sheets of LMI
Aerospace, Inc. (the Company) as of December 31, 1996 and 1997, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
LMI Aerospace, Inc. at December 31, 1996 and 1997, and the consolidated results
of its operations and its cash flows for each of the three years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles.

/s/ Ernst & Young LLP

St. Louis, Missouri
April 20, 1998, except
Note 12, as to which
the date is April 27, 1998

F-2
<PAGE> 51

LMI AEROSPACE, INC.

CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1997
------- -------
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 205 $ 244
Trade accounts receivable................................. 6,586 8,058
Inventories............................................... 7,195 8,701
Prepaid expenses.......................................... 159 147
Deferred income taxes..................................... 407 502
Other current assets...................................... 234 109
------- -------
Total current assets.............................. 14,786 17,761
Property, plant, and equipment, net......................... 13,997 15,652
Deferred financing costs, net............................... 196 130
Other assets................................................ 67 86
------- -------
$29,046 $33,629
======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable.......................................... $ 2,599 $ 3,318
Accrued expenses.......................................... 1,360 1,940
Income taxes payable...................................... 515 430
Demand note payable to stockholder........................ 250 250
Current installments of long-term debt.................... 1,436 567
------- -------
Total current liabilities......................... 6,160 6,505
Long-term debt, less current installments................... 10,735 9,274
Deferred income taxes....................................... 990 1,099
------- -------
Total noncurrent liabilities................................ 11,725 10,373
Stockholders' equity:
Common stock of $.02 par value; authorized 15,000,000
shares; issued 5,824,205 and 5,908,471 shares in 1996
and 1997, respectively................................. 116 118
Additional paid-in capital................................ 1,241 1,543
Retained earnings......................................... 9,807 15,090
------- -------
11,164 16,751
Less treasury stock, at cost, 1,365 shares in 1996........ 3 --
------- -------
Total stockholders' equity........................ 11,161 16,751
------- -------
$29,046 $33,629
======= =======
</TABLE>

See accompanying notes.

F-3
<PAGE> 52

LMI AEROSPACE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Net sales................................................... $25,424 $35,016 $55,080
Cost of sales............................................... 20,366 26,725 38,932
------- ------- -------
Gross profit................................................ 5,058 8,291 16,148
Selling, general, and administrative expenses............... 3,883 5,256 6,549
------- ------- -------
Income from operations...................................... 1,175 3,035 9,599
Other income (expense):
Interest expense.......................................... (1,038) (1,123) (1,020)
Other, net................................................ (48) 15 10
------- ------- -------
(1,086) (1,108) (1,010)
------- ------- -------
Income before income taxes.................................. 89 1,927 8,589
Provision for income taxes.................................. 52 740 3,306
------- ------- -------
Net income.................................................. $ 37 $ 1,187 $ 5,283
======= ======= =======
Net income per common share................................. $ 0.01 $ 0.21 $ 0.91
======= ======= =======
Net income per common share -- assuming dilution............ $ 0.01 $ 0.20 $ 0.89
======= ======= =======
</TABLE>

See accompanying notes.

F-4
<PAGE> 53

LMI AEROSPACE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN RETAINED TREASURY STOCKHOLDERS'
STOCK CAPITAL EARNINGS STOCK EQUITY
------ ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1994................. $109 $ 582 $ 8,583 $(127) $ 9,147
Sale of 77,644 shares of treasury stock...... -- 16 -- 127 143
Purchase of 19,740 shares of outstanding
stock for treasury......................... -- -- -- (38) (38)
Issuance of 354,580 shares of stock.......... 7 670 -- -- 677
Net income................................... -- -- 37 -- 37
---- ------ ------- ----- -------
Balance at December 31, 1995................. 116 1,268 8,620 (38) 9,966
Sale of 7,896 shares of treasury stock....... -- -- -- 15 15
Purchase of 30,646 shares of outstanding
stock for treasury......................... -- -- -- (58) (58)
Exercise of options to purchase 41,125 shares
of stock................................... -- (27) -- 78 51
Net income................................... -- -- 1,187 -- 1,187
---- ------ ------- ----- -------
Balance at December 31, 1996................. 116 1,241 9,807 (3) 11,161
Sale of 1,365 shares of treasury stock....... -- 2 -- 3 5
Issuance of 80,977 shares of stock........... 2 295 -- -- 297
Exercise of options to purchase 3,290 shares
of stock................................... -- 5 -- -- 5
Net income................................... -- -- 5,283 -- 5,283
---- ------ ------- ----- -------
Balance at December 31, 1997................. $118 $1,543 $15,090 $ -- $16,751
==== ====== ======= ===== =======
</TABLE>

See accompanying notes.

F-5
<PAGE> 54

LMI AEROSPACE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 37 $ 1,187 $ 5,283
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 1,964 2,012 2,179
Deferred income taxes..................................... 50 214 14
Changes in operating assets and liabilities:
Trade accounts receivable.............................. (911) (595) (1,472)
Inventories............................................ (1,083) (1,544) (1,506)
Prepaid expenses and other assets...................... (145) (232) 63
Income taxes........................................... 2 513 (85)
Accounts payable and accrued expenses.................. 71 1,129 1,299
------- ------- -------
Net cash provided by (used in) operating activities......... (15) 2,684 5,775
INVESTING ACTIVITIES
Additions to property, plant, and equipment................. (1,736) (1,316) (3,856)
Proceeds from sale of property, plant, and equipment........ 9 12 143
Proceeds from sale of investments........................... 183 -- --
------- ------- -------
Net cash used in investing activities....................... (1,544) (1,304) (3,713)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt.................... 1,075 3,550 3,782
Principal payments on long-term debt........................ (268) (4,914) (6,112)
Purchase of outstanding stock for treasury.................. (38) (58) --
Proceeds from sale of treasury stock........................ 143 15 5
Proceeds from exercise of stock options..................... -- .... 51 5
Proceeds from issuance of common stock...................... 677 -- 297
------- ------- -------
Net cash (used in) provided by financing activities......... 1,589 (1,356) (2,023)
------- ------- -------
Net increase in cash and cash equivalents................... 30 24 39
Cash and cash equivalents, beginning of year................ 151 181 205
------- ------- -------
Cash and cash equivalents, end of year...................... $ 181 $ 205 $ 244
======= ======= =======
Supplemental disclosures of cash flow information:
Interest paid............................................. $ 1,061 $ 1,191 $ 996
Income taxes paid......................................... $ -- $ 14 $ 3,378
======= ======= =======
</TABLE>

See accompanying notes.

F-6
<PAGE> 55

LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, 1997
1. ACCOUNTING POLICIES

DESCRIPTION OF BUSINESS

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

The accompanying financial statements include the consolidated financial
position, results of operations, and cash flows of the Company and its
subsidiaries. All significant intercompany balances and transactions have been
eliminated in consolidation.

CUSTOMER AND SUPPLIER CONCENTRATION

Direct sales to the Company's largest customer accounted for 45 percent, 46
percent, and 59 percent of the Company's total revenues in 1995, 1996, and 1997
and represented 52 percent and 62 percent of the accounts receivable balance at
December 31, 1996 and 1997, respectively. Indirect sales to the Company's
largest customer accounted for 19 percent, 20 percent, and 17 percent of the
Company's total revenues in 1995, 1996, and 1997, respectively.

Direct sales to the Company's second largest customer accounted for 18
percent, 19 percent, and 13 percent of the Company's total revenues in 1995,
1996, and 1997 and represented 17 percent and 14 percent of the accounts
receivable balance at December 31, 1996 and 1997, respectively.

Direct sales to the Company's third largest customer accounted for 11
percent, 8 percent, and 9 percent of the Company's total revenues in 1995, 1996,
and 1997 and represented 8 percent and 7 percent of the accounts receivable
balance at December 31, 1996 and 1997, respectively.

In 1997, the Company purchased approximately 50 percent of the materials
used in production from three suppliers.

USE OF ESTIMATES

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

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.

INVENTORIES

Inventories are stated at the lower of cost or market using actual cost for
raw materials and work-in-process and average cost for finished goods.
Inventories include certain deferred production costs related to long-term
production contracts. These costs are included in cost of sales over the life of
the contract based on a units-of-delivery method.

F-7
<PAGE> 56
LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

REVENUE RECOGNITION

Revenues are recorded when services are performed or when products are
shipped, except for long-term construction contracts which are recorded on the
percentage-of-completion method based on a units-of-delivery method. Sales from
long-term construction contracts were less than 10 percent of total sales for
each year in the three-year period ended in 1997. The billings in excess of
costs, under long-term construction contracts, are $321 as of December 31, 1997
and are included in accrued expenses. Billings in excess of costs were
immaterial as of December 31, 1996.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Equipment under capital leases
is stated at the present value of the minimum lease payments. Depreciation is
calculated using the straight-line method over the estimated useful lives of the
related assets. Equipment held under capital leases and leasehold improvements
are amortized using the straight-line method over the shorter of the lease term
or estimated useful life of the asset. Estimated useful lives for buildings and
machinery and equipment are 20 years and 4 to 10 years, respectively.

INCOME TAXES

The Company utilizes the liability method of accounting for income taxes.
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement and
income tax basis of the Company's assets and liabilities.

STOCK-BASED COMPENSATION

Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation.
The Company has elected to continue to measure its cost of stock-based
compensation under the provisions of Accounting Principles Board (APB) Opinion
No. 25 and provide the pro forma disclosure provisions of SFAS No. 123.

FINANCIAL INSTRUMENTS

Fair values of the Company's fixed rate long-term obligations approximate
their carrying value, as the rates approximate those which could be obtained by
the Company for similar issues with similar maturities. The Company's other
financial instruments have fair values which approximate their respective
carrying values, due to their short maturities or variable rate characteristics.

EARNINGS PER COMMON SHARE

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

Earnings per share are computed by dividing net income (loss) by the
weighted average number of common shares outstanding during the applicable
periods. The weighted average number of common shares outstanding was 5,529,483,
5,779,833, and 5,836,700 in 1995, 1996, and 1997, respectively. In order to
compute diluted earnings per common share, the Company included weighted average
dilutive stock options outstanding which totaled 15,552, 11,150, and 76,104 in
1995, 1996, and 1997, respectively.

F-8
<PAGE> 57
LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Raw materials............................................... $2,142 $2,990
Work in process............................................. 4,065 3,875
Finished goods.............................................. 988 1,836
------ ------
$7,195 $8,701
====== ======
</TABLE>

3. PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment at December 31 consist of the following:

<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Land........................................................ $ 638 $ 638
Buildings................................................... 7,010 7,405
Machinery and equipment..................................... 16,127 18,899
Leasehold improvements...................................... 307 426
Construction in progress.................................... 224 298
-------- --------
24,306 27,666
Less accumulated depreciation............................... (10,309) (12,014)
-------- --------
$ 13,997 $ 15,652
======== ========
</TABLE>

Depreciation expense (including amortization expense on capital leases)
recorded by the Company totaled $1,812, $1,907, and $2,058 for 1995, 1996, and
1997, respectively.

4. DEMAND NOTE PAYABLE TO STOCKHOLDER

The Company is obligated to a stockholder for a $250 demand note payable.
The note accrues interest quarterly at 10.5 percent per annum. In March 1998,
the note was paid. See Note 5.

F-9
<PAGE> 58
LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
1996 1997
------- ------
<S> <C> <C>
Revolving line of credit, interest payable quarterly, at a
variable rate............................................. $ 3,459 $1,281
Industrial Development Revenue Bond, interest payable
monthly, at a variable rate............................... 5,000 2,500
Term loan note payable, interest payable monthly, at a fixed
rate of 9.75%............................................. 2,250 --
Term loan note payable, principal and interest payable
monthly, at a fixed rate of 9.0%.......................... -- 3,482
Real estate note payable, principal and interest payable
monthly, at a variable rate............................... 450 428
Notes payable, principal and interest payable monthly, at
fixed rates, ranging from 8.25% to 9.56%.................. 118 1,233
Subordinated debentures, interest payable monthly, at a
fixed rate of 11%......................................... 800 800
Capital lease obligations................................... 94 117
------- ------
12,171 9,841
Less current installments................................... 1,436 567
------- ------
$10,735 $9,274
======= ======
</TABLE>

The Company has a Credit and Security Agreement with Norwest Business
Credit, Inc. for a revolving credit facility up to $6,500 subject to a borrowing
base calculation and secured by the working capital of the Company. Interest is
payable monthly on the facility at the prime rate plus .5 percent, 9 percent at
December 31, 1997. The facility matures on February 13, 1999 and requires
compliance with certain nonfinancial and financial covenants, including debt
service coverage, minimum book net worth, leverage ratio, and current ratio.

The Industrial Revenue Bond (IRB) bears interest at a variable rate, which
is based on the existing market rates for comparable outstanding tax-exempt
bonds (4.3 percent and 4.1 percent at December 31, 1996 and 1997, respectively),
not to exceed 12 percent. The IRB is secured by a letter of credit, and Magna
Bank, which holds 100 percent participation in the letter of credit, has a
security interest in certain equipment. The balance at December 31, 1997 matures
in November 2000.

On August 15, 1996, the Company executed a 9.75 percent term note payable
for $2,600 with Magna Bank N.A. (Magna Bank) secured by certain Company-owned
real estate. The term note payable was amended on January 17, 1997 requiring the
Company to make principal payments of $1,300 in 1997. Interest is payable
monthly on the term note payable at 9.75 percent per annum.

During 1997, the Company refinanced $2,500 of the IRB and the remaining
$1,000 of the 9.75 percent term note payable and executed a new 9.0 percent term
note payable for $3,500 with Magna Bank secured by certain Company-owned real
estate. Accordingly, the $2,500 which was scheduled to mature on November 1,
1997 has been classified as long-term debt at December 31, 1996. The term note
payable requires monthly principal and interest payments of $45, and any
remaining principal balance is due upon maturity in November 2000. The term note
payable contains certain nonfinancial and financial covenants, including
leverage ratio, current ratio, and minimum tangible net worth.

The real estate note payable with the Oklahoma Industrial Finance Authority
requires monthly principal and interest payments through May 2009 and bears
interest at the lender's prime rate adjusted quarterly based on the last day of
the previous quarter (8.25 percent at December 31, 1996 and 8.5 percent at
December 31, 1997). The real estate note payable is secured by a mortgage on the
property.

F-10
<PAGE> 59
LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company entered into various notes payable for the purchase of certain
equipment. The notes are payable in monthly installments including interest
ranging from 8.25 percent to 9.56 percent through November 2002. The notes
payable are secured by equipment.

The Company issued subordinated debentures during 1996 which bear interest
at 11 percent, payable monthly. The debentures are unsecured and mature on March
15, 1999.

All of the Company's property, plant, and equipment is pledged under the
above agreements.

The aggregate maturities of long-term debt as of December 31, 1997 are as
follows:

<TABLE>
<S> <C>
Year ending December 31:
1998................................................... $ 567
1999................................................... 2,655
2000................................................... 5,805
2001................................................... 307
2002................................................... 220
Thereafter............................................. 287
------
$9,841
======
</TABLE>

On March 31, 1998, the Company secured a $15,000 unsecured line of credit
with Magna Bank to fund short-term working capital needs. The Company drew upon
the line in March 1998 to retire certain outstanding debt balances, including
the Norwest revolving line of credit ($1,281 at December 31, 1997), demand notes
to former shareholders ($250 at December 31, 1997), and the subordinated
debentures ($800 at December 31, 1997). The credit facility prohibits the
payment of cash dividends on the common stock without the lender's prior written
consent.

6. LEASES

The Company leases certain facilities and equipment under various
noncancelable operating lease agreements which expire at various dates
throughout 2005. At December 31, 1997, the future minimum lease payments under
operating leases with initial noncancelable terms in excess of one year are as
follows:

<TABLE>
<S> <C>
Year ending December 31:
1998................................................... $ 610
1999................................................... 673
2000................................................... 495
2001................................................... 464
2002................................................... 479
Thereafter............................................. 1,143
------
$3,864
======
</TABLE>

Rent expense totaled $206, $364, and $539 in 1995, 1996, and 1997,
respectively.

7. DEFINED CONTRIBUTION PLANS

The Company has a noncontributory profit sharing plan and a contributory
401(k) plan which covers substantially all full-time employees. Employees are
eligible to participate in both plans after reaching 1,000 hours of accredited
service. Contributions to the profit sharing plan are at the discretion of
management and become fully vested to the employees after seven years.
Contributions by the Company to the profit sharing plan totaled $0, $74, and
$150 for 1995, 1996, and 1997, respectively. Contributions by the Company to the

F-11
<PAGE> 60
LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

401(k) plan are based upon a percentage of employee contributions, up to a
maximum of $225 per employee. The Company's contributions to the 401(k) plan
totaled $50, $52, and $78 for 1995, 1996, and 1997, respectively.

8. STOCK OPTIONS

The Company has an Employee Incentive Stock Option Plan (the Plan), which
provides options for up to 1,398,250 shares to be granted to key employees at
exercise prices greater than or equal to the fair market value per share on the
date the option is granted. All options vest immediately upon grant. Stock
option activity under the Plan is as follows:

<TABLE>
<CAPTION>
1995 1996 1997
-------------------------- -------------------------- --------------------------
NUMBER OF OPTION NUMBER OF OPTION NUMBER OF OPTION
SHARES PRICES SHARES PRICES SHARES PRICES
--------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding
at beginning of
year............... 90,475 $1.24 to $1.77 174,370 $1.24 to $1.90 241,815 $1.77 to $1.90
Granted.............. 83,895 $1.77 to $1.90 116,795 $1.90 59,467 $2.60 to $3.67
Exercised............ -- -- (41,125) $1.24 (3,290) $1.77
Canceled............. -- -- (8,225) $1.64 (65,800) $1.90
--------- --------- ---------
Options outstanding
at end of year..... 174,370 $1.24 to $1.90 241,815 $1.77 to $1.90 232,192 $1.77 to $3.67
========= ============== ========= ============== ========= ==============
Options available for
grant at end of
year............... 1,141,630 -- 1,033,060 -- 1,039,393 --
========= ============== ========= ============== ========= ==============
</TABLE>

Under the Plan, 1,271,585 common shares are reserved for issuance as of
December 31, 1997. The weighted average fair value per stock option granted
during 1995, 1996, and 1997 was $.50, $.41, and $.67, respectively, measured on
the date of grant using the Black-Scholes Option Pricing model with the
following assumptions: volatility of 25.7 percent; 0 percent dividend yield; an
expected life of 3.5 years, 2.5 years, and 1.5 to 2.25 years for 1995, 1996, and
1997, respectively; and a risk-free rate of 4.94 percent, 5.20 percent, and 5.26
percent for 1995, 1996, and 1997. The Company applied APB Opinion No. 25 in
accounting for its stock option plans, and accordingly, no compensation cost has
been recognized for stock options granted. Had the Company determined
compensation cost based on the fair value at the date of grant under SFAS. No.
123, net income and earnings per share amounts would have been as follows:

<TABLE>
<CAPTION>
1995 1996 1997
---- ------ ------
<S> <C> <C> <C>
Net income:
As reported............................................... $ 37 $1,187 $5,283
Pro forma................................................. 10 1,155 5,256
Net income per common share:
As reported............................................... $.01 $ .21 $ .91
Pro forma................................................. -- .20 .90
Net income per common share -- assuming dilution:
As reported............................................... .01 .20 .89
Pro forma................................................. -- .20 .89
</TABLE>

F-12
<PAGE> 61
LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

9. INCOME TAXES

The temporary differences between the tax basis of assets and liabilities
and their financial reporting amounts that give rise to the deferred tax assets
and deferred tax liabilities are as follows:

<TABLE>
<CAPTION>
1996 1997
----- -------
<S> <C> <C>
Deferred tax asset:
Accrued vacation.......................................... $ 122 $ 158
Inventory................................................. 142 186
Accrued environmental expenses............................ 58 13
Alternative minimum tax credit............................ 60 --
Other accrued expenses.................................... 15 135
Other..................................................... 10 10
----- -------
Total deferred tax assets................................... 407 502
Deferred tax liabilities:
Depreciation.............................................. (934) (1,074)
Other..................................................... (56) (25)
----- -------
Total deferred tax liabilities.............................. (990) (1,099)
----- -------
Net deferred tax liability.................................. $(583) $ (597)
===== =======
</TABLE>

The Company's income tax provision consisted of the following for the year
ended December 31:

<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ------
<S> <C> <C> <C>
Federal:
Current................................................... $ 2 $471 $2,937
Deferred.................................................. 43 182 (17)
--- ---- ------
45 653 2,920
State:
Current................................................... -- 55 355
Deferred.................................................. 7 32 31
--- ---- ------
$52 $740 $3,306
=== ==== ======
</TABLE>

The federal corporate statutory rate is reconciled to the Company's
effective income tax rate as follows:

<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ------
<S> <C> <C> <C>
Federal taxes............................................... $30 $653 $2,920
State and local taxes, net of federal benefit............... 9 57 258
Other....................................................... 13 30 128
--- ---- ------
Provision for income taxes.................................. $52 $740 $3,306
=== ==== ======
</TABLE>

At December 31, 1995, the Company had a net operating loss carryforward of
$789 which was fully utilized in 1996. At December 31, 1996, the Company had an
alternative minimum tax credit carryforward of $60 which was fully utilized in
1997.

F-13
<PAGE> 62
LMI AEROSPACE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. COMMITMENTS AND CONTINGENCIES

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

During January 1992, the Company entered into an agreement for the purchase
of certain real estate. The agreement contained a representation and warranty of
the seller that the property did not suffer from environmental contamination.
Environmental contamination was subsequently identified on the property, and
during 1996, the Company accrued $250 for remediation and related legal costs.
During 1997, the remediation was substantially completed. The Company incurred
total costs of $140 related to this matter, and $75 of the reserve was reversed
in 1997. As of December 31, 1997, the Company has certain monitoring
requirements related to the property, for which an accrued expense of $35 is
included in accrued expenses. In 1996 and 1997, the related income effects were
classified as selling, general, and administrative expense in the consolidated
statements of operations.

11. QUARTERLY FINANCIAL DATA (UNAUDITED)

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
<S> <C> <C> <C> <C>
1996
Net sales.............................................. $ 7,718 $ 7,766 $ 8,913 $10,619
Cost of sales.......................................... 6,067 5,760 6,628 8,270
Net income............................................. 196 371 392 228(1)
Net income per common share............................ $ .03 $ .06 $ .07 $ .04
Net income per common share -- assuming dilution....... .03 .06 .07 .04
1997
Net sales.............................................. $12,690 $14,383 $13,975 $14,032
Cost of sales.......................................... 9,393 10,266 9,598 9,675
Net income............................................. 939 1,350 1,577 1,417
Net income per common share............................ $ .16 $ .23 $ .27 $ .24
Net income per common share -- assuming dilution....... .16 .23 .27 .24
</TABLE>

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

(1) Includes a charge of $250 for environmental remediation -- see Note 10.

12. SUBSEQUENT EVENT -- INITIAL PUBLIC OFFERING

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

F-14
<PAGE> 63

LMI AEROSPACE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ---------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents................................. $ 244 $ 604
Trade accounts receivable................................. 8,058 9,745
Inventories............................................... 8,701 9,128
Prepaid expenses.......................................... 147 167
Other current assets...................................... 109 109
Deferred income taxes..................................... 502 502
------- -------
Total current assets.............................. 17,761 20,255
Property, plant, and equipment, net......................... 15,652 16,448
Deferred financing cost, net................................ 130 94
Other assets................................................ 86 86
------- -------
$33,629 $36,883
======= =======

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable.......................................... $ 3,318 $ 3,908
Accrued expenses.......................................... 1,940 2,781
Income taxes payable...................................... 430 1,216
Demand note payable to stockholder........................ 250 --
Current installments of long-term debt.................... 567 640
------- -------
Total current liabilities......................... 6,505 8,545
Long-term debt, less current installments................... 9,274 8,829
Deferred income taxes....................................... 1,099 1,099
------- -------
Total noncurrent liabilities...................... 10,373 9,928
Stockholders' equity:
Common stock of $.02 par value; authorized 15,000,000
shares; issued 5,908,471 at December 31, 1997 and at
March 31, 1998, respectively........................... 118 118
Additional paid-in capital................................ 1,543 1,543
Retained earnings......................................... 15,090 16,749
------- -------
Total stockholders' equity........................ 16,751 18,410
------- -------
$33,629 $36,883
======= =======
</TABLE>

See accompanying notes.

F-15
<PAGE> 64

LMI AEROSPACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1997 1998
-------- --------
<S> <C> <C>
Net sales................................................... $12,690 $16,335
Cost of sales............................................... 9,393 11,502
------- -------
Gross profit................................................ 3,297 4,833
Selling, general, and administrative expenses............... 1,489 1,883
------- -------
Income from operations...................................... 1,808 2,950
Other income (expense):
Interest expense.......................................... (283) (258)
Other, net................................................ 1 5
------- -------
Income before income taxes.................................. 1,526 2,697
Provision for income taxes.................................. 587 1,038
------- -------
Net income.................................................. $ 939 $ 1,659
======= =======
Net income per common share................................. $ 0.16 $ 0.28
======= =======
Net income per common share -- assuming dilution............ $ 0.16 $ 0.28
======= =======
</TABLE>

See accompanying notes.

F-16
<PAGE> 65

LMI AEROSPACE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
----------------
1997 1998
------ -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 939 $ 1,659
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 499 644
Changes in operating assets and liabilities:
Trade accounts receivable.............................. (448) (1,686)
Inventories............................................ (149) (427)
Prepaid expenses....................................... 7 (20)
Other current assets................................... (16) (43)
Other assets........................................... 2 33
Income taxes payable................................... 97 786
Accounts payable....................................... 468 590
Accrued expenses....................................... 347 841
------ -------
Net cash provided by operating activities................... 1,746 2,377
INVESTING ACTIVITIES
Additions to property, plant, and equipment................. (335) (1,405)
Proceeds from sale of property, plant, and equipment........ -- 9
------ -------
Net cash used in investing activities....................... (335) (1,396)
FINANCING ACTIVITIES
Proceeds from issuance of long-term debt.................... -- 1,292
Principal payments on long-term debt........................ (901) (1,913)
------ -------
Net cash used in financing activities....................... (901) (621)
------ -------
Net change in cash and cash equivalents..................... 510 360
Cash and cash equivalents, beginning of period.............. 205 244
------ -------
Cash and cash equivalents, end of period.................... $ 715 $ 604
====== =======
</TABLE>

See accompanying notes.

F-17
<PAGE> 66

LMI AEROSPACE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
MARCH 31, 1998
1. ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
representation have been included. Operating results for the three months ended
March 31, 1998 are not necessarily indicative of the results that may be
expected for the year ended December 31, 1998. These financial statements should
be read in conjunction with the consolidated financial statements and
accompanying footnotes for the year ended December 31, 1997.

The Company's income per share and share data in the financial statements
have been retroactively restated to reflect the effect of the 2.29-for-one stock
dividend declared on April 27, 1998 to shareholders of record on May 1, 1998 in
connection with the filing of a Form S-1 Registration Statement.

EARNINGS PER COMMON SHARE

Earnings per share are computed by dividing net income by the weighted
average number of common shares outstanding during the applicable periods. The
weighted average number of common shares outstanding was 5,908,471 and 5,822,839
at March 31, 1998 and 1997, respectively. In order to compute diluted earnings
per common share, the Company included weighted average dilutive stock options
outstanding which totaled 116,614 and 49,551 at March 31, 1998 and 1997,
respectively.

USE OF ESTIMATES

F-18
<PAGE> 67
LMI AEROSPACE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2. INVENTORIES

Inventories consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ---------
<S> <C> <C>
Raw materials............................................... $2,990 $3,588
Work in process............................................. 3,875 3,470
Finished goods.............................................. 1,836 2,070
------ ------
$8,701 $9,128
====== ======
</TABLE>

3. PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ---------
<S> <C> <C>
Land........................................................ $ 638 $ 638
Buildings................................................... 7,405 7,464
Machinery and equipment..................................... 18,376 19,018
Software costs.............................................. 523 571
Leasehold improvements...................................... 426 426
Construction in progress.................................... 298 897
-------- --------
27,666 29,014
Less accumulated depreciation............................... (12,014) (12,566)
-------- --------
$ 15,652 $ 16,448
======== ========
</TABLE>

Depreciation expense (including amortization expense on capital leases)
recorded by the Company totaled $477, and $597, for the three months ended March
31, 1997 and 1998, respectively.

F-19
<PAGE> 68
LMI AEROSPACE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. LONG-TERM DEBT

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ---------
<S> <C> <C>
Revolving line of credit, interest payable monthly, at a
variable rate............................................. $1,281 $1,527
Industrial Development Revenue Bond, interest payable
monthly, at a variable rate............................... 2,500 2,500
Term loan note payable, principal and interest payable
monthly, at a fixed rate of 9.0%.......................... 3,482 3,408
Real estate note payable, principal and interest payable
monthly, at a variable rate............................... 428 422
Notes payable, principal and interest payable monthly, at
fixed rates, ranging from 8.25% to 9.56%.................. 1,233 1,508
Subordinated debentures, interest payable monthly, at a
fixed rate of 11%......................................... 800 --
Capital lease obligations................................... 117 104
------ ------
9,841 9,469
Less current installments................................... 567 640
------ ------
$9,274 $8,829
====== ======
</TABLE>

On March 31, 1998, the Company secured a $15,000 unsecured line of credit
with Magna Bank to fund various corporate needs. Interest is payable monthly
based on a quarterly cash flow leverage calculation and the LIBOR rate (7.09% at
March 31, 1998). This facility matures on March 30, 2000 and requires compliance
with certain non-financial and financial covenants including minimum tangible
net worth and EBITDA requirements. The credit facility prohibits the payment of
cash dividends on common stock without Magna's prior written consent. The
Company drew upon the line in March 1998 to retire certain outstanding debt
balances, including the previous revolving line of credit ($1,281 at December
31, 1997), demand notes to former shareholders ($250 at December 31, 1997), and
the subordinated debentures ($800 at December 31, 1997).

The Industrial Revenue Bond (IRB) bears interest at a variable rate, which
is based on the existing market rates for comparable outstanding tax-exempt
bonds (4.1 percent and 3.85 percent at December 31, 1997 and March 31, 1998,
respectively), not to exceed 12 percent. The IRB is secured by a letter of
credit, and Magna Bank NA (Magna), which holds 100 percent participation in the
letter of credit, has a security interest in certain equipment. The bond matures
in November 2000.

During 1997, the Company executed a new 9.0 percent term note payable for
$3,500 with Magna secured by certain Company-owned real estate. The term note
payable requires monthly principal and interest payments of $45, and any
remaining principal balance is due upon maturity in November 2000. The term note
payable contains certain nonfinancial and financial covenants, including
leverage ratio, current ratio, and minimum tangible net worth. All of the
Company's property, plant and equipment is pledged under the above agreement.

The real estate note payable is with the Oklahoma Industrial Finance
Authority requires monthly principal and interest payments through May 2009 and
bears interest at the prime rate adjusted quarterly based on the last day of the
previous quarter (8.5 percent at December 31, 1997 and March 31, 1998). The real
estate note payable is secured by a mortgage on the property.

F-20
<PAGE> 69
LMI AEROSPACE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company entered into various notes payable for the purchase of certain
equipment. The notes are payable in monthly installments including interest
(ranging from 8.25 percent to 9.56 percent through November 2002). The notes
payable are secured by equipment.

5. COMMITMENTS AND CONTINGENCIES

6. SUBSEQUENT EVENT -- INITIAL PUBLIC OFFERING

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

Pursuant to the employment of one of the Company's officers, in the second
quarter of 1998, the Company will record unearned compensation expense related
to its stock transactions with the officer. The stock transactions involve the
issuance of 32,900 shares as a bonus, the purchase of 98,700 shares from the
Company, and the purchase of 98,700 shares from a principal shareholder. The
unearned compensation expense will be determined based on a formula, which
applies a discount related to the restricted nature of the shares, as determined
by an independent appraiser, to the prevailing stock price in the initial public
offering. The Company estimates this unearned compensation expense will be
approximately $600, to be recognized over 48 months.

F-21
<PAGE> 70

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NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING SHAREHOLDER OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER
TO BUY, SHARES OF COMMON STOCK IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS
NOT LAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION OR IN
WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary............................ 3
Summary Consolidated Financial
Information............................... 6
Risk Factors.................................. 7
Use of Proceeds............................... 11
Dividend Policy............................... 12
Dilution...................................... 12
Capitalization................................ 13
Selected Consolidated Financial Information... 14
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................. 16
Business...................................... 21
Management.................................... 33
Certain Transactions.......................... 40
Principal Shareholders........................ 41
Authorized and Outstanding Capital
Stock....................................... 43
Shares Eligible for Future Sale............... 45
Underwriting.................................. 47
Legal Matters................................. 48
Experts....................................... 48
Relationship with Independent Accountants..... 48
Additional Information........................ 48
Index to Financial Statements................. F-1
</TABLE>

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UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

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PROSPECTUS , 1998
- --------------------------------------------------------------------------------

2,300,000 SHARES

LMI AEROSPACE, INC.

[LMI LOGO]

Common Stock

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

EVEREN SECURITIES, INC.

GEORGE K. BAUM & COMPANY

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